By Mark Bland, Partner and Geoffrey McCarthy, Special Counsel

Mills Oakley has developed this fortnightly update to help trustees of regulated superannuation funds track and manage regulatory change. We look ahead to forthcoming developments, look back at recent changes and then consider the impact on trustees. This edition also includes a spotlight on the proposed new restrictions on hawking superannuation products.

Key developments

• 11 June – ASIC issues interim Corporate Plan 2020-2021 and revised timetable about status of ASIC regulatory work including announcing new internal dispute resolution requirements to apply from 5 October 2021
• 30 May – Regulations come into effect to remove the work test for persons aged 66 or 67 and increase the cut off age for spouse contributions from 69 to 74
• 28 May – Regulations made with retrospective effect from 30 March 2020 to exclude JobKeeper “top up” payments from the calculation of superannuation guarantee payments made by employers to their employees

Looking ahead

Commonwealth Parliament is now sitting until 18 June and scheduled to progress the following Bills:

• House of Reps to debate on Payments Times Reporting Bill and the Payment Times Reporting (Consequential Amendments) Bill Payment Times Reporting Bill
• House of Reps to consider: Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 and Superannuation Supervisory Levy Imposition Amendment Bill 2020 to increase limits and change indexation for APRA supervisory levies Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
• House of Reps to resume debate on Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 to allow bring forward non-concessional superannuation contributions to persons aged 65 and 66 Treasury Laws Amendment (More Flexible Superannuation) Bill 2020
• Senate to consider Treasury Laws Amendment (2019 Measures No. 3) Bill 2019, which aims to: ensure super death benefits with an untaxed element are not subject to tax when rolled over to another super fund, ensure super downsizer contributions operate as intended, remove certain reporting obligations for unclaimed money and extend deadlines for educational requirements for advisers FASEA Educational Requirements Treasury Laws Amendment (2019 Measures No. 3) Bill 2019
• Senate to consider: Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 which aims to ensure employees under workplace determinations or enterprise agreements can choose the super fund for their employer contributions Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019

Looking back

11 June – ASIC issues Interim Corporate Plan 2020-2021 and revised timetable about status of ASIC regulatory work.  ASIC’s enforcement focus includes superannuation. ASIC will be taking action to ensure that entities give accurate information to consumers, particularly on accessing early release of superannuation.  ASIC’s focus also includes insurance in superannuation and compliance by those providing intra-fund advice in reliance on ASIC relief.  ASIC will be conducting thematic surveillance of trustee communications to members about the impact of the COVID-19 pandemic and resultant legislative measures on superannuation funds and member benefits.  ASIC will publish a new regulatory guide on Internal Dispute Resolution RG 271 by July 2020 with the new requirements in effect from 5 October 2021. See ASIC Corporate Plan

4 June – Exposure draft regulations released to remove the current exemption under which stamping fees paid in respect of listed investment companies and trusts are not classified as conflicted remuneration Draft stamping fee exemption regulation

30 May  – Regulations come into effect to remove the work test for persons aged 66 or 67 and increase the cut off age for spouse contributions from 69 to 74 Superannuation Legislation Amendment (2020 Measures No. 1) Regulations 2020

29 May  – ABS survey released indicating use of funds from COVID-19 Early release of super, People who had applied for early access to their superannuation were asked about the ways they used or planned to use the money and 57% used or planned to use the money to pay household bills, mortgage, rent and other debts and 36% added or planned to add it to savings. Household Impacts of COVID-19 Survey, 12-15 May 2020

28 May  – Regulations made with retrospective effect from 30 March 2020 to exclude JobKeeper “top up” payments from the calculation of superannuation guarantee payments made by employers to their employees.  This given effect to previous Government announcements that paying SGC on jobkeeper payments to the extent the amount paid was more earned by the employee’s work Superannuation Guarantee (Administration) Amendment (Jobkeeper Payment) Regulations 2020

On the horizon spotlight – Hawking of superannuation products

Australian Treasury consulted for four weeks from 31 January 2020 about draft provisions that would amend the Corporations Act 2001 to significantly extend regulation of superannuation trustees under the Australian financial services (AFS) licence provisions of the Corporations Act.

The draft reforms are designed to harmonise, modernise and tighten the anti-hawking regime.

The provisions are drawn from the Hayne Royal Commission recommendations to generally prohibit hawking of superannuation products.  Under the proposed new provisions a person must not offer a superannuation product for issue to a retail client, or request or invite a retail client to ask or apply for a superannuation product in the course of, or because of, an unsolicited contact with the retail client unless within certain excepted situations.

The draft Explanatory Memorandum states:

“It is intended that the new prohibition on the hawking of financial products will mean that consumers have greater control over their decisions to purchase financial products by determining how they want to be contacted by product providers and the kinds of financial products they are offered.”

The provisions were proposed to apply from the commencement of the amending provisions on 1 July 2020.  The Government has announced a deferral in the commencement date of legislation to implement Royal Commission recommendations by 6 months so that the provisions are now expected to apply from 1 January 2021.

As part of the implementation of the proposal, amendments will be made to the regulations to remove the provisions which regulated the time when hawking could occur, as it will now only be permitted within exceptions in the Corporations Act, regardless of the time in which it occurs.

ASIC intends to consult in late 2020 on changes to Regulatory Guide 38 The hawking prohibitions to expand the hawking prohibition to superannuation and insurance products.

Unsolicited

In general terms, a person will be prohibited from making offers to issue superannuation products in the course of, or because of, “unsolicited” contact with the client.

Contact is unsolicited if it wholly or partly by telephone call, face to face meeting or any other form of contact that a reasonable person would consider creates an expectation of an immediate response from the other person unless the retail client did request the contact in accord with the provisions.  This may include web chat, online video chat and conversations in instant messaging apps.

If a consumer requests contact relating to a financial product, the contact will not be unsolicited if it meets certain conditions: The client’s request must be a positive act that was clear. The client must understand what they are requesting. If the request indicates the form of contact the contact must be in that form. The request must have been within 6 weeks before the contact occurs and not withdrawn before the contact occurs. The contact must also be reasonably within the scope of the request.

Advertising

Advertising or publishing notices complying with section 1018A is excepted.  This includes advertising that indicates the issue of a product, that a Product Disclosure Statement is available and that it should be considered when deciding whether to acquire or continue to hold the superannuation product.  It also includes distribution of the PDS.

Personal advice exception

The prohibition does not apply to advice given to the client by a person who is required under Division 2 of Part 7.7A to act in the best interests of the client in relation to the advice. This applies to personal advice given by an AFS licensee or authorised representative. It does not apply to general advice, so the nexus between an unsolicited contact and an offer can be broken by intervening personal advice, but not personal advice.

Pensions, sub-plans and payment splits

The prohibition does not apply in relation to an offer, request or invitation relating to an interest in a superannuation fund that is taken, under regulations made for the purposes of paragraph 761E(7)(a) of the Corporations Act, to be issued if the offer, request or invitation is made by or on behalf of the trustee of the fund.

There are three situations currently in which an interest is taken to be issued as a result of the relevant regulations:

where a member in growth phase in a superannuation fund elects to take a pension as part of their interest in that fund (reg 7.1.04E of the Corporations Regulations);

when a membership changes to a different sub-plan (regulation 7.9.02 of the Corporations Regulations); and

when an entitlement to a benefit under a payment split is first made available to a non-member spouse (regulation 7.8.86 of the Corporations Regulations.

Presumably “is taken” is to be interpreted as, “relating to a circumstance that would be taken” although literally the offer, request or invitation would not itself be taken to be an issue. The draft EM states that the exception provision applies to “offers made by or on behalf of superannuation trustees relating to a member’s a move to the retirement phase, subplan changes and payment splits.  This ensures superannuation trustees can continue to contact members about their retirement options and changes to their superannuation interest.”

Investment and Insurance within super

As investment options and insurance within super are not technically a “financial product”, these provisions will not apply to contact with members about them.

Impact on Trustees

Trustees will need to carefully assess any marketing and communications to clients in light of any history of previous contact.  In particular, care will need to be taken about telephone or internet chat contacts to make sure that if the trustee is marketing the fund to a potential new member, they have been requested by the client in a proper form. The requirements will also apply to face to face meetings where care will be needed not to go outside the scope of the meeting that has been agreed.  This may mean significant changes in communications, advice and marketing approach for some trustees.