Federal election 2022
On 21 May 2022, the Federal Election saw the Australian Labor Party (ALP) form a majority government and the makeup of the Senate change. On 31 May, Stephen Jones was announced as the Assistant Treasurer and Minister for Financial Services.
Preceding the election, the ALP had announced several measures relating to superannuation including:
- Reducing the eligibility age for downsizer contributions from 60 to 55.
- Reviewing the Annual Performance Test.
- Freezing the pension deeming rate at 0.25% and maintaining the upper rate at 2.25% for two years.
- Increasing the income thresholds for access to a Commonwealth Seniors Health Card to $90,000 per year (singles) and $144,000 per year (couples).
- Legislating an objective test to determine whether a worker is casual.
- Legislating to make wage theft a criminal offence.
- Legislating a right to superannuation within the National Employment Standards, allowing workers to pursue unpaid super as an entitlement.
These measures have been proposed only and are not yet legislated.
It is expected that the ALP will also re-introduce previously introduced reforms when Parliament recommences, including the Financial Accountability Regime (FAR), the Compensation Scheme of Last Resort (CLSR) and the Financial Sector Reform Bill.
1 July changes
A number of superannuation-related changes came into effect 1 July 2022:
- Eligibility age for downsizer contributions reduced from 65 to 60;
- Super Guarantee rate increased from 10% to 10.5%;
- $450 per month threshold no longer applies;
- Increase to $50,000 of amounts released under First Home Super Saver Scheme;
- Members under 75 years old no longer have to meet the work test to make super contributions; and
- Retirement income strategy summary must be posted on website.
Choice of Fund – Defined Benefit
APRA is seeking input into its review of the impact of choice of fund amendments on defined benefit schemes’ operations, profitability, funding and viability.
The Superannuation Guarantee (Administration) Act 1992 was amended on 4 September 2020 by the Treasury Laws Amendment (Your Superannuation, Your Choice) Act 2020 (Your Superannuation, Your Choice Act).
The amendments provide that employers who make contributions for employees under workplace determinations or enterprise agreements made on or after 1 January 2021 need to provide those employees with choice of fund. This is known as ‘stapling’.
The Your Superannuation, Your Choice Act requires APRA to conduct a review to identify any unintended consequences of the amendments on the operation of defined benefit schemes.
Insurance in super
After two rounds of consultation, APRA made Superannuation (prudential standard) determination No. 1 of 2022, Prudential Standard SPS 250 Insurance in Superannuation.
The instrument commences on 1 July 2022. The key changes to the prudential standard are:
- Conflicted arrangements: heightened obligations to assess whether there are any conflicted provisions or business practices with respect to insurance arrangements, and whether they are appropriate and in the best interests of beneficiaries.
- Independent certification: requirement to obtain an independent certification for related party insurance arrangements, before entering into, or materially altering, an insurance arrangement, and on a triennial basis.
- Insurance strategy: Updated provisions reinforcing APRA’s expectation that rigorous analysis is undertaken to ensure that the kind and/or level of insurance offered does not inappropriately erode retirement income.
- Insurance management framework: consideration to potentially conflicting arrangements and ensuring that insurance outcomes are in the best financial interests of members.
- Member matters: amendments to improve protections for members regarding their insurance arrangements.
- Data management: strengthened expectations to improve cohort analysis.
Employer Contributions during SFT
The ATO issued a news release for APRA-regulated funds, ensuring that employers are able to keep making contributions to all funds for their employees through a successor fund transfer (SFT).
The ATO recommends that trustees:
- notify the ATO well in advance of processing employer contributions during an SFT, which will allow the ATO to provide guidance and support to reduce impacts for the fund and members, and the broader super system;
- engage with their Gateway provider to discuss ways they can assist the trustee and communicate broadly with employers; and
- consider how messages and payments will be actioned and how response messaging and error management will be dealt with past the SFT date.
AFCA Funding Model
Following a period of consultation, AFCA finalised a new funding model which will take effect from 1 July 2022. The new model includes a single registration fee and a simplified complaints fee structure.
APRA Superannuation Data Transformation
APRA updated two FAQs and published five new FAQs to support the implementation of the Superannuation Data Transformation project.
The new FAQs cover:
- How an RSE licensee should report historical insurance policies under SRF251.2 (FAQ 1.11).
- When an RSE licensee should report tax rebates in relation to insurance premium amounts in SRF251.3 (FAQ 251.3h).
- How an RSE licensee should classify an expense when considering APRA’s look through requirements (FAQ 332.0r).
- When an RSE licensee should report a benchmark allocation to the ‘Currency Exposure’ strategic sector or a currency hedging ratio to internationally domiciled strategic sectors (FAQ 550.0q).
- How an RSE licensee should report 'Investment Horizon Years Number’ in SRF 705.1 when the investment time horizon in the relevant return objective is not specified (FAQ 705.1f).