Government Introduces Your Future, Your Super Bill Into the House of Representatives
On 17 February 2021, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 (Cth) (‘the Bill’) was introduced to the House of Representatives. On 18 February, the Bill was referred to the Senate Economics Legislation Committee with the Committee due to submit their report on 22 April. In his Second Reading Speech, the Treasurer, Mr Josh Frydenberg, stated that the Bill will implement several recommendations from the Productivity Commission's 2018 final report, Superannuation: assessing efficiency and competitiveness and will “lower fees, increase transparency and improve accountability.” The Bill’s three schedules are intended to implement three key changes to the Australian superannuation system.
Single Default Account
Firstly, Schedule 1 of the Bill proposes to amend the Superannuation Guarantee (Administration) Act 1992 (Cth) such that if a new employee has an existing ‘stapled’ superannuation fund and does not choose a fund to receive contributions, their employer is required to make contributions on behalf of the employee into the stapled fund. A superannuation fund is referred to as 'stapled' if it will remain the employee’s default account despite changes in a person’s employment. In order to facilitate this change, the Bill proposes to allow employers to request that the Commissioner identify any stapled fund for their employees. These changes are intended to be implemented for employees beginning their employment on or after 1 July 2021.
Schedule 1 of the Bill is a response to Recommendation 1 of the Productivity Commission’s 2018 report and Recommendation 3.5 of the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Both Commissions identified that under the current superannuation rules, it is common practice for employers to automatically create a new superannuation account in their chosen default fund for new employees when employees do not specify a superannuation fund. As the Treasurer states in his Second Reading Speech, this typically results in a single employee holding multiple superannuation accounts, “paying multiple sets of fees and insurance premiums and unnecessarily erodes their retirement savings."
Addressing Underperformance in Superannuation
Secondly, Schedule 2 of the Bill intends to implement Recommendation 4 of the Productivity Commission's 2018 report which recommended that APRA-regulated superannuation funds should be subject to annual performance tests.
The key features of Schedule 2 include:
- A requirement that APRA must conduct an annual performance test for MySuper products and any other product specified by the Regulations
- A requirement that a trustee of a superannuation product which fails the annual performance test must inform the beneficiaries. The notice must adhere to any requirements outlined in the Regulations.
- A prohibition against trustees adding new beneficiaries for a superannuation product that has failed the performance test in two consecutive years.
Best Financial Interests Duty
Finally, Schedule 3 of the Bill will amend the Superannuation Industry (Supervision) Act 1993 (Cth), to specify that trustees are obliged to act in the best financial interests of the beneficiaries in the performance of their duties, as opposed to the current law which states an obligation to act in the beneficiaries’ best interests.
This statutory obligation will apply to:
- Trustees of registrable superannuation entities;
- Trustees of self managed superannuation funds; and
- Directors of the corporate trustee of a registrable superannuation entity.
Furthermore, the Bill proposes to reverse the evidential proof of the best financial interests duty such that the onus is on the trustee rather than the Regulator. Moreover, the Bill will remove the exemption under the portfolio holdings disclosure rules contained in the Corporations Act 2001 (Cth) which exempts trustees from disclosing information for up to 5% of superannuation holdings. According to the Treasurer in the Second Reading Speech, the removal of the exemption will empower members “to make fully informed decisions about their retirement - how their retirement savings are invested.”
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Treasury Laws Amendment (Your Future, Your Super) Bill 2021 (Cth) and explanatory materials available on TimeBase’s LawOne service