On 12.8.21, the Federal Minister for Superannuation a media release, saying that the Government proposes to make changes to ensure the superannuation system’s financial reporting and auditing framework is commensurate to the size and significance of the sector and to do that, was releasing an exposure draft, of the relevant legislation, for consultation, with submissions due by 8 September 2021.
See below for further detail.
[Tax Month – August 2021]
By way of background, the Minister noted that, as at 31 March 2021, registrable superannuation entities with more than four members (then, the limit on SMSF membership) had a combined value of $2.1 trillion. By comparison, the value of all listed companies in Australia at that time was $2.3 trillion, yet superannuation funds are subject to less stringent financial reporting obligations than public companies and registered schemes. And yet, $1 in every $10 Australians earn is compulsorily directed into superannuation. The sector needs to be fit for purpose, as Australians expect and deserve.
She noted that, while super funds are required to provide financial information and data to the Australian Prudential Regulation Authority, there is currently no requirement to prepare financial reports in accordance with Australian Accounting Standards and for these reports to be lodged on the public record. This results in a lack of transparency, accountability and regulatory oversight unsuited to the compulsory nature of superannuation.
These reforms will require registrable superannuation entities to prepare, and lodge audited financial reports with the Australian Securities and Investments Commission (ASIC). This will increase the transparency of financial information and better enable regulators’ oversight of superannuation funds.
The Exposure Draft of the Treasury Laws Amendment (Financial Reporting and Auditing Requirements for Registrable Superannuation Entities) Bill 2021 proposes to require registrable superannuation entities (RSE) licensees to:
- prepare and lodge financial reports for each financial year and half-year with ASIC, including directors’ reports and financial statements for the entity and each sub-fund;
- publish the financial report, directors’ report and auditor’s report for a financial year on the RSE’s website and provide details of how to access these reports with the notice of the annual members meeting; and
- provide a copy of the financial reports for a financial year and half-year to members and beneficiaries on request.
Also, the Draft Bill will also amend the requirements for the auditor of an RSE, who will have obligations under both the Corporations Act 2001 and SIS Act.
- In addition to existing reporting requirements, members of an RSE audit firm, and directors of an RSE audit company, will be required to report certain contraventions to APRA.
- RSE auditors will also be prohibited from playing a significant role in the audit of a RSE for more than 5 (out of 7) successive years.
- An RSE auditor may also be required to prepare, lodge and publish an auditor transparency report.
- RSEs will be required to keep financial and accounting records for 7 years (up from 5 years).
DATE OF EFFECT: 1 July 2022 (subject to application and transitional provisions).
SUBMISSIONS are due by 8 September 2021.
[Treasury website: Consultation Page, Draft Bill, Draft EM; Minister’s website: Media Release; LTN 155, 13/8/21]
