Measures to target underperforming funds, duplicate accounts
The government announced a range of reforms for superannuation it plans to implement over four years starting from 2020–21, aimed at improving outcomes for superannuation fund members. These include measures to reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members from joining underperforming funds.
In order to help members select funds, senator Jane Hume said the government plans to provide members with a new online comparison tool, developed by the ATO, called the YourSuper comparison tool. Ms Hume said this will “encourage funds to compete harder for members’ savings”.
The budget papers also revealed plans to staple existing superannuation accounts to a member in order to avoid the creation of a new account when the person changes their employment.
“Future enhancements will enable payroll software developers to build systems to simplify the process of selecting a superannuation product for both employees and employers through automated provision of information to employers,” the papers explained.
From July next year, the government also wants the Australian Prudential Regulation Authority to conduct benchmarking tests on the net investment performance of MySuper products.
To protect members from poor outcomes and encourage funds to lower costs, Senator Hume said the government will require superannuation products to meet an annual objective performance test.
“Those that fail will be required to inform members,” Ms Hume warned.
“Persistently underperforming products will be prevented from taking on new members.”
Products that have underperformed over two consecutive annual tests will be prohibited from receiving new members until a further annual test that shows they are no longer underperforming.
Non-MySuper accumulation products where the decisions of the trustee determine member outcomes will be added from 1 July 2022.
Senator Hume said the government also plans to increase trustee accountability by strengthening their obligations to ensure trustees only act in the best financial interests of members.
“The government will also require superannuation funds to provide better information regarding how they manage and spend members’ money in advance of annual members’ meetings,” she stated.
SuperConcepts SMSF technical specialist Anthony Cullen said most of the superannuation-related measures have mainly been focused on APRA-regulated funds, in terms of trying to make them more transparent and accountable.
Given the significant budget deficit, Mr Cullen said the government may have potentially decided to reduce contribution caps or even make taxation changes to exempt current pension income or franking credits.
“The fact that they haven’t made changes has been a good thing, from an SMSF point of view,” he said.
Start date for Retirement Income Covenant pushed to 1 July 2022
After announcing earlier this year that the Retirement Income Covenant would be deferred, the government has announced the new start date will be moved to 1 July 2022. The Treasury said this will allow for continued consultation and legislative drafting to take place during COVID-19.
“This will also allow for the finalisation of the measures to be informed by the Retirement Income Review,” it said.
The Retirement Income Covenant will require trustees to formulate a retirement income strategy for their members.
Measures to target crime in the tax and super systems
The government has also announced $15.1 million in additional funding to the ATO to address serious and organised crime in the tax and superannuation systems. This extends measures announced in the 2017–18 federal budget by a further two years to 30 June 2023.
Electronic execution of documents
As part of measures to reduce regulatory barriers, the budget papers also stated that the government will undertake public consultation on making permanent changes to the Corporations Act 2001 that would allow companies to call and conduct meetings electronically with a quorum achievable through virtual attendance of shareholders and officers and provide certainty that company officers can electronically execute a document.
Smarter SMSF chief executive Aaron Dunn said that a commitment to make permanent changes to utilise technology for electronic execution of documents would be a “win for the SMSF sector”.
The government announced in August that it had extended the relief provided for electronic document execution for a further six months, which may allow SMSFs with a corporate trustee in some cases to use electronic signatures for longer.