Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017

Monday 18 September 2017 @ 11.50 a.m. | Corporate & Regulatory | Legal Research | Taxation

On Thusday 4 August 2017 the Financial Services Minister Kelly O'Dwyer introduced into the Senate the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 (Cth) (the Bill). A key proposal of the Bill is provisions to force industry boards to ensure that a third of trustees are independent and that an independent chairman is also appointed.

Background

The Bill is one that the Federal Government has made several attempts to pass through the parliament, the last being when the proposed reforms were blocked by the Senate in December 2015. The current Minister is the latest minister having charge of the proposed reforms, previous Ministers Frydenberg and Sinodinos also made attempts which did not succeed.

What Proposed Legislation Does

In general terms the proposed legislation will require a minimum of one third of directors be "independent" with an independent chair. The primary costs expected to be incurred relate to the increased remuneration costs associated with the proposed new governance requirements. Other significant costs indicated by the Minister, include search and engagement costs and legal costs (for example, changes to constitutions and trust deeds). The impact of these costs on the superannuation industry is expected to be $8.5 million for start up costs and a further $12.3 million annually for ongoing costs. The success of the legislation is to be measured by how quickly superannuation trustee boards move to a minimum of one third independent directors with the "ultimate yardstick" being in the Minister's view, how many trustees are compliant with the requirements at the end of the three year transition period.

Schedule 1 to the Bill proposes to amend the Superannuation Industry (Supervision) Act 1993  introducing new trustee arrangements requiring registrable superannuation (RSE) licensees to:

  • have at least one third independent directors, and 
  • for the Chair of the Board of directors to be one of these independent directors. 

Schedule 2 to the Bill introduces new independence requirements in respect of certain Commonwealth Superannuation Corporation Board (CSC Board) positions, consistent with the provisions contained in Schedule 1. Schedule 2 amends the Governance of Australian Government Superannuation Schemes Act 2011 (Cth), to enable the trustee board of the CSC Board to comply with the independence requirements set out in Schedule 1. 

The Bill is part of a package of two Bills. The other Bill is the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017.

Reaction and Comment 

The main reaction to the proposed legislation has come from the industry super funds who claim that the Government was pursuing an ideological dispute, given the union backing of many of those funds. The Minister has rejected the criticisim and is reported as saying that such claims  were ". . . a diversion from the need to protect the interests of members".

The ABC reports that Industry Super Australia has accused the Government of caving in to pressure from retail funds to dismantle the current governance of super funds. The Chief executive David Whiteley is reported as saying  that the Government was giving banks a "leave pass" on transparency and disclosure requirements:

"Rather than dealing with the big issues like the superannuation gender gap and unpaid superannuation, it appears the Government has caved in, dismantling the successful industry super governance model, . . "

Next

The Bill was introduced last Thursday, amidst the business of a very busy last sitting day in parliament and has a way to go before being enacted, which given the past history of attempts to pass this legislation, is unlikely to go through uncontested when parliament returns.

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Sources:

Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 and supporting material as reported  in the TimeBase LawOne Service.

Superfund industry furious over Government legislation to overhaul superannuation funds (ABC News)

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