Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2010-2011-2012

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

SENATE

 

 

 

SUPERANNUATION LEGISLATION AMENDMENT (FURTHER MYSUPER AND transparency MEASURES) BILL 2012

 

 

 

 

REVISED EXPLANATORY MEMORANDUM

 

 

 

(Circulated by the authority of the

Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

 

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Fees, costs and intrafund advice....................................... 7

Chapter 2               Insurance............................................................................. 23

Chapter 3               Collection and disclosure of information....................... 31

Chapter 4               Modern awards and enterprise agreements.................. 55

Chapter 5               Defined benefit members................................................. 67

Chapter 6               Transition to MySuper....................................................... 73

Chapter 7               Eligible rollover funds........................................................ 85

Index.............................................................. Error! Bookmark not defined.

 

Do not remove section break.



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

APRA

Australian Prudential Regulation Authority

APRA Act

Australian Prudential Regulation Authority Act 1998

ASIC

Australian Securities and Investments Commission

Corporations Act

Corporations Act 2001

DEEWR

Department of Education, Employment and Workplace Relations

ERF

Eligible Rollover Fund

FW Act

Fair Work Act 2009

FSCOD Act

Financial Sector (Collection of Data) Act 2001

FWA

Fair Work Australia

LI Act

Legislative Instruments Act 2003

MySuper Core Provisions Bill

Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011

Retirement Savings Accounts Act

Retirement Savings Accounts Act 1997

RIS

regulation impact statement

RSE

registrable superannuation entity

SG Act

Superannuation Guarantee (Administration) Act 1992

SG Regulations

Superannuation Guarantee (Administration) Regulations 1993

SIS Act

Superannuation Industry (Supervision) Act 1993

SIS Regulations

Superannuation Industry (Supervision) Regulations 1994

SMSF

self-managed superannuation fund

The Review

The review into the governance, efficiency, structure and operation of Australia’s superannuation system or the Super System Review (Cooper Review)

TPCA Act

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

TPD

total permanent disability insurance

Trustee Obligations and Prudential Standards Act

Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012



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 Government released the Super System Review’s final report on 5 July 2010.

To provide input on the design and implementation of the Stronger Super reforms, the Government undertook extensive consultations 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 third tranche of legislation implementing the Government’s MySuper and governance reforms as part of Stronger Super.  The first tranche of legislation was introduced to the Parliament on 3 November 2011 as the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 (the MySuper Core Provisions Bill).  The second tranche of legislation, the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (the Trustee Obligations and Prudential Standards Act) received Royal Assent on 8 September 2012.

This Bill introduces the next stage of the reforms.  The Bill:

•        bans entry fees and sets criteria for the charging of other fees in superannuation, including rules for the charging of financial advice;

•        requires all superannuation funds to provide life and TPD insurance to members (excluding defined benefit members) on an opt-out basis;

•        enables APRA to collect information on a look-through basis;

•        requires the disclosure and publication of key information in relation to superannuation funds;

•        allows only  funds that offer a MySuper product and exempt public sector superannuation schemes to be eligible as default funds in modern awards and enterprise agreements;

•        allows exceptions from MySuper for members of defined benefit funds;

•        requires trustees to transfer certain existing balances of members to MySuper; and

•        provides rules in relation to ERFs.

Date of effect :  T he majority of these provisions will apply from no earlier than the commencement of the MySuper Core Provisions Bill or the Trustee Obligations and Prudential Standards Act.  This ensures that appropriate provisions of this Bill commence at the same time as provisions of the first two tranches of legislation.

•        Schedule 1, relating to fees, costs and intrafund advice, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);

•        Schedule 2, relating to insurance, generally commences on 1 July 2013;

•        Schedule 3, relating to collection and disclosure of information, generally commences the day after the Bill receives Royal Assent;

•        Schedule 4, relating to modern awards and enterprise agreements, generally commences the day after the Bill receives Royal Assent;

•        Schedule 5, relating to defined benefit members, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);

•        Schedule 6, relating to the transition to MySuper, generally commences immediately after the commencement of the MySuper Core Provisions Bill (being 1 January 2013 or an earlier date set by Proclamation);

•        Schedule 7, relating to eligible rollover funds, generally commences on 1 July 2013; and

•        Schedule 8, relating to other amendments, generally commences immediately after the commencement of the MySuper Core Provisions Bill.

Proposal announced On 16 December 2010, the Minister announced the Stronger Super reforms.  On 21 September 2011, the Minister announced the Government’s decisions on the key design aspects of the Stronger Super reforms.

Financial impact This Bill has no significant financial impact on Commonwealth expenditure or revenue.

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 the transfer of accrued default balances, types of insurance offered through superannuation and sections 2 and 3 of the appendix.  A RIS exemption was granted for the remainder of the Stronger Super reforms, which will be subject to a post-implementation review.

Measures to be contained in subsequent tranches of legislation

The MySuper and governance reforms will be implemented in several tranches of legislation.  This is the third tranche. 

Further reforms will be contained in a subsequent tranche of legislation, including:

•        additional governance measures relating to service providers, voting, fines, reasons for decisions and access to the Superannuation Complaints Tribunal; and

•        consequential changes to the SIS Act, the Corporations Act and the First Home Saver Accounts Act 2008 .

 Do not remove section break.



Chapter 1          

Fees, costs and intrafund advice

Outline of chapter

1.1                   This chapter explains the requirement for an RSE licensee to elect not to charge commissions in respect of amounts held in a MySuper product, rules governing the charging for financial advice including intrafund advice and the general fee rules that will apply to regulated superannuation funds and approved deposit funds.

Context of amendments

1.2                   The Government has committed to MySuper as a commission-free superannuation product.  Therefore, to be authorised to offer a MySuper product, RSE licensees will need to design their MySuper products so that they do not charge any fee that relates to commission payments. 

1.3                   To ensure equitable charging of fees for financial advice provided to members, it is important that those members seeking more complex personal advice in relation to their superannuation bear the cost of that advice.  However, it is appropriate that superannuation funds continue to be able to provide a member with simple, non-ongoing personal advice relating to the member’s interest in the fund — commonly referred to as intrafund advice — and that this advice be able to be collectively charged across the fund’s membership. 

1.4                   Performance-based fees are used as an incentive to encourage investment managers to obtain returns greater than they otherwise would if they were simply paid an asset-based fee.  However, the Review identified a range of concerns with the current structure of performance-based fees that mean they may not always be in members’ best interests.  In response, the Government announced it would determine parameters for performance-based fee arrangements in MySuper. 

1.5                   The charging of fees within superannuation is a crucial determinant of the returns that members receive and the retirement benefits that accrue to members.  Certain fees may also impede competition by inhibiting members from making active choices in relation to their superannuation.  For these reasons, the Government has previously announced that entry fees would be prohibited and that certain other fees would be limited to being charged on a cost-recovery basis only.  Further, a fair and reasonable allocation of costs between different products within a fund will ensure members are only charged for the benefits and services they are receiving. 

Summary of new law

1.6                   An RSE licensee that applies for authorisation to offer a MySuper product must elect not to charge members of a MySuper product a fee that relates to the payment of conflicted remuneration in relation to a MySuper product.  This election effectively prohibits the trustee from deducting any amount from a MySuper product that relates to making a commission payment to a financial adviser. 

1.7                   New criteria will apply to any performance-based fee payable to an investment manager in relation to assets of a fund that are attributable to a MySuper product.  However, a trustee may still have an arrangement without all or some of these criteria if they can demonstrate the arrangement promotes the financial interests of MySuper members.

1.8                   Specific restrictions will apply to the types of personal advice that superannuation trustees can charge collectively across their membership.  The types of personal advice for which a superannuation trustee cannot charge across the membership of the fund are those types of advice that are likely to be more complex in nature and therefore more costly to provide.  Further, only personal advice that is of a one-off or transactional nature will be allowed to be spread across the membership of the fund.  All personal advice provided to members must comply with the Corporations Act including the best interests duty, obligation for the advice to be appropriate and the conflicted remuneration and other prohibited remuneration provisions. 

1.9                   The cost of personal financial product advice that is provided to an employer of one or more members of the fund will be prohibited from being recovered through a fee charged to members of the fund.  This prevents commissions and other costs being deducted from the balances of the employees of an employer in relation to advice that employer receives.

1.10               All regulated superannuation funds and approved deposit funds will have to comply with some general fee rules.  These include a prohibition of entry fees and limitation on exit fees, switching fees and buy-sell spreads to being charged at an amount that is not more than it would be if it were charged on a cost recovery basis.

1.11               An RSE licensee that charges a different administration fee to employees of a particular employer in a MySuper product must comply with an additional condition in relation to that administration fee.  The administration fee must be at least equal to the costs that reasonably relate to the administration and operation of the MySuper product for those employees.

Comparison of key features of new law and current law

New law

Current law

An RSE licensee that applies for a MySuper product must elect that they will not charge a fee on an amount in a MySuper product that relates to the payment of conflicted remuneration to a financial services licensee. 

No equivalent currently in the SIS Act.

Performance-based fees must comply with criteria regarding how the fee is determined. 

No equivalent currently in the SIS Act.

Superannuation trustees are prohibited from charging across the membership of the fund for providing personal financial product advice on specific topics and personal financial product advice on an ongoing basis. 

No specific restrictions on superannuation trustees charging across the membership of the fund for providing financial product advice. 

The cost of personal financial advice that is provided to an employer of one or more members of the fund will be prohibited from being recovered through a fee charged to any member of the fund.

No equivalent currently in the SIS Act.

Exit fees, switching fees and buy-sell spreads will be limited to being charged at an amount that is not more than it would be if it were charged on a cost recovery basis.  For MySuper products, activity fees and insurance fees will also be limited to being charged at an amount that is not more than it would be if it were charged on a cost recovery basis.

No equivalent currently in the SIS Act.

Entry fees will be prohibited.

No equivalent currently in the SIS Act.

An administration fee charged to employees of a particular employer in a MySuper product that is different to the administration fee charged to other members must, in addition to being the same for all employees, be at least equal to the costs that reasonably relate to the administration and operation of the fund for those employees.

The MySuper Core Provisions Bill requires a trustee to charge all employees of a particular employer the same administration fee, whether it is the same flat fee, the same percentage fee or the same combination of flat fee and percentage fee. 

Detailed explanation of new law

Election regarding fees in MySuper products relating to conflicted remuneration

1.12               An RSE licensee that applies for authorisation to offer a MySuper product must accompany their application with an election not to charge members of the MySuper product a fee relating to the payment of conflicted remuneration.  [Schedule 1, item 18, subsection 29SAC(1)]

1.13               The RSE licensee must elect that they will not charge any member of the MySuper product a fee in relation to that MySuper product that relates directly or indirectly to costs of the fund in paying conflicted remuneration to a financial services licensee or a representative of a financial services licensee.  This part of the election effectively prohibits the trustee from making any commission payment to a financial adviser that is deducted from a MySuper product.  [Schedule 1, item 18, subparagraph 29SAC(1)(a)(i)]

1.14               In addition, the election by the RSE licensee also extends to not charging a member of the MySuper product a fee in relation to that MySuper product that relates to costs of the fund in paying an amount to another person that the RSE licensee knows, or reasonably ought to know, relates to conflicted remuneration paid by that other person to a financial services licensee, or a representative of a financial services licensee.  [Schedule 1, item 18, subparagraph 29SAC(1)(a)(ii)]

1.15               Therefore, this second part of the election will prohibit an RSE licensee from paying premiums on insurance policies that have embedded commissions paid by an insurance company to a financial adviser in relation to the insurance arrangements offered through the superannuation fund.  An RSE licensee will only have to elect not to pay amounts to other parties to the extent that they know or reasonably ought to know that the amount paid relates to the payment of conflicted remuneration.  This prevents an RSE licensee breaching the election due to another party to whom they have paid an amount using part or that entire amount to pay conflicted remuneration that they are unaware of, and cannot reasonably be expected to be aware of. 

1.16               For the purposes of this election, the meaning of conflicted remuneration will also cover financial product advice provided to the RSE licensee or to any other person to whom the RSE licensee pays an amount that relates to the conflicted remuneration paid to the financial services licensee or a representative of a financial licensee that provided the advice.  [Schedule 1, item 18, subsection 29SAC(3)]

1.17               Under the Corporations Act, a trustee of a superannuation fund is considered to be a retail client if it has net assets of less than $10 million.  This definition would exclude most RSE licensees.  For this reason, all RSE licensees must be treated as a retail client to prevent the cost of commission payments relating to advice provided to the RSE licensee being deducted from a MySuper product in these circumstances.  [Schedule 1, item 18, subsection29SAC(3)]

1.18               For example, an RSE licensee may receive advice in relation to a life insurance product which the RSE licensee subsequently acquires for the MySuper product members of the fund and the insurer may pay a commission to the financial adviser in respect of that advice.  The RSE licensee will be deemed to be a retail client in relation to this advice, which will mean that the commission is treated as conflicted remuneration for the purposes of the election, even if, under the Corporations Act, the RSE licensee is not a retail client.

1.19               If APRA is satisfied that the RSE licensee has failed to give effect to this election then they will have the ability to cancel an authorisation to offer a MySuper product.  [Schedule 1, item 21, paragraph 29U(2)(k)]

1.20               The election must be in writing and in the approved form.  [Schedule 1, item 18, paragraphs 29SAC(1)(b) and 29SAC(1)(c)]

Performance-based fees

1.21               New criteria will apply to any performance-based fee payable to an investment manager under a contract or arrangement to invest assets of a fund that are attributable to a MySuper product.  [Schedule 1, item 36, section 29VD]

1.22               Performance-based fees typically entitle the investment manager to a payment equal to a pre-determined percentage of the increased value of the asset or income received from the investment that exceeds a given benchmark over a particular testing period.

1.23               The criteria will apply to an arrangement entered into on or after 1 July 2013 if all or any part of the assets invested under that mandate is attributable to a MySuper product that the superannuation fund offers.  [Schedule 1, item 36, subsection 29VD(1)]

1.24               There are five criteria that must be contained in the terms of the arrangement the fund has with the investment manager if there is a fee that is determined, in whole or in part, by reference to the performance of the investment made by the investment manager on behalf of the trustee or trustees of the fund.  [Schedule 1, item 36, subsections 29VD(3) — (7)]

1.25               The first criterion is that if the investment manager is entitled to a fee in addition to the performance-based fee then this fee must be lower than it would be if there was no performance-based fee.  [Schedule 1, item 36, subsection 29VD(3)]

1.26               This requires trustees to only agree to pay performance-based fees where the investment manager puts at risk the fees they would otherwise be entitled to.  This ensures that there is sufficient incentive for the investment manager to achieve the required performance.

1.27               The second criterion is that the period over which the performance-based fee is determined must be appropriate to the kinds of investment to which it relates.  [Schedule 1, item 36, subsection 29VD(4)]

1.28               To satisfy this requirement, certain assets, such as infrastructure, may require longer testing periods to reflect that these investments are usually made for several years and may have high costs to exit early.  However, other assets that may be invested in over shorter periods, such as bonds, could have shorter testing periods.

1.29               The third criterion is that the performance of the investment must be measured by comparison with the performance of investments of a similar kind.  [Schedule 1, item 36, subsection 29VD(5)]

1.30               An investment manager should only be paid a performance-based fee where they generate returns that are greater than assets with a comparable level of risk and that are subject to the same market forces.  For example, a performance-based fee for any shares traded on the Australian Securities Exchange could be measured by comparison to an after-tax benchmark that uses the All Ordinaries index.  In this example, it would not be appropriate to determine the performance of these shares against the interest rate paid on Commonwealth Government Securities.

1.31               The fourth criterion is that a performance-based fee must be determined on an after-costs and, where possible, an after-tax basis.  [Schedule 1, item 36, subsection 29VD(6)]

1.32               This is consistent with the new obligation of RSE licensees in relation to members that hold a MySuper product to promote the financial interests of members, in particular returns to those beneficiaries (after the deduction of fees, costs and taxes).  Consistent with this obligation, the trustee should only agree to an arrangement that is targeted to the objective of maximising the returns members receive. 

1.33               The fifth criterion is that the performance-based fee must be calculated in a way that includes disincentives for poor performance.  [Schedule 1, item 36, subsection 29VD(7)]

1.34               Superannuation is a long-term investment and the culmination of returns over a long period determines a member’s retirement benefit.  For this reason, there must be commensurate disincentives for investment managers to avoid underperformance compared to the potential performance-based fee that provides the incentive to outperform. 

1.35               A disincentive for poor performance must be part of the calculation of the performance fee that is payable in any given testing period. 

1.36               For example, there may be clawback provisions that require performance-based fees from earlier testing periods to be returned to the superannuation fund if the investment manager underperforms in the current testing period.  Also, there could be high-water mark provisions that require an investment manager to recover prior periods of underperformance before becoming entitled to a performance-based fee in the current testing period.

1.37               The ability to terminate the arrangement with an investment manager without reasons and at short notice is not sufficient to satisfy this criterion.

1.38               A lack of disincentives can encourage investment managers to pursue volatile investments that may entitle them to a performance-based fee in one period without that fee being at risk in later testing periods.  This short-term focus without any consequences for the longer term return is not in the interests of members for whom the ultimate objective is to maximise their retirement benefit.

1.39               However, despite these five criteria, a RSE licensee may still have an arrangement under which assets attributable to the MySuper product are invested subject to a performance-based fee which does not meet the criteria if it can demonstrate the arrangement promotes the financial interests of the members of the fund that hold the MySuper product.  [Schedule 1, item 36, subsection 29VD(8)]

1.40               These criteria should be able to be included in the majority of arrangements that RSE licensees have with investment managers.  It would be difficult for an RSE licensee to assert that a particular arrangement that did not meet some or all of the criteria was in the best financial interests of MySuper members where they could invest in those same assets under an alternative arrangement that includes a performance based fee that does contain these criteria or has no performance based fee.  However, it may not be possible to access certain assets, in particular assets sold through international markets, without entering into an arrangement that does not contain one or more of these criteria.

Intrafund advice

1.41               Superannuation funds often provide financial product advice to their members — commonly referred to as intrafund advice.  This financial product advice can be general (that is advice that does not take into account the particular circumstances of the client) or personal (advice that does take into account those circumstances).  In the case of general advice, it might be delivered through lectures or website material, while personal advice is more likely to be delivered through a call centre or meeting.  As long as the superannuation trustee complies with the sole purpose test under the Act, there are currently no restrictions on trustees passing on the costs of providing this advice to their membership, most commonly through the administration fee. 

1.42               In recognition of the importance of retirement savings not being eroded through excessive fees, the amendments place specific restrictions on the types of personal advice that superannuation trustees can charge across their membership as intrafund advice.  The amendments do not seek to inhibit the ability of a superannuation trustee to provide advice to their members, but recognise that the cost of providing some types of advice should be incurred directly by the member receiving the advice rather than the membership of the fund as a whole. 

1.43               The types of personal advice for which a superannuation trustee will not be able to charge across the membership of the fund are those types of advice that are likely to be more complex in nature and therefore more costly to provide.  In particular, a trustee will not be able to charge across their membership for personal advice, provided by the trustee or an employee or person acting under an arrangement with the trustee, to the extent that:

•        the person to whom the advice is given has not acquired a beneficial interest in the fund, and the advice relates to whether the person should acquire such an interest;

•        the advice relates to a financial product other than a beneficial interest in the fund, a related pension fund, a related insurance product or a cash management facility that is within the fund;

•        the advice relates to whether the member should consolidate their superannuation holdings in two or more superannuation entities into one; or

•        the advice is ongoing personal advice, insofar as there is a reasonable expectation that the trustee will periodically review the advice, provide further personal advice, monitor the implementation of recommendations or other prescribed circumstances apply.

[Schedule 1, item 40, subsection 99F(1)]

1.44               In relation to the last item of the list, the amendments only allow the cost of personal advice that is of a one-off or transactional nature to be spread across the membership of the fund.  Costs for an ongoing advice relationship must be charged directly to the member.  Under this amendment, advice will be ongoing (and therefore subject to the prohibition) where the member of the fund who receives the advice reasonably expects that the provider will periodically review the advice, provide further personal advice, monitor whether recommendations in the advice are implemented, or monitor the results of implementing the recommendations.  [Schedule 1, item 40, paragraph 99F(1)(c)(iv)]

1.45               The focus of subparagraph 99F(1)(c)(iv) is on what the member of the fund reasonably expects at the time the advice is provided.  For example, where a member seeks advice about the level of insurance cover within the fund and the member does not reasonably expect the trustee to review their insurance cover periodically, the cost of this advice can be spread across the membership of the fund.  Further advice can be given to the member on other matters as long as this also does not create an expectation on the part of the member that the provider will periodically review the advice, monitor whether recommendations in the advice are implemented, or monitor the results of implementing the recommendations.  For example, it is unlikely that the following would create such an expectation:

•                providing assistance to a member to implement the original advice; and

•                providing further one-off advice on other topics initiated by the member.  [Schedule 1, item 40, paragraph 99F(1)(c)(iv)]

1.46               In addition, it is expected that superannuation trustees that offer advice services to their members that are collectively charged across the membership of the fund will have in place internal policies to manage the costs of those services and ensure they are not excessively used by any particular member to the detriment of other members. 

1.47               The amendments allow for the collective charging for advice relating to a member’s beneficial interest in the fund, including advice about moving between investment options within the fund (for example, from an accumulation option to a pension option).  The amendments also allow collective charging for advice about a related pension fund for the member and the fund, a related insurance product for the member and the fund, or a cash management facility.  [Schedule 1, item 40, paragraph 99F(1)(c)(ii)]  

1.48               These terms are defined for the purposes of this section.  A related pension fund is a fund out of which the member of the superannuation fund would be entitled to receive a pension following the release of benefits from the superannuation fund, where the RSE licensee for the pension fund is the RSE licensee for the superannuation fund, or is an associate of that RSE licensee.  [Schedule 1, item 40, subsection 99F(2)]

1.49               This allows for collective charging for advice in relation to moving a member, for example, from an accumulation fund to a related pension fund.  However, this will exclude personal advice to the member about a specific financial product that the member’s beneficial interest should be invested in (for example, advice in relation to a regulated acquisition as defined in section 1012IA of the Corporations Act).  The cost of such advice must not be charged across the membership of the fund.

1.50               A related insurance product is a life policy or contract of insurance by which the trustees of a fund provide insurance to holders of a particular class of beneficial interest in the fund.  [Schedule 1, item 40, subsection 99F(3)]

1.51               A cash management facility an interest in a cash management trust, a basic deposit product or a bank accepted bill.  [Schedule 1, item 40, subsection 99F(4)]

1.52               The amendments also provide for additional circumstances in which the cost of providing personal advice must be charged directly to a member to be prescribed by regulations.  This provides for the flexibility to allow for further circumstances or types of advice to be added, should evidence indicate that the costs of superannuation trustees to provide this form of advice are unreasonably eroding retirement savings.  [Schedule 1, item 40, subparagraph 99F(1)(c)(v)]

1.53               Many superannuation trustees outsource their advice services to an external advice provider rather than providing these services in-house.  The rules outlined in these amendments governing the cost of financial product advice apply regardless of whether the advice is provided in-house or through an external advice provider acting under an arrangement with the trustee.  [Schedule 1, item 40, subsection 99F(1)(a)]

1.54               Nothing in these amendments operates to exclude the application of the laws governing the provision of financial product advice imposed by the Corporations Act.  Importantly, this means that personal advice provided to members must be appropriate and in the best interests of the member.  These amendments are about how superannuation trustees recover the costs of providing advice services to their members.

1.55               ASIC is the responsible regulator for intrafund advice.  However, APRA may also cancel an RSE licensee’s authorisation to offer a MySuper product if, on the advice of ASIC, it is concluded that the RSE licensee has not complied with section 99F.  [Schedule 1, item 20, paragraph 29U(2)(d)]

General fee rules

1.56               General fee rules will apply to certain fees charged by regulated superannuation funds and approved deposit funds.  However, these rules will not apply to SMSFs and pooled superannuation trusts.  [Schedule 1, item 34, section 99A]

1.57               While RSE licensees will have to comply with the general fee rules for all products they offer APRA will be able to specifically ensure that the general fee rules are complied with in relation to a MySuper product at the time they consider an application for authorisation.  If a RSE licensee does not comply with the general fee rules they will be in breach of a standard condition on their RSE licence.  In addition, if they do not comply with the general fee rules in relation to the MySuper product then APRA may cancel authorisation of that MySuper product.  [Schedule 1, item 19, paragraph 29T(1)(i) and Schedule 1, item 20, paragraph 29U(2)(d))]

1.58               The cost of financial product advice (other than intrafund advice) provided to a member will be able to be charged to that member as an advice fee.  [Schedule 1, item 31, subsection 29V(8)]

1.59               The MySuper Core Provisions Bill requires an RSE licensee to charge each member that has an interest in a MySuper product, and to whom a particular activity relates, an activity fee calculated on the same basis.  For example, each member that requests that their contribution is split must be charged the same flat fee, same percentage fee or same combination of flat fee and percentage fee. 

1.60               Therefore, to allow the costs of financial advice to be passed directly to the member to whom it relates, an advice fee relating to financial advice will not have to comply with the charging rules in relation to MySuper products and may be a different fee for each MySuper member.  [Schedule 1, item 33, subsection 29VA(9)]

1.61               This means that for more complex financial advice the trustee may charge for certain financial advice as an activity fee to pass the cost of that advice directly onto the member who was provided that advice rather than charging the costs of that advice to all members of the fund.  Financial advice may also be charged as part of the administration fee to all members of the fund unless it is a certain type of personal advice that must be charged to the member to whom the advice relates.

1.62               The cost of insurance premiums and any costs relating to the provision of insurance for the member may be charged as an insurance fee.  The premiums that can be included in an insurance fee must be for an insurance policy or contract for the realisation of a risk.  It cannot include premiums paid for an insurance policy or contract that is for investment.  These costs, if charged for, must be part of the investment fee.  [Schedule 1, item 33, subsection 29VA(10)]

1.63               The definition of insurance fee clarifies that amounts deducted for the cost of insurance are to be considered a fee and, therefore, fall within provisions that apply to fees such as the election not to charge a fee that relates to conflicted remuneration.

1.64               An insurance fee in relation to a MySuper product will not have to comply with the charging rules in relation to MySuper products and may be a different fee for each MySuper member.  This allows variability in the insurance fee to reflect that there are different premiums that are attributable to members depending on their level of coverage and other relevant factors such as the age of the member.

1.65               The insurance fee charged must be an amount that is not more than it would be if it were charged on a cost recovery basis.  This will ensure that a trustee cannot charge above cost fees outside of the two main headline fees of a MySuper product — the investment fee and administration fee — and the advice fee which may be charged where the member seeks financial advice.  These two main headline fees will be a key point of comparison between MySuper products, and therefore, by only allowing certain fees to be charged greater than cost recovery, this comparability will place downward pressure on the total fees that are charged to members in MySuper products.  [Schedule 1, item 36, subsection 29VC]

1.66               Similarly, an activity fee in MySuper will be limited to being charged at an amount that is not more than if the fee was charged on a cost-recovery basis.  [Schedule 1, item 36, subsection 29VC]  

1.67               The charging of entry fees will be prohibited.  An entry fee is defined as a fee that relates, directly or indirectly to the issuing of a beneficial interest in a superannuation entity to a person who is not already a member of the entity.  [Schedule 1, item 40, subsection 99B(1)]

1.68               Buy-sell spreads, switching fees and exit fees will only be able to be charged as an amount that is not more than it would be if the fee was charged on a cost recovery basis.  [Schedule 1, item 40, subsection 99C(1)]

1.69               Charging a fee on a cost recovery basis means that the fee aims to recover the expected costs of that action.  It does not require precise cost recovery in each instance of the fee being charged to a member.  Rather, a cost recovery basis would mean that the cumulative amount of fees must equal, as close as is practicable, the costs of undertaking that action for all members that are charged the fee.

1.70               Regulations, if any, may prescribe in further detail ways in which these fees may be calculated on a cost-recovery basis.  [Schedule 1, item 40, subsection 99C(2)]

1.71               The costs of providing personal financial advice to employers cannot be included in any fee charged to any member of a superannuation fund.  Employees should not have their benefits reduced by costs relating to personal advice provided to their employer in satisfying their superannuation guarantee obligations, including selecting a default fund for the contributions of their employees.  [Schedule 1, item 40, section 99D]

1.72               RSE licensees must attribute costs of the fund fairly and reasonably between the classes of beneficial interest in the fund.  This means that costs must be fairly and reasonably allocated across all MySuper products and choice products offered by the fund.  The attribution of costs will be reflected in the fees charged to members consistent with the RSE licensee satisfying its obligation to act fairly in dealing with classes of beneficiaries within the entity.  However, the fair and reasonable attribution of costs also means that an RSE licensee should only deduct costs that solely relate to a class of beneficiaries from that class.  For example, if there are certain costs of the fund which only relate to a choice product, then these costs should only be deducted from that choice product.  There will also be some costs that are common to more than one class of beneficiaries for which there may be more than one method for attributing them fairly and reasonably.  [Schedule 1, item 40, subsection 99E]

1.73               The definitions of administration fee, activity fee, investment fee, buy-sell spread, exit fee and switching fee, as included in the MySuper Core Provisions Bill, will be amended to refer to superannuation entities.  These definitions are used in the general fee rules which will apply to entities that are not a regulated superannuation fund such as an approved deposit fund.  These definitions and the definition of general fee rules will be included in the definitions of the Act in subsection 10(1) of the SIS Act [Schedule 1, items 5, 7-9 and 12, subsection 10(1) and items 23 — 30, section 29V]

1.74               As there will be new general fee rules, fees will be explicitly added as a matter that can be dealt with in operating standards made in the SIS Regulations.  [Schedule 1, item 37, paragraphs 31(2)(da) and 31(2)(db)]

1.75               To avoid doubt, operating standards may be prescribed for any aspect of the operation of an entity to which a covenant or other provision of the Act or Regulations relates.  Further, an operating standard is of no effect to the extent it conflicts with the Act.  [Schedule 1, item 38, section 33A]

Additional condition administration fee discounts

1.76               The MySuper Core Provisions Bill sets out the conditions that must be met for a fund to be able to offer a different administration fee in respect of employees of a particular employer, such as, that the administration fee charged must be the same for each employee of that particular employer.

1.77               An additional condition to be met by is that the total amount of the administration fee charged to the employees of a particular employer must be at least equal to an amount that reasonably relates to the administrative and operating costs incurred by the fund in relation to those members.  This aims to ensure that any discounted administration fees reflect actual administrative efficiencies, and also prevent cross subsidisation of administration fees across different members of a fund.  [Schedule 1, item 35, subsection 29VB(5)]

1.78               The condition only applies to the administration fee charged in relation to the members that are employees of the employer.  It does not prevent an employer from directly subsidising the administration fees of their employees.  In other words, the fee charged in relation to members that are employees of the employer must at least equal the costs in the administration and operation of the fund in relation to the members that are employees of the employer but the fee may be paid fully or partly by the employer. 

1.79               Any costs incurred by the trustee of the fund in the administration and operation of the fund that are charged as part of an investment fee, a buy-sell spread, a switching fee, an exit fee or an activity fee are excluded from this additional condition as these fees will have to be the same for all MySuper members, not just the employees of a particular employer.  [Schedule 1, item 35, paragraph  29VB(5)(b)]

Application provisions

1.80               The general fee rules will not apply to a fee to the extent that it is charged to a member in relation to a life policy that covered that member immediately prior to 1 July 2013 and that policy is:

•        a capital guaranteed life insurance policy where the contributions and accumulated earnings may not be reduced by negative investment returns or any reduction in the value of assets in which the policy is invested; and

•        an investment account contract that is held solely for the benefit of that member, and relatives and dependants of that member — to cover legacy products such as endowment and whole of life policies.  [Schedule 1, item 41]

1.81               The general fee rules will commence immediately after the provisions of the MySuper Core Provisions Bill that relate to authorisation.  This allows APRA to assess trustees against the general fee rules, in addition to the MySuper fee rules, when they apply for authorisation to offer a MySuper product. 

1.82               However, the general fee rules will only apply to funds from 1 July 2013.  [Schedule 1, item 41]

Do not remove section break.



Chapter 2          

Insurance

Outline of chapter

2.1                   This chapter explains the amendments relating to the provision of benefits that are supported by an insurance policy to MySuper members.

Context of amendments

2.2                   Insurance is a key element of the benefits provided to members of a superannuation fund.

2.3                   These benefits protect members against the risk of not being able to accumulate sufficient retirement savings, for themselves or their dependents, due to having to cease work as a result of injury or illness or as a result of death.

2.4                   For this reason, the Government has announced that trustees will be required to provide minimum levels of default life insurance and total and permanent disability (TPD) insurance to members of their fund that hold the MySuper product on an opt-out basis.  Trustees that cannot obtain opt-out insurance at a reasonable cost must provide MySuper members with compulsory insurance. 

2.5                   Currently, some members are being charged premiums for various types of insurance that may not be released to them when an insurance payment is made for them, because the circumstances do not meet a condition of release.  The Government announced that it would end this practice and believes that it is in best interests of members to align the insurance definitions with the conditions of release so that insurance is consistent with the purposes of superannuation and that monies are available to members when the insurer makes a payment to the fund under the relevant insurance policy.

2.6                   Following the Review, the Government announced that, following a suitable transition period, funds would be prohibited from self-insuring any benefits of the fund, including life and TPD insurance benefits.  An exception to this prohibition will be defined benefit funds that are permitted to self-insure.  The ban on self-insurance will address the risks of any short fall in insurance benefits being funded from other member balances and also ensures that insurance benefits are paid from authorised insurance institutions that are required to comply with relevant prudential regulation.

Summary of new law

2.7                   A trustee of a superannuation fund must provide MySuper members with benefits by way of insurance that are for death and benefits that are consistent with the definition of permanent incapacity in the SIS Regulations.  This definition of permanent incapacity will continue to be prescribed by the SIS regulations as it will also be used to define the types of insurance that can be offered.

2.8                   A relevant member must have the option to opt-out of life and TPD insurance unless the fund meets conditions prescribed in the regulations.  It is intended these include where a trustee is not able to obtain opt-out cover at a reasonable cost.  An RSE licensee may require a member that wishes to opt-out of these benefits to opt-out of both the life and TPD insurance or require a member that wishes to opt-out of life insurance to also opt-out of TPD insurance. 

2.9                   Reasonable conditions will be able to be imposed in relation to qualifying for life and TPD insurance given to the member.  It would be reasonable for the trustee to reflect conditions in the underlying insurance policy in the benefits that are provided to members.

2.10               The existing requirement for a fund to offer a minimum level of life insurance in order to accept contributions for employees that do not have a chosen fund will be retained.  This amount of insurance provided to a MySuper member must be at least to that minimum unless the member elects that the benefits not be provided or, if permitted by the fund, the member elects to hold a lower amount of life insurance. 

2.11               Operating standards will be able to be made in the SIS Regulations on the kinds of benefits that may be offered by way of insurance and the kinds of benefits that must be offered by way of insurance.  New regulations will be made to ensure that trustees only offer insurance that is consistent with benefits that can be released under the conditions of release in the SIS Regulations and to prohibit self-insurance.  Exceptions to these rules will be contained in the regulations, including an exception from the prohibition on self-insurance for defined benefits funds that self-insure for defined benefit members.

Comparison of key features of new law and current law

New law

Current law

Each member of a fund that holds the MySuper product must be offered benefits that are supported by life and TPD insurance with the ability to opt-out of these benefits.  The amount of life insurance given must be at least the minimum set out in the SG Regulations.

There are no requirements in the SIS Act regarding default insurance currently.  However, to accept contributions from an employer for employees that do not have a chosen fund the fund must offer at least the minimum amount of life insurance required by the SG Regulations.

Operating standards will be able to deal with kinds of benefits that must, and the kinds of benefits that must not, be provided by the trustee taking out insurance (or insurance of a particular kind).

The SIS Act does not expressly allow operating standards to be made on types of insurance offered or self-insurance.

Detailed explanation of new law

Minimum level of life insurance for SG Act purposes

2.12               The sole purpose test permits benefits to be provided to members of a superannuation fund, including on the member’s death and on the cessation of gain or reward in any business, trade, profession, vocation, calling, occupation or employment on account of ill-health of the member.  Trustees that provide these benefits will typically purchase insurance policies that provides for additional benefits on the realisation of these risks. 

2.13               Currently, to accept contributions from an employer on behalf of an employee that does not have a chosen fund, a fund must offer a minimum level of life insurance as set out in the SG Regulations.  This requirement will be changed so that a fund that accepts contributions for employees must actually provide benefits to each MySuper member in respect of death at the minimum level set out in the SG Regulations.  However, this amount will be subject to the member electing that the benefits not be provided or, if it is permitted by the fund, the member electing to hold a lower amount of life insurance.  [Schedule 2, item 1, paragraphs 32C(2)(d) and (e)]

Default insurance

2.14               There will be a general requirement for RSE licensees to provide each member of a fund that holds the MySuper product benefits by taking out insurance on permanent incapacity and in the event of the death of the member.  In other words, a fund that offers a MySuper product will have to give life and TPD insurance as a default within their MySuper product.  [Schedule 2, item 6, section 68AA]

2.15               This will provide a safety net to members who are least likely to give consideration to their insurance needs.  To avoid doubt, to meet this requirement it is not sufficient for trustees to simply release the member’s accrued superannuation balance.  Rather, the trustee must provide benefits by taking out an insurance policy or through self-insurance, where the fund is permitted to self-insure under the operating standards.  A failure to comply with this requirement will be a breach of a standard condition of the RSE licence.  [Schedule 2, item 6, subsection 68AA(1)]

2.16               Permanent incapacity will be defined using the existing definition in the SIS Regulations.  This definition will be prescribed by regulations to maintain consistency with present conditions of release and because the definition will also be used to define the types of insurance, particularly TPD insurance, that may be offered within superannuation.  [Schedule 2, item 3, subsection 10(1)]  

2.17               Trustees may determine reasonable conditions under which the provisions for death and permanent incapacity benefits may be made.  Reasonable conditions may include, but are not restricted to: the member working a certain number of hours per week; the member accruing a particular balance; or a member or their employer making a certain level of contributions in a specified period.  Where a trustee has taken out insurance, a condition is also considered to be reasonable if it is the same or corresponds with the terms and conditions of the underlying insurance policy.  Should a member not meet any reasonable condition set by a trustee, the trustee will not be required to provide the insured benefits to the member.  The conditions that apply to life and TPD insurance may be different.  For example, a member may not qualify for TPD insurance under a certain condition but may still qualify for life insurance.  [Schedule 2, item 6, subsections 68AA(3) — (5)]

2.18               As these provisions mean that an RSE licensee has the discretion whether to provide MySuper members benefits for temporary incapacity, otherwise known as income protection insurance, the conditions that apply to the provision of that income protection insurance may also be determined by the RSE licensee.  These conditions may mean that members are no longer entitled to the same insured benefits when they cease being an employee of their current employer.

2.19               A member who holds the MySuper product may elect to opt-out of the provided life and TPD insurance.  An RSE licensee may require a member to elect to opt-out of both life and TPD insurance or require members that wish to opt-out of life insurance to also opt-out of TPD insurance.  However, a RSE licensee may also provide members the flexibility to opt-out of one type of insurance if they wish.  

2.20               Providing members with the option to opt-out of life and TPD insurance allows them to protect their balance whilst accepting the financial risks of death and permanent incapacity if they choose.  It also provides members with the option of obtaining this cover outside of superannuation.  If a member elects to opt-out of either life or TPD insurance, the trustee is not required to provide this insurance to the member.  Funds may also permit members to increase or decrease their insurance cover from the default amount.  [Schedule 2, item 6, subsection 68AA(6)]

2.21               However, trustees will not have to comply with the opt-out requirements should they meet the conditions prescribed in the regulations in relation to the taking out of insurance.  It is intended that the regulations will provide an exception where a trustee is unable to obtain opt-out insurance at a reasonable cost.  Should a trustee meet the conditions prescribed in the regulations, it will be required to offer compulsory insurance for any member who holds the MySuper product.  [Schedule 2, item 6, subsections 68AA(7) and (8)]

2.22               Trustees will have the discretion to determine the minimum levels of insurance they may provide for their members depending on what is in members’ best interests.  Trustees may offer each member of the fund the same minimum level of default life and TPD insurance or they may vary the minimum level either across different workplaces or at the member level.  There are no additional restrictions applying to default insurance.  For example, this gives trustees the option of providing different levels of default insurance cover to different categories of employees within a particular workplace, reflecting their different insurance needs. 

2.23               The requirement for trustees to provide opt-out life and TPD insurance to MySuper members does not apply if that member is a defined benefit member of the fund.  [Schedule 2, item 6, subsection 68AA(9)]

Operating standards for types of insurance and self-insurance

2.24               Operating standards will be able to be made in the SIS Regulations that relate to the kinds of benefits that must not be provided by taking out insurance and the kinds of benefits that must not be provided other than by taking out insurance.  It is expected there will be two new operating standards on insurance under these provisions.  [Schedule 2, item 5, paragraphs 31(2)(ea) and (eb)]

2.25               First, an operating standard will be made to define the types of insured benefits that can be offered through superannuation, where the fund has taken out an insurance policy to provide these benefits.  [Schedule 2, item 5, paragraphs 31(2)(ea)]  

2.26               The operating standard will limit trustees to only taking out risk insurance policies for the provision to beneficiaries of insured benefits that satisfy the conditions of release in the SIS Regulations for death, terminal medical condition, permanent incapacity and temporary incapacity. 

2.27               By using an operating standard, the types of insurance will be directly aligned with the existing definitions of these concepts that are used in the conditions of release in the SIS Regulations.  This means that members can only have premiums deducted to the extent that the trustee is able to release the proceeds of that insurance policy to the member.  This ensures members are able to have the proceeds of insurance policies released to them at the time a risk that they are insured for occurs.  At present, insurance that is not consistent with these definitions cannot be released to members when the insurer makes a payment to the fund under the relevant insurance policy.  It is intended that these types of insurance policies will have to be phased out over a transition period, which will be prescribed by the operating standard.  The operating standard will also specify any exceptions to the restrictions on types of insurance.  [Schedule 2, item 5, paragraphs 31(2)(ea) and (eb)]

2.28               Second, an operating standard will be made prohibiting a superannuation fund from providing insured benefits consistent with the conditions of release for death, terminal medical condition, permanent incapacity or temporary incapacity in the SIS Regulations unless it is backed by an insurance policy.  This operating standard will ensure that a superannuation fund cannot self-insure unless it satisfies an exception contained in the operating standard.  In particular, an exception will be made for defined benefit funds or schemes that are permitted to self-insure in respect of defined benefit members by a condition on their RSE license.  Prohibiting self-insurance will reduce the risk for other members should the fund not maintain adequate capital resources to release unforseen member claims as well as ensuring that the insurance provided complies with the prudential requirements relating to insurance.  [Schedule 2, item 5, paragraph 31(2)(eb)]

Application provisions

2.29               An election by a member made prior to 1 July 2013 to opt-out of life and TPD insurance will mean that they do not have to be provided with life and TPD insurance after the commencement of these provisions.  The election must still be in force as at 1 July 2013.  [Schedule 2, item 7]

2.30               If an election of a member made prior to 1 July 2013 only related to one type of insurance then the requirement to provide life and TPD insurance continues to apply for the other type of insurance.  For example, a member may have already elected not to be provided with life insurance.  However, if the fund did not offer TPD insurance at that time and the election remained in force at 1 July 2013, the RSE licensee would not have to provide life insurance, but would have to provide TPD insurance unless the member subsequently made an election not to be provided with that benefit.  [Schedule 2, item 7]

Do not remove section break.



Chapter 3          

Collection and disclosure of information

Outline of chapter

3.1                   This chapter explains amendments to the APRA Act, the Corporations Act, the FSCOD Act and the SIS Act to expand the coverage of APRA’s data collection, enable the publication of data on MySuper products, and improve disclosure for superannuation, including through new requirements to publish a product dashboard and portfolio holdings. 

Context of amendments

3.2                   The Review identified a lack of transparency, comparability and, consequently, accountability in Australia’s superannuation system.  In particular, there is no standardised methodology for calculating and disclosing relevant fund or investment option information.  It was also noted that members often rely inappropriately on historical investment return data which gives no information about the risk attached to those returns. 

3.3                   The Government has committed to improve transparency in the superannuation system through enhanced disclosure requirements and broadening APRA’s ability to collect and publish information on the operation and efficiency of superannuation funds.

3.4                   MySuper products are intended to set a new benchmark for superannuation in the level of transparency and comparability of key performance information.  APRA will collect and publish information on the fees, costs and returns of each MySuper product. 

3.5                   The Review noted that portfolio disclosure in Australia is unduly opaque and does not meet global best practice.  Requiring the disclosure of portfolio holdings will provide greater transparency and allow members to understand where their superannuation is invested.

Summary of new law

APRA’s data collection       

3.6                   APRA will have the ability to collect additional data from RSE licensees.  In particular, an obligation to provide relevant data will apply to related bodies corporate, custodians of an RSE licensee and other parties under a contract or arrangement with one of these entities or the RSE licensee itself.  This will allow APRA to collect more accurate and complete data on the investments and costs of superannuation entities. 

Publication of MySuper data

3.7                   APRA will be required to publish information on the returns, fees and costs of all MySuper products quarterly.  This requirement does not limit APRA from publishing other information regarding MySuper or other superannuation products.

Requirements to publish a product dashboard and other information

3.8                   RSE licensees will be required to publish a product dashboard for each of the fund’s MySuper and choice products on a part of their website that is accessible to the public at all times.  The product dashboard will contain information on the investment return target and the number of times the target has been achieved, level of investment risk, a statement about the liquidity of the product and a measure of the average amount of fees and other costs in relation to the product.

3.9                   Funds will also have to disclose the remuneration of directors and executive officers.  Regulations will specify other documents to be published on a fund’s website to promote transparency.

Requirement to publish portfolio holdings

3.10               RSE licensees will be required to publish information regarding their portfolio holdings on their website.  The RSE licensee must publish portfolio holdings as at the reporting day, which will occur once every six months on 30 June and 31 December, within 90 days after each reporting day. 

3.11               A person who acquires a financial product or enters into a custodial arrangement using the assets, or assets derived from the assets, of an RSE under a contract or arrangement will be required to notify any person with whom they are investing those assets that they will be required to provide the relevant information to the RSE licensee so that it can satisfy its obligation to publish portfolio holdings.

3.12               Any person that receives a notification must provide information sufficient to identify the financial product acquired and any other property and financial products that they know, or reasonably ought to know, will be acquired using assets, or assets derived from assets, of the RSE licensee and the value invested, so that the RSE licensee is able to comply with their obligation to publish portfolio holdings.

Comparison of key features of new law and current law

New law

Current law

APRA may make a determination concerning the confidentiality of a reporting document or reporting documents of a specified kind that are required to be given.  APRA may determine whether a document of a particular kind is confidential even though the documents have not yet been received by APRA. 

If a document relating to a financial sector entity is given to APRA in accordance with the FSCOD Act and is then determined by APRA to not contain confidential information then it is not an offence for APRA to disclose the document or any information contained in the document.

APRA may make a non-confidentiality determination in relation to a specified part of a reporting document (or reporting document of a specified kind), as well as the whole of the reporting document (or reporting document of a specified kind).

By legislative instrument, APRA can determine whether a particular document given by a financial sector entity is non-confidential. 

APRA may determine that information is non-confidential if, taking into account any representations made by interested parties, APRA considers that the benefit to the public from the disclosure outweighs any detriment to commercial interests that the disclosure may cause.

APRA may make a determination as to whether a reporting document contains confidential information but there is no guidance as to how that is to be assessed. 

If APRA requires an RSE licensee to provide information in relation to the investment of assets, or assets derived from assets of the RSE licensee or a person connected with the RSE licensee, certain persons connected with the RSE licensee, in or through whom assets of or deriving from the RSE are invested, will be required to provide information to enable the RSE licensee to report to APRA. 

There are no provisions in the FSCOD Act enabling APRA to require RSE licensees to provide such information to APRA, or applying to persons connected with RSE licensees.

A choice product will be defined as a product which is not a MySuper product or a defined benefit product. 

A choice product is defined in the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 as a product which is not a MySuper product. 

RSE licensees will be required to publish the details of the remuneration of directors and executive officers.  Further disclosure of documents to promote systemic transparency will be specified in regulations.

There are no existing requirements in the SIS Act to publish detail of remuneration.

When an RSE licensee provides information to any person, other than if required to give the information to a Commonwealth agency, it will be required to provide that information which is consistent with information provided to APRA under a reporting standard.

There is no existing provision in the SIS Act requiring the provision of consistent information.

APRA must publish quarterly information on MySuper products.  This will include information on fees, costs and net returns.

There is no existing provision in the SIS Act requiring publication of MySuper data.

RSE licensees will be required to publish a product dashboard for each MySuper and choice product that is up-to-date, accurate and complete.  The product dashboard will contain information on investment return target, the number of times the current target has been achieved, level of investment risk, a statement about the liquidity of the product and a measure of the average amount of fees and other costs in relation to the MySuper product or investment option  during the last quarter, expressed as a percentage of the assets of the fund attributable to the MySuper product or investment option

There is no existing requirement in the Corporations Act for RSE licensees to publish a superannuation product dashboard.

RSE licensees must publish information on their portfolio holdings as at the reporting day within 90 days of the reporting day.

There are no existing requirements to publish portfolio holdings in the Corporations Act.

Parties who acquire a financial product using assets of an RSE, or assets derived from assets of an RSE, will be required to notify the provider of the financial product that they must provide information to the RSE licensee that will allow the RSE licensee to comply with the requirement to publish portfolio holdings.

There are no existing requirements for other parties to notify that assets invested relate to an RSE or to provide information to an RSE licensee on financial products.

Detailed explanation of new law

APRA’s data collection and publication

3.13               APRA will have an expanded role in the collection and publication of data on superannuation entities.  The additional data to be published by APRA will provide members, employers, the industry, and other interested stakeholders with information to compare the performance of superannuation products.  This will also enhance the accountability of trustees in meeting their heightened duties to promote the best financial interests of members that hold the MySuper product. 

APRA’s Secrecy obligations and determination

3.14               At present, section 57 of the APRA Act permits APRA to make a determination that data provided in a particular reporting document, which has been submitted in accordance with a reporting standard made under the FSCOD Act, is non-confidential, and can be published without breaching section 56 of the APRA Act. 

3.15               APRA will now be able to make a determination on a class of reporting document required to be given to APRA under the FSCOD Act by a registered entity or a body regulated by APRA.  It is also made clear that APRA can make a determination in relation to a specified part (or the whole of) a reporting document.  [ Schedule 3, item 4, subsection 57(1)]

3.16               Therefore, APRA’s determination may cover document of a certain type, or particular information within documents of that type.  Such a determination will be able to apply prospectively in relation to reporting documents yet to be received by APRA.  For example, APRA may determine that information reported in specified line items of a particular reporting form is non-confidential.  APRA will also be able to do this for a specific document that has been received by APRA (as is presently the case).  This change will allow APRA to streamline the current determination process where APRA undertakes a single consultation process as to the confidentiality of information but is required to repeat confidentiality determinations as information is received in accordance with periodic reporting requirements.  [ Schedule 3, item 4, subsection 57(2)]

3.17               APRA will not be able to make a section 57 determination unless it has given interested parties a chance to make a representation on whether the document contains confidential information.  [ Schedule 3, item 4, subsection 57(3)]

3.18               Where APRA’s determination relates to a particular document an interested party is defined as an entity or body which is required to give the information to APRA under the FSCOD Act.  APRA may make a determination that information is not confidential if, taking into account representations made by the interested party, APRA considers that the benefit to the public from the disclosure outweighs any detriment to commercial interests that the disclosure may cause.  [ Schedule 3, item 4, paragraph 57(4)(a)]

3.19               Where APRA’s determination is on a type of document then an interested party is defined as an association or other body representing the entities or bodies which are required to give the information to APRA under the FSCOD Act.  Again, APRA may make a determination that information is not confidential if, taking into account representations made by these parties, APRA considers that the benefit to the public from the disclosure outweighs any detriment to commercial interests that the disclosure may cause.  [ Schedule 3, item 4, paragraph 57(4)(b)]

APRA’s ability to collect look through data

3.20               The Review identified that an existing deficiency in the information available on superannuation entities is the costs of downstream investment vehicles being deducted from gross investment returns which may not be reported to APRA and often will not be charged as an explicit fee to members.

3.21               The diagram below is an example of the types of arrangements that the Review identified as currently obscuring the availability of transparent and comparable information.  An RSE licensee that provides a mandate to an investment manager to invest assets may have an arrangement that allows the investment manager to deduct their fees from the investment return on assets.  Similarly, investment vehicles such as managed investment schemes may also deduct their fees from the investment return from assets.  In the diagram, the member’s assets earn a return of 6.5 per cent from which the investment manager deducts a fee of 1 per cent and the managed investment scheme deducts a fee of 0.5 per cent.  An investment return of 5 per cent is returned to the RSE licensee that provides it to members and charges an explicit fee of 1 per cent to members.  Similarly, the RSE licensee may report costs of 1 per cent to APRA.  Therefore, the full investment costs to members of 2.5 per cent may not be disclosed.

Diagram 3.1  

 

 

 

 

 

 

 

 

 

 

 



3.22               For this reason, the Review recommended that APRA be provided with the ability to collect information on a ‘look-through’ basis.  This will ensure that the full costs of investing the assets of members are provided to APRA and, through APRA’s statistical publications, to members.

3.23               APRA will be given an explicit power to make a reporting standard, requiring RSE licensees to provide investment information on their assets or assets derived from their assets that are invested by a connected person who is a related body corporate of the RSE licensee, a custodian holding the RSE licensee’s superannuation assets, or a person under a contract or arrangement with the RSE licensee, related body corporate or custodian.  [ Schedule 3, item 29, subsection 13(4A)]

3.24               The reporting standard will be able to require information on deductions from the return on investment, the financial products or other property which the assets are invested in and the operations of the investor.  [ Schedule 3, item 29, paragraph 13(4A)(a) and (b)]

3.25               For example, under such a reporting standard, RSE licensees may be required to provide information on assets and financial products invested in a managed investment scheme, PST or other trust, which has in turn invested the assets in financial products or property.  A reporting standard may impose such a requirement where the investment is by a person connected with the RSE licensee.  [Schedule 3, item 29, paragraph 13(4A)(c),(d) and (e)]

3.26               As noted above, a reporting standard may require the RSE licensee to provide information in relation to assets invested by a person connected with the RSE licensee.  [ Schedule 3, item 29, paragraph 13(4B)(a)]

3.27               Where the assets are invested under contract or other arrangement between the RSE licensee (or a related body corporate of the RSE licensee or a custodian in relation to the relevant assets) and a person connected with the RSE licensee then the contract or arrangement has an implied term which requires the RSE licensee to notify the connected person that the assets are derived from a RSE.  [ Schedule 3, item 29, paragraph 13(4B)(c)]

3.28               The contract or arrangement will also have an implied term requiring the connected person to provide the RSE licensee with the required information.  [ Schedule 3, item 29, paragraph 13(4B)(d)]

3.29               For example, if the RSE licensee invests assets of the superannuation fund in an investment life policy issued by a related life company, which in turn invests in a managed investment scheme of which another related body corporate is responsible entity, both the life company and the responsible entity will be persons connected with the RSE licensee.  Accordingly, a reporting standard may require the RSE licensee to report on the underlying investments of the managed investment scheme and the deductions on net returns imposed by the responsible entity and life company. 

3.30               These requirements may apply to several contracts or arrangements that invest the assets, or assets derived from the assets, of an RSE licensee through several parties as set out in example 3.1.

Example 3.1  

An RSE licensee (ABC Super) invests assets of their fund through a custodian.  The custodian must invest as directed by ABC Super.  The custodian, at the direction of ABC Super, purchases units in Managed Investment Scheme 1.  Managed Investment Scheme 1 is not a related body corporate of ABC Super.

In this example, ABC Super must notify the custodian the assets are those of ABC Super.  The custodian must, in turn, notify Managed Investment Scheme 1 that they are investing assets of ABC Super.

Information on the deductions from the investments and details on the types of financial products and other property that is invested in must be provided by each entity to the entity preceding it in the chain of investment.

Managed Investment Scheme 1 provides the custodian details of the costs it deducts from the investment return.  In turn, the custodian provides this information and details of the costs it deducts from the investment return it received from Managed Investment Scheme 1 to ABC Super. 

The steps involved are set out in Diagram 3.2.

Diagram 3.2  

Text Box: Investment of assets that require notification
Text Box: Providing the required information
 

 

 

 

 

 

 



3.31               ‘Arrangement’ and ‘financial product’ are defined as having the same meaning as under chapter 7 of the Corporations Act as these terms are used with the same underlying concepts as the Corporations Act.  [ Schedule 3, items 31 and 33, section 31]

3.32               Custodian, pooled superannuation trust, related body corporate, registrable superannuation entity and RSE licensee are defined as having the same meaning as in the SIS Act as these terms are used with the same underlying concepts and are superannuation specific.  [ Schedule 3, items 32, and 34 — 37, section 31]

3.33               Information collected under a reporting standard that relates to entities other than the RSE licensee will also be treated as protected documents and protected information for the purposes of the APRA Act.  [ Schedule 3, items 1 and 2, subsection 56(1)]

3.34               The objects of the FSCOD Act are amended to explicitly acknowledge APRA’s role in collecting data for the purposes of publishing information given to it by financial sector entities.  [ Schedule 3, item 26, paragraph 3(1)(aa)]

3.35               These amendments are not intended to prevent APRA from seeking information, to the extent it is known to the RSE licensee, about investments through entities that would not be required to provide information under these new requirements.  [ Schedule 3, item 26, paragraph 3(1)(aa)]

APRA’s publication of superannuation data

3.36               APRA will be required to publish quarterly information in relation to MySuper fees, costs and net returns at the product level.  This will provide a central source of information on MySuper products and will help inform consumers and drive competition between funds that offer MySuper products.  [ Schedule 3, item 44, paragraph 348A(1)(a), (b) and (c)]

3.37               APRA will also be required to publish any other information to be prescribed by the regulations.  This allows flexibility to specify additional information which APRA will be required to publish.  [ Schedule 3, item 44, paragraph 348A(1)(d)]

3.38               APRA must not publish information that would identify the beneficiary of a regulated superannuation fund.  [ Schedule 3, item 44, subsection 348A(2)]

Product dashboard and other disclosure

Product Dashboard

3.39               RSE licensees will be required to publish a product dashboard for each of the fund’s MySuper and choice products.  This should be made available on a part of their website that is accessible to the public at all times.  The product dashboard will include key information, useful for both new and existing members.  Standardised disclosure of key information will allow members to easily compare products and thus make informed choices. 

3.40               Trustees of regulated superannuation funds must ensure that each product dashboard is available publicly on their website, is updated as required and contains the right information.  [ Schedule 3, item 8, paragraphs 1017BA(1)(a), (b), (c) and (d)]

3.41               A product dashboard for an investment option of a choice product or a MySuper product will be required to include the investment return target, the number of times the current target has been met in the last ten financial years (or for the period the product has been offered if it has been offered for less than ten financial years), the level of investment risk, a statement about the liquidity, and the average amount of fees (excluding activity fees, advice fees and insurance fees) and other costs such as embedded investment costs in relation to the MySuper product or investment option  during the last quarter, expressed as a percentage of the assets of the fund attributable to the MySuper product or investment option.  [ Schedule 3, item 8, subsections 1017BA(2) and(3)]

3.42               It is expected that APRA will make reporting standards that will determine the methodology that must be used in calculating the information that is to be disclosed on the product dashboard.

3.43               An RSE licensee will be required to update the product dashboard on their website within 14 days of the information changing.  For example, if the trustee decides to change the investment return target for an investment option it must update the product dashboard within 14 days of making this change.  In regards to the amount of costs incurred in a quarter, this will have to be updated within 14 days of the end of the each quarter to reflect the costs incurred in the previous quarter.  [ Schedule 3, item 8, paragraphs 1017BA(1)(c) and (d)]

3.44               It is important that the way information is displayed on a product dashboard enables members to make comparisons between products.  Therefore, regulations may be prescribed on how the information in the product dashboard must be displayed.  [ Schedule 3, item 8, paragraph 1017BA(1)(e)]

3.45               For the purposes of the product dashboard, the terms choice product, member, MySuper product, and regulated superannuation fund are defined as having the same meaning as in the SIS Act as these terms are used with the same underlying concepts and are superannuation specific.  [ Schedule 3, item 8, subsection 1017BA(5)]

3.46               ASIC will be able to issue a stop order if information in the product dashboard is defective.  This power could be used where the product dashboard contains misleading or deceptive information, there is an omission, or it is not updated as required.  In this situation ASIC may order specific conduct in respect of the product which the defective product dashboard relates to in order to remedy the situation.  ASIC already has these stop order powers for other disclosure documents.  [ Schedule 3, item 9, paragraph 1020E(1)(c), item 10, paragraph1020E(2)(c), item 11, paragraph 1020E(7)(a) and item 12, paragraphs 1020E(11)(c)] 

3.47               The product dashboard is a key reform to the superannuation disclosure regime, and to ensure that the product dashboard is published and available to members it will be an offence for a trustee, who is required to publish a product dashboard, not to do so.  [ Schedule 3, item 14, subsection 1021NA(1)]

3.48               It will also be an offence for a trustee to publish a product dashboard containing defective information.  This will apply if the trustee knows that the information is not updated as required, contains misleading or deceptive information or there is an omission.  This will ensure that all elements of the product dashboard are relevant, accurate and available to members.  [ Schedule 3, item 14, subsections 1021NA(2) and(3)]

3.49                 Strict liability will also apply to failure to update the product dashboard as required and where there is an omission from the product dashboard.  This will apply whether or not the trustee knew or did not know the information was not updated as required or there was an omission.  It is important for trustees to provide the product dashboard and keep it up-to-date for the product dashboard to be useful for members.  Strict liability is imposed with regard to the product dashboard disclosure requirements to reflect the benefit of these disclosures for consumers and the importance that trustees maintain a level of vigilance to ensure that the information is provided in an accurate and timely manner.  The strict liability offence mirrors similar offences that apply to other important disclosures, such as a product disclosure statement.  [ Schedule 3, item 14, subsection 1021NA(4)]

3.50               The trustee will have a defence where it has taken reasonable steps to ensure that the dashboard was updated as required, not misleading or deceptive, and contained no omissions.  This is consistent with defences available in relation to other disclosure offences.  [ Schedule 3, item   14, subsection 1021NA(5)]

3.51               Civil action against the trustee will be able to be taken by a person who suffers loss or damage as a result of the trustee’s product dashboard not containing information as required by the 1017BA, not being updated as required, containing misleading or deceptive information, or if there is an omission.  The trustee is not liable for civil action if the trustee took reasonable steps to ensure that the information is not misleading or deceptive or there would not be an omission from the information.  This is consistent with the other civil liability disclosure offences in 1022B.  [ Schedule 3, item 15, paragraph 1022B(1)(f) and Schedule 3, item 16, paragraph 1022B (2)(f) and Schedule 3, item 18, paragraph 1022B(3)(e) and Schedule 3, item 19, subsections 1022B(7B) and (7C)]



3.52                

3.53               The requirement to publish a product dashboard will not apply to investment options within a choice product if:

•        the assets under the investment option are invested only in one or more of the following:

-       a capital guaranteed life insurance policy where the contributions and accumulated earnings may not be reduced by negative investment returns or any reduction in the value of assets in which the policy is invested;

-       a life policy providing benefits based solely on the realisation of a risk, and not related to the performance of an investment; and

-       an investment account contract that is held solely for the benefit of that member, and relatives and dependants of that member — to cover legacy products such as endowment and whole of life policies.

•        the sole purpose of the investment option is the payment of a pension to members, such as an allocated pension investment option; and

•        the assets of the fund invested under that investment option are only invested in another single asset, such as individual financial products offered on a platform.  [ Schedule 3, item 8, subsection 1017BA(4)]

3.54               The MySuper Core Provisions Bill defines a choice product as a product which is not a MySuper product.  This definition is being amended to define a choice product as a class of beneficial interest in a regulated superannuation fund unless all the members of the fund who hold the class of beneficial interest in the fund are defined benefit members or the class of beneficial interest is a MySuper product.  This ensures that the product dashboard will not apply to defined benefit arrangements.  [ Schedule 3, item 40, subsection 10(1)]

Remuneration and other information

3.55               An RSE licensee will have a new requirement to disclose the details of remuneration of each executive officer if the RSE licensee is a body corporate or each trustee if the RSE licensee is a group of individual trustees.  The details of this disclosure will be prescribed by regulations.  It is intended that these requirements will be modelled on the existing requirements for listed companies at section 300A of the Corporations Act.  [ Schedule 3, item 42, paragraph 29QB(1)(a)]

3.56               Currently a large amount of information is only available to members through request or on the member only section of the website.  Therefore, regulations will be able to prescribe certain superannuation specific documents that will have to be published on the public section of the fund’s website.  [ Schedule 3, item 42, paragraph 29QB(1)(b)]

3.57               It is intended that regulations will specify the following documents to be published:

•        the net returns of all MySuper and investment options of choice products for the past ten years and the investment return target for all MySuper and investment options of choice products;

•        the fund’s trust deed(s) and any amending or supplemental deeds;

•        the fund’s most recent audited financial report;

•        the fund’s most recent actuarial report (if applicable);

•        the fund’s product disclosure statements;

•        the fund’s annual report;

•        the fund’s financial services guide (if applicable);

•        each significant event or material change notification made by the fund to any members;

•        the names of all outsourced service providers;

•        the name and a brief biography of each director or trustee, or person involved in the trusteeship of the fund;

•        details of board meeting attendance by directors; and

•        the fund’s proxy voting policies and procedures as well as voting behaviour.

3.58               ASIC will be the responsible regulator for this new provision in the SIS Act.  A failure to publish up-to-date information on the fund’s website at all times will be a strict liability offence carrying a penalty of 50 penalty units.  A strict liability offence is necessary to ensure effective enforcement of this provisions by ASIC.  Superannuation is a compulsory system of retirement savings, therefore, it is appropriate that RSE licensees do everything that they can reasonably do to ensure that there is complete transparency on the financial products members have an equitable interest in.  However, recognising that this obligation will extend to a wide range of information, a lower penalty will apply compared to other disclosure-related offences.  [ Schedule 3, item 42, subsections 29QB(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)]

Obligation to give consistent information

3.59               To improve comparability of superannuation products, there will be a requirement for consistency in how information is calculated.  An RSE licensee will be required to give any person, other than an agency of the Commonwealth, information that is calculated in the same way as required under a reporting standard made by APRA.  [ Schedule 3, item 42, subsection 29QC(1)]

3.60               This requirement applies to the data for the period that APRA is collecting it under the reporting standards.  Therefore, historical that was calculated differently to the methodology set out in the reporting standards does not have to be recalculated in order for it to be provided to another person unless the reporting standard requires data for that period to be provided to APRA.  [ Schedule 3, item 42, subsection 29QC(1)]

3.61               Regulations will be able to prescribe situations where information that is disclosed is provided to APRA under a reporting standard does not have to be calculated in the same way.  This will allow for regulations to deal with any situation where APRA may require information for prudential purposes that may be misleading if it is calculated in the same way when disclosed to members.  [ Schedule 3, item 42, subsection 29QC(2)]

3.62               ASIC will be the responsible regulator for this new provision in the SIS Act.  Failure to provide information calculated on the same basis will be an offence of strict liability carrying a penalty of 50 penalty units.  Inconsistent information provided through multiple means can cause significant damage to members of superannuation funds and inhibit informed decision-making.  Superannuation is a compulsory system of retirement savings, therefore, it is appropriate that RSE licensees do everything that they can reasonably do to ensure that there is complete transparency on the financial products members have an equitable interest in.  However, recognising that this obligation will extend to a wide range of information provided to many individuals, a lower penalty will apply compared to other disclosure-related offences.  [ Schedule 3, item 42, subsections 29QC(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)]]

Portfolio holdings

Trustees must publish details of portfolio holdings

3.63               RSE licensees will have an obligation to make publicly available the details of their portfolio holdings twice annually as at each reporting day, which will be 30 June and 31 December each year, by publishing this information on the fund’s website within 90 days.  [ Schedule 3, item 8, section 1017BB]

3.64               The details published must cover information sufficient to identify each financial product or other property, and the value of the RSE’s investment in each financial product or other property.  The regulations may prescribe the format in which the information must be published.  [ Schedule 3, item 8, subsections 1017BB(1) and (3)]

3.65               For example, the fund website must list each share held by the RSE, or held by another party for the ultimate benefit of the RSE, the number of shares held and the price of each share at the end of the reporting day.

3.66               The portfolio holdings information must remain on the fund website until updated with information from the next reporting day.  The fund’s website will, therefore, always contain details of the RSE’s portfolio holdings that relate to the most recent reporting day.  [ Schedule 3, item 8, subsection 1017BB(2)]

3.67               The RSE licensee is not required to publish information relating to financial products or other property which is not acquired in this jurisdiction unless the RSE licensee knew, or reasonably ought to know, information sufficient to identify the financial products or other property acquired.  For example, an RSE licensee may use an offshore custodian to acquire assets in the United States of America.  However, the custodian will not be subject to these requirements as they are not based in Australia.  However, as the custodian only invests at the direction of the RSE licensee, then the RSE licensee itself will have the knowledge of the financial products or other property acquired and it will still have to publish this information on the fund’s website.

3.68               The regulations will be able to prescribe a materiality threshold for the information that must be published on an RSE licensee’s website.  The Government will give consideration to prescribing a threshold to strike a balance between the compliance costs and the benefits for members from portfolio holdings disclosure.  In the absence of any regulations being made, the legislation requires that all portfolio holdings must be disclosed subject to the holding being acquired in Australia.

3.69               The publishing requirement extends to financial products in which ‘assets derived from assets’ of the RSE are invested.  The concept of ‘assets derived from assets’ is intended to capture situations where assets are invested through intermediaries; for example, where assets are invested through fund of funds structures such as multiple levels of pooled investments, including managed investment schemes. 

3.70               In other words, an RSE licensee may invest and in return acquire an interest in an entity.  That entity may then in turn use the assets contributed by the RSE, or perhaps part of those assets, pooled with the assets contributed by other investors, to invest and in return acquire an interest in a third party.  At the point that the pooled assets are invested by the entity in the third party they are ‘assets derived from assets’ of the RSE.  To avoid confusion, the term is not intended to refer to derivative products, such as contracts for difference.  This may, in fact, be an asset of the RSE.  [ Schedule 3, item 8, paragraphs 1017BB(1)(a) and (b)]

Other parties must provide relevant information to the RSE licensee

3.71               To enable an RSE licensee to obtain the required information for disclosure of their portfolio holdings, obligations will be imposed on parties to contracts and arrangements that acquire a financial product using the assets, or assets derived from the assets, of an RSE.

3.72               Specifically, where a person (the first party) enters into a contract or other arrangement with another person (the second party), to acquire a financial product using the assets, or assets derived from assets of an RSE, or to provide a custodial arrangement then the first party must notify the second party to that contract or arrangement relates to assets, or assets derived from assets, of an RSE.  [ Schedule 3, item 8, subsections 1017BC(1) and (2)]

3.73               The first party must also provide details of the RSE licensee to the second party.  For example, the name of the RSE licensee and a mailing address to which to send the required information.  [ Schedule 3, item 8, paragraph 1017BC(2)(b)]

3.74               This requirement will only apply to contracts or arrangements where assets, or assets derived from assets, of an RSE are subject of the arrangement and:

•        the first party acquires a financial product from a second party;

•        there is an agent of the first party acquiring a financial product from the second party;

•        the second party provides a custodial arrangement to which the first party is a client; or

•        the first party is the provider of a custodial arrangement and the second party will acquire a financial product for the first party under that custodial arrangement.  [ Schedule 3, item 8, subsection 1017BC(1)]

3.75               If a financial product is acquired under the contract or arrangement, the second party will have an obligation to provide the RSE licensee with information sufficient to identify the financial product acquired and any financial products or other property that the second party knows, or reasonably ought to know, will be acquired using the assets, or assets derived from the assets, of the RSE.  [ Schedule 3, item 8, subsection 1017BC(3)]

3.76               If no financial product is acquired under a contract or arrangement that is a custodial arrangement then there will be no obligation on the second party to provide information, however, the second party providing the custodial arrangement will then be aware that the investment are assets, or assets derived from assets, of a RSE licensee and hence will be under an obligation to provide a notice to any other party that provides it with a custodial arrangement or from whom they acquire a financial product.  For example, where the arrangement is to provide a custodial arrangement then no information must be provided by the second party.  However, this ensures that the second party is made aware that the assets that are subject of the arrangement are assets, or assets derived from assets, of the RSE licensee.  If that second party subsequently enters into a separate arrangement, for which it would be the first party, to acquire a financial product from another party then it must provide a separate notice to that other party who would be under an obligation to provide the relevant information to the RSE licensee so that it can comply with its obligation to publish portfolio holdings.  [ Schedule 3, item 8, sections 1017BD and 1017BE]

3.77               ‘Custodial arrangement’ is defined using an existing definition in the Corporations Act.  This has been generally understood to applying to platform arrangements that allow members to direct a superannuation entity to invest in a particular financial product.  However, in the context of these provisions, it will capture traditional custody arrangements that are provided to RSE licensees by professional custodians as these arrangements only permit the custodian to invest assets as directed by the RSE licensee.  [ Schedule 3, item 8, sections 1017BC, 1017BD and 1017BE]

3.78               In some circumstances, a professional custodian may only acquire other property on behalf of the RSE licensee.  In this case, the custodian may not meet the definition of custodial arrangement in the Corporations Act.  However, in this case, the custodian is acquiring the other property at the direction of the RSE licensee which means the RSE licensee should already have information regarding the other property acquired, and therefore this must be published on the RSE licensee’s website. 

3.79               These requirements may apply to several contracts or arrangements that invest the assets, or assets derived from the assets, of an RSE licensee through several parties as set out in example 3.2.

Example 3.2  

An RSE licensee (ABC Super) invests assets of their fund through a custodian.  The custodian must invest as directed by ABC Super.  The custodian, at the direction of ABC Super, invests assets in a financial product provided by Managed Investment scheme 1. 

Managed Investment Scheme 1 makes investments into other managed investment schemes.  It is a fund of funds. 

Managed Investment Scheme 1 invests in a financial product offered by Managed Investment Scheme 2 by purchasing units in that scheme.

In this example, ABC Super must notify the custodian the assets are those of ABC Super. 

The custodian must then notify Managed Investment Scheme 1 that the assets invested are those of ABC Super as it is an investment in a financial product.  Managed Investment Scheme 1 will have an obligation to provide information to ABC Super that is sufficient to identify its financial product, the financial products it acquires with the assets and other property that it acquires with the assets as well as the value of ABC Super’s investment in each of these things.

Managed Investment Scheme 1 must subsequently notify Managed Investment Scheme 2 that it is investing assets derived from the assets of ABC Super as it is investing in another financial product. 

Therefore, Managed Investment Scheme 2 will also have an obligation to provide information directly to ABC Super that is sufficient to identify its financial product, the financial products it acquires with the assets and other property that it acquires with the assets as well as the value of ABC Super’s investment in each of these things. 

The steps involved are set out in Diagram 3.3.

Diagram 3.3  

Text Box: Providing the required information Text Box: Investment of assets that require notification
 

 

 

 

 

 

 

 

 



3.80               These obligations will only apply to contracts or arrangements entered into from the day of Royal Assent.  [ Schedule 3, item 20, section 1541]

3.81               Regulations will be able to prescribe certain contracts and arrangements to which the obligation to provide a notice does not apply.  For example, regulations may be used to exclude contracts and arrangements where the first party will already be required to provide information on the financial product that will be acquired as they will always know, or reasonably ought to know, information sufficient to identify the financial product and the value of assets attributable to the RSE licensee that is invested in the financial product.

3.82               Parties entering into contracts or arrangements which cover assets of an RSE, or assets derived from assets, of an RSE, who have not been notified that the contract or arrangement covers such assets, or the details of the RSE licensee, will not be required to provide the necessary information.  [ Schedule 3, item 8, subsections 1017BC(2) and (3)]

Offences relating to publication of information

3.83               RSE licensees who fail to publish the details of their portfolio holdings on the fund’s website commit an offence with a penalty of 100 penalty units or imprisonment for two years, or both.  It is a defence to show that the RSE licensee would have published the information, but for the fact that the trustee was not provided with the required information.  That is, it is a defence to show that the details of an RSE’s portfolio holdings were not published because the information was not provided.  [ Schedule 3, item 14, subsections 1021NB(1) and (5)]

3.84               There will be a separate defence for an RSE licensee who omits information where the information would have been published except for the fact that the information was not provided because the requirement for another party to provide the relevant information did not apply because the contract or arrangements was entered into prior to the day of Royal Assent.  [ Schedule 3, item 22, subsection 1541(3)]

3.85               RSE licensees who knowingly publish misleading or deceptive information, or information containing omissions, commit an offence.  This offence carries a penalty of 200 penalty units or imprisonment for five years, or both.  [ Schedule 3, item 14, subsection 1021NB(2)]

3.86               A corresponding strict liability offence exists for where the RSE licensee knew or did not know whether the information was misleading or deceptive or contained an omission.  This offence carries a penalty of 100 penalty units or imprisonment for two years, or both.  [ Schedule 3, item 14, subsection 1021NB(3)]

3.87               A strict liability offence is necessary to ensure effective enforcement of these provisions by ASIC.  Superannuation is a compulsory system of retirement savings, therefore, it is appropriate that RSE licensees do everything that they can reasonably do to ensure that there is complete transparency on the financial products members have an equitable interest in.

3.88               However, where portfolio holdings information is published that contains an omission, it is a defence to show that a trustee took reasonable steps to ensure there would not be an omission, or that necessary information to meet the requirement was not provided to the RSE licensee by other parties or that the information was omitted because it would have been misleading and deceptive and a trustee took reasonable steps to obtain information that would not have been misleading or deceptive.  [ Schedule 3, item 14, subsection 1021NB(6)]

3.89               An additional defence exists solely for the strict liability offence in relation to publishing misleading or deceptive information, where the RSE licensee took reasonable steps to ensure that the information published would not be misleading or deceptive.  [ Schedule 3, item 14, subsection 1021NB(7)]

Offences relating to requirements to provide relevant information

3.90               Parties who do not notify another party that a contract or arrangement invests assets of an RSE, or assets derived from the assets of an RSE, or who fail to notify other parties of the details of the RSE licensee commit an offence.  This offence carries a penalty of 100 penalty units or imprisonment for two years, or both.  [ Schedule 3, item 14, subsection 1021NC(1)]

3.91               A party to a contract or arrangement who invests assets of an RSE, or assets derived from assets of an RSE, and who is notified by the investing party but who fails to provide the relevant information to the RSE licensee commits an offence.  This offence also carries a penalty of 100 penalty units or imprisonment for two years, or both.  [ Schedule 3, item 14, subsection 1021NC(2)]

3.92               Parties commit an offence when they knowingly omit, or knowingly provide misleading or deceptive, information when either: notifying another party that a contract or arrangement invests assets, or assets derived from assets, of an RSE, or notifying another party of the details of the trustee, or who have been so notified and do not provide the relevant information to the RSE licensee.  This offence carries a penalty of 200 penalty units or imprisonment for five years, or both.  [ Schedule 3, item 14, s ubsection 1021NC(3)]

3.93               A corresponding strict liability offence exists for whether or not the person knew the information provided was misleading or deceptive or omitted information.  This offence carries a penalty of 100 penalty units or imprisonment for two years, or both.  [ Schedule 3, item 14, subsections 1021NC(4) and (5)]

3.94               A strict liability offence is necessary to ensure effective enforcement of this provisions by ASIC.  Superannuation is a compulsory system of retirement savings, therefore, it is appropriate that RSE licensees do everything that they can reasonably do to ensure that there is complete transparency on the financial products members have an equitable interest in.

3.95               Where a person has committed an offence by omitting to provide relevant information to the RSE licensee, it is a defence to show that the person took reasonable steps to ensure there would not be an omission in providing the information.  In the alternative, it is a defence to show that the information was omitted because it would have been misleading or deceptive, and that the person took reasonable steps to obtain information that would not have been misleading or deceptive.  [ Schedule 3, item 14, subsection 1021NC(6)]

3.96               Where a person has committed an offence because that person provided misleading or deceptive information to the RSE licensee under these provisions, it is a defence to the strict liability offence only that the person took reasonable steps to ensure the information provided would not be misleading or deceptive.  [ Schedule 3, item 14, subsection 1021NC(7)]

Application and transitional provisions

3.97               A consultation undertaken in respect of the existing section 57 of the FSCOD Act will be valid for the purposes of APRA making a determination for the amended section 57.  Representations made by interested parties also are valid for the amended section 57.  [Schedule 3, item 45]

3.98               The requirement for RSE licensees to provide APRA with information through an implied term in contracts will apply to both new and existing contracts.  The exception to this where the contract was entered into before the commencement of the Bill and the disclosure of this information would result in an acquisition of property on unjust terms.  If there is an acquisition of property on unjust terms then the RSE is not required to comply with the reporting standard to the extent that it relates to this information.  [Schedule 3, item 46]

3.99                APRA will be able to publish quarterly data on MySuper products beginning on 1 July 2013.  [Schedule 3, item 47]

3.100           The obligation to publish a product dashboard for a MySuper product will apply from 1 July 2013.  The obligation to publish a product dashboard for an investment option of a choice product will apply from 1 July 2014.  The longer lead in time for choice products is due to the more complex nature of some choice products.  [Schedule 3, item 22, section 1539]

Consequential provisions

3.101           Section 601TAA of the Corporations Act provides that a licensed trustee company must publish an up-to-date schedule of fees on their website.  This section is amended to avoid any doubt that may be created by the requirement to make certain information publicly available on an RSE licensee’s website that a fee schedule published by a licensed trustee company must also be publicly available on their website.

3.102           The offences applying to RSE licensees for the product dashboard and the disclosure of portfolio holdings are added to section 38A of the SIS Act which defines ‘regulatory provision’ for the purpose of specifying that contravention of a regulatory provision may result in a notice by the relevant regulator that removes complying fund status.

Do not remove section break.



Chapter 4          

Modern awards and enterprise agreements

Outline of chapter

4.1                   This chapter explains amendments to the FW Act relating to the nomination of default superannuation funds in modern awards and enterprise agreements.  The amendments generally provide that only funds offering a MySuper product can be included in modern awards and enterprise agreements.

Context of amendments

4.2                   From 1 January 2014, employers will generally only be able to avoid penalties under the choice of fund provisions in the SG Act by making superannuation contributions, on behalf of those employees who have not chosen their fund, to a superannuation fund that is authorised to offer a MySuper product.

4.3                   Most modern awards specify a particular fund or funds to which employers must make compulsory superannuation contributions for the benefit of employees covered by the award who have not chosen a fund (‘default funds’).  A failure to make contributions for such employees to a default fund listed in the award constitutes a contravention of the award,  exposing the employer to penalties under the FW Act.

4.4                   These amendments introduce a new requirement that default funds listed in modern awards (other than exempt public sector superannuation schemes) must be authorised to offer a MySuper product.  This requirement is intended to ensure that the new MySuper requirements under the SG Act do not result in employers being required to make compulsory superannuation contributions twice, because they are required to comply with both the terms of the modern award and the SG Act.  Otherwise, employers could be required to make contributions to a fund that offers a MySuper product in order to satisfy their superannuation guarantee obligation under the SG Act, and to make contributions to a default fund listed in a modern award that does not offer a MySuper product in order to comply with the award.

4.5                   Enterprise agreements can also nominate a fund to which an employer must make compulsory superannuation contributions for the benefit of employees who are covered by the agreement.  In the case of enterprise agreements, generally the nominated fund is effectively the ‘chosen’ fund for all employees covered by the agreement.  The SG Act exempts the employer from providing those employees with a standard choice form.  An employee who did not support that fund being included in the enterprise agreement, or who joined the employer after the enterprise agreement was made, will have their superannuation contributions sent to the nominated fund.  However, an enterprise agreement may also nominate a fund as a default fund, while still allowing employees to choose a different fund.

4.6                   An enterprise agreement covers all the employees engaged to perform work covered by the agreement, including those who did not vote in favour of the agreement or who were not employed at the time the agreement was approved.  It is intended that, in general, these employees should have their superannuation contributions made to a fund that offers a MySuper product.

Summary of new law

4.7                   Modern awards will generally only be permitted to nominate a fund that offers a MySuper product as a ‘default fund’ (that is a fund to which employers are to make compulsory contributions for employees that do not have a chosen fund). 

4.8                   An exception to this rule is that an ‘exempt public sector superannuation scheme’, within the meaning given by the SIS Act, will also be permitted to be included as a default fund in a modern award.  Exempt public sector superannuation schemes are not regulated by APRA and will not be able to offer MySuper products. 

4.9                   A term of a modern award will be invalid to the extent that it does not comply with this requirement.

4.10               Despite a term of a modern award being invalid to the extent that it nominates a non-compliant default fund, such terms may remain in the text of a modern award and cause confusion for employers and employees.  For this reason, FWA will be required to conduct a ‘one-off’ process to ensure, as far as possible, that on 1 January 2014 modern awards do not purport to nominate any default funds that do not comply with the new requirement. 

4.11               There will also be an ongoing obligation on FWA to remove any invalid references to non-compliant funds in modern awards ‘as soon as practicable’ after receiving a written notification from APRA that a fund has ceased to offer any MySuper product or that a fund has ceased to be an exempt public sector superannuation scheme and does not offer a MySuper product. 

4.12               FWA will be required to include a new term in modern awards that permits employers to make contributions to a fund for an employee who is a defined benefit member of that fund.  This will allow contributions to defined benefit schemes even if the fund is not specified in the modern award and does not offer a MySuper product.

4.13               Under the SG Act, contributions made to superannuation funds in accordance with the terms of certain industrial instruments are deemed to comply with the choice of fund requirements.  Contributions made under two further types of award-based transitional instrument, made under the former federal workplace relations system, will be deemed compliant with the choice of fund requirements.  The effect of these amendments is that funds listed in any such instruments that remain in operation on 1 January 2014 will not be required to offer a MySuper product.  The FW Act will also be amended to provide that  an enterprise agreement approved by FWA on or after 1 January 2014 will only be able to nominate a default fund (or scheme) that is either:

•        a fund that offers a MySuper product;

•        a fund that only receives contributions in respect of employees of the relevant employer who have not chosen a fund if such employees are defined benefit members; or

•        an exempt public sector superannuation scheme.

4.14               A term of an enterprise agreement will be an unlawful term and of no effect to the extent that it nominates a default fund that does not comply with this requirement.

Comparison of key features of new law and current law

New law

Current law

From 1 January 2014, a term of a modern award cannot nominate a default fund, unless the fund:

a)       offers a MySuper product; or

b)       is an ‘exempt public sector superannuation scheme’.

A term of a modern award has no effect to the extent that it does not comply with this requirement.

The FW Act currently provides that modern awards may include terms about superannuation (s 139(1)(i) of the FW Act).

Modern awards generally provide that where an employee has not chosen a superannuation fund, employers are required to pay compulsory contributions into a default fund listed in the award (or a default fund or successor fund which the employer was making contributions to before 12 September 2008, provided the fund is an eligible choice fund).

FWA must conduct a ‘one-off’ process to ensure that on 1 January 2014, modern awards do not include terms providing for superannuation contributions to be made to a non-compliant default fund.

While terms of this nature would have no effect, this process will ensure that such terms are not included on the face of modern awards on 1 January 2014.

There will also be an ongoing obligation on FWA to remove any invalid references in modern awards to a non-compliant fund ‘as soon as reasonably practicable’ after receiving a notification from APRA that the fund has ceased to be compliant.

Under the FW Act, while terms that are not permitted to be included in modern awards have no effect (s 137), there are no specific provisions requiring FWA to remove any such terms from the face of modern awards.

However, there are a range of existing mechanisms allowing modern awards to be reviewed or varied which could be used for this purpose (ss 156-158 and 160 of the FW Act).  It is intended that these provisions could be relied upon to remove any references in modern awards to a default fund that ceases to be compliant with the new requirements on or after 1 January 2014. 

From 1 January 2014, modern awards must include a new term that permits an employer to make contributions to a superannuation fund or scheme for default fund employees who are ‘defined benefit members’.

The new term will allow employers to continue to make contributions to funds for ‘defined benefit members’, regardless of whether the fund offers a MySuper product.

There is currently no requirement in the FW Act to include a term in modern awards in relation to superannuation contributions.

Enterprise agreements approved by FWA on or after 1 January 2014 are not permitted to nominate a default fund for employees covered by the agreement unless the fund:

a)       offers a MySuper product;

b)       only receives contributions in respect of employees of the relevant employer who have not chosen a fund if such employees are ‘defined benefit members’; or

c)       is an ‘exempt public sector superannuation scheme’.

A term of an enterprise agreement will be an unlawful term and will be of no effect to the extent that it does not comply with these criteria.

Enterprise agreements may include terms dealing with superannuation but are not required to do so (s 172 FW Act).

If an enterprise agreement nominates a superannuation fund, that fund is deemed to comply with the choice of fund requirements in the SG Act, provided the fund is an ‘eligible choice fund’.

Contributions under two further award-based transitional instruments are deemed to be compliant with the choice of fund requirements under the SG Act.  Default funds listed in these instruments will therefore not be required to offer a ‘MySuper product’ or otherwise comply with the new requirement.

The relevant instruments are ‘awards’ (often referred to as ‘pre-reform federal awards’) and ‘State reference transitional awards or common rules’.  These industrial instruments were made under the former federal workplace relations system before being preserved for a limited duration by item 2 of Schedule 3 to the TPCA Act.

While the majority of these instruments have been terminated, there may be some residual instruments that continue to operate on 1 January 2014, when the MySuper requirements commence.

The SG Act currently deems contributions made under certain award and agreement-based transitional instruments to be compliant with the choice of fund requirements.  These instruments include, for example, pre-reform certified agreements, Australian Workplace Agreements, workplace determinations and Division 2B State instruments.  Contributions made in accordance with ‘notional agreements preserving State awards’ are also deemed compliant with the choice of fund requirements if the contributions were made in respect of salary or wages paid before 1 July 2006.

Because contributions made under these instruments are deemed compliant with the choice of fund requirements, such contributions will not be required to be made to a fund that offers a MySuper product. 

Detailed explanation of new law

4.15               A definition of the term ‘default fund employee’ will be inserted into the FW Act.  ‘Default fund employees’ are employees who have no chosen fund within the meaning of the SG Act.  Definitions of the terms ‘defined benefit member’, ‘exempt public sector superannuation scheme’ and ‘MySuper product’ will also be inserted into the FW Act as they are relevant to interpreting these amendments.  The terms are to take the meaning ascribed to them by relevant superannuation legislation.  [Schedule 4, items 1, 2, 3 and 4, section 12]

4.16               Modern awards must not include a term that requires or permits contributions to be made to a superannuation fund for the benefit of an employee who has no chosen fund (that is a ‘default fund employee’), unless the fund:

•        offers a MySuper product; or

•        is an exempt public sector superannuation scheme. 

[Schedule 4, item 6, subsection 155A(1)] 

4.17               Allowing exempt public sector superannuation schemes to be named as default funds in modern awards is required because such funds or schemes are not regulated by APRA and therefore cannot be authorised to offer a MySuper product.  [Schedule 4, item 6, paragraph 155A(1)(b)] 

4.18               The requirement that default funds in modern awards offer a MySuper product or be an exempt public sector superannuation scheme will apply to both existing modern awards and any new modern awards from 1 January 2014.  [Schedule 4, item 8, schedule 1, clause 9] 

4.19               Section 137 of the FW Act will operate so that a term of a modern award will have no effect to the extent that it does not comply with the new requirement.  For example, if the authorisation of a fund to offer a MySuper product is cancelled and the fund is not an exempt public sector superannuation scheme, a term in a modern award will be invalid to the extent that it nominates that fund as a default fund from the time of the cancellation.  This will ensure that employers are not exposed to double-jeopardy in circumstances where a default fund listed in a modern award ceases to comply with these criteria.  Employers should not be obligated to make contributions to a fund under the terms of a modern award when they would be subject to penalties under the SG Act for doing so.  [Schedule 4, item 6, subsection 155A(1)] 

4.20               The new requirement only applies to terms in modern awards that specify a particular superannuation fund as a default fund.  A term of a modern award will still have effect if it requires or permits superannuation contributions to a class of fund but does not specify a particular fund.  For example, most modern awards include a grandfather clause that permits an employer to make contributions to a fund that the employer was contributing to before 12 September 2008, provided the fund is an eligible choice fund.  Although this term would notionally permit contributions to a fund that does not meet the new requirement, the term would still have effect because it does not specify a particular fund.  However, contributions to a default fund made in reliance on the grandfather clause would not meet the requirements of the SG Act if the contributions are not made to a fund that offers a MySuper product or an exempt public sector superannuation scheme, and the contributions are not made for a defined benefit member.

4.21               FWA must conduct a ‘one-off’ process to ensure that on 1 January 2014, modern awards do not include any terms that fail to comply with the new requirement for default funds.  [Schedule 4, item 8, clause 11]

4.22               While any such terms would have no effect as a result of section 137 of the FW Act, this process will ensure that they are not included on the face of a modern award in order to avoid confusion for employers and employees.

4.23               FWA will be required to ensure that by 1 January 2014, the text of each modern award does not include any term to the extent that it contravenes the new requirement for default funds in the following circumstances:

•        the award was made before 1 January 2014;

•        the award was in operation on 1 January 2014; and

•        immediately before 1 January 2014, the award included a term that would not have complied with the new requirement.

[Schedule 4, item 8, clause 11] 

4.24               For example, FWA would be required to remove a reference to one default fund from a modern award by 1 January 2014 in the following circumstances:

•        On 31 December 2013 a modern award includes a term permitting superannuation contributions to be made in respect of employees with no chosen fund to four different funds. 

•        One of the funds does not, at this time, comply with the new requirement for default funds because the fund is not authorised to offer a MySuper product and is not an exempt public sector superannuation scheme. 

[Schedule 4, item 8, clause 11] 

4.25               Where a default fund listed in a modern award ceases to comply with the new requirement that such funds either offer a MySuper product or be an exempt public sector superannuation scheme on or after 1 January 2014, the ‘one-off’ process will not apply.  Instead, FWA will be compelled to ensure that modern awards do not include any invalid references to a non-compliant fund after receiving a notification from APRA concerning the fund.

4.26               If APRA cancels the authorisation of a fund to offer a MySuper product and the fund is not authorised to offer any other MySuper product, APRA will be required to notify FWA in writing.  In addition, if APRA becomes aware that a fund ceases to be an exempt public sector superannuation scheme and is not authorised to offer a MySuper product APRA must notify FWA in writing of that fact.  [Schedule 4, items 11, section 29U and item 12, section 29XC]

4.27               If FWA receives a notice in writing from APRA that a fund is no longer authorised to offer any MySuper product or has ceased to be an exempt public sector superannuation scheme and is not authorised to offer a MySuper product, then FWA must ensure that the text of the modern award is updated to remove any invalid references to the fund as soon as reasonably practicable after receiving the notice.  It is intended that invalid references to non-compliant funds be removed quickly in order to avoid confusion for employers and employees.  [Schedule 4, item 6, subsections 155A(2)-(5)] 

4.28               While FWA is required to remove any invalid references in modern awards to a non-compliant fund in modern awards after receiving a notification concerning the fund from APRA, FWA may also vary modern awards to remove non-compliant default funds at any time, using one of the existing variation mechanisms in the FW Act:

•        an ongoing system of four yearly reviews of modern awards, the first of which will occur in 2014;

•        variations to modern awards, either on application or on FWA’s own motion, where FWA considers the variation necessary to achieve the modern awards objective.  Applications to vary modern awards under section 157 of the FW Act can be made by an employee or employer covered by the modern award, or by an organisation entitlement to represent their industrial interests; and

•        variations to modern awards, either on application by a party to the award, or on its own initiative, to remove an ambiguity or uncertainty, or to correct an error.

4.29               Each modern award must include a new term that permits an employer to make contributions to a superannuation fund or scheme for employees that do not have a chosen fund if the employee is a ‘defined benefit member’ of the fund or scheme.  [Schedule 4, item 5, section 149A]

4.30               The new mandatory term to be included in modern awards will ensure consistency with the amendments in Schedule 5 to the Bill, which allow employers to continue to make default contributions to funds for defined benefit members, regardless of whether that fund offers a MySuper product.  The mandatory term in modern awards will comply with the new requirement in section 155A of the FW Act because it would not specify any particular fund.

4.31               The requirement that modern awards include the mandatory term will apply to both existing modern awards and any new modern awards from 1 January 2014.  [Schedule 4, item 8, schedule 1, clause 9] 

4.32               FWA is required to amend existing modern awards to ensure that they include the new mandatory term by 1 January 2014.  [Schedule 4, item 8, Schedule 1, clause 10]  

4.33               A term of an enterprise agreement that requires or permits superannuation contributions to be made to a specified fund for the benefit of a default fund employee  is an unlawful term, unless:

•        the fund offers a MySuper product;

•        all ‘default fund employees’ in relation to whom contributions are being made to the fund or scheme by the relevant employer are ‘defined benefit members’; or

•        the fund is an exempt public sector superannuation scheme.

[Schedule 4, item 8, paragraph 194(h)] 

4.34               This requirement will apply to enterprise agreements that are approved by FWA on or after 1 January 2014.  Therefore, a term that nominates a fund in an enterprise agreement approved by FWA before 1 January 2014 that does not meet the criteria will remain a lawful term.  [Schedule 4, item 8, clause 12]

4.35               Under section 253 of the FW Act, a term of an enterprise agreement has no effect to the extent that it is an unlawful term.

4.36               FWA can only approve an enterprise agreement once satisfied that it does not contain any unlawful terms under subsection 186(4) of the FW Act.  FWA can accept undertakings from an employer to address concerns about the inclusion of unlawful terms in an enterprise agreement.  [Schedule 4, item 8, clause 8] 

4.37               To ensure that an RSE licensee may accept contributions for employees that do not have a chosen fund under enterprise agreements and have not asked their contributions to be directed to a specified choice product, section 29WA of the MySuper Core Provisions Bill will not apply to contributions made in accordance with an enterprise agreement approved before 1 January 2014, even though the fund specified does not meet one of the criteria.  [Schedule 4, item 13]

4.38               Contributions made to default funds nominated in two types of award-based transitional instruments will be deemed compliant with the choice of fund requirements in the SG Act.  The effect of this amendment is that a contribution to a fund by an employer for the benefit of an employee is deemed to have been made in compliance with the choice of fund requirements if the contribution, or a part of the contribution, is made under or in accordance with such instruments.  Such contributions will therefore not have to be made to a MySuper product.  [Schedule 4, item 9, subsection 12A(1) and Schedule 4, item 10, subsection 32C(6)] 

4.39               The relevant instruments are ‘awards’ (often referred to as ‘pre-reform federal awards’) and State reference transitional awards or common rules.  These instruments were made under the former federal workplace relations system  and have since been preserved as transitional instruments under Schedule 3 to the TPCA Act.  [Schedule 4, item 9, subsection 12A(1) and Schedule 4, item 10, subsection 32C(6)] 

4.40               While the majority of these transitional instruments have now been terminated, there may be some residual instruments that continue to operate for a limited period on or after 1 January 2014. 

Do not remove section break.



Outline of chapter

5.1                   This chapter explains amendments that will: allow for defined benefit arrangements to be used by an employer as a default fund regardless of whether the fund offers a MySuper product; and which exclude defined benefit members from the 500 employees for which an employer must contribute to the fund to qualify for a separate MySuper product.

Context of amendments

5.2                   Defined benefit funds and schemes provide members with a specified benefit on retirement that is calculated by a formula or other process.

5.3                   Defined benefit members are entitled, in whole or in part, to a specified benefit on retirement that is calculated by reference to their salary or a specified amount regardless of investment earnings or costs incurred by the fund.  If the accumulated amount in the fund is insufficient to meet the specified benefit, in most cases, this shortfall will be met by the contributing employer.  The member’s defined retirement benefit will not usually be exposed to investment risk.

5.4                   A defined contribution fund will provide a member with the accumulated amount, of contributions and investment earnings, when withdrawn by the member.  The member bears the investment risk on their retirement benefit. 

5.5                   The MySuper regime will lift standards in relation to defined contribution products that are provided as the default option of a superannuation fund.  In particular, it will ensure that there will be certain rules for charging of fees, additional duties for trustees and that an appropriate investment strategy is adopted in relation to members who do not make active choices. 

5.6                   In contrast, defined benefit members will be entitled to a benefit that is not altered by the charging of fees or the investment strategy adopted.  Therefore, the MySuper regime is not designed to apply to defined benefit arrangements.

Summary of new law

5.7                   Defined benefit funds and schemes will be able to continue to be used by employers for the contributions of employees that do not have a chosen fund.

5.8                   An exemption will apply to the requirement that employers must make contributions to a fund that offers a MySuper product for an employee that does not have a chosen fund for any employee that is a defined benefit member of the fund to which the employer is contributing.

5.9                   An exemption will also apply, in respect of defined benefit members, to the trustee’s obligation to pay contributions into a MySuper product for members that have not given the trustee an election in writing that their contributions are to be paid into a specified choice product. 

5.10               This will apply to any contribution on behalf of a defined benefit member whether it supports the defined benefits of the member or is held on a defined contribution basis.

5.11               Defined benefit members will not be able to be counted in working out whether an employer contributes to the fund for 500 or more employees and hence qualifies the trustee of that fund to apply for authorisation of a MySuper product that is open to the employees of that employer. 

Comparison of key features of new law and current law

New law

Current law

Employers may make contributions to a fund for employees that do not have a chosen fund but are a defined benefit member of that fund regardless of whether it offers a MySuper product.

The MySuper Core Provisions Bill will require employers to make contributions for employees that do not have a chosen fund to a fund that offers a MySuper product.

Defined benefit members will not be able to be counted in working out whether an employer is a large employer for the purposes of authorisation of a MySuper product under section 29TB of the MySuper Core Provisions Bill. 

The MySuper Core Provisions Bill allows any employee that the employer contributes to the fund for to be counted in working out whether an employer is a large employer for the purposes of authorisation of a MySuper product under section 29TB. 

Detailed explanation of new law

5.12               Employers will be able to make contributions for employees that do not have a chosen fund to a fund that provides defined benefits to that employee, even if that fund does not offer a MySuper product provided it meets the other requirements in subsection 32C(2) of the SG Act (for example, the fund must be an eligible choice fund for the employee).  In effect, this maintains the current operation of the SG Act in respect of contributions for employees that are defined benefit members of a superannuation fund.  [Schedule 5, item 3, subsection 19(2CA)]

5.13               For these purposes, a defined benefit member is a member who is entitled to a benefit on retirement that is defined, wholly or in part, by reference to the member’s salary at the date of retirement, an earlier date or averaged over a period before retirement, or is defined as a specified amount.  This definition, therefore, excludes a member who is entitled to a specified benefit upon termination of employment but is not entitled to a defined benefit or who is entitled to a specified amount upon realisation of a risk such as death or permanent disability.  These members must have contributions made to a MySuper product for the accumulation benefits they will receive on retirement. 

5.14               The MySuper Core Provisions Bill requires trustees to pay a contribution into a MySuper product unless the member has elected that it be paid into a specified choice product.  The requirement will now exclude contributions made on behalf of a defined benefit member.  Therefore, trustees will not be limited to which product they pay contributions to for defined benefit members.  Contributions that support the defined benefit can be made to the pool supporting those defined benefits.  Contributions that are to be held on an accumulation basis can be made to either a MySuper product or a choice product in the fund.  This permits trustees to hold accumulation contributions for defined benefit members outside of the MySuper regime.  [Schedule 5, item 10, paragraph 29WA(1)(a)]

5.15               A defined benefit member may have an accumulation interest in connection with their defined benefit interest.  It will often be appropriate for the fees, services and investment strategy for accumulation benefits of a defined benefit member to be treated differently to the benefits of members that only have accumulation benefits.  For example, the fees charged to a defined benefit member may be paid out of the pool held to support the defined benefits.  Therefore, this may permit the trustee to charge a lower fee on the accumulation amount of a defined benefit member than they would otherwise have to charge on a balance in a MySuper product.  Therefore, as MySuper products must charge members the same fees (except in limited circumstances), trustees will be allowed to pay accumulation contributions of defined benefit members into a product that is best suited to the member and has an appropriate fee structure, services and investment strategy to complement these members’ entitlements to a defined benefit. 

5.16               The MySuper Core Provisions Bill allows for a trustee to apply for authorisation in respect of a MySuper product to be established for the benefit of the employees of a particular employer if that employer contributes to the fund for 500 or more employees.  This will be amended to exclude defined benefit members from the employees that are counted in working out whether an employer qualifies.  Defined benefit members will generally not have any contributions held within a MySuper product, and therefore, should not be counted for the purposes of working out whether an employer can be offered a separate MySuper product.  [Schedule 5, item 7, subparagraph 29TB(1)(d)(i) and Schedule 5, item 6, subparagraph 29TB(1)(d)(ii)]

5.17               A power to make regulations will allow for regulations to prescribe whether a member of a superannuation fund is, or is not, a defined benefit member for the purpose of certain provisions of the SG Act or the SIS Act to ensure that these exemptions apply in the intended circumstances.  [Schedule 5, item 2, section 6AA and Schedule 5, item 8, subsection 10(1A)]  

5.18               Firstly, regulations may prescribe circumstances in which a member of a fund is not a defined benefit member.  For example, the exemption is primarily intended to deal with members for whom a significant proportion of their retirement benefit is specified by reference to salary or is a specified amount.  It is not intended to allow trustees to avoid the requirement to place contributions into a MySuper product by having a defined benefit that is an insignificant specified amount, such as $100 paid on retirement, for a class of members.  In these circumstances, regulations could be made to ensure that members in this type of arrangement are not excluded from the protections of MySuper.  

5.19               Secondly, regulations may prescribe circumstances in which a member of a superannuation fund who is not otherwise a defined benefit member is taken to be a defined benefit member.  This will be used to ensure that where public sector employees have interests in two superannuation entities, one of which is a fully unfunded scheme that provides a defined benefit to the member, then the regulations will prescribe that they are deemed to be a defined benefit member across both schemes.  This is necessary to ensure that the member is not disadvantaged by having to meet higher costs in a MySuper product simply because it must be paid into a different scheme than their defined benefit interest. 

5.20               A savings provision will ensure that the existing definition of defined benefit member in the SIS Regulations continues in force and is incorporated into the new definition of defined benefit member to be inserted into subsection 10(1) of the SIS Act.  [Schedule 5, item 5]  

Do not remove section break.



Chapter 6          

Transition to MySuper

Outline of chapter

6.1                   This chapter explains the requirements for certain existing member balances to be moved to MySuper products and the transitional rules applying to these requirements

Context of amendments

6.2                   In responding to the Review, the Government noted that existing default funds will be required to transition to MySuper after an appropriate period. 

6.3                   The Government subsequently announced that the trustees of superannuation funds offering MySuper products will need to transfer certain existing balances of their members to a MySuper product by 1 July 2017.  Trustees that do not seek authorisation to offer a MySuper product will also be required to transfer certain balances to a MySuper product in another fund before 1 July 2017.

Summary of new law

6.4                   Amendments to the SIS Act will introduce a new concept of an ‘accrued default amount’.  This concept defines those parts of a member’s interest in a fund which must be moved to a MySuper product.  In essence, these are the entire balance of a member that has not exercised an investment choice or if the entire balance is held in a current default investment option of the fund.

6.5                   An application by an RSE licensee to APRA for authorisation to offer a MySuper product will need to be accompanied by an election to transfer accrued default amounts held in all funds for which the RSE licensee is trustee to one or more MySuper products.  Where the RSE licensee fails to give effect to its election, APRA will be able to cancel the RSE licensee’s authority to offer a MySuper product. 

6.6                   Provisions in the SIS Act will apply to this election to require the transfer of all accrued default amounts to MySuper products so that:

•        before 1 July 2017, all accrued default amounts in the fund must be transferred to an authorised MySuper product offered by the fund unless the member opts-out in writing; and

•        where a member in the fund is not eligible to hold a MySuper product in the fund, or where accrued default amounts are held for members in other funds for which the RSE licensee is trustee, the RSE licensee must take the action required under the relevant prudential standard to move these amounts to a MySuper product before 1 July 2017.

6.7                   RSE licensees will also have to make a separate election that will also require the trustee to take action in accordance with the prudential standards to transfer amounts held in a MySuper product in circumstances where authorisation for a MySuper product is subsequently cancelled.

6.8                   To remove impediments to the transfer of accrued default amounts, any trustee that transfers an accrued default amount in accordance with these amendments will not have any liability to a member of their fund in relation to that transfer.  In addition, any governing rules that prevent an accrued default amount from being transferred will be void. 

6.9                   To facilitate the transition to MySuper products, trustees will have discretion to move amounts in an investment option in which the member’s assets would be invested if no direction were given to a MySuper product, even if the amount is not an accrued default amount. 

6.10               The Bill also ensures that APRA is able to make prudential standards dealing with matters relating to accrued default amounts and SIS Act matters of a transitional nature relating to the Stronger Super reforms.

Comparison of key features of new law and current law

New law

Current law

Accrued default amounts are defined as the total amount attributable to the member where the member has given the trustee (or trustees) of the fund no direction on investment or the amount is invested in the investment option which is the investment option for new members if no investment direction is given.

Certain interests within a fund are specifically excluded from the meaning of accrued default amount.

The concept of accrued default amount is not used in the SIS Act.

RSE licensees will have discretion to move amounts in an investment option in which the member’s assets would be invested if no direction were given to a MySuper product

 

The requirements for an application by an RSE licensee for authorisation to offer a MySuper product include an election by the RSE licensee to transfer accrued default amounts to a MySuper product unless the member opts-out in writing.

RSE licensees will need to apply to APRA for authorisation to offer a MySuper product (section 29S, inserted by the MySuper Core Provisions Bill).

All RSE licensees will have until 1 July 2017 to transfer all accrued default amounts to a MySuper product unless the member opts-out in writing.

There is currently no equivalent in the SIS Act.

An RSE licensee must elect, in writing and in the approved form, to transfer accrued default amounts held within all funds for which it is trustee, to a MySuper product by 1 July 2017 unless the member opts-out in writing (or within 30 days with respect to elections outside the transitional period). 

This election not currently required under SIS Act.

An RSE licensee will not be subject to any liability to a member of the fund for an action taken to give effect to a requirement to transfer accrued default amounts or amounts on the cancellation of a MySuper authorisation.

There is currently no equivalent in the SIS Act.

Any provision of the governing rules of a fund that would prevent an RSE licensee from giving effect to a requirement to transfer accrued default amounts, or amounts on the cancellation of a MySuper authorisation, is void.

There is currently no equivalent in the SIS Act.

APRA will be able to make prudential standards dealing with transitional matters.

Part 3A in the Trustee Obligations and Prudential Standards Act will provide APRA with the ability to make prudential standards in relation to prudential matters.

Detailed explanation of new law

Amounts to be moved to MySuper products

6.11               Amendments to the SIS Act will introduce a new concept of an ‘accrued default amount’.  [Schedule 6, item 3, subsection 10(1)]

6.12               The accrued default amount for a member is the  total amount attributed by the RSE licensee to a member of the fund (that is the member’s entire balance) where:

•                the member has given the RSE licensee of the fund no direction on investment; or

•                the amount is invested in the investment option which, under the current governing rules of the fund, is the investment option for new members if no investment direction is given (that is the current default investment option).  [Schedule 6, item 4, subsections 20B(1), (1A) and (1B)]

6.13               This means if a member makes a direction to invest their entire balance in the current default investment option relevant to that member then the entire amount will be an accrued default amount.  However, if a member makes a direction to invest part of their balance in an investment option other than the current default investment option then the entire balance of that member, even though part may be invested in the current default investment option, will not be an accrued default amount.  [Schedule 6, item 4, subsections 20B(1), (1A) and (1B)]

6.14               For the purposes of the definition of accrued default amounts, where a member has provided an investment direction to a RSE licensee of a previous fund, and that member’s benefits are transferred under the successor fund transfer rules to an equivalent investment option in the current fund, they are deemed to have given an investment direction to be invested in the equivalent investment option to the RSE licensee of the current fund.  This includes directions given to a RSE licensee of a previous fund prior to the commencement of this provision.  [Schedule 6, item 4, subsection 20B(3A)]

6.15               This allows for the situation where a member’s benefits have been transferred more than once between funds.  For example, if a member made an investment direction to the RSE licensee of their original fund and is transferred to an equivalent investment option in a receiving fund, that member is taken to have given a direction to the RSE licensee of the receiving fund.  If that same member is further transferred from that receiving fund to an equivalent investment option in their current fund, they are still taken to have given an investment direction to the RSE licensee of the current fund to be invested in the equivalent investment option.  [Schedule 6, item 4, subsection 20B(3A)]

6.16               It is a factual matter as to whether a member has given an investment direction.  Therefore, an RSE licensee is not required to have a physical copy of the investment direction if, for example, an RSE licensee is able to show that a member would only be able to be invested in their current investment option by having given an investment direction to a RSE licensee of a previous fund and being transferred to an equivalent investment option, as a matter of fact, then the amount so invested would be outside the definition of accrued default amounts.  [Schedule 6, item 4, subsections 20B(1A) and (1B)]

6.17               The meaning of accrued default amount specifically excludes certain amounts.  These include amounts to the extent that they are:

•        already attributed to a MySuper product;

•        attributed to defined benefit members;

•        held in an eligible rollover fund;

•        invested in one or more of the following:

-               a capital guaranteed life insurance policy where the contributions and accumulated earnings may not be reduced by negative investment returns or any reduction in the value of assets in which the policy is invested;

-               a life policy providing benefits based solely on the realisation of a risk, and not related to the performance of an investment; and

-               an investment account contract that is held solely for the benefit of that member, and relatives and dependants of that member — to cover legacy products such as endowment and whole of life policies.

•        invested in an investment option that is held in cash; and

•        that support the payment of a pension (these cannot be part of a MySuper product under paragraph 29TC(1)(i) of the MySuper Core Provisions Bill).

[Schedule 6, item 4, subsections 20B(2), (3) and (4)]

Application to include election to move ‘accrued default amounts’

6.18               An application by an RSE licensee for authority to offer a MySuper product will require an election that the RSE licensee will attribute to a MySuper product each accrued default amount in each fund for which the RSE licensee is the trustee.  [Schedule 6, item 7, section 29SAA]

6.19               An RSE licensee may attribute an amount to a MySuper product by obtaining authorisation for an existing default investment option as a MySuper product.  In other cases, to attribute an accrued default amount to a MySuper product will require the amount to be transferred. 

6.20               This election must accompany an RSE licensee’s application for authorisation to offer a MySuper product, in writing and in the approved form.  [Schedule 6, item 6, paragraph 29S(2)(f)]

6.21               For accrued default amounts in the fund for which the RSE licensee has applied for authorisation of a MySuper product, the RSE licensee will have to transfer the amounts by 1 July 2017 or within 30 days of receiving notice of authority to offer a MySuper product or notice of refusal of authority, whichever is later.  [Schedule 6, item 13, paragraph 387(1)(a)]

6.22               An RSE licensee is not required to transfer an accrued default amount if the member directs the RSE licensee in writing not to.  This ensures that members have the right to opt-out of having their existing balance moved to a MySuper product if they wish to.  [Schedule 6, item 7, subparagraph 29SAA(1)(a)(i)]

6.23               The transitional period to 1 July 2017 is given effect to by applying provisions of the SIS Act that will apply to any election that is made before 1 July 2017.  A transitional period is provided to allow RSE licensees to prepare for and manage the transfer of accrued default amounts from existing superannuation arrangements to the new MySuper environment.  [Schedule 6, item 13, section 387]

6.24               Beyond the transitional period, the transfers must be made within 30 days of receiving notice of authority to offer a MySuper product, unless otherwise directed by the member.   [Schedule 6, item 7, section 29SAA]

6.25               The RSE licensee will also be required to elect to comply with relevant prudential standards before the later of 1 July 2017 and 90 days after notice of authorisation of a MySuper product has been given or refused in respect of:

•        each accrued default amount for a member of the fund who is not eligible to hold an interest in a MySuper product offered by the fund; and

•        each accrued default amount for members of any regulated superannuation fund for which the RSE licensee is trustee, and which does not offer a MySuper product.

[Schedule 6, item 7, paragraph 29SAA(1)(b) and subsection 29SAA(2)]

6.26               It is intended that the prudential standards or the regulations will similarly allow for a member to direct the RSE licensee in writing not to transfer these amounts.

6.27               The RSE licensee must also elect to comply with requirements to be prescribed in regulations to provide a notice to a member when their accrued default amount is moved to a MySuper product or is moved to another fund.  It is expected that the regulations will provide that a notice must be given 90 days in advance of an accrued default amount being moved where it will result in a change to the fees, insurance or investment strategy of the member’s interest.  However, in some cases, there may be only immaterial changes to members’ rights as a result of the RSE licensee being authorised to offer a MySuper product, for example, if an existing default investment option is simply able to be converted into a MySuper product.  In this case, it is expected that a notice will be able to be given after the change has occurred.  It is also expected that the Corporations Regulations will amended to ensure that an RSE licensee is not required to provide a notice under section 1017B of the Corporations Act where amounts are moved under this election to avoid duplication.  ASIC will be responsible for enforcing the regulations prescribing that notices must be given to members.  [Schedule 6, item 7, subsection 29SAA(3)]

6.28               APRA may cancel an authority to offer a MySuper product where it is satisfied the RSE licensee has failed to give effect to its election to transfer accrued default amounts to a MySuper product.  [Schedule 6, item 8, paragraph 29U(2)(j)]

6.29               If the RSE licensee makes this election it will also be a condition of their license to give effect to this election.  [Schedule 6, item 5, subsection 29E(6B)]

6.30               An RSE licensee’s actions in giving effect to an election under new section 29SAA will not give rise to a liability to a member.  [Schedule 6, item 9, section 29XA]

6.31               A provision of the governing rules of a superannuation fund that prevents an RSE licensee giving effect to an election to transfer an amount in an accrued default amount to a MySuper product is void to the extent it would prevent the RSE licensee from giving effect to the election.  [Schedule 6, item 10, section 55B]

Discretion to transfer amounts in current default option to a MySuper product

6.32               To facilitate the transition to MySuper products, RSE licensees will have discretion to move amounts in an investment option in which the member’s assets would be invested if no direction were given to a MySuper product, even if the amount is not an accrued default amount. 

6.33               This is achieved by making void any governing rules that would prevent an RSE licensee from moving these amounts to a MySuper product and ensuring that moving these amounts will not give rise to a liability to a member.  This discretion will permit funds to convert their existing default investment option to a MySuper product because the proposed definition of accrued default amounts would not capture all amounts invested in the default investment option.  [Schedule 6, item 9, paragraph 29XB(b) and Schedule 6, item 10, section 55C]

6.34               Also to facilitate the transition to MySuper, provisions in the MySuper Core Provisions Bill will be amended to excise the provision of risk insurance from the general requirement that an RSE licensee must provide equal access to options, benefits and facilities.  In particular, this will ensure members need not lose insurance cover when an accrued default amount is moved to a MySuper product as an RSE licensee will be able to continue the member’s existing insurance (so long as the cover is provided on an opt out basis).  [Schedule 6, item 8A, paragraph 29TC(1)(b)]

6.35               Despite insurance being excluded from this general requirement in relation to MySuper products, the RSE licensee must still comply with other requirements relating to insurance.  In particular, life and TPD insurance must still be provided to each member that holds the MySuper product and the cover must only be subject to conditions that are reasonable.  Furthermore, provision of insurance benefits must comply with the trustee covenants, including the best interests’ covenant.

Election to transfer amounts if MySuper authorisation cancelled

6.36               An RSE licensee’s application for authorisation for a MySuper product must also be accompanied by another election.  The RSE licensee must elect that it will transfer assets that were attributed to a MySuper product if the MySuper product authorisation is ever subsequently cancelled.  [Schedule 6, item 7, section 29SAB]

6.37               The transfer must be made in accordance with the actions required by the prudential standards that set out arrangements in relation to the transfer of these amounts.  [Schedule 6, item 7, paragraph 29SAB(a)]

6.38               The RSE licensee will be required, by this election, to transfer amounts within 90 days of receiving a notice of cancellation of authorisation of that MySuper product.  [Schedule 6, item 7, paragraph 29SAB(a)]

6.39               If the RSE licensee makes this election it will be a condition of their license to give effect to this election.  [Schedule 6, item 5, subsection 29E(6B)]

6.40               The election must be in writing and in the approved form.  [Schedule 6, item 7, paragraphs 29SAB(b) and (c)]

6.41               A provision of the governing rules of a superannuation fund that prevents an RSE licensee giving effect to this election to transfer amounts in a MySuper product if authorisation is cancelled is also void to the extent it would prevent the RSE licensee from giving effect to the election.  [Schedule 6, item 10, section 55B]

Requirement to transfer amounts to MySuper product

6.42               Any RSE licensee who does not make an application for MySuper authorisation, and therefore does not make an election to transfer accrued default amounts, will still be required to transfer amounts to a MySuper product by 1 July 2017 under a new civil penalty provision.  [Schedule 6, item 12, paragraph 193(l) and item 13, section 388]

6.43               RSE licensees which are required to transfer accrued default amounts to another superannuation fund will have to comply with requirements set out in regulations and relevant APRA prudential standards.  It is expected that the arrangements to transfer accrued default amounts will include a requirement for RSE licensees to advise each affected member of the intention to transfer the amounts to a MySuper product, and of the member’s right to opt out of the process.  For the avoidance of doubt, the transfer of an accrued default amount is not required to be made to a successor fund as defined in the SIS Regulations.  [Schedule 6, item 13, subsection 388(1)]

6.44               A trustee’s actions in giving effect to the civil penalty provision will not give rise to a liability to a member.  [Schedule 6, item 13, subsection 388(2)]

6.45               Contravention of the civil penalty provision will mean that Part 21 of the SIS Act will apply. 

Application of paragraph 51(xxxi) of the Constitution

6.46               To the extent that a provision of this Bill, or the SIS Act would result in an acquisition of property, within the meaning of paragraph 51(xxxi) the Constitution, without just terms then the provision has no effect.  The amendment clarifies that particular actions that would otherwise be required by this Bill or the SIS Act are not required if the action would result in an acquisition of property without just terms.  For example, if the Bill requires an RSE licensee to take action in relation to an accrued default amount, such as attribute it to a MySuper product, that would result in an acquisition of property without just terms then the RSE licensee will not be required to take that action.  [Section 4 and Schedule 6, item 12A, section 349B]

Prudential standards and regulations on transition

6.47               Prudential standards will be able to be made in relation to the transfer of accrued default amounts that are held by members of the fund that is not eligible to hold a MySuper product offered by the fund or for members of a fund for which that RSE licensee does not offer a MySuper product.  These prudential standards apply to both where the RSE licensee has elected to transfer these amounts and where the RSE licensee is required to transfer the amounts under the civil penalty provision.  [Schedule 6, item 9, section 29X]

6.48               The prudential standards may set out requirements that must be met in relation to the transfer of the amounts and any other matters that relate to the amount.  [Schedule 6, item 9, paragraphs 29X(b) and (c)]

6.49               APRA will be able to make prudential standards dealing with matters of a transitional nature relating to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 , the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 , and the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Act 2012 .  The specific provisions relating to prudential standards are set out in Part 3A of the Trustee Obligations and Prudential Standards Act.  [Schedule 6, item 13, section 389]

6.50               These prudential standards on transition will deal with matters such as processes for identifying accrued default amounts, selecting a MySuper product to transfer certain amounts to and other actions required by the RSE licensee in relation to the transfer of accrued default amounts.

6.51               Provision is made to enable regulations to be made dealing with transitional, saving and application matters related to amendments made by the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012 , the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 , and the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Act 2012 [Schedule 6, item 13, section 390]

Other amendments

6.52               A definition of ‘MySuper member’ is inserted into the definitions at subsection 10(1) of the SIS Act.  A MySuper member is a member that holds a MySuper interest in the fund.  [Schedule 8, items 1 and 2, subsection 10(1)]

Do not remove section break.



Chapter 7          

Eligible rollover funds

Outline of chapter

7.1                   This chapter explains the new regime by which RSE licensees must be authorised to operate a specified superannuation fund as an eligible rollover fund (ERF).

7.2                   This chapter also outlines the enhanced director obligations and enhanced trustee obligations for RSE licensees that operate an ERF and transitional arrangements for existing ERFs that are not authorised before the commencement of the new regime. 

Context of amendments

7.3                   ERFs are maintained for the single purpose of being a temporary repository for the interests of members who have lost connection with their superannuation accounts.  ERFs are intended to hold these superannuation interests and generally preserve their value until they can be reconnected with the member. 

7.4                   ERFs are currently required to accept rollovers and transfers of superannuation from all other regulated superannuation funds and in circumstances specified in the SIS Regulations. 

7.5                   The amounts transferred to ERFs are typically small inactive amounts or other amounts for members that cannot continue to be a member of their original fund (for example, non-member spouse, in circumstances connected with the division of superannuation).

7.6                   Members of ERFs have lost connection with their superannuation and rely on the trustee to protect their interests and preserve their retirement benefit.

7.7                   However, the Review found that ERFs, in general, were not effectively fulfilling their function as they have failed to reconnect amounts with members and member protection rules have not been adequately protecting members’ interests.  Lost accounts can materially impact on the adequacy of many individuals’ retirement incomes, particularly where accounts remain unclaimed at retirement, are eroded by unnecessary fees or charges, or receive poorer investment returns than other retirement savings. 

Summary of new law

7.8                   Schedule 7 of this Bill amends the SIS Act to require trustees to obtain authorisation from APRA to operate an ERF.

7.9                   APRA will be able to accept applications for authorisation to operate a regulated superannuation fund as an ERF from any RSE licensee of a prescribed class.  It is expected that the regulations will prescribe that only RSE licensees with a public offer class of license or an extended public offer class of license will be able to apply for authorisation for an ERF. 

7.10               On 1 January 2014, if an application for authorisation has not been made or if APRA has refused authorisation, all balances in an existing ERF are required to be transferred into an authorised ERF or a fund that offers a MySuper product within 90 days.

7.11               To be authorised to operate an ERF, an RSE licensee must elect the following:

•        to transfer amounts held in the ERF as required by prudential standards if authorisation is cancelled; and

•        not charge members of the ERF a fee that relates to the costs of paying conflicted remuneration or paying an amount to another person that the RSE licensee knows, or reasonably ought to know, relates to the payment of conflicted remuneration.

7.12               New enhanced trustee obligations will apply to a trustee of an RSE that has been authorised by APRA to offer an ERF as members fully rely on the trustee to make judgments about managing their superannuation.  These enhanced trustee obligations require trustees to comply with a duty to promote the financial interests of members of the fund. 



 

Comparison of key features of new law and current law

New law

Current law

RSE licensees must be authorised by APRA to operate an ERF.  Only an RSE that is a regulated superannuation fund can operate as an ERF.  Approved deposit funds (ADFs) cannot operate as an ERF. 

A trustee of a regulated superannuation fund or ADF must give to APRA a notice in the approved form stating that the fund or ADF is an ERF. 

Each trustee of an ERF must promote the financial interests of the beneficiaries of the fund, in particular returns to those beneficiaries (after the deduction of fees, costs and taxes).

Existing duties for trustees of ERFs are contained in current section 52 of the SIS Act and regulation 10.06 and 10.07 of the SIS Regulations.

A director of a corporate trustee of an ERF must exercise a reasonable degree of care and diligence for the purpose of ensuring that the corporate trustee carries out the obligation to promote the financial interests of the beneficiaries of the fund. 

A director of a corporate trustee is required to exercise a reasonable degree of care and due diligence (to the standard of a reasonable person) for the purpose of ensuring that the corporate trustee carries out its covenants in current section 52. 

Detailed explanation of new law

Definition of eligible rollover fund

7.13               An eligible rollover fund is defined as a regulated superannuation fund where the RSE licensee has been authorised by APRA to operate a specified the superannuation fund as an eligible rollover fund.  [Schedule 7, item 1, subsection 10(1)] 

Application process

7.14               To ensure that APRA is provided with sufficient relevant information to be able to adequately assess applications from RSE licensees, information must be provided in the approved form.  This includes the RSE licensee’s and the fund’s ABNs and other information required by the approved form.  [Schedule 7, item 15, subsections 242A(1) and 242A(2)] 

7.15               If an existing ERF intends to continue operating as an ERF, the RSE licensee should lodge their applications by 1 July 2013, or as soon as possible after that date, in order to avoid the possibility that APRA has not decided their application before 1 January 2014.  A late application means the trustee runs the risk that the application is not decided and the trustee would be obliged to transfer amounts to an authorised ERF or MySuper product. 

7.16               If any information contained in the application ceases to be correct after the application was submitted to APRA and before APRA has made a decision, the RSE licensee will be required to provide APRA with the correct information as soon as practicable.  An application is taken not to comply with this section if this requirement is contravened.  [Schedule 7, item 15, subsections 242A(3) and 242A(4)] 

7.17               An application for authority lapses if it was made by an RSE licensee and the RSE licensee ceases to be an RSE licensee before APRA makes a decision on the application or, if APRA’s decision is subject to review, before the review is finally determined or otherwise disposed of.  [Schedule 7, item 15, subsection 242A(5)] 

7.18               An RSE licensee that makes an application for authority must accompany the application with two completed elections.  These elections are the same as the two corresponding elections that an RSE licensee would have to make if they were to apply for authorisation to offer a MySuper product. 

7.19               First, the RSE licensee must elect to take the action required by prudential standards in relation to amounts held in the ERF if an RSE licensee’s authority to operate the fund as an ERF is cancelled.  The prudential standards will set out a process for transferring assets to another fund in these circumstances.  The RSE licensee will not be subject to any liability to a member for giving effect to this election.

7.20               Second, the RSE licensee must elect that they will not charge any member of the ERF a fee that relates directly or indirectly to costs of the fund in paying conflicted remuneration to a financial services licensee or a representative of a financial services licensee. 

7.21               In addition, the election by the RSE licensee also extends to not charging any member of the ERF a fee that relates to costs of the fund in paying an amount to another person that the RSE licensee knows, or reasonably ought to know, relates to conflicted remuneration paid by that other person to a financial services licensee, or a representative of a financial services licensee.

7.22               APRA may request an RSE licensee to provide additional information before making a decision on the application.  [Schedule 7, item 15, section 242B]

Time period for deciding applications

7.23               APRA must decide an application by an RSE licensee for authority to operate a regulated superannuation fund as an ERF within 60 days of the application being received, subject to certain provisions allowing this period to be extended.  This is the same period that is allowed for a decision on an application for authorisation to offer a MySuper product.  The 60-day period starts on 1 July 2013 or the date of APRA’s receipt of the application, whichever is the later.  [Schedule 7, item 15, paragraph 242C(1)(a), subsection 242C(2) and section 393]  

7.24               Should APRA request an RSE licensee to provide additional information in relation to its application, APRA will have an additional 60 days from when it receives this information in which to decide the application.  The period of 60 days restarts if further information is requested.  [Schedule 7, item 15, paragraph 242C(1)(b)]  

7.25               Additionally, APRA may extend the period for making a decision on an application to operate an ERF by an RSE licensee by a further 60 days, providing it notifies the RSE licensee in writing and within the period they would otherwise have to decide the application.  [Schedule 7, item 15, subsection 242C(2)]  

7.26               Should APRA not have made a decision within the time period required, the application is deemed to be refused by APRA and the RSE licensee is not authorised to operate an ERF.  This is the same process that occurs should APRA not have decided on an application for an RSE licence or MySuper authorisation within the required time.  [Schedule 7, item 15, subsection 242C(4)]

Authorisation process

7.27               APRA must authorise an RSE licensee to operate an ERF if:

•        the application is in the approved form, contains the information required, states the RSE licensee’s and fund’s ABNs and is accompanied by elections relating to the transfer of amounts if authority to operate the fund as an ERF is cancelled and to not charge members of the ERF a fee that relates to conflicted remuneration;

•        the RSE licensee provides all of the information required by APRA to approve the authority;

•        the RSE licensee is of the prescribed class;

•        the fund is a registered fund under Part 2B of the Act;

•        it is satisfied the governing rules require that the fund meets the purposes of an ERF and that a single diversified investment strategy is to be adopted in relation to all the assets of the fund;

•        it is satisfied that the RSE licensee or each individual trustee is likely to comply with the enhanced trustee obligations for ERFs;

•        it is satisfied that the directors of the RSE licensee are likely to comply with the enhanced director obligations for ERFs;

•        it is satisfied that the RSE licensee is likely to comply with the general fee rules; and

•        it is satisfied that the RSE licensee is not likely to represent a product as an ERF when they are not authorised to do so. 

[Schedule 7, item 15, subdivision B, section 242D]

7.28               APRA must refuse an RSE licensee’s application for authorisation to operate an ERF if it is not satisfied of any of these elements.  APRA’s decision to refuse an application is a reviewable decision.  [Schedule 7, item 15, subsection 242D(2) and item 4, paragraph 10(1)(ua)]

7.29               If APRA authorises an RSE licensee to operate a regulated superannuation fund as an ERF, APRA must notify the RSE licensee in writing of the authority.  For a notice given before 1 January 2014, the authority takes effect on 1 January 2014.  [Schedule 7, item 15, sections 242E and 392]

7.30               If APRA refuses an application by an RSE licensee for authority to operate a regulated superannuation fund as an ERF, APRA must take all reasonable steps to ensure that the RSE licensee is given a notice informing it of APRA’s refusal of the application and setting out the reasons for the refusal.  [Schedule 7, item 15, section 242F]

Cancellation of authorisation

7.31               APRA may cancel the authorisation to operate an ERF where:

•        it ceases to be satisfied that the governing rules of the fund meet the purpose of an ERF or that a single diversified investment strategy is to be adopted in relation to all the assets of the fund;

•        it ceases to be satisfied that the RSE licensee is likely to comply with the enhanced trustee obligations for ERFs;

•        it ceases to be satisfied that the directors of the RSE licensee are likely to comply with the enhanced trustee obligations for ERFs;

•        it ceases to be satisfied that the RSE licensee is likely to comply with the general fee rules;

•        it ceases to be satisfied that the RSE licensee is not likely to represent a product as an ERF when they are not authorised to do so;

•        the RSE licensee ceases to be of the prescribed class;

•        the fund ceases to be registered under Part 2B of the Act;

•        the RSE licensee contravenes a governing rule of the ERF; or

•        it is satisfied that the RSE licensee has failed to give effect to an election not to charge a fee to members of the ERF that relates to conflicted remuneration.

[Schedule 7, item 15, subsections 242G(1) and 242G(2)]

7.32               If APRA decides to cancel an authority to operate a regulated superannuation fund as an ERF, it is required to take all reasonable steps to notify the RSE licensee in writing of the reasons for their decision.  [Schedule 7, item 15, subsection 242G(3)]

Trustee obligations relating to eligible rollover funds

Enhanced trustee obligations

7.33               Each trustee of an ERF must promote the financial interests of the beneficiaries of the fund.  These duties should be equal to requirements for a MySuper product as trustees have full responsibility for managing the members’ balances.  [Schedule 7, item 15, section 242H]

7.34               The enhanced trustee obligations for RSE licensees of ERFs are the obligations imposed by the covenants in section 52, as enhanced by the additional obligation to promote the financial interests of members of the ERF.  The obligations also include any covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced trustee obligations for ERFs.  [Schedule 7, item 3, paragraph 10(1)(b)]

Enhanced director obligations

7.35               Each director of a corporate trustee of an ERF is required to exercise a reasonable degree of care and diligence that a superannuation entity director would exercise in the corporate trustee’s circumstance for the purpose of ensuring that the corporate trustee complies with its duty to promote the financial interests of beneficiaries of the fund.  [Schedule 7, item 15, section 242J]

7.36               The enhanced director obligations in relation to ERFs comprise this obligation and any covenants prescribed under section 54A that are specified in the regulations as forming part of the enhanced director obligations for ERFs.  [Schedule 7, item 2, paragraph 10(1)(b)]

Contravention of trustee obligations relating to eligible rollover funds

7.37               There is a civil penalty provision for contravention of the additional obligations of a trustee or director of a corporate trustee in relation to an ERF where a trustee or a director of a corporate trustee has breached their obligations.  Accordingly, the consequences set out in Part 21 of the Act will apply.  [Schedule 7, item 15, subsection 242K(2)]  

7.38               This is appropriate as (in addition to the potential for the court to order a civil penalty or, if certain fault requirements are satisfied, a criminal penalty), it gives the court power to order a person to pay compensation in relation to a contravention of the provision.  A civil penalty provision can be escalated to a criminal offence if it is breached and there has been dishonesty or an intention to deceive or defraud.

Governing rules

7.39               The governing rules of an ERF are void to the extent that they are inconsistent with the additional obligations of a trustee or director of a corporate trustee in relation to an ERF.  [Schedule 7, item 15, subdivision D, section 242L]  

Misrepresentation of eligible rollover funds

7.40               All persons will be prohibited from being able to offer an ERF unless they are authorised to do so by APRA.  It is an offence of strict liability if a person represents that they offer an ERF when they are not authorised.  A penalty of 60 penalty units will apply.  This penalty is consistent with similar offences for MySuper products and RSE licensees.  [Schedule 7, item 15, section 242M]  

7.41               A strict liability offence is appropriate as APRA will provide a written notice upon the authorisation or refusal of authorisation and hence RSE licensees will always know whether they are authorised to operate a specified superannuation fund as an ERF. 

7.42               Furthermore, ERFs play a specialised role in the superannuation system as a temporary repository for the interests of members who have lost connection with their superannuation accounts.  These members are most vulnerable and require their interests to be protected. 

7.43               Misrepresentation that a fund is an ERF could inadvertently reduce the level of protection for members in relation to the enhanced trustee and director obligations when they otherwise would be in an authorised ERF or a MySuper product.

Transitional provisions relating to eligible rollover funds

7.44               The RSE licensee of an existing ERF that has not been authorised to operate as an ERF must take the action required under the prudential standards in relation to the amount before the end of a period of 90 days beginning 1 January 2014.  [Schedule 7, item 17, subsection 394(1)]  

7.45               From 1 January 2014, existing ERFs can no longer accept amounts unless they are authorised.  This commencement date is consistent with the start of the inter-fund consolidation regime.  Balances of existing ERFs that do not become authorised will need to be transferred to an authorised ERF or to a MySuper product.  [Schedule 7, item 17, paragraph 394(2)(a)]  

7.46                 This provision ensures the amount is moved under inter-fund consolidation or to an authorised ERF or MySuper product.  This will mean members will either be reconnected with their balances or remain with the heightened protections of ERFs or MySuper products. 

7.47               An existing ERF is taken to be an ERF for the purposes of Division 3 of Part 24 during the period beginning on the day the amendments commence and ending on 31 December 2013.  [Schedule 7, item 17, section 393]

7.48               APRA will be able to make prudential standards on the movement of amounts held in existing ERFs that may include provisions requiring an RSE licensee of an existing ERF that is not authorised to operate as an ERF to transfer the amount to a regulated superannuation fund that is an ERF or offers a MySuper product; setting out the requirements that must be met in relation to the transfer of such an amount; and dealing with other matters relating to such an amount.  [Schedule 7, item 17, subsection 394(2)]  

7.49                   The RSE licensee is not subject to any liability to any member of the fund for an action taken in accordance with moving amounts held in existing ERFs.  [Schedule 7, item 17, subsection 394(3)]



Schedule 1:  Fees, costs and intrafund advice

Bill reference

Paragraph number

Items 5, 7-9 and 12, subsection 10(1) and items 23 — 30, section 29V

1.73

Item 18, subparagraph 29SAC(1)(a)(i)

1.13

Item 18, subparagraph 29SAC(1)(a)(ii)

1.14

Item 18, subsection 29SAC(3)

1.16

Item 18, subsection29SAC(3)

1.17

Item 18, paragraphs 29SAC(1)(b) and 29SAC(1)(c)

1.20

Item 18, subsection 29SAC(1)

1.12

Item 19, paragraph 29T(1)(i) and Schedule 1, item 20, paragraph 29U(2)(d))

1.57

Item 20, paragraph 29U(2)(d)

1.55

Item 21, paragraph 29U(2)(k)

1.19

Item 31, subsection 29V(8)

1.58

Item 33, subsection 29VA(10)

1.62

Item 33, subsection 29VA(9)

1.60

Item 34, section 99A

1.56

Item 35, subsection 29VB(5)

1.77

Item 35, paragraph  29VB(5)(b)

1.79

Item 36, section 29VD

1.21

Item 36, subsection 29VD(1)

1.23

Item 36, subsections 29VD(3) — (7)

1.24

Item 36, subsection 29VD(3)

1.25

Item 36, subsection 29VD(4)

1.27

Item 36, subsection 29VD(5)

1.29

Item 36, subsection 29VC

1.65, 1.66

Item 36, subsection 29VD(6)

1.31

Item 36, subsection 29VD(7)

1.33

Item 36, subsection 29VD(8)

1.39

Item 37, paragraphs 31(2)(da) and 31(2)(db)

1.74

Item 38, section 33A

1.75

Item 40, subsection 99F(3)

1.50

Item 40, subsection 99F(4)

1.51

Item 40, subparagraph 99F(1)(c)(v)

1.52

Item 40, subsection 99B(1)

1.67

Item 40, subsection 99C(1)

1.68

Item 40, subsection 99C(2)

1.70

Item 40, section 99D

1.71

Item 40, subsection 99E

1.72

Item 40, subsection 99F(1)(a)

1.53

Item 40, subsection 99F(1)

1.43

Item 40, paragraph 99F(1)(c)(iv)

1.44, 1.45

Item 40, paragraph 99F(1)(c)(ii)

1.47

Item 40, subsection 99F(2)

1.48

Item 41

1.80, 1.82

Schedule 2:  Insurance

Bill reference

Paragraph number

Item 1, paragraphs 32C(2)(d) and (e)

2.13

Item 3, subsection 10(1)

2.16

Item 5, paragraphs 31(2)(ea) and (eb)

2.24, 2.27

Item 5, paragraphs 31(2)(ea)

2.25

Item 5, paragraph 31(2)(eb)

2.28

Item 6, subsection 68AA(6)

2.20

Item 6, subsections 68AA(7) and (8)

2.21

Item 6, subsection 68AA(9)

2.23

Item 6, subsection 68AA(1)

2.15

Item 6, section 68AA

2.14

Item 6, subsections 68AA(3) — (5)

2.17

Item 7

2.29, 2.30



 

Schedule 3:  Collection and disclosure of information

Bill reference

Paragraph number

Items 1 and 2, subsection 56(1)

3.33

Item 4, subsection 57(2)

3.16

Item 4, subsection 57(3)

3.17

Item 4, paragraph 57(4)(a)

3.18

Item 4, paragraph 57(4)(b)

3.19

Item 4, subsection 57(1)

3.15

Item 8, paragraphs 1017BA(1)(a), (b), (c) and (d)

3.40

Item 8, subsections 1017BA(2) and(3)

3.41

Item 8, paragraphs 1017BA(1)(c) and (d)

3.43

Item 8, paragraph 1017BA(1)(e)

3.44

Item 8, subsection 1017BA(5)

3.45

Item 8, subsection 1017BA(4)

3.53

Item 8, section 1017BB

3.63

Item 8, subsections 1017BB(1) and (3)

3.64

Item 8, subsection 1017BB(2)

3.66

Item 8, paragraphs 1017BB(1)(a) and (b)

3.70

Item 8, subsections 1017BC(1) and (2)

3.72

Item 8, paragraph 1017BC(2)(b)

3.73

Item 8, subsection 1017BC(1)

3.74

Item 8, subsection 1017BC(3)

3.75

Item 8, sections 1017BD and 1017BE

3.76

Item 8, sections 1017BC, 1017BD and 1017BE

3.77

Item 8, subsections 1017BC(2) and (3)

3.82

Item 9, paragraph 1020E(1)(c), item 10, paragraph1020E(2)(c), item 11, paragraph 1020E(7)(a) and item 12, paragraphs 1020E(11)(c)

3.46

Item 14, subsection 1021NA(1)

3.47

Item 14, subsections 1021NA(2) and(3)

3.48

Item 14, subsection 1021NA(4)

3.49

Item 14, subsection 1021NA(5)

3.50

Item 14, subsections 1021NB(1) and (5)

3.83

Item 14, subsection 1021NB(2)

3.85

Item 14, subsection 1021NB(3)

3.86

Item 14, subsection 1021NB(6)

3.88

Item 14, subsection 1021NB(7)

3.89

Item 14, subsection 1021NC(1)

3.90

Item 14, subsection 1021NC(2)

3.91

Item 14, subsection 1021NC(3)

3.92

Item 14, subsections 1021NC(4) and (5)

3.93

Item 14, subsection 1021NC(6)

3.95

Item 14, subsection 1021NC(7)

3.96

Item 15, paragraph 1022B(1)(f) and Schedule 3, item 16, paragraph 1022B (2)(f) and Schedule 3, item 18, paragraph 1022B(3)(e) and Schedule 3, item 19, subsections 1022B(7B) and (7C)

3.51

Item 20, section 1541

3.80

Item 22, subsection 1541(3)

3.84

Item 22, section 1539

3.100

Item 26, paragraph 3(1)(aa)

3.35

Item 26, paragraph 3(1)(aa)

3.34

Item 29, paragraph 13(4B)(c)

3.27

Item 29, paragraph 13(4B)(d)

3.28

Item 29, subsection 13(4A)

3.23

Item 29, paragraph 13(4A)(a) and (b)

3.24

Item 29, paragraph 13(4A)(c),(d) and (e)

3.25

Item 29, paragraph 13(4B)(a)

3.26

Items 31 and 33, section 31

3.31

Items 32, and 34 — 37, section 31

3.32

Item 40, subsection 10(1)

3.54

Item 42, paragraph 29QB(1)(b)

3.56

Item 42, subsections 29QB(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)

3.58

Item 42, subsection 29QC(1)

3.59, 3.60

Item 42, subsection 29QC(2)

3.61

Item 42, subsections 29QC(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)

3.62

Item 42, paragraph 29QB(1)(a)

3.55

Item 44, subsection 348A(2)

3.38

Item 44, paragraph 348A(1)(a), (b) and (c)

3.36

Item 44, paragraph 348A(1)(d)

3.37

Item 45

3.97

Item 46

3.98

Item 47

3.99

Schedule 4:  Modern awards and enterprise agreements

Bill reference

Paragraph number

Items 1, 2, 3 and 4, section 12

4.15

Item 5, section 149A

4.29

Item 6, paragraph 155A(1)(b)

4.17

Item 6, subsections 155A(2)-(5)

4.27

Item 6, subsection 155A(1)

4.16, 4.19

Item 8, schedule 1, clause 9

4.18, 4.31

Item 8, clause 11

4.21, 4.23, 4.24

Item 8, Schedule 1, clause 10

4.32

Item 8, paragraph 194(h)

4.33

Item 8, clause 12

4.34

Item 8, clause 8

4.36

Item 9, subsection 12A(1) and Schedule 4, item 10, subsection 32C(6)

4.38, 4.39

Items 11, section 29U and item 12, section 29XC

4.26

Item 13

4.37

Schedule 5:  Defined benefit members

Bill reference

Paragraph number

Item 2, section 6AA and Schedule 5, item 8, subsection 10(1A)

5.17

Item 3, subsection 19(2CA)

5.12

Item 5

5.20

Item 7, subparagraph 29TB(1)(d)(i) and Schedule 5, item 6, subparagraph 29TB(1)(d)(ii)

5.16

Item 10, paragraph 29WA(1)(a)

5.14

Schedule 6:  Transition to MySuper

Bill reference

Paragraph number

Item 3, subsection 10(1)

6.11

Item 4, subsections 20B(1), (1A) and (1B)

6.12

Item 4, subsections 20B(1), (1A) and (1B)

6.13

Item 4, subsection 20B(3A)

6.14, 6.15

Item 4, subsections 20B(1A) and (1B)

6.16

Item 4, subsections 20B(2), (3) and (4)

6.17

Item 5, subsection 29E(6B)

6.29, 6.39

Item 6, paragraph 29S(2)(f)

6.20

Item 7, subparagraph 29SAA(1)(a)(i)

6.22

Item 7, paragraph 29SAA(1)(b) and subsection 29SAA(2)

6.25

Item 7, subsection 29SAA(3)

6.27

Item 7, section 29SAA

6.18, 6.24

Item 7, section 29SAB

6.36

Item 7, paragraph 29SAB(a)

6.37

Item 7, paragraph 29SAB(a)

6.38

Item 7, paragraphs 29SAB(b) and (c)

6.40

Item 8, paragraph 29U(2)(j)

6.28

Item 8A, paragraph 29TC(1)(b)

6.34

Item 9, paragraph 29XB(b) and Schedule 6, item 10, section 55C

6.33

Item 9, section 29XA

6.30

Item 9, section 29X

6.47

Item 9, paragraphs 29X(b) and (c)

6.48

Item 10, section 55B

6.31, 6.41

Item 12, paragraph 193(l) and item 13, section 388

6.42

Item 13, subsection 388(1)

6.43

Item 13, subsection 388(2)

6.44

Item 13, section 387

6.23

Item 13, paragraph 387(1)(a)

6.21

Item 13, section 389

6.49

Item 13, section 390

6.51

Schedule 7:  Eligible rollover funds

Bill reference

Paragraph number

Item 1, subsection 10(1)

7.13

Item 2, paragraph 10(1)(b)

7.36

Item 3, paragraph 10(1)(b)

7.34

Item 15, subsection 242A(5)

7.17

Item 15, section 242B

7.22

Item 15, paragraph 242C(1)(a), subsection 242C(2) and section 393

7.23

Item 15, paragraph 242C(1)(b)

7.24

Item 15, subsection 242C(2)

7.25

Item 15, subsection 242C(4)

7.26

Item 15, subdivision B, section 242D

7.27

Item 15, subsection 242D(2) and item 4, paragraph 10(1)(ua)

7.28

Item 15, sections 242E and 392

7.29

Item 15, section 242F

7.30

Item 15, subsections 242G(1) and 242G(2)

7.31

Item 15, subsection 242G(3)

7.32

Item 15, section 242H

7.33

Item 15, subsections 242A(1) and 242A(2)

7.14

Item 15, section 242J

7.35

Item 15, subsections 242A(3) and 242A(4)

7.16

Item 15, subsection 242K(2)

7.37

Item 15, subdivision D, section 242L

7.39

Item 15, section 242M

7.40

Item 17, subsection 394(1)

7.44

Item 17, paragraph 394(2)(a)

7.45

Item 17, section 393

7.47

Item 17, subsection 394(2)

7.48

Item 17, subsection 394(3)

7.49

 

Do not remove section break.