'Your Future, Your Super - Exposure Draft of Amending Regs to effect - Single Default Accounts, Underperforming funds disclosure & sanctions, improving accountability at annual members' meetings etc.

On Wed 28.4.21, Treasury released 3 sets of exposure draft regulations proposing to support the Government’s Your Future, Your Super (YFYS) package of super reforms announced in the 2020-21 Budget. The Regulations will: (1) Outline the methodology for the annual performance test and re-opening test, as well as requirements for notifications to members; (2) Prescribe the definition of a ‘stapled fund’, including tie-breaker rules for determining which fund is to be an employee’s stapled fund, where they have multiple existing funds; (3) Specify the formulas as a basis for ranking products on the YourSuper comparison tool; (4) Set out the manner in which the portfolio holdings disclosures are organised; (5) Prescribe the information that must be included with the notice of an Annual Members’ Meeting; (6) Further strengthen the prohibition on funds offering inducements to employers.

See below for further details.

[Tax Month – April 2021]

On Wed 28.4.21, Treasury released 3 sets of exposure draft regulations proposing to support the Government’s Your Future, Your Super (YFYS) package of super reforms announced in the 2020-21 Budget.

Treasury Laws Amendment (Your Future, Your Super – Single Default Account) Regulations 2021 (Exposure Draft) – will amend the Superannuation Guarantee (Administration) Regulations 2018 (SGA Regs) to support the amendments proposed by the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 (YFYS Bill) which is still before the House of Reps.
1. The Bill seeks to limit the creation of multiple super accounts for employees who do not choose a super fund when they start a new job. If a new employee (who has started their employment on or after 1 July 2021) has no chosen fund, but has an existing “stapled” fund, an employer will need to comply with the choice of fund rules by making contributions to the employee’s stapled fund.
2. To determine whether a stapled fund for an employee exists, employers will need to request that information from the ATO.
3. The Draft Regs set out the proposed requirements that a fund must meet to be a stapled fund, and procedural matters relating to requests to and responses from the ATO about stapled funds.
4. DATE OF EFFECT: Applicable to employment that starts on or after 1 July 2021.
Treasury Laws Amendment (Your Future, Your Super – Addressing Underperformance in Superannuation) Regulations 2021 (Exposure Draft) – will amend the SIS Regs to support the implementation of the annual performance assessments under the YFYS Bill.
1. The Bill proposes to require trustees of super funds providing “Part 6A products” (eg MySuper products and other specified products) to give notice to its beneficiaries if it has failed a performance test conducted by APRA.
2. Where a product has failed the performance test in 2 consecutive years, the trustee will be prohibited from accepting new beneficiaries into that product.
3. The Draft Regs support the Bill by specifying when APRA must conduct the annual performance test; the circumstances where products are to be treated as combined; the form and content for notices about failing a test; the circumstances where APRA may lift an underperformance prohibition on a trustee; and the formulas for ranking Part 6A products for use in the Government’s YourSuper comparison tool.
4. DATE OF EFFECT: Annual performance tests are proposed to apply to MySuper products from 1 July 2021 (and from 1 July 2022 for other specified products).
Treasury Laws Amendment (Your Future, Your Super – Improving accountability and member outcomes) Regulations 2021 (Exposure Draft) – will amend the SIS Regs and the Corporations Regulations 2001:
1. to prescribe how information must be provided under the portfolio holdings disclosure (PHD) regime;
2. to prescribe the information that must be provided with a notice for an annual members’ meeting; and remove an exception to the prohibition on the use of goods and services to influence employers in revised s 68A of the SIS Act (the employer kickback rule).
3. DATE OF EFFECT:
  1. The PHD amendments will apply to the first reporting day on or after 31 December 2021, or the first reporting day after the commencement of the final Regulations, whichever occurs later.
  2. The amendments in relation to members’ meetings will apply prospectively to any notices that relate to a year of income that ends on or after the commencement of the final Regulations.
  3. The employer kickback rule amendments will apply to the provision of goods or services from the day after the final Regulations are registered.

SUBMISSIONS are due by 25 May 2021 via email: superannuation@treasury.gov.au (View our submission guidelines.)

Industry Super Australia welcomed the Draft Regulations and noted its view that the proposed performance test better focuses on member outcomes and appears to now include administration fees. Industry Super Australia also welcomed that the Draft Regs will benchmark the performance of unlisted assets to more appropriate indices and ensure super funds are not penalised for investing in local infrastructure projects.

[Treasury website: Consultation page; Single Default Account: Draft Regs, Draft Explanation; Underperformance: Draft Regs, Draft Explanation; Accountability: Draft Regs, Draft Explanation]

[29.4.21; LTN 79, 28/4/21]

‘Your Future, Your Super – Exposure Draft of Amending Regs to effect – Single Default Accounts, Underperforming funds disclosure & sanctions, improving accountability at annual members’ meetings etc.

Author: John Morgan