Legislation and regulation
Over the last quarter, legislation introducing significant changes to the Privacy Act (the Privacy and Other Legislation Amendment Bill 2024) and Anti-Money Laundering and Counter-Terrorism Financing Act (the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024) were introduced to Federal Parliament. Both have been referred to the Senate Legal and Constitutional Affairs Legislation Committee, with reports due mid November 2024.
The Paid Parental Leave Amendment (Adding Superannuation for a More Secure Retirement) Bill 2024 , introducing superannuation on paid government parental leave, was passed, with a commencement date in respect of children born or adopted on or after July 1, 2025.
On September 17, 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 received Royal Assent. This legislation introduces new climate-related financial reporting requirements for entities. This law will be supported by new Accounting Standards AASB SI General Requirements for Disclosure of Sustainability-related Financial Information [voluntary] and AASB S2 Climate-related Disclosures.
Amendments were introduced to APRA CPS 230 Operational Risk Management, carving out non-significant financial institutions from having to comply with some of the requirements of CPS 230 until July 1, 2026. These amendments relate to business continuity and scenario analysis requirements.
On September 10, 2024, ASIC released changes to the relief that applies to the provision of superannuation calculators and retirement estimates. The change introduces a revision of the default inflation rate and come into effect January 1, 2025 (with earlier transitional opt-in provisions).
The Australian Taxation Office (“ATO”) released Tax Ruling TD 2024/6, setting out the ATO’s views on the deductibility for a super fund under section 8-1 of the Income Tax Assessment Act 1997 in respect to payments made by the trustee of a fund (in its capacity as trustee) to itself to address the trustee’s risk of exposure arising from amendments to section 56 of the Superannuation Industry (Supervision) Act 1993.
From the Government
On September 18, 2024, the Treasurer, The Hon Dr Jim Chalmers, announced further policy design details to the Payday super reforms. The purpose of these details is to incentivise compliance and ensure employees are compensated for any delays in receiving their super. Payday super will come into effect July 1, 2026, if it is legislated.
From the regulators
On September 24, 2024, APRA released a package of product performance metrics and insights to increase transparency and sharpen superannuation trustees' focus on improving member outcomes. The Comprehensive Product Performance Package (“CPPP”) brings together the product performance metrics underpinning the APRA performance test and APRA's superannuation heatmaps. The CPPP covers 876 MySuper and choice products. APRA noted a drop in the number of products that failed the APRA performance test in 2024 (down from 97 to 37), with 52 products that failed the 2023 performance test exiting the market. When looking more broadly at investment performance to factor in asset class selection and performance relative to peers, the CPPP identifies additional products that have underperformed.
AUSTRAC has released for public consultation draft updated guidance on alternative identification procedures which may be used where a customer has difficulty providing documents such as drivers licence or birth certificate. Customers may have difficulty in accessing or obtaining these documents for various reasons including natural disaster, personal emergencies, their location or structural barriers. The guidance is being reviewed and updated to support financial inclusion outcomes and address industry feedback.
On August 15, 2024, APRA wrote to all APRA-regulated entities to provide further insights and guidance on common cyber control weaknesses. The letter is part of APRA's commitment to supervising cyber resilience across the industry and follows APRA previous letter on the security and adequacy of backups. The letter includes a list of the weaknesses observed by APRA, and references to APRA's guidance. APRA has stated it expects regulated entities review their control environment against these common weaknesses. If the review identifies gaps that could materially impact the fund's risk profile or financial soundness, then this is a reportable event under paragraph 36 of CPS234.
On Friday August 30, 2024, APRA released the results of its 2024 superannuation performance test. The test evaluated the performance of 57 MySuper products and 590 trustee directed (choice) products. For the first time, all MySuper products passed the performance test. This compares with one fail in 2023, five fails in 2022 and 13 fails in 2021. Of the trustee directed products, 37 out of 192 platform products failed to meet the test benchmarks. This includes 27 products that have failed for a second time and will now be closed to new members. None of the 398 non-platform products assessed failed the test benchmarks. In 2023 (the first year that choice products were assessed), 76 platform and 20 non-platform products failed the test.
APRA has announced that it has delivered its multi-year project to modernise the prudential architecture (“MPA”), with the publication of the final version of its digital Prudential Handbook. The MPA initiative was launched in 2021, with the goal of making APRA's regulatory framework clearer to understand, simpler to navigate, and more adaptable to ongoing changes in the operating environment. The new APRA Prudential Handbook brings together all of APRA's Prudential Standards, Prudential Practice Guides and relevant supporting information into one location.
On July 4, 2024, and following consultation in 2023, APRA released the updated Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) and related guidance, which will take effect from July 1, 2025. According to APRA, 'the changes ensure members' interests are front-and-centre in trustees' strategic and business planning, financial resource management, implementation of the retirement income covenant and fund transfers'. APRA noted that fund expenditure is a significant focus area. With the collection and analysis of detailed expenditure data and the fund level, APRA will review the data to ensure the expenditure aligns with the best financial interests of members and will follow up trustees with outlying discretionary expenditure. Further scrutiny will be placed on the sector when the Financial Accountability Regime comes into effect in March 2025, with trustees required to identify an accountable person with responsibility for expenditure.
On July 2, 2024, the Australian Prudential Regulation Authority (“APRA”) and the Australian Securities and Investments Commission (“ASIC”) released the results of a recent pulse check on trustee progress on the Retirement Income Covenant (“Covenant”). APRA and ASIC undertook a follow-up survey of the broader superannuation industry following the joint thematic review in July 2023, which identified a lack of urgency by trustees. In identifying that trustees have made good progress, there remains significant gaps and a lack of urgency by trustees in embracing the intent of the Covenant. Superannuation funds with a greater number of member accounts and assets in retirement or approaching retirement generally have made more progress than the rest of the industry. The survey, however, identified that many are still not adequately tracking the success or otherwise of their retirement income strategy. There is an expectation that all RSE licensees will assess gaps and identify opportunities to accelerate progress in closing these gaps, using the examples of progress provided in the latest update.
On July 9, 2024, AUSTRAC published insights on Australia's money laundering and terrorism financing in two national risk assessments. These risk assessments provide a collective understanding of the scale, sophistication, and threat of money laundering and terrorism financing in Australia. The Money Laundering in Australia: National Risk Assessment found that despite new channels emerging, launderers continue to prefer to conduct their operations via traditional methods using cash, banks, luxury goods, real estate, and casinos. Superannuation fraud is assessed a posing a medium and stable money laundering threat. According to AUSTRAC, the level of involvement of national and transnational serious and organised crime groups is assessed to be low to medium. The Cost of Crime report estimates these groups are responsible for between 10% and 50% of criminal proceeds generated from superannuation fraud. These groups primarily use compromised personal information obtained through cybercrime to fraudulently access superannuation funds. Superannuation fraud is likely to remain a stable money ‘laundering threat over the next three years,’ stated AUSTRAC. The second report, Terrorism Financing in Australia: National Risk Assessment, found that retail banking, remittance, and exchanging cash remain the preferred avenues to move funds. Most of these illicit funds go to overseas organisations and affiliated groups. Social media and crowdfunding platforms have also become integral to fundraising terrorist activities.
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