In his address to the Association of Superannuation Funds of Australia (ASFA) conference, Assistant Treasurer Stuart Robert observed that 'the momentum for change continues to build outside the halls of Parliament House' in relation to superannuation, and confirmed the government's intention to push forward with its superannuation reform agenda.  

Superannuation reform package

Assistant Treasurer Stuart Robert said that the government intends to progress the following five Bills. 

Protecting Your Superannuation Package

Mr Robert said that that the proposed reforms are in line with the Productivity Commission draft report recommendations and 'are consistent with or build on the momentum of the Voluntary Insurance in Superannuation Code of Practice'.

Changes to the Bill: Mr Robert said the government intends to make changes to the Bill to address stakeholder concerns in relation to workers in 'dangerous occupations'.  Mr Robert said that stakeholders had provided feedback that these workers are likely to benefit from default insurance in superannuation (as they 'may face barriers to accessing insurance elsewhere).  In response, he said that the government will make available an exception to the opt-in changes for new members in prescribed 'dangerous occupations' eg police officers, truck drivers, farmers or concreters who are under 25 or have an active low balance account, where trustees elect to apply it.

Other proposed changes? Separately, The AFR reports that Labor has said it will push for default insurance policies to continue to cover physically demanding jobs (not just dangerous occupations as is proposed by the government). 'The government's proposed exemption is far too narrow, covering only "dangerous occupations" – we are worried about the thousands of Australians working in hospital lifting patients, moving boxes in supermarket warehouses and the young working families who would be left destitute without insurance' shadow treasurer Chris Bowen and opposition superannuation spokeswoman Claire O'Neil are quoted as stating.  In addition, Labor is reportedly seeking further amendments including a requirement for the Tax Office to consolidate accounts more quickly than is currently proposed, and changes to ensure mothers on maternity leave are not deemed to have an inactive account.

Industry response? The AFR reports that REST has said the legislation would see more than 880,000 members lose automatic death, total and permanent disability and income protection insurance.
REST CEO Vicki Doyle is quoted as stating: 'The demographics, the economics and the health profiles of rural and regional areas compared to urban ones are vastly different," she said. "I don't think the policy development has considered these differences.'

Current status of this Bill: Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 was introduced into the House of Representatives on 21 June and has reached second reading stage in the senate, the senate economics legislation committee having recommended that the Bill be passed on 13 August.

The Bill proposes to introduce a range of reforms intended to 'protect against the undue erosion of superannuation balances through excessive fees and inappropriate insurance arrangements' through (among other things): capping certain fees at 3% on low balance accounts; preventing trustees from providing opt-out insurance to new members aged under 25 years, to members with balances below $6000 and to members with inactive MySuper or choice accounts (unless a member has directed otherwise); requiring the transfer of low balance accounts to the Commissioner of Taxation if an account related to a MySuper or choice product has been inactive for a continuous period of 13 months; and enabling the commissioner to consolidate those accounts (see: Governance News 11/05/2018; 25/06/2018).

Improving Accountability and Member Outcomes in Superannuation Bill No 1

Mr Robert said that given the 'compulsory nature of superannuation, it is critical that the superannuation industry is held to the highest standards of transparency and accountability' and that the need for the measures in the Improving Accountability and Member Outcomes in Superannuation No 1 and No 2 Bills had 'never been more apparent' than currently ie in the light of the 'revelations' coming out of the Financial Services Royal Commission.  He added that the reform measures included are in line with the Productivity Commission's draft recommendations.

Changes to Member Outcomes No 1 Bill? Mr Robert flagged a number of changes to the Bill in light of industry concerns/feedback. These include:

• Extension of the outcomes test to choice products (rather than being limited to MySuper products) The extended outcomes test will impose a new covenant on trustees which extends the current obligation on MySuper trustees to promote the financial interest of members to trustees of choice products as well.
• Disclosure: To clarify disclosure requirements and ensure they are consistent, changes will be made to 'put beyond doubt that the portfolio holdings disclosure applies to all choice products, even where there is a no investment option' and to 'make it clear that there was no carve-out for platform products' Mr Robert said.

Current status of the Bill: Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 was introduced into the Senate on 14 September 2017 and reached second reading stage (see: Governance News 02/08/2018).  The Bill was introduced with the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, which has also not progressed past the Senate (and was not referenced by Mr Robert in his speech).

Improving Accountability and Member Outcomes in Superannuation Measures No 2

Mr Robert said that the Bill is significant because it would both 'extend choice of fund to more Australians and it will close loopholes letting some employers reduce their Superannuation Guarantee contributions for employees who choose to make salary sacrifice contributions'.  The government does not propose to make any amendments to the Bill.

Current status of the Bill:  Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 was introduced into the House of Representatives on 14 September and passed the House on 23 October.  The Bill is currently at second reading stage in the Senate.

Treasury Laws Amendment Bill No 4

Mr Robert said that the measures included in the Bill, will 'crack down on employers that fail to pay their workers their full Superannuation Guarantee (SG) entitlements' by giving the Australian Taxation Office (ATO) near real-time visibility of how much SG employees are owed and the contributions their superannuation funds actually receive.  'For the first time, the ATO will be able to seek court-ordered penalties in the most egregious cases of non-payment, including up to 12 months jail for employers who are repeatedly caught but fail to pay superannuation guarantee liabilities.  To better inform employees, the ATO will also be able to tell all affected employees about their actions to recover unpaid super and will display contribution information using MyGov' Mr Robert said.

Current status of the Bill: Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 was introduced into the House of Representatives on 28 March and passed the House on 25 June.  The Bill has made no further progress.

Superannuation Guarantee compliance measures – including the SG integrity package and the SG amnesty

Mr Robert also noted that the government has introduced a one-off, 12-month amnesty (for employers if they come forward before they are identified by the ATO's usual enforcement activity) to encourage them to self-correct historical SG non-compliance.  Penalties will apply if employers fail to come forward.  Mr Robert said that this would incentivise employers to address their historical SG debts and added that the measure is estimated to collect around $230m in unpaid super for 50,000 workers.

Current status of the Bill: Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018 was introduced into the House of Representatives on 24 May and passed the House on 20 June.  It progressed to second reading stage in the senate on 25 June and has not progressed further to date.

Comments on the Financial Services Royal Commission

Noting that the Financial Services Royal Commission's Interim Report made no recommendations, and that therefore it was too early to 'start speculating' on what the government's response might be, Mr Robert called on industry to nevertheless take responsibility for the misconduct identified and use the Commission as a 'catalyst' for change.  In particular, Mr Robert drew attention to the following 'overarching' issues:

• Pursuit of short term profit at the expense of duties to customers and 'basic standards of honesty and fair dealing.
• A sales culture, rather than a culture focused on good customer outcomes, which is driven by remuneration and incentive structures at all levels in firms and for intermediaries.
• Failure to identify misconduct and/or failure to punish it at all, or to ensure the consequences reflected the seriousness of the misconduct.
• Failure to adhere to the law.
• Mr Robert also said that 'Complexity of the law may be part of the problem, and simplification may be part of the solution' but added that 'The financial sector must take responsibility for the misconduct heard by the Commission. Primary responsibility for misconduct lies with financial firms, their boards and senior executive teams'.

[Source: Assistant Treasurer Stuart Robert Address to the Association of Superannuation Funds of Australia (ASFA) Conference, Adelaide 14/11/2018; [registration required] The AFR 14/11/2018]