Protect your super with regulatory updates

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June 2018 |Pensions & Superannuation Regulatory Update
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In Brief
Major Reform Updates
Protecting Your Super
Package
28 June 2018
Bill passed House of
Representatives
The Treasury Laws Amendment (Protecting Your Superannuation Package)
Bill 2018 has been passed by the House of Representatives and will move
to the Senate. The Bill would implement the Protecting Your Super Package,
and contains measures to protect the retirement savings of individuals from
erosion. The major components are:
▪ trustees of superannuation funds are prevented from charging certain
fees and costs exceeding 3% of the balance of a MySuper or choice
product annually where the balance of the account is below $6,000
▪ trustees are prevented from providing opt out insurance to new members
aged under 25 years, members with balances below $6,000 and
members with inactive MySuper or choice accounts, unless a member
has directed otherwise.
▪ measures to increase the rate of consolidation of superannuation
accounts, decrease low-balance account erosion and reduce insurance
premium and fee duplication for many members.
QMV recommends that superannuation trustees assess the impact of
these changes on trustee revenue from member fees, and consider
any corresponding adjustments to fees charged by service providers.
Planning should commence for updating systems, procedures, and
controls to ensure the new rules are not breached.
🔗Link to Details
Commonwealth Parliament has now risen for its winter break until 13 August, with plenty
of superannuation-related bills still awaiting consideration.
The Protecting Your Super Package was introduced to Parliament, including measures
intended to protect lower account balances. The long road to law for the Asia Region
Funds Passport was finally achieved, with the SG Amnesty Bill remaining in
Parliament and subject to intense debate.
There was also the regular flurry of pre- 1 July regulatory activity, with technical changes
extending existing exemptions and addressing MATS dates, Employer Shortfall
Exemption Certificates, and strengthening corporate crime enforcement options.
Guidance was issued by APRA, questioning the classification of certain assets as
cash (when they may not be so), and the ATO issued guidance around the transition of
early release administration.

June 2018 |Pension & Superannuation RegulatoryUpdate
advisory | delivery | professional resources
Superannuation Guarantee
Enforcement Amnesty
20 June 2018
Representatives
The Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill
2018 has been passed by the House of Representatives, containing the
superannuation guarantee amnesty.
The Bill provides for a one-off 12-month amnesty to allow employers to
claim tax deductions for payments of SG charge or contributions made
during the amnesty period to offset SG charge, as well as have penalties
and fees that may otherwise apply in relation to historical SG non-
compliance reduced to nil.
QMV recommends that Trustees and service providers monitor the
progress of the Bill, and prepare for any enquiries which may be
received from employers intending to utilise the scheme.
Financial Complaint &
Dispute Resolution
29 June 2018
Consultation
The Australian Financial Complaints Authority (AFCA) has released for
consultation a three-phase funding model approach, consisting of initial
transition funding, an interim funding model, and a long-term funding model.
The focus of this consultation is on the transition and interim funding
arrangements for AFCA. Consultation is being conducted with industry
stakeholders, existing and potential AFCA members and industry
associations.
The AFCA funding consultation paper has been circulated to relevant
industry stakeholders and is available on the member portal for existing
AFCA members.
QMV recommends that superannuation trustees review the proposed
funding model, and provide any feedback directly to AFCA. Budgeting
for the proposed funding model should follow the introduction of the
funding model.
Asian Region Funds
Passport
29 July 2018
Royal Assent
The Corporations Amendment (Asia Region Funds Passport) Act 2018 has
received royal assent.
The Act enables a fund registered in one country to be sold to retail
investors in other participating countries, which include Australia, Japan,
Korea, Thailand and New Zealand.
The Passport is a common framework of coordinated regulatory oversight to
facilitate cross border issuing of managed investment funds.
The Asian Region Funds Passport may make regional managed
investments more accessible for Australian superannuation funds.
🔗Link to Details
🔗Link to Details
🔗Link to Details

ASIC Cost Recovery Model
29 June 2018
ATO Alert Issued
The ASIC Fees Bill, the Credit ASIC Fees Bill, the ASIC Superannuation
Auditor Registration Bill and the SIS ASIC Fees Bill amend the Corporations
(Fees) Act 2001, National Consumer Credit Protection (Fees) Act 2009,
Superannuation Auditor Registration Imposition Act 2012 and the
Superannuation Industry (Supervision) Act 1993 to allow ASIC to better
align its fees, by enabling ASIC to charge a cost-reflective fee for the
services it provides for a specific entity by:
▪ increasing the caps to allow ASIC to recover the costs ASIC incurs when
providing regulatory services;
▪ expanding the definition of chargeable matter and prescribes who is liable
to pay and when the liability is incurred;
▪ providing that the Fees Regulations may prescribe for a particular
chargeable matter, whether the fee is for low, medium or high complexity;
▪ providing that the Fees Regulations may prescribe for a particular
chargeable matter, different fees based on the type of entity;
▪ providing that ASIC can determine by legislative instrument whether a
type of application for a particular regulatory service is low, medium or
high complexity;
▪ allowing regulations to be made for the purposes of the Act; and
▪ providing that ASIC can charge additional fees in relation to an application
to vary or revoke the conditions or cancel the registration of an approved
SMSF auditor.
QMV recommends that superannuation trustees assess the impact of
the new model on budgeting for expenses and related arrangements.
Corporate Collective
Investment Vehicles
14 June 2018
Treasury Consultation
The Government has released for public consultation the first tranche of the
Treasury Laws Amendment (Corporate Collective Investment Vehicle) Bill
2018 and explanatory materials.
The Corporate Collective Investment Vehicle (CCIV) will offer an
internationally recognisable investment vehicle which can be readily
marketed to foreign investors, including through the Asia Region Funds
Passport.
The Government previously consulted on the draft Bill from 25 August to 25
September 2017.
The exposure draft includes revisions from the September consultation:
▪ A revised draft of the new chapter containing the core provisions
establishing how the CCIV and its sub-funds will operate
▪ Amendments to apply Chapters 2A to 2P of the Corporations Act (such as
the meetings rules and members’ rights and remedies) to CCIVs
▪ An outline in the explanatory materials of the proposed legislative
approach to depositary independence.
The second tranche of consultations will cover the remaining substantive
aspects of the regulatory framework for CCIVs, including external
administration, consequential amendments to apply the Chapter 7 financial
services regime to CCIVs, and penalty provisions.
QMV recommends that the legal and investments business units of
superannuation trustees engage in the CCIV consultation as early as
possible. The new vehicle is likely to require assessment of any
difference to dealing with Managed Investment Trusts.
🔗Link to Details
🔗Link to Details

Technical Changes & Updates
PAYG on super income
stream payments
1 June 2018
Legislative instrument
The ATO has issued a legislative instrument which provides rules for
calculating the amount to be withheld from the taxable component of certain
super income stream payments.
The rules in the instrument apply to the taxed element of the taxable
component of payments that:
▪ are superannuation income streams covered by s 12-80(a) of Schedule 1
to the Taxation Administration Act 1953
▪ consist of a taxed element only
▪ are paid to a payee who is aged 59 years on 30 June immediately before
the start of the relevant financial year; and
▪ do not exceed the defined benefit income cap.
The instrument commences on 1 July 2018.
QMV recommends that superannuation trustees ensure that benefit
administration systems and assurance procedures are configured to
apply PAYG tax on such income streams accurately.
29QB Exemption
1 June 2018
ASIC has (again) extended a legislative instrument to allow additional time
to consider the policy position in relation to certain disclosure obligations of
managed investment schemes and superannuation trustees.
The instrument extends the exemption for superannuation trustees from
section 29QB of the Superannuation Industry (Supervision) Act 1993 to the
extent it requires publication on the website for a superannuation fund of
personal information or information that relates to a standard-employer
sponsored sub-plan.
The instrument was due to expire on 30 June 2018. The extension
maintains the status quo in the meantime, enabling ASIC to adjust or revoke
the relief once the policy position is settled by Government.
No change or action required of superannuation trustees.
Shorter PDS Exemption
1 June 2018
ASIC has also extended ASIC instrument related to the shorter PDS regime.
The extended exemption allows additional time to consider the policy
position in relation to the disclosure obligations of managed investment
schemes and superannuation trustees.
This instrument extends the period of operation of the declaration in [CO12-
749] to the effect that certain superannuation and managed investment
products need not comply with the obligation to prepare a shorter PDS.
The instrument had been due to expire on 30 June 2018. The extension
maintains the status quo, enabling ASIC to adjust or revoke the relief once
the policy position is settled by Government.
No change or action required of superannuation trustees.
🔗Link to Details
🔗Link to Details
🔗Link to Details

Member Account
Transaction Service (MATS)
29 June 2018
The timeframe for giving statements about an individual’s superannuation
account transactions in the Member Account Transaction Service (MATS)
form is set out in a Legislative Instrument made by the Commissioner.
The effect of the instrument is that superannuation providers in relation to
superannuation plans (excluding SMSFs), and life insurance companies, are
required to report information relating to an individual’s superannuation
account transactions to the Commissioner by lodging a statement in the
approved form (the MATS form) by the specified due date.
The reporting of information relating to superannuation account transactions
to the Commissioner in the MATS form commenced on 1 July 2018.
The Commissioner will however provide administrative concessions to
support the transition to MATS reporting during a transitional period from 1
July 2018 until 31 March 2019, allowing for the first lodgement of the MATS
form to be no later than 10 business days from the 31 March 2019, unless
the time for lodging the approved form is deferred by the Commissioner.
QMV recommends that superannuation trustees and service providers
become familiar with the timing of MATS reporting obligations.
Employer Shortfall
Exemption Certificate
20 June 2018
Bill passed house of
representatives
2018 has been passed by the House of Representatives.
The Bill contains measures related to employees with multiple employers,
and introduces an employer shortfall exemption certificate for certain
employees with multiple employers to allow individuals to avoid
unintentionally breaching their concessional contributions cap when they
receive superannuation contributions from multiple employers.
QMV recommends that superannuation trustees ensure that member
service representatives and member resources provide appropriate
guidance to members of the option of accessing the employer shortfall
exemption certificate.
Non-Arm’s Length Income
20 June 2018
Representatives
2018 also contains measures related to non-arm’s length income.
The Bill ensures that the non-arm’s length income rules for superannuation
entities apply in situations where a superannuation entity incurs non-arm’s
length expenses in gaining or producing the income.
This Bill clarifies the operation of Subdivision 295-H to ensure that
complying superannuation entities cannot circumvent the non-arm’s length
income rules by entering into schemes involving non-arm’s length
expenditure (including where expenses are not incurred).
QMV recommends that superannuation trustees remain diligent in
ensuring that income and capital schemes involved in do not breach
the new non-arm’s length income rules.
🔗Link to Details
🔗Link to Details
🔗Link to Details

Meaning of Australian
Superannuation Fund
21 June 2018
Addendum to ruling issued
The ATO has issued an addendum to TR 2008/9 Income tax: meaning of
“Australian superannuation fund” in s 295-95(2) of the Income Tax
Assessment Act 1997.
The addendum amends TR 2008/9 to replace a reference to withdrawn
Taxation Ruling TR 2004/15 Income tax: residence of companies not
incorporated in Australia — carrying on business in Australia and central
management and control with new Taxation Ruling TR 2018/5 Income tax:
central management and control test of residency.
The definition of 'Australian superannuation fund' is relevant in determining
whether a superannuation fund is a 'complying superannuation fund' for the
purposes of the Superannuation Industry (Supervision) Act 1993.
This change is administrative in nature and has little substantive
impact of superannuation fund trustees.
Corporate Crime
Prosecution
21 June 2018
Consultation
The Deferred Prosecution Agreement (DPA) Scheme Code of Practice, was
released by the Attorney General for consultation.
Under the scheme, the Commonwealth Director of Public Prosecutions
(CDPP) would be able to offer corporations alleged to have committed
certain serious corporate crimes the opportunity to negotiate an agreement
to comply with a range of specified conditions.
These conditions could include a requirement to pay a financial penalty,
compensate any victims, improve a compliance program and cooperate in
other investigations and prosecutions.
The Code would complement the existing legislative framework contained in
the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017,
which is currently before Parliament.
The scheme highlights the importance of ensuring that appropriate
controls are in place to manage the risks of criminal activity occurring
within the organisations responsible for the superannuation industry.
🔗Link to Details
🔗Link to Details

Policy & Guidance
Early Release
Administration
12 June 2018
Announcement
The ATO has announced the transfer of responsibility for the administration
of the early release of superannuation benefits on compassionate grounds
from the Department of Human Services (DHS) from 1 July 2018.
A key improvement under the new process will be the ATO providing
electronic copies of approval letters to superannuation funds at the same
time as to the applicant.
This is hoped to mitigate fraud risk and negate the need for superannuation
funds to independently verify the letter with the regulator. Individuals will
also upload accompanying documentation simultaneously with their
application, rather than the current two-step process.
The transfer of responsibility for compassionate early release of super from
the Department of Human Services to the ATO will affect large super funds
and their members.
QMV recommends that superannuation trustees take measures to
communicate the change to member service providers, update fund
websites and documents where appropriate to ensure that members
are aware of the new process for making an application for early
release on compassionate grounds.
Cash Investments,
Regulatory Guidance
29 June 2018
Announcement
APRA has issued a letter to all superannuation trustees outlining findings as
part of a review that APRA has identified examples where ‘cash’ investment
options appear to include exposure to underlying investments that would not
generally be considered cash or cash-like in nature.
Assets that APRA has observed forming part of cash options’ underlying
investments included asset-backed and mortgage-backed securities,
commercial bonds and hybrid debt instruments, credit-default swaps, loans
and other credit instruments. The letter provides guidance to trustees, that
these assets do not typically exhibit the characteristics necessary to be
considered as cash or cash equivalent.
QMV recommends that superannuation trustees liaise with custody
service providers to ensure that classification of assets and reporting
of cash investments is appropriate, and that processes ensure that
assets are correctly classified.
Housing Affordability
Measures
29 June 2018
ATO Alert Issued
The ATO has published its version of the form that an individual must
complete in order to make a ‘downsizer’ contribution to their superannuation
fund, along with some information to assist funds create their own version of
the form. The ATO has also provided guidance in Super CRT Alert 061/2018
to funds that may wish to design their own version of the form.
Amendments have also been made to the regulations to prescribe the
circumstances in which the Commissioner of Taxation is to determine that
an individual has suffered a financial hardship for the purposes of the First
Home Super Saver Scheme.
As members will be able to withdraw benefits available under the First
Home Super Saver Scheme from 1 July 2018, QMV recommends that
superannuation trustees ensure member service representatives are
familiar with the relevant forms and processes.
🔗Link to Details
🔗Link to Details
🔗Link to Details

More Questions or Need Support?
QMV partners with superannuation fund trustees and
administrators to adapt to changes in the legal and
regulatory environment.
If you have any questions or need assistance, you can
contact me directly at jsteffanoni@qmvsolutions.com
Jonathan Steffanoni, Principal Consultant, Legal & Risk

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