Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SUPERANNUATION LEGISLATION AMENDMENT (SERVICE PROVIDERS
AND OTHER GOVERNANCE MEASURES) BILL 2012
(Circulated by the authority of the
Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Service providers ........................................................... 5
Chapter 2 Infringement notices ...................................................... 9
Chapter 3 Reasons for decisions and Superannuation
Complaints Tribunal time limits .................................... 15
Chapter 4 Dual regulated entities ................................................. 19
Chapter 5 Actions for breaches of directors' duties ...................... 23
Chapter 6 Other measures and consequential
amendments ................................................................ 29
Chapter 7 Statement of Compatibility with Human Rights ............ 49
Index ..................................................................................................... 53
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ADI authorised deposit-taking institution
APRA Australian Prudential Regulation Authority
ASIC Australian Securities and Investments
Commission
Corporations Act Corporations Act 2001
FHSA Act First Home Saver Accounts Act 2008
FSCOD Act Financial Sector (Collection of Data)
Act 2001
Further MySuper and Superannuation Legislation Amendment
Transparency Measures Bill (Further MySuper and Transparency
Measures) Bill 2012
MySuper Core Provisions Bill Superannuation Legislation Amendment
(MySuper Core Provisions) Bill 2012
RIS regulation impact statement
RSE registrable superannuation entity
SCT Superannuation Complaints Tribunal
SIS Act Superannuation Industry (Supervision)
Act 1993
SIS Regulations Superannuation Industry (Supervision)
Regulations 1994
SMSF Self managed superannuation fund
SRC Act Superannuation (Resolution of Complaints)
Act 1993
1
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Glossary (continued)
Abbreviation Definition
The Review The review into the governance, efficiency,
structure and operation of Australia's
superannuation system or the Super System
Review (Cooper Review)
TPD total and permanent disability insurance
Trustee Obligations and Superannuation Legislation Amendment
Prudential Standards Act (Trustee Obligations and Prudential
Standards) Act 2012
2
General outline and financial impact
Stronger Super
On 16 December 2010, the Assistant Treasurer and Minister for Financial
Services and Superannuation, the Hon Bill Shorten MP, announced the
Stronger Super reforms.
Stronger Super represents the Government's response to the review of the
governance, efficiency, structure and operation of Australia's
superannuation system, the Super System Review (the Review). The
Government released the Review's final report on 5 July 2010 and its
response on 16 December 2010 (Minister's Media Release No. 024 of
16 December 2010).
To obtain input on the design and implementation of the Stronger Super
reforms, the Government undertook extensive consultation with industry,
employer and consumer groups. The Government announced its decisions
on the key design aspects of the Stronger Super reforms on
21 September 2011 (Minister's Media Release No. 131 of
21 September 2011).
This Bill is the fourth tranche of legislation implementing the
Government's MySuper and governance reforms as part of Stronger
Super. The Legislative and Governance Forum for Corporations has been
notified of the Bill as per section 506 of the Corporations Agreement, and
the Bill does not require forum approval as it is exempt under section 507
of the Corporations Agreement.
The first tranche of legislation, the Superannuation Legislation
Amendment (MySuper Core Provisions) Bill 2012 (MySuper Core
Provisions Bill), was introduced to the Parliament on 3 November 2011.
The second tranche of legislation, the Superannuation Legislation
Amendment (Trustee Obligations and Prudential Standards) Act 2012
(Trustee Obligations and Prudential Standards Act) received Royal Assent
on 8 September 2012.
The third tranche of legislation, the Superannuation Legislation
Amendment (Further MySuper and Transparency Measures) Bill 2012
(Further MySuper and Transparency Measures Bill) was introduced to the
Parliament on 19 September 2012.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Date of effect: Except for the changes relating to dual regulated entities
which will apply from 1 July 2015, and some of the consequential
changes, the majority of the provisions will take effect from 1 July 2013.
Proposal announced: On 16 December 2010, the Minister announced the
Government would implement the Stronger Super reforms, and, following
consultation, on 21 September 2011, the key design aspects of the
Stronger Super reforms were announced.
Financial impact: This Bill has no significant financial impact on
Commonwealth expenditure or revenue.
Human rights implications: The human rights issues this Bill raises are
explained in the Statement of Compatibility with Human Rights --
Chapter 7.
Summary of regulation impact statement
Regulation impact on business
Impact: The regulation impact statement (RIS) for Stronger Super
implementation can be found at http://ris.finance.gov.au. The relevant
sections of the RIS covered in this Bill are MySuper and governance of
superannuation (including section 4.4 in the appendix). A RIS exemption
was granted for the remainder of the Stronger Super reforms, which will
be subject to a post-implementation review.
4
Chapter 1
Service providers
Outline of chapter
0.1 Schedule 1 to this Bill amends the Superannuation Industry
(Supervision) Act 1993 (SIS Act) to over-ride any provisions in a fund's
governing rules that require the trustee to use a specified service provider,
investment entity or financial product. All legislative references in this
chapter are to the SIS Act unless otherwise stated.
Context of amendments
0.2 The Review was concerned that some trust deeds require a
trustee to use a particular service provider, investment entity or financial
product, effectively removing a trustee's discretion to ensure such
arrangements are in the best interests of fund members. The Review
recommended (recommendation 2.14) that any such provisions in trust
deeds should be over-ridden.
Summary of new law
0.3 The Act will be amended to over-ride any provision in the
governing rules of a registrable superannuation entity (RSE) that requires
the trustee to use a specified service provider, investment entity or
financial product.
Comparison of key features of new law and current law
New law Current law
A provision in the governing rules of The Act allows the governing rules of
an RSE will be void to the extent that an RSE to limit choices available to
it specifies the trustee use particular trustees.
service providers, entities in which
funds may or must be invested or
financial products.
An exception will apply in the case
where the arrangement is specified by
law.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Detailed explanation of new law
0.4 This Bill amends the Act to void any provisions in a fund's
governing rules that require the trustee to use a specified service provider,
investment entity or financial product. [Schedule 1, item 68, subsection 58A(2)]
0.5 A provision in the governing rules that specifies a service
provider from whom the trustee may or must acquire a service will be
void. Service providers include but are not limited to investment
managers, custodians, administrators, clearing houses and professional
service providers. [Schedule 1, item 72, subsection 58A(2)]
0.6 Similarly, a provision in the governing rules of the fund that
specifies an entity in or through which assets of the fund may or must be
invested, will be void. The entities include, but are not limited to
managed investment schemes, life insurers, pooled superannuation trusts
and other unit trusts and ADIs. [Schedule 1, item 72, subsection 58A(3)]
0.7 In addition, provisions in the governing rules will be void where
they specify a financial product that assets of the fund may or must be
invested in, purchased, or used to make payments. Financial products
include, but are not limited to, insurance, including tied group life
insurance policies. [Schedule 1, item 72, subsection 58A(4)]
0.8 The amendments will restore a trustee's discretion to act in the
best interests of members when entering into relevant arrangements.
0.9 The amendments do not require termination of contracts giving
effect to arrangements required under a fund's governing rules. However,
trustees will be required to determine whether the continuation of the
arrangements is consistent with the obligation to act in the best interests of
members. Arrangements that can be demonstrated to be in the best
interests of members can continue. Arrangements determined not to be in
members' best interests will not be able to continue when the current
period of a relevant contract comes to an end.
0.10 If the costs of changing from the current service provider
outweigh potential benefits to members then it is possible for trustees to
conclude that the arrangement is in the best interests of members and no
change would be required.
0.11 The changes do not limit a trustee's ability to identify generic
categories of investment, for example ethical investment.
0.12 The section overrides provisions that state that the RSE licensee
`may' use a particular entity as well provisions that state the RSE licensee
`must' do so. This is to ensure that the requirements of the provision
6
Service providers
cannot be avoided through a clause that confers power to use particular
named entities which might have the effect of encouraging or sanctioning
the use of those entities instead of considering other options in the market.
0.13 The requirements for selecting service providers in members'
best interests will be supported by prudential standards. APRA's
prudential standards were released on 15 November 2012, and cover a
range of topics including conflicts of interest and outsourcing. The
commencement date for the prudential standards will be 1 July 2013,
except where an RSE licensee seeks to enter into a new contractual
arrangement that falls within the coverage of the new outsourcing,
business continuity management and insurance prudential requirements.
Transition provisions in these prudential standards will commence on the
day after the date of registration of the relevant standard on the Federal
Register of Legislative Instruments.
0.14 The amendments will not apply to self managed superannuation
funds (SMSFs). [Schedule 1, item 72, subsection 58A(1)]
0.15 An exception will apply in the case where the limitation is
specified by law. [Schedule 1, item 72, subsection 58A(5)]
Application and transitional provisions
0.16 The amendments will apply from 1 July 2013.
7
Infringement notices
Outline of chapter
1.1 Schedule 1 to this Bill amends the SIS Act to provide APRA
with the power to issue infringement notices for certain breaches of the
Act. All legislative references in this chapter are to the SIS Act unless
otherwise stated.
Context of amendments
1.2 APRA currently has the power to issue infringement notices
under the Financial Sector (Collection of Data) Act 2001 (FSCOD Act).
The power to issue infringement notices in this context has resulted in
substantial improvement in the timeliness of lodgement of returns.
1.3 The Review recommended (recommendation 10.4) that APRA
be given an administrative power to impose infringement notices as an
alternative to criminal prosecution for selected SIS Act provisions.
1.4 Infringement notices provide regulators with a simple and
flexible tool for dealing with non-compliance as an alternative to court
action, which can be costly and time consuming for all parties.
Summary of new law
1.5 APRA will be able to issue infringement notices for minor and
straight-forward breaches of the Act.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Comparison of key features of new law and current law
New law Current law
APRA will have an administrative APRA currently has a power under
power to issue infringement notices Division 3 of the FSCOD Act to issue
for a broader range of breaches of the infringement notices in lieu of
Act. prosecution for certain offences under
that Act. APRA also has power
(along with the Commissioner of
Taxation) to issue infringement
notices under section 252B of the Act
in relation to trustees of funds that
have not notified their status as either
an SMSF or RSE.
Detailed explanation of new law
1.6 This Bill inserts a new Part 22 into the Act to provide APRA
with the power to issue infringement notices for certain breaches of the
Act. [Schedule 1, item 112, Part 22]
1.7 A person who receives an infringement notice can choose to pay
the amount as an alternative to having court proceedings brought against
them for contravention of the provision. If the person chooses not to pay
the amount, proceedings can be brought against them in relation to the
contravention.
1.8 Examples of provisions in the Act to which infringement notices
will apply include: not putting contributions into a MySuper product (in
cases where the member has not given the trustee a direction in writing
that the contribution is to be invested under one or more specified
investment options); not notifying as soon as practicable each beneficiary
about an acting trustee's appointment; not having rules in place for the
appointment of member or independent representatives where required to
do so; and not meeting APRA's deadline for receipt of a report relating to
an investigation. [Schedule 1, item 112, subsection 223A(1)]
1.9 Provisions in the Act jointly administered by APRA and the
ATO will also be enforceable under this Part, except where the offence
relates to an SMSF. These include: certain regulated superannuation
funds accepting contributions by an employer-sponsor contrary to the
Regulator's written notice to the fund's trustee; and an employer not
paying a trustee the amount of the deduction from salary or wages before
the end of the 28-day period beginning immediately after the end of the
month in which the deduction was made. [Schedule 1, item 112,
subsection 223A(2)]
10
Infringement notices
1.10 Further offences may be included by way of regulations, which
are disallowable instruments. [Schedule 1, item 112, subsection 223A(3)]
1.11 The Chair of APRA will determine a class of APRA staff
members as `infringement officers'. Infringement officers will have the
power to issue infringement notices. The Chair must be satisfied that
persons of that class have suitable training or experience to properly
exercise the powers of an infringement officer. [Schedule 1, item 112,
sections 223B and 223C]
1.12 Certain other powers (in particular, the power in
subsection 224C(2) to withdraw an infringement notice) are conferred on
`the relevant chief executive'. This is deemed to be the Chair of APRA.
The Chair of APRA may delegate powers and functions to an APRA
member or an executive general manager or equivalent. [Schedule 1,
item 112, section 223D]
1.13 An infringement notice may be given where an infringement
officer has reasonable grounds to believe that a person has contravened an
enforceable provision. [Schedule 1, item 129, section 224]
1.14 APRA has a 12-month time limit within which infringement
notices must be given. [Schedule 1, item 112, subsection 224(2)]
1.15 An infringement notice must relate to a single contravention of a
single offence provision unless four conditions are satisfied. The first is
the provision requires something to be done within a particular period or
before a particular time. The second is that the person fails (or refuses) to
do the required thing within the required time. The third is that the failure
or refusal occurs on more than one day and the fourth is that each
contravention is constituted by the failure or refusal on one of those days
(multiple offences of this kind may arise as a result of the application of
section 4K of the Crimes Act 1914). [Schedule 1, item 112, subsections 224(3)
and (4)]
1.16 The notice must include a range of particulars including a
unique identifying number, the day on which it is given, the amount that is
payable, the name of the person to whom the notice is given, the name of
the infringement officer, a statement that payment of the amount is not an
admission of guilt or liability, a statement that the person may choose not
to pay the amount and what the consequences are, and how the notice can
be withdrawn. [Schedule 1, item 112, subsection 224A(1)]
1.17 The amount of an infringement notice is one-fifth of the
maximum penalty that a court could impose on the person for that
contravention. [Schedule 1, item 112, subsection 224A(2)]
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
1.18 There is a 28-day limit for paying infringement notices.
However, it is possible to apply for an extension of time to pay the
amount. [Schedule 1, item 112, paragraph 224A(1)(h) and section 224B]
1.19 An infringement notice may be withdrawn after taking into
account a number of factors including written representations seeking the
withdrawal and the circumstances of the alleged contravention. Where a
notice is withdrawn, notice of the withdrawal must be given to the person.
[Schedule 1, item 112, section 224C]
1.20 Infringement notices are designed to provide a fast and effective
remedy which is in proportion to the alleged breach. Once an
infringement notice is paid, any liability of the person for the offence
specified in the notice is taken to be discharged, and the person is not
regarded as having been convicted of the offence specified in the notice.
[Schedule 1, item 112, section 224D]
1.21 New Part 22 does not require an infringement notice to be given
to a person for an alleged contravention of an enforceable provision, nor
does it prevent the giving of two or more infringement notices to a person
or limit a court's discretion to determine penalty amounts. [Schedule 1,
item 112, section 224E]
1.22 The Bill inserts the definition of `APRA staff member' into
subsection 10(1). This is relevant for the purposes of the Chair of
APRA's power of delegation under section 223D. [Schedule 1, item 31,
subsection 10(1)]
1.23 Section 252B, which previously detailed the regime for
contravention notices, is repealed as contravention notices have now been
replaced with the infringement notice regime at Part 22. [Schedule 1,
item 113, section 252B]
1.24 At section 4, an item titled `infringement notices' is inserted into
the summary of provisions table. [Schedule 1, item 27, section 4]
1.25 The Bill also amends subparagraph 6(1)(a)(x) to update the
reference from `Part 23' to `Part 22' to reflect APRA has the general
administration of the new infringement notice provisions in Part 22.
[Schedule 1, item 28, subparagraph 6(1)(a)(x)]
12
Infringement notices
1.26 The Bill also amends sections 56 and 57 of the Act to ensure that
a provision in the governing rules of a superannuation entity is void if it
would have the effect of indemnifying a trustee or a director out of the
assets of the fund in relation to the payment of an infringement notice
which is issued under the SIS Act or another Act such as the FSCOD Act.
[Schedule 1, item 70, subsections 56(2) and 57(2) and item 71, paragraphs 56(2)(b) and
57(2)(b)]
1.27 One of the reasons the Review recommended providing APRA
with the ability to issue infringement notices is to deter uncompliant
behaviour. This objective would be undermined if trustees and directors
were able to use fund money to pay for the infringement notice.
1.28 Not enabling indemnification in relation to infringement notices
is consistent with the existing provisions which exclude indemnity for a
monetary penalty under a civil penalty order.
1.29 Changes are also being made to sections 56 and 57 by the
Superannuation Legislation Amendment (Reducing Illegal Early Release
and Other Measures) Bill 2012 to prohibit indemnification in the case of
penalties.
Application and transitional provisions
1.30 The changes apply to contraventions that occur on or after
1 July 2013. [Schedule 1, items 124 and 127]
13
Reasons for decisions and
Superannuation Complaints Tribunal time
limits
Outline of chapter
2.1 Schedule 1 to this Bill amends the SIS Act to require
superannuation trustees to provide eligible persons, generally on request,
with the reasons for decisions made in relation to a complaint.
2.2 The Superannuation (Resolution of Complaints) Act 1993
(SRC Act) is amended to increase the time limits within which
beneficiaries can lodge complaints with the Superannuation Complaints
Tribunal (SCT) regarding total and permanent disability (TPD) claims.
2.3 All legislative references in this chapter are to the SIS Act unless
otherwise stated.
Context of amendments
2.4 The Review was concerned that fund members frequently were
not able to obtain information from trustees in relation to decisions that
affected them. The Review recommended (recommendation 2.9)
amending the Act to require a trustee to provide members with reasons for
the trustee's decision in relation to complaints.
2.5 The Review was concerned that time limits for lodging
complaints to the SCT were too short and out of alignment with related
time limits for making claims through the courts. The Review
recommended (recommendation 5.7) amending the SRC Act to allow a
longer time for the SCT to consider complaints in respect of TPD claims.
Summary of new law
2.6 The Act is amended to require superannuation trustees to,
generally on written request, provide an eligible person with the reasons
for decisions in relation to a complaint.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
2.7 The SRC Act is amended to increase the time limits for making
claims in relation to TPD to the SCT.
Comparison of key features of new law and current law
New law Current law
Trustees will be required to provide A trustee must ensure they take
reasons for decisions in relation to reasonable steps to ensure an affected
death benefit complaints. beneficiary has the right to make a
In relation to other complaints, complaint and for it to be properly
trustees will be required to provide considered. Superannuation trustees
reasons for decisions when requested are not required to provide a reason
in writing. for their decision in relation to an
eligible person's complaint.
The time limit for members to lodge a The SCT can only deal with
complaint with the SCT in respect of complaints about a trustee's handling
TPD claims is increased to six years of a TPD claim if they lodged it with
after the decision. the SCT within two years of a trustee
Where a person has permanently decision and, in the case where a
ceased employment, and lodged a beneficiary permanently ceases
claim within two years of ceasing employment because of the injury or
employment, they will have four illness in which the TPD claim
years from the decision to make a relates, that the claim was lodged
complaint. with the trustee within two years of
the beneficiary ceasing employment.
Detailed explanation of new law
Death benefit complaints
2.8 The Act is amended to provide that if an eligible person, which
includes a beneficiary, executor of the estate of a former beneficiary, or a
person that has an interest in the death benefit, makes a complaint that
relates to the payment of a death benefit then the person will be given
written reasons for the decision in relation to the complaint, when the
person is given notice of the decision. [Schedule 1, item 74, subsection 101(1)]
2.9 Where no decision in relation to a death benefit complaint has
been made within 90 days, and an eligible person makes a written request
for reasons for that non-decision, written reasons are to be given to the
person within 28 days after the request is given to the trustee. [Schedule 1,
item 74, subparagraph 101(1)(c)(ii) and paragraph 101(1)(e)]
16
Reasons for decisions and Superannuation Complaints Tribunal time limits
2.10 It is possible that the 28-day period set out in proposed
paragraph 101(1)(e) may be too short, for example in cases where a Board
only meets once a month. To deal with such a case, Australian Securities
and Investments Commission (ASIC) will be able to permit a longer
period in which the reasons can be given. It is expected that in cases
where ASIC permits a longer period, the Government will consider
including a requirement in the Corporations Regulations for the RSE
licensee to give the person who made the request notice of the extension.
[Schedule 1, item 74, paragraph 101(1)(e)]
Other complaints
2.11 Superannuation trustees will also be required to provide eligible
persons, on written request, with reasons for a decision (or non-decision)
in relation to complaints other than those relating to death benefits.
[Schedule 1, item 74, paragraph 101(1)(d)]
2.12 In both instances, the written reasons are to be given to the
person within 28 days after the request is given to the trustee. [Schedule 1,
item 74, paragraph 101(1)(e)]
2.13 The Government will consider including a requirement in the
Corporations Regulations for trustees to inform members that they can
request written reasons for a decision made by the trustee in relation to
non-death benefit complaint.
2.14 As is the case with death benefit complaints, it is possible that
the 28 day period set out in proposed paragraph 101(1)(e) may be too
short, for example in cases where a Board only meets once a month. To
deal with such a case, ASIC will be able to permit a longer period for the
reasons to be given. The Government will consider including a
requirement in the Corporations Regulations for the RSE licensee to give
the person who made the request notice of the extension. [Schedule 1,
item 74, paragraph 101(1)(e)]
Time limits for total and permanent disability claims
2.15 The SRC Act is amended to increase the time limits within
which beneficiaries can lodge complaints with the SCT regarding TPD
claims.
2.16 Presently, should a member wish to lodge a complaint with the
SCT in relation to a trustee decision on a TPD claim, subsection 14(6A) of
the SRC Act requires the complaint to be made to the SCT within
two years of the trustee's decision to which the complaint relates.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
2.17 The amendment increases the time limit within which a
beneficiary can lodge a TPD complaint with the SCT from two years to
six years from the time the decision to which the complaint relates was
made. [Schedule 1, item 122, subsection 14(6A)]
2.18 Where a person has permanently ceased employment because of
the physical or mental condition that gave rise to the claim, the time
period will only be increased to four years, because in that case, the
person has already had two years from ceasing employment to lodge their
claim. The four year time period in paragraph 14(6A)(a) reflects the
two-year time limit in subsection 14(6B). [Schedule 1, item 122,
paragraph 14(6A)(a)]
2.19 The amendment will not change the time limits in
subsection 14(6B) of the SRC Act.
Application and transitional provisions
2.20 The changes apply to decisions made on or after 1 July 2013.
[Schedule 1, Part 2, item 126(a)]
2.21 The changes will also apply in the case where no decision has
been made and the 90 day period has expired after 1 July 2013.
[Schedule 1, Part 2, item 126(b)]
2.22 Changes to time limits for TPD complaints apply in relation to
decisions made on or after 1 July 2013. [Schedule 1, Part 2, item 128]
18
Dual regulated entities
Outline of chapter
3.1 Schedule 1 to this Bill amends the Corporations Act 2001
(Corporations Act) to apply requirements for adequate resources and risk
management systems to RSE licensees that also manage
non-superannuation registered managed investment schemes.
3.2 All references in this chapter are to the Corporations Act unless
otherwise specified.
Context of amendments
3.3 Some RSE licensees, in addition to managing RSEs, are also the
responsible entities of one or more non-superannuation registered
managed investment schemes.
3.4 In addition to complying with the SIS Act and SIS Regulations,
these entities are also required to hold an Australian Financial Services
Licence issued by ASIC. As a result, these entities are regulated by both
APRA and ASIC.
3.5 The holders of financial services licences must comply with a
range of general obligations, set out in section 912A of the Corporations
Act. These include obligations to have available adequate resources
(including financial, technological and human resources) and to have
adequate risk management systems. These requirements are set out in
paragraphs 912A(1)(d) and (h) respectively.
3.6 Currently, bodies regulated by APRA, including RSE licensees,
are exempt from the requirements set out in paragraphs 912A(1)(d) and
(h). RSE licensees are required to satisfy risk management requirements
and requirements for adequate resources (human, technological and
financial) imposed under the SIS Act and SIS Regulations. These
requirements are not, however, designed to ensure that adequate resources
or risk management systems are maintained in respect of the
non-superannuation business of RSE licensees that also manage registered
managed investment schemes. In particular, the Review recommended
(recommendation 6.1(e)) that dual regulated entities meet Corporations
Act financial resource requirements.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
3.7 To address this gap in regulatory coverage, the Corporations Act
will be amended so that RSE licensees that also manage
non-superannuation registered managed investment schemes must comply
with Corporations Act requirements to have available adequate resources
and have adequate risk management systems. For these entities, the
requirement to have adequate risk management systems will not include
risks that relate solely to the operation of an RSE by the entity.
Summary of new law
3.8 The Bill requires RSE licensees that are also responsible entities
of registered managed investment schemes to comply with Corporations
Act requirements on adequate resources and risk management systems.
Comparison of key features of new law and current law
New law Current law
RSE licensees that are also RSE licensees that are also
responsible entities for registered responsible entities for registered
managed investment schemes must managed investment schemes are
comply with Corporations Act exempt from Corporations Act
requirements to have available requirements to have available
adequate resources and have adequate adequate resources and have adequate
systems for managing their risks, risk management systems.
except for those risks that relate
solely to the operation of an RSE by
these entities.
Detailed explanation of new law
Requirement to have adequate resources
3.9 Existing paragraph 912A(1)(d) requires financial services
licensees (which include the responsible entities of non-superannuation
registered managed investment schemes) to have adequate resources
(including financial, technological and human resources), unless they are
a body regulated by APRA.
3.10 The effect of the exemption for APRA-regulated bodies is that
an RSE licensee which also manages one or more non-superannuation
registered managed investment schemes only has to satisfy requirements
for adequate resources (human, technological and financial) imposed
20
Dual regulated entities
under the SIS Act and SIS Regulations. These requirements are not
designed to ensure that adequate resources are maintained in respect of the
non-superannuation business of the entity that is the RSE licensee.
Removing the exemption from the Corporations Act adequate resources
requirement for these entities will address this regulatory gap. [Schedule 1,
item 4, paragraph 912A(1)(d) and item 6, subsections 912A(4) and (6)]
Requirement to have adequate risk management systems
3.11 Existing paragraph 912A(1)(h) requires financial services
licensees to have adequate risk management systems, unless they are a
body regulated by APRA. An RSE licensee which also manages
registered managed investment schemes only has to satisfy risk
management requirements imposed under the SIS Act. As above, these
requirements are focused on the risks relating to the RSE business and do
not fully capture risks relating to the non-superannuation business of the
entity that is the RSE licensee. Amending the Corporations Act to require
these entities to have adequate systems for managing their risks, except
for those that relate solely to the operation of an RSE by these entities will
address this regulatory gap. [Schedule 1, item 5, paragraph 912A(1)(h) and item 6,
subsections 912A(5) and (6)]
3.12 The Bill does not alter the arrangements for APRA-regulated
bodies other than RSE licensees that are also responsible entities of
registered managed investment schemes.
Application and transitional provisions
3.13 The obligations to comply with Corporations Act requirements
for adequate resources and risk management systems will begin on
1 July 2015.
21
Actions for breaches of directors' duties
Outline of chapter
4.1 Schedule 1 to this Bill amends the SIS Act to :
· require persons who have suffered loss or damage due to a
director's contravention of duties under the SIS Act to seek
leave from the court before bringing an action against a
director;
· extend the availability of the legal defence for trustees and
directors in court proceedings to proceedings involving
breaches of MySuper obligations; and
· amend the defences to actions for loss or damage suffered
as a result of the making of an investment or the
management of reserves to take into account the relevance
of the breach of covenants or MySuper obligations to the
loss or damage suffered.
4.2 All references in this Chapter are to the SIS Act unless otherwise
stated.
Context of amendments
4.3 The Trustee Obligations and Prudential Standards Act separately
identifies the duties of directors of superannuation funds and imposes
extra obligations on directors and trustees of funds with MySuper
products.
4.4 The aim of the changes, which will apply from 1 July 2013, is to
improve the governance of superannuation funds. This was in response to
concerns raised in the Review that accountabilities in the system had
become obscured by the corporate trustee structure, and that there have
been difficulties for trustees and their directors in understanding what is
expected of them.
4.5 While the superannuation industry has supported heightened
obligations and the need for improved accountability of directors,
23
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
concerns have been raised about the potential for frivolous and vexatious
legal action being brought against directors.
Summary of new law
4.6 This Bill will require persons who have suffered loss or damage
due to a director's contravention of duties under the Act to seek leave
from the court before bringing action against directors.
4.7 In deciding whether to grant an application for leave, the court
must take into account whether the applicant is acting in good faith and
there is a serious question to be tried.
4.8 The Bill also extends the defence of having acted with
reasonable precaution in section 323 so it is available to directors and
trustees who are facing allegations of a breach of their MySuper duties.
Comparison of key features of new law and the position under
the Trustee Obligations and Prudential Standards Act
New law Position under the Trustee
Obligations and Prudential
Standards Act
Before being able to bring an action A person who suffers a loss or
against an individual director for a damage as a result of a director's
breach of a director's covenant or breach of a covenant or MySuper
MySuper obligation, a person must be obligations may bring an action
granted leave by the court. against a director or trustee.
In making its decision, the court will
take into account whether the person
bringing the action is acting in good
faith and whether there is a serious
question to be tried.
Trustees and directors have a defence Trustees and directors have a defence
to a contravention of a covenant or to a contravention of a covenant, but
MySuper obligation if the not a MySuper obligation, if the
contravention was due to reasonable contravention was due to reasonable
mistake or due to the fault of another mistake or due to the fault of another
and they acted with reasonable and they acted with reasonable
precaution and applied due diligence. precaution and applied due diligence.
In order to rely on the defence in In order to rely on the defence in
subsection 55(5) in relation to subsection 55(5) in relation to
investment loss, trustees and directors investment loss, trustees and directors
24
Actions for breaches of directors' duties
New law Position under the Trustee
Obligations and Prudential
Standards Act
must show they have complied with must show they have complied with
the covenants and MySuper duties in the covenants and MySuper duties in
relation to each act, or failure to act, relation to the investment.
that resulted in the loss or damage.
In order to rely on the defence in
Similarly, in order to rely on the
subsection 55(6) in relation to loss
defence in subsection 55(6) in
arising from the management of a
relation to loss arising from the
reserve, the trustees and directors
management of a reserve, trustees and
must show they have complied with
directors must show they have
the covenants and MySuper duties in
complied with the covenants and
relation to the management of the
MySuper duties in relation to each
reserves.
act, or failure to act, that resulted in
the loss or damage.
Detailed explanation of new law
Requirement to seek leave for pursuing a breach of directors' duties
4.9 If a person seeks to bring an action against a director under
subsection 55(3) for loss or damage due to contravention by a director of
their duties in section 52A, or prescribed under section 54A, that person
needs to seek leave from the court. [Schedule 1, item 65, subsection 55(3) and
item 66, subsection 55(4A)]
4.10 Leave to commence an action against a director under
subsection 55(3) for loss or damage as a result of a breach of director
duties may be sought at any time within 6 years after the day on which the
alleged breach occurred. The court may specifiy a period within which
the action may be brought. [Schedule 1, item 66, subsections 55(4B)and 55(4D)]
4.11 Before granting leave, the court will take into account whether
the person is bringing the action against the director in good faith and in
bringing the action there is a serious question to be tried. [Schedule 1,
item 66, subsection 55(4C)]
4.12 The Bill also inserts relevant headings in section 55. [Schedule 1,
item 62, before subsection 55(1), item 63 before subsection 55(2), item 64 before
subsection 55(3) and item 67, before subsection 55(5)]
25
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Requirement to seek leave for pursuing a breach of directors' MySuper
obligations
4.13 The MySuper obligations for directors are contained in section
29VO and require directors of funds with a MySuper product to exercise a
reasonable degree of care and diligence to ensure that the corporate trustee
carries out its MySuper obligations.
4.14 The Bill introduces a requirement to seek leave from the court
where a person seeks to bring an action against a director under
subsection 29VPA(4) for loss due to contravention by a director of their
MySuper obligations at section 29VO. [Schedule 1, item 43, section 29VPA]
4.15 In deciding whether to grant leave, the court will take into
account two things. The first is whether the person is bringing the action
against the director in good faith and the second is that in bringing the
action, there is a serious question to be tried. [Schedule 1, item 43,
subsection 29VPA(5)]
4.16 Leave to commence an action against a director for breach of a
MySuper obligation under the Act may be sought at any time within
six years after the day on which the alleged breach occurred. The court
may specifiy a period within which the action may be brought. [Schedule 1,
item 43, subsections 29VPA(4) and (6)]
4.17 In granting leave to bring such an action, the court may specify a
period within which the action may be brought. [Schedule 1, item 43,
subsection 29VPA(6)]
4.18 The existing provisions for members taking action against
trustees for breach of their MySuper obligations remain. [Schedule 1,
item 43, section 29VP]
4.19 The MySuper obligations for trustees are contained in
section 29VN and include a requirement for trustees to promote the
financial interests of the beneficiaries of the fund that hold the MySuper
product. For clarity, this requirement applies to the financial interests of
the membership of the MySuper product as a whole.
Defences for a breach of MySuper obligations
4.20 The Bill expands the defence in section 323 to cover MySuper
obligations.
4.21 Directors will be able to utilise the defence where a person
brings legal action under subsection 29VPA(3) for a breach of the
director's MySuper obligations if their contravention was due to
26
Actions for breaches of directors' duties
reasonable mistake, reasonable reliance on information supplied by
another, or the contravention was due to the act of another, an accident or
something outside of the director's control. Where a director or trustee
seeks to rely on one of last three reasons to explain contravention, then it
must also be demonstrated that the director took reasonable precautions
and exercised due diligence to avoid the contravention. [Schedule 1,
item 114, paragraph 323(1)(b)]
4.22 Access to the defence in section 323 will also be expanded to
cover trustees MySuper obligations in subsection 29VP(3). [Schedule 1,
item 114, paragraph 323(1)(b)]
Defences to actions for loss or damage suffered as a result of the making
of an investment or the management of reserves
4.23 The Bill amends the defences to actions for loss or damage
suffered as a result of the making of an investment or the management of
reserves so that the test will be whether the defendant complied with the
covenants relevant to the act or omission that caused the loss or damage.
4.24 A trustee or director will be able to rely upon a defence to an
action for loss or damage suffered as a result of the making of an
investment where they can establish compliance with all of the covenants
and MySuper obligations that apply in relation to each act, or failure to
act, that resulted in the loss or damage. This creates a requirement for
there to be a nexus between the act or omission of the director or trustee
and the loss or damage which occurred. [Schedule 1, item 68, subsection 55(5)]
4.25 A similar change has been made in relation to the defence for
loss or damage suffered as the result of the management of any reserves,
so that the trustee or director will need to establish compliance with all of
the covenants and MySuper obligations that apply in relation to each act,
or failure to act, that resulted in the loss or damage. [Schedule 1, item 69,
subsection 55(6)].
Application and transitional provisions
4.26 The changes to the defence for a breach of MySuper obligations
commences on 1 July 2013.
4.27 The remaining provisions commence on 1 July 2013,
immediately after the Trustee Obligations and Prudential Standards Act.
27
Other measures and consequential
amendments
Outline of chapter
5.1 This Chapter outlines the remaining changes contained in the
Bill. All legislative references in this chapter are to the SIS Act unless
otherwise stated.
Context of amendments
5.2 The Review recommended the removal of restrictions on
director voting (recommendation 2.8) and clarifying the definition of
`superannuation contribution' in the Corporations Act
(recommendation 6.12).
5.3 As this Bill is the fourth tranche of legislation implementing the
MySuper and governance elements of the Stronger Super reforms, it also
includes changes to reflect requirements that will now be covered by
APRA's prudential standards, as well as other consequential amendments.
Summary of new law
5.4 The Bill ensures that directors of corporate trustees (and
individual trustees) are only prohibited from voting on any company
business in limited circumstances, including where a conflict of interest
arises. The Bill also clarifies the definition of `superannuation
contribution' to ensure defined benefits are treated consistently with
superannuation contributions in the event of an insolvency.
5.5 It also makes consequential amendments, including in relation to
acting trustees, administration fee discounts, fitness and propriety and
auditor and actuary requirements, the First Home Saver Accounts
Act 2008 (FHSA Act) and the Corporations Act.
29
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Comparison of key features of new law and current law
New law Current law and the position in the
MySuper Core Provisions Bill
Removing voting limitations
Provisions in a fund's governing rules A director of a corporate trustee may
that prohibit a director or individual be prohibited from voting on
trustee from voting on a matter company business in the event of a
relating to the superannuation fund conflict of duty or interest.
(subject to certain exceptions In addition, nothing in the Act
including where a conflict of interest prevents a fund's governing rules
or duty exists) will be made from prohibiting directors from
ineffective. voting on company business in other
circumstances. Similarly nothing in
the Act prevents the governing rules
from prohibiting an individual trustee
from voting on business in other
circumstances as well.
Definition of `superannuation
contribution'
For the avoidance of doubt, the `Superannuation contribution' is
definition of `superannuation defined in subsection 556(2) of the
contribution' in the Corporations Act Corporations Act.
is clarified to ensure it includes
defined benefits.
Consequential -- First Home Saver
Accounts Act 2008
Consequential amendments to the The FHSA Act contains references to
FHSA Act, including amendments to provisions of the Act prior to
reflect the changes to the covenants legislation implementing the
and introduction of prudential Government's Stronger Super
standards as a result of the Trustee reforms, including the Trustee
Obligations and Prudential Standards Obligations and Prudential Standards
Act. Act.
Consequential -- MySuper
Authorisation for a particular Under the MySuper Core Provisions
MySuper product given to an RSE Bill, authorisation for a MySuper
licensee will continue in effect where product is given to the RSE licensee
an acting trustee is appointed. of a fund. Where an acting trustee is
Similarly, acting trustees are allowed appointed, this would constitute a
to operate eligible roll over funds in new RSE licensee who is not
place of the trustee who has been authorised to offer the MySuper
removed. product.
Where a trustee offers a tailored Under the MySuper Core Provisions
MySuper product, the trustee must Bill, a trustee must place a member's
direct all contributions from members contributions into a MySuper product
30
Other measures and consequential amendments
New law Current law and the position in the
MySuper Core Provisions Bill
eligible to hold a beneficial interest in unless the member has directed the
that tailored MySuper product into trustee that all or part of their
that tailored MySuper product, unless contributions be invested in one or
the member has directed the trustee more choice products.
that all or part of their contributions
be invested in one or more other
investment options.
A trustee cannot charge different Under the MySuper Core Provisions
administration fees to members of a Bill, a trustee may charge a different
tailored large employer MySuper administration fee with respect to
product. employees of a particular employer.
The RSE licensee will have to pay Under the MySuper Core Provisions
contributions to a MySuper product Bill, the RSE licensee is to pay
unless the member has directed the contributions to a MySuper product
RSE licensee to pay the contributions unless the member has directed the
into one or more specified investment RSE licensee to pay the contributions
options. to a specified choice product.
The switching advice requirements in The switching advice requirements in
the Corporations Act apply where the Corporations Act apply where
advice is given to reduce or dispose advice is given to reduce, replace or
of interest in a MySuper product. dispose of an interest in a financial
product.
Where a MySuper member has died, Under the MySuper Core Provisions
the trustee will be able to move the Bill, it is not possible to move
member's interest in a MySuper MySuper amounts without written
product to another class of beneficial consent of the member.
interest in the fund.
Consequential -- Fit and proper
Reference to the criteria for fitness The Court can disqualify an
and propriety, as set out in the individual if it is not satisfied that the
prudential standard are inserted into individual is a fit and proper person.
certain SIS Act provisions. These `Fit and proper' is not defined in the
include: provisions relating to Act.
disqualification (sections 126H and
130D), to enable the Court to take
those criteria into account; provisions
relating to the removal of member
representatives and independent
trustees (sections 107 and 108); and
certain other provisions concerning
the removal or appointment of
persons (sections131AA and 134) and
referral to a professional association
(section 131A).
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
New law Current law and the position in the
MySuper Core Provisions Bill
Consequential -- Auditor and
actuary
APRA's prudential standard in Audit and record-keeping
relation to the audit of RSEs will requirements for RSEs (and SMSFs)
determine eligibility criteria for, and are currently set out in the Act. The
functions and duties of, auditors and Act currently defines `approved
actuaries. auditor' and `actuary'.
As a result consequential
amendments are made to the Act to:
differentiate between auditors and
actuaries of RSEs and SMSFs so that
(among other things) APRA can
determine audit requirements for
RSEs in a prudential standard;
separate out the auditing and
record-keeping requirements in
relation to RSEs and SMSFs; allow
APRA to determine eligibility criteria
for auditors and actuaries who
perform work in relation to RSEs;
and make consequential amendments
to other provisions relating to
auditors and actuaries to reflect the
fact that RSE licensees and auditors
and actuaries will be required to
comply with the prudential standards.
Consequential--MySuper Core
Provisions Act
APRA will have the ability to assess The enhanced trustee obligations in
applications for MySuper against the relation to MySuper products will
enhanced trustee obligations for come into effect on 1 July 2013.
MySuper products based on expected
compliance with those obligations.
Detailed explanation of new law
Removing voting limitations
5.6 The Act will be amended to ensure directors of corporate
trustees (and individual trustees) are only prohibited from voting on fund
business when the prohibition falls within a relevant exception, including
where it relates to a conflict of interest.
32
Other measures and consequential amendments
5.7 These amendments provide that a provision in the governing
rules of an RSE is void to the extent that it precludes a director of a
corporate trustee or an individual trustee from voting on a matter relating
to the fund. [Schedule 1, item 73, subsections 68C(1) and (2) and 68D(1) and (2)]
5.8 Exceptions to this general rule exist where the person has a
material personal interest or a conflict of duty or interest. [Schedule 1,
item 73, subsections 68C(3) and 68D(3)]
5.9 The changes do not over-ride the requirements in Part 9 of the
Act. [Schedule 1, item 73, paragraphs 68C(3)(e) and 68D(3)(e)]
5.10 The amendments apply from 1 July 2013.
Definition of `superannuation contribution'
5.11 The definition of `superannuation contribution' in the
Corporations Act is clarified to ensure it includes defined benefits.
[Schedule 1, item 2, subsection 556(2)]
5.12 Both funds and schemes including defined benefits are covered
in the definition of `superannuation contribution' at subsection 211(3) of
the Corporations Act. [Schedule 1, item 1, paragraph 211(3)(a)]
5.13 The Bill makes the same amendment at paragraph 596AA(2)(b)
to update the reference to include fund or scheme, including defined
benefit. [Schedule 1, item 3, paragraph 596AA(2)(b)]
5.14 The amendments apply to contributions paid or payable on or
after 1 July 2013. [Schedule 1, item 12, section 1538A]
Consequential amendments to the First Home Saver Accounts Act 2008
5.15 Consequential amendments are made to the FHSA Act as a
result of changes made in the MySuper Core Provisions Bill, the Trustee
Obligations and Prudential Standards Act and the Further MySuper and
Transparency Measures Bill.
5.16 Section 18 of the FHSA Act is amended to include a definition
of `responsible officer'. [Schedule 1, item 13, section 18]
5.17 The Bill repeals existing section 93 of the FHSA Act and
replaces the existing capital requirements for applicants seeking
authorisation as an FHSA provider with a requirement that an applicant
satisfy the financial requirements set out in prudential standards under the
FHSA Act. The existing capital requirements in the FHSA Act are based
on the capital requirements for the trustees of public offer superannuation
33
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
funds that were repealed by the Trustee Obligations and Prudential
Standards Act. [Schedule 1, item 14, section 93]
5.18 The amendment to section 93 of the FHSA Act (item 14 of
Schedule 1 to the Bill) applies in relation to: RSE licensees who apply to
be authorised as an FHSA provider on or after the day on which that item
commences; and RSE licensees that are authorised as FHSA providers,
whether before, on or after the day on which that item commences.
[Schedule 1, item 125]
5.19 Subsection 114(2) of the FHSA Act is amended to apply the
provisions of the SIS Act to persons involved in the management of an
FHSA provider in the same way that the SIS Act provisions apply to a
responsible officer of an RSE licensee that is a trustee of a public offer
superannuation fund. [Schedule 1, item 15, paragraph 114(2)(aa)]
5.20 The amendments to sections 18, 93 and subsection 114(2) of the
FHSA Act will commence on 1 July 2013.
5.21 The Bill amends paragraph 115(b) of the FHSA Act and inserts
a new paragraph 115(ba) to include Parts 2C, 3A and 3B of the SIS Act,
which deal respectively with MySuper products, prudential standards and
data and payment regulations and standards, in the list of SIS Act
provisions that do not apply for the purposes of the FHSA Act. The
inclusion of Parts 3A and 3B will commence on Royal Assent, while the
inclusion of Part 2C will commence on the later of the day after this Act
receives Royal Assent or the day after commencement of the
Superannuation Legislation Amendment (MySuper Core Provisions)
Act 2012. [Schedule 1, item 16, paragraph 115(b), item 17, paragraph 115(ba), and
item 18, paragraph 115(b)]
5.22 Paragraph 115(d) of the FHSA Act is amended to include
subsection 52(7) and section 55B of the SIS Act in the list of SIS Act
provisions that do not apply for the purposes of the FHSA Act.
Subsection 52(7) of the SIS Act deals with the requirement for
superannuation fund trustees to comply with insurance covenants.
Section 55B of the SIS Act requires the governing rules of superannuation
funds to be read to permit certain elections. The inclusion of
subsection 52(7) will commence on 1 July 2013, while the inclusion of
section 55B will commence on the later of the day after this Act receives
Royal Assent or the day after commencement of the Superannuation
Legislation Amendment (MySuper Core Provisions) Act 2012. [Schedule 1,
items 19 and 20, paragraph 115(d)]
5.23 The Bill amends paragraph 115(g) of the FHSA Act to include
Part 11A of the SIS Act, which deals with fee rules, in the list of SIS Act
provisions that do not apply for the purposes of the FHSA Act. The
34
Other measures and consequential amendments
inclusion of Part 11A will commence on the later of the day after this Act
receives Royal Assent or the day after commencement of the
Superannuation Legislation Amendment (MySuper Core Provisions)
Act 2012. [Schedule 1, item 21, paragraph 115(g)]
5.24 Paragraph 115(k) of the FHSA Act is amended to include
Parts 33 and 34 of the SIS Act, which deal respectively with transitional
arrangements for MySuper products and eligible rollover funds, in the list
of SIS Act provisions that do not apply for the purposes of the FHSA Act.
The inclusion of Part 33 will commence on the later of the day after this
Act receives Royal Assent or the day after commencement of the
Superannuation Legislation Amendment (MySuper Core Provisions)
Act 2012, while the inclusion of Part 34 will commence on 1 July 2013.
[Schedule 1, items 22 and 23, paragraph 115(k)]
5.25 The Bill amends section 116 of the FHSA Act to treat references
to prudential standards in applied provisions of the SIS Act as references
to prudential standards made under the FHSA Act. [Schedule 1, item 24,
paragraph 116(ba)]
5.26 Subsection 119(3) of the FHSA Act is amended to replace the
reference to paragraph 146(1)(d) of the SIS Act with a reference to
paragraph 146(d) of the SIS Act. [Schedule 1, item 25, subsection 119(3)]
5.27 The amendments to section 116 and subsection 119(3) of the
FHSA Act will commence on the day after this Act receives Royal
Assent.
5.28 The Bill repeals subsections 120(2) to 120(7) of the FHSA Act
and substitutes a new subsection 120(3). This reflects changes to the
investment covenants which superannuation fund trustees must comply
with as a result of the Trustee Obligations and Prudential Standards Act.
[Schedule 1, item 26, subsection 120(3)]
5.29 The Bill also introduces new subsections 120(2) and (4) of the
FHSA Act so that references to a prudent superannuation trustee in
paragraph 52(2)(b) of the SIS Act and to a prudent superannuation entity
director in paragraph 52A(2)(b) of the SIS Act are references,
respectively, to a prudent FHSA provider and a prudent director of an
FHSA provider. [Schedule 1, item 26, subsections 120(2) and (4)]
5.30 The amendments to section 120 of the FHSA Act will
commence on 1 July 2013.
35
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Consequential amendments -- MySuper
5.31 Except where identified separately below, the amendments will
apply from the day after Royal Assent unless relevant items in the
MySuper Core Provisions Bill have not yet commenced. In the latter
case, as the amendments are made to provisions inserted or changed by
the MySuper Core Provisions Bill, they will apply from the day after the
relevant items in the MySuper Core Provisions Act commence. This will
ensure that the amendments do not apply retrospectively or prior to the
MySuper Core Provisions Act commencing.
Acting trustees
5.32 In some cases, APRA may remove or suspend a trustee. Where
the suspended or removed trustee was authorised for a particular MySuper
fund that authorisation will continue to be effective for the acting trustee.
Section 139A facilitates the appointment of acting trustees and allows
contributions to continue to be made to the fund. This continuation of
authorisation is limited to the time the RSE licensee is the acting trustee.
An acting trustee must make the elections in sections 29SAA, 29SAB and
29SAC (which includes the election to transfer accrued default amounts)
before it will be able to be appointed as an acting trustee. [Schedule 1,
item 110, section 139A]
5.33 This change applies from 1 July 2013.
5.34 New section 139B allows acting trustees to operate eligible roll
over funds in place of the trustee who has been removed, where they have
made the elections in section 242B (to transfer amounts if authorisation is
cancelled) and 242C (not to charge members for payment of conflicted
remuneration). [Schedule 1, item 111, section 139B]
5.35 This change applies immediately after the commencement of
Schedule 7 to the Superannuation Legislation Amendment (Further
MySuper and Transparency Measures) Act 2012.
5.36 Paragraph 29U(2)(b) omits `the RSE licensee was authorised' to
substitute it with `authority was given'. This amendment recognises that
an acting trustee may be appointed to a fund and will have authority to
operate a MySuper product in the fund that the previous trustee was
authorised for although the acting trustee itself had not received
authorisation from APRA. [Schedule 1, item 40, paragraph 29U(2)(b)]
Large employer exemption
5.37 Where a trustee is authorised to offer a tailored MySuper
product for employees of a particular employer, contributions made by the
36
Other measures and consequential amendments
employer for those employees must be paid into that tailored MySuper
product unless the employee has directed the trustee in writing that all or
part of their contributions are to be invested in one or more investment
options. A contravention of subsection 29WB(2) is an offence of strict
liability. This ensures that employees appropriately have their
contributions placed in the MySuper product tailored for their benefit,
rather than any other MySuper product offered by the trustee. This is to
prevent contributions of a sub-set of employees being paid into a tailored
MySuper product while other employees of the same employer have their
contributions paid into a generic MySuper product. [Schedule 1, item 47,
section 29WB]
5.38 References are updated to include both sections 29WA and
29WB. [Schedule 1, item 38, paragraph 29T(1)(j) and item 41, paragraph 29U(2)(e)]
Administration fee exemption
5.39 Section 29VB of the MySuper Core Provisions Bill allows RSE
licensees to charge a different administration fee to MySuper members
who are employees of a particular employer. This Bill prevents different
administration fees being charged in relation to a tailored large employer
product. For example, the employees of an associate of the large
employer will not be able to have a different administration fee to the
employees of the large employer. For these MySuper products, all
members of the product must be charged the same administration fee.
[Schedule 1, item 42, paragraph 29VB(1)(aa)]
Obligation to pay contributions to a MySuper product
5.40 The MySuper Core Provisions Bill requires an RSE licensee to
pay contributions to a MySuper product unless the member has directed
the RSE licensee to pay the contributions to a specified choice product.
This provision is amended so that an RSE licensee must pay contributions
to a MySuper product unless the member has directed the RSE licensee to
pay the contributions into one or more specified investment options.
[Schedule 1, item 44, paragraph 29WA(1)(c) and item 46, subsection 29WA(4)]
5.41 This amendment clarifies that it is necessary for a member to
make a direction to have contributions placed in a particular investment
option, and it is not sufficient that the member has joined the fund by
selecting one product offered by the fund. This is necessary because a
product offered by a superannuation fund is one way in which a member
may have joined the fund and does not represent a decision to have
contributions made to an investment option other than a MySuper product.
However, to be clear, this amendment does not prevent a member
providing a direction to pay contributions to a MySuper product.
37
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
5.42 Subsection 29WA(2) is amended to omit `election has been
made' to substitute it with `direction has been given'. [Schedule 1, item 45,
subsection 29WA(2)]
Switching advice
5.43 Section 947D of the Corporations Act requires a provider of
financial advice that recommends a client replace a financial product with
another financial product to include certain information in their Statement
of Advice to their client, including a description of the charges that the
client will incur, any benefits they will receive from switching financial
products and any other significant consequences for the client (this is
referred to as switching advice). [Schedule 1, item 7, subsection 947D(1)]
5.44 A MySuper product and investment options of a choice product
can be offered to members within a single financial product. Therefore,
subsection 947D(1) of the Corporations Act is amended to ensure that
these switching advice requirements apply where advice is given to reduce
or dispose of an interest in a MySuper product. [Schedule 1, item 8,
section 947D]
5.45 The amendments will apply in relation to personal advice that is
given on or after commencement. [Schedule 1, item 12, section 1538B]
Deceased members
5.46 The SIS Act will be amended to permit a member's beneficial
interest in the MySuper product to be moved to another class of beneficial
interest in the fund where the member has died and the replacement meets
any criteria prescribed in the regulations. [Schedule 1, item 39,
paragraph 29TC(1)(g)]
5.47 Giving trustees discretion will mean the trustee could put the
money into a cash option such as bank deposits or Government bonds.
This could be done to reduce risk and preserve the balance accumulated
by the member until a beneficiary can be identified and the benefits paid
out, which in some cases may take several years.
5.48 The definition of `MySuper product' is inserted into
subsections 947D(5) and 1017B(9). [Schedule 1, item 8, subsection 947D(5) and
item 10, subsection 1017B(9)]
5.49 The change in relation to subsection 1017B(9) of the
Corporations Act applies immediately after the commencement of
item 1A of Schedule 1 to the Superannuation Legislation Amendment
(MySuper Core Provisions) Act 2012.
38
Other measures and consequential amendments
Validation provision
5.50 A validation provision is being included in the Bill to enable
APRA to assess applications for MySuper, taking into account expected
compliance with the MySuper provisions in this Bill that relate to: the
large employer exemption; deceased members; acting trustees; directions
relating to investment options and directors' obligations. The provision
will apply from the day this Act receives Royal Assent. [Schedule 1,
item 129]
Consequential amendments -- fit and proper requirements
5.51 The Trustee Obligations and Prudential Standards Act
introduced the power for APRA to make prudential standards.
5.52 APRA's prudential standards, including the proposed fit and
proper prudential standard, were released on 15 November 2012. The fit
and proper prudential standard will come into effect on 1 July 2013.
5.53 Trustees will be required to ensure that rules relating to the
removal of a member representative, and any independent trustees or
directors, allow the persons to be removed for failing to meet fitness and
propriety criteria set out in the prudential standards. This change is
necessary to align the appointment and removal procedures in the Act
with the requirements under the fit and proper prudential standard for RSE
licensees. [Schedule 1, item 75, subparagraph 107(2)(a)(ii)(DA) and item 76,
subparagraph 108(2)(a)(iia)]
5.54 The Court is currently able to take into account fitness and
propriety when deciding on disqualification of an individual from being or
acting as a trustee or responsible officer listed at subsection 126H(2). The
section will be amended to ensure that the Court may give consideration
to any criteria for fitness and propriety in the prudential standards which
are relevant to the trustee or responsible officer under the prudential
standards. [Schedule 1, item 77, subsection 126H(6A)]
5.55 Similarly, the Court is able to take into account fitness and
propriety in deciding whether an auditor or actuary should be disqualified
under section 130D. The section will be amended to ensure that the Court
has power to take into account relevant criteria for fitness and propriety,
as well as relevant eligibility criteria, in the prudential standards.
[Schedule 1, item 90, subsection 130D(5A)]
5.56 APRA will be able to take into account any criteria for fitness
and propriety in the prudential standards that are relevant to the
appointment of an auditor or actuary in deciding whether grounds to end
appointment are present under paragraph 131AA(2)(b). APRA's
39
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
prudential standard on fitness and propriety includes the following
criteria: competence, character, diligence, experience, honesty, integrity
and judgment to perform properly the duties of the responsible person's
position. [Schedule 1, item 95, subsection 131AA(2A)]
5.57 Under section 134, if APRA removes an RSE licensee that
comprises a group of individuals from being the trustee of a particular
RSE, but APRA is satisfied that one or more members of that group are fit
and proper, APRA may appoint those fit and proper persons to be acting
trustee. Section 134 is amended so that APRA can take into account any
relevant criteria for fitness and propriety in the prudential standards when
deciding whether to appoint these persons as acting trustee. [Schedule 1,
item 108, subsection 134(5)]
5.58 A number of consequential amendments are being made to
ensure the Act contains references to the prudential standards. [Schedule 1,
item 78, subparagraph 129(1)(a)(i), item 79, paragraph 129(1)(b), item 80,
paragraph 130(1)(b), item 81, paragraph 130A(ba), item 82, section 130A , item 83,
subparagraphs 130C(1)(a)(i) and (ii), item 84, paragraph 130C(1)(b), item 86,
subparagraph 130D(4)(a)(i), item 87, subparagraph 130D(4)(a)(iii), item 89,
paragraph 130D(5)(a), item 91, paragraph 130D(6)(a), item 94, paragraph 131AA(2)(c),
item 97, subparagraph 131A(1)(a)(i), and item 98, subparagraph 131A(1)(a)(iii)]
5.59 The amendments apply from 1 July 2013.
Consequential amendments -- auditors and actuaries
5.60 The Trustee Obligations and Prudential Standards Act
introduced the power for APRA to make prudential standards. APRA has
made prudential standards dealing with the conduct of audits of RSEs and
setting out eligibility requirements for auditors and actuaries of RSEs. As
a result of this, a number of consequential amendments to the Act are
required.
5.61 APRA's prudential standard on audit and related matters was
released on 15 November 2012. The commencement date for this
prudential standard will be 1 July 2013.
5.62 In addition to consequential changes as a result of the
introduction of prudential standards, many of the amendments relating to
auditors and actuaries are largely as a consequence of the separation of the
auditor provisions applying to RSEs and SMSFs. This will require
changes to definitions in the Act and also amendments to Part 4.
5.63 This Bill amends existing section 35A (accounting records of all
regulated superannuation entities, including SMSFs) to substitute a new
Division 2 which will comprise new sections 35A, 35AB, 35AC and
35AD. These provisions will only apply to RSEs. The new section 35A
40
Other measures and consequential amendments
will therefore deal with accounting records of RSE licensees only. The
SMSF accounting record provisions will be contained in section 35AE in
Division 3 and section 35C will be amended so that it only applies to
SMSFs. The Bill does not affect the operation of the existing provisions
relating to SMSFs. [Schedule 1, item 48, before section 35 and item 49,
sections 35A, 35AB, 35AC and 35AD]
5.64 Non-compliance with subsections 35A(1),(2),(4) and (5) will be
offences of strict liability. Subsections (1) and (2) are not new strict
liability offences as the same treatment is afforded to the existing
subsections 35A(1) and (2). A strict liability offence is necessary as the
consequences of contravening this requirement significantly impacts
APRA's ability to monitor superannuation funds. The consequence of
hindered auditing could have a detrimental impact on tracking financial
decisions which impacts the fund's members. It is a reasonable
expectation that records are kept in an appropriate manner for audit.
Subsections (4) and (5) are new strict liability offences. A strict liability
offence is necessary for failure of a trustee of an RSE to notify APRA of
the address where records are kept as without this information, APRA is
unable to verify accounting records. [Schedule 1, item 49, subsection 35A(8)]
5.65 New section 35AB gives auditors of RSEs the power to seek, in
writing, documents pertaining to operations of the entity or the RSE
licensee of the entity. This new section reflects the existing situation in
subsection 35C(2), which will be amended so that it only applies to
SMSFs. [Schedule 1, item 49, section 35AB and item 57, subsection 35C(2)]
5.66 Non-compliance with the new subsection 35AB(1) is a strict
liability offence, as it is for trustees of RSEs and SMSFs under the current
subsection 35C(2). The audit of superannuation entities provides
beneficiaries with a level of assurance that the claimed assets will be
available to meet their retirement needs. A person who is appointed as an
auditor must perform the functions and duties that are set out in the RSE
licensee law that are relevant to their employment as an auditor. The
auditor has a limited time in which to prepare the audit report. Failure by
the trustee to provide necessary records within the time specified in the
request would undermine confidence in the audit process. The
consequence of hindered auditing could have a detrimental impact on
tracking financial decisions which impacts the fund's members, thus it is
appropriate that this remain a strict liability offence in section 35AB.
[Schedule 1, item 49, subsection 35AB(3)]
5.67 In addition to non-compliance with subsection 35AB(1) being
an offence of strict liability, section 126L of the SIS Act will apply to the
obligation to provide a document under this section. Section 126L
provides that a person is not entitled to refuse to comply with a
requirement under the Act to produce books or information on the ground
41
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
that this might make the person liable to a penalty by way of
disqualification, and the material produced may be admissible in
disqualification proceedings. This is necessary for the same reason a strict
liability offence is necessary: that the required records are essential to the
audit process which is to ensure efficient functioning of the
superannuation fund in accordance with the law.
5.68 New section 35AC will apply if an auditor of an RSE is required
to be appointed under the prudential standards, or is otherwise required or
permitted to be appointed or perform a function or duty under the RSE
licensee law. The section provides that the auditor must meet eligibility
criteria specified in the prudential standards and not have been
disqualified. The auditor will be required to perform the functions and
duties of an auditor that are set out in the RSE licensee law. The RSE
licensee law includes the prudential standards. The section also clarifies
that if a person is appointed as an auditor for a specific purpose, then their
requirements under RSE licensee law only apply to the person's
appointment to the extent that obligations under RSE licensee law are
relevant to the specific appointment. APRA's prudential standard on
audit sets out relevant functions and duties of auditors. Section 35AC also
requires the trustee to make arrangements necessary to enable the auditor
to perform their functions and duties and to ensure that they are removed
if the trustee becomes aware that the auditor has ceased to meet the
relevant eligibility criteria set out in the prudential standards or has been
disqualified. [Schedule 1, item 49, section 35AC]
5.69 New section 35AD mirrors section 35AC and requires a person
who is appointed as an actuary to perform the functions and duties that are
set out in the RSE licensee law that are relevant to their employment as an
actuary. This section also allows the separation of auditor duties from
actuary duties and consequently, RSEs and SMSFs. [Schedule 1, item 49,
section 35AD]
5.70 The Court will have the power to disqualify a person if they
acted previously, or are currently acting as the auditor or actuary of an
RSE, while knowing that they did not meet the criteria set out in the
prudential standards. [Schedule 1, item 88, paragraph 130D(4)(aa)]
5.71 Paragraph 131AA(2)(ba) mirrors the changes at
paragraph 130D(4)(aa) relating to what grounds APRA may rely upon for
disqualifying an auditor or actuary. If a person has acted or is acting as an
auditor or actuary of an RSE and in addition, knew at the time he or she
was acting, that they did not meet the relevant eligibility criteria set out in
the prudential standards, APRA may give a direction requiring the trustee
to end the appointment of the person as an auditor or actuary. [Schedule 1,
item 93, paragraph 131AA(2)(ba)]
42
Other measures and consequential amendments
5.72 If a person has acted or is acting as an auditor or actuary of an
RSE and in addition, knew at the time he or she was acting that they did
not meet the relevant eligibility criteria set out in the prudential standards,
APRA may refer the details of the matter to a professional association.
[Schedule 1, item 99, paragraph 131A(1)(aa)]
5.73 Subsection 131A(1A) provides that APRA may consider any
criteria for fitness and propriety in the prudential standards when deciding
whether to refer details of a matter to a professional association. APRA
may consider any criteria for fitness and propriety that are relevant to the
auditor or actuary. [Schedule 1, item 101, subsection 131A(1A)]
5.74 Section 36 is repealed as it previously referred to RSEs
exclusively. This is no longer necessary given auditors will now need to
comply with obligations to provide reports to APRA through prudential
standards. Section 35AC now contains a requirement that all auditors
comply with the prudential standards, which form part of the RSE law.
[Schedule 1, item 61, section 36 and item 49, section 35AC]
5.75 Paragraphs 327(aa) and (b) are repealed as a consequence of the
repeal of section 36 and the amendments to section 35C. [Schedule 1,
item 115, section 327]
5.76 `Division 3 -- Obligations for self managed superannuation
funds' and section 35AE are inserted by the Bill. This outlines the type of
accounting records SMSFs must keep and mirrors section 35A which now
applies only to RSEs. Non-compliance with new section 35AE is not a
new strict liability offence as the same treatment continues to apply under
section 35A. A strict liability offence is necessary as the consequences of
contravening this requirement and hindering auditing could have a
detrimental impact on tracking financial decisions. It is a reasonable
expectation that records are kept in an appropriate manner for audit.
[Schedule 1, item 49, section 35AE and item 49, section 35A]
5.77 The Bill repeals the definition of `approved auditor' to substitute
it with `superannuation auditor' which covers both an `RSE auditor' and
an `approved SMSF auditor'. [Schedule 1, items 30, 34 and 37, subsection 10(1)]
5.78 Item 53 omits the term `approved auditor' and replaces it with
`approved SMSF auditor'. This change in use of terms is due to the repeal
of the definition of `approved auditor' in this Bill and the use of the term
`approved SMSF auditor' in the Superannuation Laws Amendment
(Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012
which was introduced on 19 September 2012. [Schedule 1, item 53,
subsection 35C(1)]
5.79 The Bill omits an `approved auditor (other than an approved
SMSF auditor) or actuary' to substitute it with `an RSE auditor or a
43
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
superannuation actuary'. This change is necessary to reflect the repeal of
the term `approved auditor' in this Bill. [Schedule 1, item 96,
subsection 131A(1)]
5.80 The Bill omits a reference to `approved auditor' to replace it
with `auditor' at paragraphs 131AA(1)(a), 131AA(2)(a) and
subsection 130D(3). This reflects the repeal of the term `approved
auditor' in this Bill. [Schedule 1, item 92, paragraphs 131AA(1)(a) and 131AA(2)(a)
and item 85, subsection 130D(3)]
5.81 The Bill repeals the definition of `actuary' to substitute it with
specific definitions of `RSE actuary' and `SMSF actuary' and also
`superannuation actuary' which covers both RSE and SMSF actuaries.
[Schedule 1, items 29, 33, 35 and 36, subsection 10(1) and item 105,
paragraphs 131B(1)(a) and (b)]
5.82 Paragraph 131A(1)(b) omits `an approved auditor of a
superannuation entity that is not a self managed superannuation fund, or to
be an actuary', to substitute it with `an RSE auditor or a superannuation
actuary'. This reflects the repeal of the term `approved auditor'.
[Schedule 1, item 100, paragraph 131A(1)(b)]
5.83 Amendments are required to remove references to the term
`approved auditor' which this Bill repeals. Amendments are also required
to reflect the new terms inserted in the definitions in subsection 10(1).
[Schedule 1, item 102, subsection 131A(2), item 103, subsection 131A(3), item 104,
subsection 131A(4), item 106, paragraph 131B(2A)(a), and item 107,
paragraph 131B(2A)(b)]
5.84 The section 35B heading is repealed to substitute it with `Audit
of accounts and statements' which removes the previous reference in the
heading to all superannuation entities. The heading `Audit of accounts
and statements' is repealed in section 35C, and the section 35D heading is
also repealed to remove the reference to SMSFs. [Schedule 1, item 51, section
35C, item 50, section 35B and item 60, section 35D]
5.85 The Bill inserts a specific reference to SMSFs after
`superannuation entity' at subsection 35C(1) which captures the intention
of this provision to only apply to SMSFs. Subsection 35C(1) is also
amended to remove, ` and the RSE licensee (if any) of the entity'. The
note at subsection 35C(1) is also repealed. [Schedule 1, items 52, 54 and 55,
subsection 35C(1)]
5.86 Subsection 35C(1A) is repealed to remove the description of
what an approved auditor is not as the term `approved auditor' has been
repealed through this Bill. [Schedule 1, item 56, subsection 35C(1A)]
5.87 Subsection 35C(5) is repealed to reflect that the Division now
only relates to SMSFs. [Schedule 1, item 58, subsection 35C(5)]
44
Other measures and consequential amendments
5.88 Subsection 35C(7) is repealed to remove the offence provision
for contravening the requirement for auditors to give the report to the
trustee of the entity within the prescribed period. [Schedule 1, item 59,
subsection 35C(7)]
5.89 The amendments apply from 1 July 2013.
Additional consequential amendments
5.90 Consequential amendments to the SIS Act and Corporations Act
are required following the MySuper Core Provisions Bill, the Trustee
Obligations and Prudential Standards Act and the Further MySuper and
Transparency Measures Bill. Many of the consequential amendments
relate to APRA's ability to issue prudential standards which was legislated
in the Trustee Obligations and Prudential Standards Act.
5.91 As a consequential change resulting from the Future of Financial
Advice reforms, subsection 964(3) of the Corporations Act is amended to
specify that the reference to `custodial arrangement' in section 1012IA of
the Corporations Act is to include a reference to a direction given by a
beneficiary (under paragraph 58(2)(d) of the SIS Act) that involves an
acquisition of a particular financial product or a direction to follow an
investment strategy of the kind mentioned in section 52B of the SIS Act
that will involve an acquisition of a particular financial product.
[Schedule 1, item 9, subsection 964(3)]
5.92 The amendment to subsection 964(3) of the Corporations Act
will apply from 1 July 2013.
5.93 Subsection 1526(2) of the Corporations Act is also amended to
specify that the reference to custodial arrangement is to include a
reference to a direction given by a beneficiary. [Schedule 1, item 11,
subsection 1526(2)]
5.94 The amendment to subsection 1526(2) of the Corporations Act
will commence immediately after the commencement of Schedule 1 to the
Trustee Obligations and Prudential Standards Act.
5.95 Subsections 135(3) and (4) are added to enable acting trustees to
provide appointment information to APRA. Subsection 135(3) requires
former trustees who have been suspended or removed to do all things
reasonably practicable to assist the acting trustee in providing the
information to APRA, but only when the acting trustee gives the former
trustee notice in writing of their obligation. It is common for APRA to
have issues with former trustees facilitating the role of acting trustees due
to the difficult circumstances often surrounding the removal or suspension
of a trustee. Therefore, there is a high risk of the former trustee
45
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
obstructing, or failing to facilitate, the role of the acting trustee, thus an
offence of strict liability is required. [Schedule 1, item 109, subsections 135(3)
and (4)]
5.96 The amendments apply from 1 July 2013.
5.97 As a result of APRA's power to grant or refuse authority to an
RSE licensee to offer a MySuper product, new types of reviewable
decisions exist at subsection 344(12). [Schedule 1, items 116 and 117,
subsection 344(12)]
5.98 The new decisions are: a decision of APRA under
subsection 242F(2) to refuse to authorise an RSE licensee to operate an
APRA regulated superannuation fund as an eligible rollover fund; a
decision of APRA under subsection 242J(1) to cancel an authority to
operate a regulated superannuation fund as an eligible rollover fund; a
decision of APRA under subsection 29T(2) to refuse to authorise an RSE
licensee to offer a class of beneficial interest in a regulated superannuation
fund as a MySuper product, or a decision of APRA under subsection
29U(1) to cancel an authority to offer a class of beneficial interest in a
regulated superannuation fund as a MySuper product.
5.99 These new types of reviewable decisions are all reviewable by
any person affected. This is due to the significant impact the decisions
have on members of superannuation funds.
5.100 The paragraph (dq) definition of `reviewable decision' is
amended to take into account the repeal of section 35A in this Bill.
Paragraph (dq) now relates to a reviewable decision under
subsection 35A(3) instead of 35A(2). [Schedule 1, item 32, subsection 10(1)]
5.101 The treatment of the reviewable decisions at
paragraphs 10(1)(doa) and (dob) as being reviewable by any affected
party will commence from the day after Royal Assent unless relevant
items in the MySuper Core Provisions Bill have not commenced. In the
latter case, as the amendments are made to provisions inserted or changed
by the MySuper Core Provisions Bill they will apply from the day after
the relevant items in the MySuper Core Provisions Bill commence. These
decisions relate to authorising and cancelling MySuper authorisations.
[Schedule 1, item 116, subsection 344(12)].
5.102 The treatment of reviewable decisions at paragraph 10(1)(ua)
and (ub) as being reviewable by any affected party will commence
immediately after the commencement of Schedule 7 (which includes new
types of reviewable decisions) to the Superannuation Legislation
Amendment (Further MySuper and Transparency Measures) Act 2012.
These decisions relate to refusing to authorise, and cancelling
46
Other measures and consequential amendments
authorisation for an RSE licensee to operate a regulated superannuation
fund as an eligible roll over fund. [Schedule 1, item 117, subsection 344(12)]
5.103 Sections 389 and 390 are amended to enable regulations to be
made dealing with transitional, saving and application matters related to
amendments made by the Superannuation Legislation Amendment
(Service Providers and Other Governance Measures) Bill 2012.
[Schedule 1, item 118, paragraph 389(d) and item 119, paragraph 390(d)]
Amendments to the Superannuation Legislation Amendment (MySuper
Core Provisions) Act 2012
5.104 An application provision is inserted into the Superannuation
Legislation Amendment (MySuper Core Provisions) Act 2012 to ensure
that APRA can be satisfied, in authorising a MySuper product, that the
trustee is likely to satisfy the enhanced trustee obligations, despite those
obligations not taking effect until 1 July 2013. [Schedule 1, item 120, item 11A
of Part 2 of Schedule 1 to the Superannuation Legislation Amendment (MySuper Core
Provisions) Act 2012]
5.105 This change will commence the day this Act receives Royal
Assent.
5.106 References to section 29WA are updated to include references
to section 29WB which is inserted by this Bill. [Schedule 1, item 121,
subitem 12(3) , item 122, paragraph 12(5)(b) and item 123, item 13 of Schedule 1 to the
Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012]
5.107 These changes will apply from the day after Royal Assent unless
relevant items in the MySuper Core Provisions Bill have not yet
commenced. In the latter case, as the amendments are made to provisions
inserted or changed by the MySuper Core Provisions Bill they will apply
from the day after the relevant items in the MySuper Core Provisions Bill
commence. This will ensure that the amendments do not apply
retrospectively or prior to the MySuper Core Provisions Bill commencing.
47
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Superannuation Legislation Amendment (Service Providers and
Other Governance Measures) Bill 2012
6.1 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
6.2 This Bill makes amendments relating to: the use of specific
service providers; infringement notices; trustees providing reasons for
their decisions; an increase in the time limit for members to lodge
complaints with the Superannuation Complaints Tribunal; resource and
risk requirements for dual regulated entities; actions for breaches of
directors duties; removing voting prohibitions; clarifying the definition of
`superannuation contribution'; and consequential amendments.
Human rights implications
6.3 This Bill engages the following rights and freedoms:
· Article 14 of the International Covenant on Civil and Political
Rights (ICCPR)-Presumption of innocence; and
· Article 17 of the ICCPR- Right to privacy.
Presumption of innocence
6.4 Sections 35A, 35B and 35AE offences engage the presumption
of innocence due to the application of strict liability in these provisions.
Section 29WB and subsection 135(3) also engage this right. However, the
limitations on the presumption of innocence are reasonable, necessary and
proportionate.
49
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
6.5 The strict liability offences in subsections 35A(1) and (2),
subsection 35AB(1) and subsection 35AE(1) and (2) are all existing strict
liability offences.
6.6 Article 14(2) of the ICCPR states that everyone charged with a
criminal offence shall have the right to be presumed innocent until proved
guilty according to law. Strict liability offences are examples of
provisions which will engage the presumption of innocence in that, if the
physical elements of the offence are proven by the prosecution, the only
means by which a defendant may avoid conviction is by making out a
mistake of fact defence.
6.7 Subections 35A(1) and (2) require accounting records to be kept
by registrable superannuation entities (RSEs). This requirement reflects
the current requirement in the Superannuation Industry (Supervision) Act
1993 (SIS Act) at subsections 35A(1) and (2). Superannuation funds need
to maintain records which explain and record the financial position of the
fund. This requirement facilitates the regulator's role in prudential
regulation and is a reasonable request of superannuation entities.
6.8 Subsections 35A(4) and (5) requirements to notify APRA of the
address of accounting records are now also strict liability offences. This
reflects the importance of this information being available. Without
notification of where these documents are kept, ARPA would be limited
in its ability to follow up on specific information should trustees become
uncooperative. Subsections 35A(4) and (5) were not previously strict
liability offences under the SIS Act and non-compliance with the
requirement to provide or update an address of where accounting records
are kept could only be acted upon by APRA taking administrative action,
such as issuing a direction to comply with the requirement (where APRA
had reasonable grounds to believe the RSE was in breach). The new
treatment of subsections 35A(4) and (5) as strict liability offences will
help to ensure APRA has the available information should it need to act to
verify accounting records.
6.9 Non-compliance with the new section 35AB will be a strict
liability offence, as it is currently for trustees of RSEs and self managed
superannuation funds (SMSFs) under the existing subsection 35C(2). The
audit of superannuation entities provides beneficiaries with a level of
assurance that the claimed assets will be available to meet their retirement
needs. Further, the auditor has a limited time in which to prepare the audit
report. Failure by the trustee to provide necessary records within the time
specified in the request would undermine confidence in the audit process.
The consequence of hindered auditing could have a detrimental impact on
tracking financial decisions which impacts the fund's members, thus it is
appropriate that this remain a strict liability offence in section 35AB.
50
Statement of Compatibility with Human Rights
6.10 The new section 35AE outlines the type of accounting records
SMSFs must keep and mirrors section 35A which now applies only to
RSEs. Non-compliance with new section 35AE is not a new strict
liability offence as the existing treatment under section 35A will continue
to apply. A strict liability offence is necessary as the consequences of
contravening this requirement and hindering auditing could have a
detrimental impact on tracking financial decisions. It is a reasonable
expectation that records are kept in an appropriate manner for audit.
6.11 A strict liability offence in section 29WB ensures that
employees appropriately have their contributions placed in the MySuper
product tailored for their benefit, rather than any other MySuper product
offered by the trustee. This is to prevent contributions of a sub-set of
employees being paid into a tailored MySuper product while other
employees of the same employer have their contributions paid into a
generic MySuper product. An offence of strict liability assists in ensuring
all sub-sets of employees receive equal treatment in regards to where their
contributions are placed. This strict liability offence reflects the
importance of protecting member's interests. The consequences of a
trustee failing to comply may be reduced retirement savings.
6.12 It is common for APRA to have issues with former trustees
facilitating the role of acting trustees due to the difficult circumstances
than can surround the removal or suspension of a trustee. Therefore, there
is a risk of the former trustee obstructing, or failing to facilitate, the role of
the acting trustee, thus an offence of strict liability is required for a breach
of subsection 135(3).
6.13 The provisions of the Bill limiting the presumption of innocence
through the use of strict liability offences are reasonable, proportional and
necessary in the circumstances given the importance of transparency in
prudential regulation and for members.
6.14 In relation to the infringement notice scheme, this is introducing
a no fault offence scheme. The new infringement notice scheme being
inserted by the Bill is limited in application to existing offences which are
already strict liability offences. Broadly, these offences impinge upon
APRA's ability to administer the law in a timely, and effective manner,
therefore their limitation on the right of presumption of innocence is
reasonable and necessary to facilitate effective administration of the
SIS Act.
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Bill 2012
Right to Privacy
6.15 Section 35AB requires a trustee to provide certain documents to
an auditor upon request. These documents have the potential to contain
personal information; therefore this engages the right to privacy.
6.16 The documents that must be given to auditors include details
about the fund's finances. These details will often contain membership
numbers and balances of members' accounts.
6.17 In order for an interference with privacy not to be `arbitrary',
any interference with privacy must be in accordance with the provisions,
aims and objectives of the ICCPR and should be reasonable in the
particular circumstances. Reasonableness, in this context, incorporates
notions of proportionality to the end sought.
6.18 The disclosure of member numbers and account balances is
reasonable as it is inevitable that in the financial statements of a
superannuation fund, the amount held in each account and the losses and
gains made by those accounts are disclosed. Without the inclusion of
member accounts and balances, auditors' roles would be more challenging
as the ability to document changes in finances would be more difficult.
The specific details which will be disclosed also relate to how much a
member has contributed.
6.19 The provision of member information to an auditor is reasonable
and is proportional to the end goal of prudential regulation of a
superannuation fund which is necessary to protect members' interests.
Without disclosure of specific information relating to members, it would
be too difficult for APRA to monitor financial transactions.
6.20 Auditors are required to be fit and proper in accordance with the
prudential standard on fitness and propriety. This provides a safeguard to
the types of persons who have access to the information required to be
handed over in the audit process.
6.21 The provisions of the Bill are therefore proportional and
necessary in the circumstances. Consequently, the limitation to the right
to privacy is reasonable according to Article 17 of the ICCPR.
Conclusion
6.22 The Bill is compatible with human rights. To the extent that it
limits human rights, those limitations are reasonable, necessary and
proportionate.
Minister for Financial Services and Superannuation, the Hon Bill Shorten
MP
52
Index
Schedule 1: Amendments
Bill reference Paragraph number
Item 1, paragraph 211(3)(a) 6.12
Item 2, subsection 556(2) 6.11
Item 3, paragraph 596AA(2)(b) 6.13
Item 4, paragraph 912A(1)(d) and item 6, subsections 912A(4) and 4.10
(6)
Item 5, paragraph 912A(1)(h) and item 6, subsections 912A(5) and 4.11
(6)
Item 7, subsection 947D(1) 6.43
Item 8, section 947D 6.44
Item 8, subsection 947D(5) and item 10, subsection 1017B(9) 6.48
Item 9, subsection 964(3) 6.91
Item 11, subsection 1526(2) 6.93
Item 12, section 1538B 6.45
Item 12, section 1538A 6.14
Item 13, section 18 6.16
Item 14, section 93 6.17
Item 15, paragraph 114(2)(aa) 6.19
Item 16, paragraph 115(b), item 17, paragraph 115(ba), and item 18, 6.21
paragraph 115(b)
Items 19 and 20, paragraph 115(d) 6.22
Item 21, paragraph 115(g) 6.23
Items 22 and 23, paragraph 115(k) 6.24
Item 24, paragraph 116(ba) 6.25
Item 25, subsection 119(3) 6.26
Item 26, subsection 120(3) 6.28
Item 26, subsections 120(2) and (4) 6.29
Item 27, section 4 2.24
Item 28, subparagraph 6(1)(a)(x) 2.25
Items 29, 33, 35 and 36, subsection 10(1) and item 105, 6.81
paragraphs 131B(1)(a) and (b)
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Bill 2012
Items 30, 34 and 37, subsection 10(1) 6.77
Item 31, subsection 10(1) 2.22
Item 32, subsection 10(1) 6.100
Item 38, paragraph 29T(1)(j) and item 41, paragraph 29U(2)(e) 6.38
Item 39, paragraph 29TC(1)(g) 6.46
Item 40, paragraph 29U(2)(b) 6.36
Item 42, paragraph 29VB(1)(aa) 6.39
Item 43, subsection 29VPA(6) 5.17
Item 43, section 29VP 5.18
Item 43, section 29VPA 5.14
Item 43, subsection 29VPA(5) 5.15
Item 43, subsections 29VPA(4) and (6) 5.16
Item 44, paragraph 29WA(1)(c) and item 46, subsection 29WA(4) 6.40
Item 45, subsection 29WA(2) 6.42
Item 47, section 29WB 6.37
Item 48, before section 35 and item 49, sections 35A, 35AB, 35AC 6.63
and 35AD
Item 49, section 35AE and item 49, section 35A 6.76
Item 49, subsection 35A(8) 6.64
Item 49, section 35AB and item 57, subsection 35C(2) 6.65
Item 49, subsection 35AB(3) 6.66
Item 49, section 35AC 6.68
Item 49, section 35AD 6.69
Item 51, section 35C, item 50, section 35B and item 60, section 35D 6.84
Items 52, 54 and 55, subsection 35C(1) 6.85
Item 53, subsection 35C(1) 6.78
Item 56, subsection 35C(1A) 6.86
Item 58, subsection 35C(5) 6.87
Item 59, subsection 35C(7) 6.88
Item 61, section 36 and item 49, section 35AC 6.74
Item 62, before subsection 55(1), item 63 before subsection 55(2), 5.12
item 64 before subsection 55(3) and item 67, before subsection 55(5)
Item 65, subsection 55(3) and item 66, subsection 55(4A) 5.9
Item 66, subsection 55(4C) 5.11
Item 66, subsections 55(4B)and 55(4D) 5.10
Item 68, subsection 55(5) 5.24
Item 68, subsection 58A(2) 1.4
54
Index
Item 69, subsection 55(6) 5.25
Item 70, subsections 56(2) and 57(2) and item 71, paragraphs 2.26
56(2)(b) and 57(2)(b)
Item 72, subsection 58A(4) 1.7
Item 72, subsection 58A(1) 1.14
Item 72, subsection 58A(5) 1.15
Item 72, subsection 58A(2) 1.5
Item 72, subsection 58A(3) 1.6
Item 73, subsections 68C(1) and (2) and 68D(1) and (2) 6.7
Item 73, subsections 68C(3) and 68D(3) 6.8
Item 73, paragraphs 68C(3)(e) and 68D(3)(e) 6.9
Item 74, subparagraph 101(1)(c)(ii) and paragraph 101(1)(e) 3.9
Item 74, paragraph 101(1)(e) 3.10, 3.12, 3.14
Item 74, paragraph 101(1)(d) 3.11
Item 74, subsection 101(1) 3.8
Item 75, subparagraph 107(2)(a)(ii)(DA) and item 76, subparagraph 6.53
108(2)(a)(iia)
Item 77, subsection 126H(6A) 6.54
Item 78, subparagraph 129(1)(a)(i), item 79, paragraph 129(1)(b), 6.58
item 80, paragraph 130(1)(b), item 81, paragraph 130A(ba), item 82,
section 130A , item 83, subparagraphs 130C(1)(a)(i) and (ii), item
84, paragraph 130C(1)(b), item 86, subparagraph 130D(4)(a)(i), item
87, subparagraph 130D(4)(a)(iii), item 89, paragraph 130D(5)(a),
item 91, paragraph 130D(6)(a), item 94, paragraph 131AA(2)(c),
item 97, subparagraph 131A(1)(a)(i), and item 98, subparagraph
131A(1)(a)(iii)
Item 88, paragraph 130D(4)(aa) 6.70
Item 90, subsection 130D(5A) 6.55
Item 92, paragraphs 131AA(1)(a) and 131AA(2)(a) and item 85, 6.80
subsection 130D(3)
Item 93, paragraph 131AA(2)(ba) 6.71
Item 95, subsection 131AA(2A) 6.56
Item 96, subsection 131A(1) 6.79
Item 99, paragraph 131A(1)(aa) 6.72
Item 100, paragraph 131A(1)(b) 6.82
Item 101, subsection 131A(1A) 6.73
Item 102, subsection 131A(2), item 103, subsection 131A(3), item 6.83
104, subsection 131A(4), item 106, paragraph 131B(2A)(a), and
item 107, paragraph 131B(2A)(b)
Item 108, subsection 134(5) 6.57
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Bill 2012
Item 109, subsections 135(3) and (4) 6.95
Item 110, section 139A 6.32
Item 111, section 139B 6.34
Item 112, subsection 223A(2) 2.9
Item 112, subsection 223A(3) 2.10
Item 112, sections 223B and 223C 2.11
Item 112, section 223D 2.12
Item 112, subsection 224(2) 2.14
Item 112, subsections 224(3) and (4) 2.15
Item 112, subsection 224A(1) 2.16
Item 112, subsection 224A(2) 2.17
Item 112, paragraph 224A(1)(h) and section 224B 2.18
Item 112, section 224C 2.19
Item 112, section 224D 2.20
Item 112, section 224E 2.21
Item 112, Part 22 2.6
Item 112, subsection 223A(1) 2.8
Item 113, section 252B 2.23
Item 114, paragraph 323(1)(b) 5.21, 5.22
Item 115, section 327 6.75
Items 116 and 117, subsection 344(12) 6.97
Item 116, subsection 344(12) 6.101
Item 117, subsection 344(12) 6.102
Item 118, paragraph 389(d) and item 119, paragraph 390(d) 6.103
Item 120, item 11A of Part 2 of Schedule 1 to the Superannuation 6.104
Legislation Amendment (MySuper Core Provisions) Act 2012
Item 121, subitem 12(3) , item 122, paragraph 12(5)(b) and item 6.106
123, item 13 of Schedule 1 to the Superannuation Legislation
Amendment (MySuper Core Provisions) Act 2012
Item 122, subsection 14(6A) 3.17
Item 122, paragraph 14(6A)(a) 3.18
Items 124 and 127 2.30
Item 125 6.18
Item 129 6.50
Item 129, section 224 2.13
Part 2, item 126(a) 3.20
Part 2, item 126(b) 3.21
Part 2, item 128 3.22
56
Index
57