On 16 December 2010, the Government released a package of "Stronger Super" reforms in response to the recommendations of the Cooper Super System Review [i] . The Government has expressed support for 139 of the 177 recommendations in the Cooper Review.
Maddocks comment: The Government's policy is in part to encourage compliance by better educating advisors and auditors. This 'top-down' approach is long term regulation, and monitoring of compliance with these obligations could be costly to Government. These are complemented however, by more immediate 'bottom – up' deterrence.
Maddocks comment: Deterrence helps achieve the Government's more short-term compliance objectives. A more nimble and tailored administrative penalties process, and the threat of sending retirees back to school at their own cost, gives the ATO some useful flexibility.
Maddocks comment: SMSF trustees should hopefully see that, if they make this change for the purpose of accepting rollovers, then APRA funds will be more comfortable (and expedient) at getting those rollovers done.
The Government rejected the following changes proposed by the Cooper review:
Maddocks comment: The Government's approach here seems to be 'wait and see'. It would be prudent for Government to revisit all these issues in light of prevailing industry practice. The continued availability of borrowing and in-house assets seems to be in the hands of industry and how they make use of these strategies.
Related party transactions
Acquisitions and disposals - The Government has agreed in principle with the recommendation that the sections of the SIS Act relating to acquisitions and disposals between related parties in SMSFs should be amended so that either: [vi]
These restrictions do not apply to APRA funds. The Government intends to consult with stakeholders to refine and manage the implementation of this recommendation.
The Government will establish an SMSF sub-group in early 2011 to progress the implementation of the SMSF reforms.
The Government has advised that SMSFs can expect an increase in the supervisory levy that they need to pay as part of their annual return. Currently, the levy is $150.
MySuper is intended to be a simple, low cost default superannuation product provided by superannuation funds, which will replace those funds' existing default funds. Default funds are types of super funds in which employers make compulsory superannuation contributions for employees who do not select a fund in to which they would like their employer to pay the required contributions. [vii] Superannuation funds will still be able to offer other products in addition to MySuper products.
Although MySuper products will not be compulsory for employees, it is anticipated that the majority of employees will choose to use a MySuper product. Eventually however, after a transition period, MySuper products will be the only products eligible to accept contributions from employers on behalf of employees who do not choose a fund. [viii]
My Super is intended to increase the transparency and comparability of default superannuation products. This is achieved in part through a set of standardised features and reporting requirements that includes plain English reporting and a single investment strategy.
MySuper products will be required to meet legislative standards which will be enforced by APRA. APRA's powers will include the power to revoke trustee licences. Funds that do not operate as default funds, such as SMSFs or choice products, will not have to comply with these legislative standards. [ix]
The Government will establish a MySuper sub-group to implement MySuper. The early consultation stages will focus on detailed design and implementation issues, with later stages focusing on exposure draft legislation.
Maddocks comment: Essentially, these are consumer protection measures, but a step further on from the financial services reforms of 2002. Those reforms focused on ensuring financial services organisations all made disclosures in the same way (using say, product disclosure statements). This reform aims to clarify disclosure by requiring financial services organisations to design their products in the same way, which is a very interesting development.
'SuperStream' refers to the package of measures designed to enhance the 'back office' of superannuation. SuperStream will assist in reducing current administrative burdens associated with operating funds.
The Government has proposed that SuperStream will:
The Government has acknowledged that there will be short term costs associated with introducing electronic processing and common data standards. Despite this, the long term benefits in streamlining administration processing will deliver a greater number of long term benefits for members and trustees.
The Government will establish a SuperStream consultative sub-group consisting of industry, employer and consumer representatives who will consult on data standards and the design and implementation of the SuperStream measures.
Maddocks comment: The measures are unlikely to impact significantly on SMSFs. For those people in funds that are impacted by these changes, one would hope there are long term benefits for members and that savings are ultimately passed on to them. In the meantime, members ultimately pay for the trustee's cost of compliance.
The following timeline is the proposed implementation dates for the reforms:
|Early 2011||Consultative committee to be formed|
|1 July 2011||New legislative standards apply for new investments in collectibles and personal use assets|
|1 July 2012||Most measures proposed to commence|
|1 July 2013||
Review of leverage within super funds
Anti Money Laundering/Counter Terrorism Finance requirements introduced for rollovers to commence
|1 July 2014||Amendments to SMSF registration process to commence|
|1 July 2016||All collective and personal use assets to comply with new requirements|
For more information, contact Maddocks on (03) 9288 0555 and ask for a member of the Maddocks Superannuation Team.
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[i] The Cooper System review was a review into the efficiency, structure and operation of the Australian Superannuation System which was conducted by Jeremy Cooper along with a panel of 7 part-time members. A copy of the review is available here .
[iii] See 52(2)(d) of the Superannuation Industry (Supervision) Act 1993 (SIS Act)
[iv] Super System Review Final Report, Chapter 8 Self-managed super solutions, pg's 259.
[v] Ibid at pg's 248 – 249.
Paul is a Senior Associate in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.
Paul's key areas of practice include:
Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.
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