Super Alert – 12 July 2024: Final rules for FAR; changes to NALI rules; Quality of Advice changes; mFund closure
Welcome to the latest issue of the KHQ Super Alert. This week, APRA and ASIC released the final guidance materials for the financial accountability regime. ASIC also announced a proposal to change some default rates currently contained in the rules for superannuation calculators.
We are very pleased to welcome new Principal Solicitor Jenny Taing OAM to our team to deepen our financial services expertise. As a result, our Alert will now also include some news updates applicable to the financial services industry more broadly.
APRA and ASIC – Final rules for FAR released
On 11 July 2024, APRA and ASIC released the following materials relevant to the expansion of the Financial Accountability Regime to superannuation trustees:
- ‘an amendment to the Regulator rules, which prescribes key functions information for inclusion in the FAR register of accountable persons for insurance and superannuation industries’; and
- ‘a joint ASIC and APRA letter summarising key issues raised during consultation and their response, including the concept and application of key functions’.
As referred to in our Super Alert of 15 March 2024, the regulators sought feedback from trustees earlier this year about these guidance materials. Seven submissions were received during the consultation process. As a result of this feedback, the regulators have:
- ‘given greater detail to the key function descriptions for ‘member outcomes and member engagement’ and ‘product origination’ to remove overlap with other RSE licensee Key Functions’;
- ‘tightened the key function description for ‘scam management’ and ‘marketing and advertising’ to be more specific to superannuation entities’ operations’; and
- ‘clarified the ‘investment management’ key function description in response to consultation feedback’.
The regulators have advised that ‘[t]his information completes the total package of FAR guidance materials’.
Click here for details.
Federal Court – Design and distribution obligations decision
On 10 July 2024, the Federal Court handed down its judgment in Australian Securities and Investments Commission v Firstmac Limited [2024] FCA 737. In an associated media release issued on the same day, ASIC said the Court ‘found that Firstmac Limited breached the new design and distribution provisions by failing to take reasonable steps that would have resulted in, or would have been reasonably likely to have resulted in, the distribution of one of its investment products being consistent with its target market determination for the product’. ASIC stated that this is the first time an entity has been found to have breached the design and distribution obligation provisions.
Click here and here for details.
ASIC – Proposed funding levies for 2023-24 released
On 8 July 2024, ASIC issued its ‘Cost Recovery Implementation Statement’ for the 2023/24 financial year. The purpose of the statement is to assist regulated entities with their planning by allowing them to budget for these levies and fees to be charged for ASIC’s regulatory services. The final levy figures are scheduled to be published in December 2024 and invoiced by March 2025.
Click here for details.
ATO – Changes to NALI rules for APRA-regulated funds
On 8 July 2024, the ATO issued a media release confirming that the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024 has now received Royal Assent after being passed by both Houses of Parliament on 25 June 2024 (see Super Alert of 28 June 2024). The ATO explained that they ‘exempt large APRA regulated funds from the non-arm’s length expenditure (NALE) provisions for both general and specific expenses of the fund, and confirm the remaining NALI rules continue to apply’ and will ‘apply [retrospectively] from 1 July 2018’.
Click here for details.
Legislation – Income Tax Assessment Amendment (Superannuation) Regulations 2024 (Cth)
On 5 July 2024, the Income Tax Assessment Amendment (Superannuation) Regulations 2024 (Cth) were registered on the Federal Register of Legislation. These regulations amend the transfer balance cap rules to ensure that members with capped defined benefit income streams are not adversely affected in successor fund transfers. As reported in our Super Alert of 5 April 2024, Treasury released the draft legislation for consultation earlier this year.
Click here for details.
Legislation – Instrument registered related to Quality of Advice changes
On 5 July 2024, the ASIC Corporations (Amendment) Instrument 2024/554 was registered on the Federal Register of Legislation. The purpose of this instrument is to support recent changes passed as part of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (Cth) (the first tranche of Quality of Advice reforms) (the Act).
According to the Explanatory Statement, three existing instruments have been amended in response to the changes made by the Act which are:
- ‘ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125 (LI 2021/125) to clarify requirements for statements disclosing lack of independence in website disclosure information’;
- ‘ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2021/716 (LI 2021/716) by removing a provision notionally inserted by that instrument, which the Act directly inserts into subsections 912D(3)(b) to (e) of the Corporations Act’; and
- ‘ASIC Corporations (Investor Directed Portfolio Services) Instrument 2023/669 (LI 2023/669), which relate to the apportionment of liability for a defective Financial Services Guide (FSG) or Supplementary FSG, to ensure that their exemptions from liability apply in respect of defective information in website disclosure information, in addition to FSGs and Supplementary FSGs’.
Click here for details.
ASIC – Proposal to update superannuation calculators instrument
On 5 July 2024, ASIC announced that it proposes to update the current nominal wage inflation rate in both the ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603 and Regulatory Guide 276 Superannuation forecasts: Calculators and Retirement estimates. This follows a revision by Treasury of the long-term forecast of the nominal wage inflation rate from 4% in the 2021 Intergenerational Report to 3.7% in the 2023 Intergenerational Report.
ASIC considers ‘that the reduction of 0.3 percentage points in the long-term forecast of nominal wage inflation in the [2023 Intergenerational Report] evidences a material change to economic conditions for long-term wage growth, and as such, the default rate of nominal wage inflation in ASIC Instrument 2022/603 and RG 276 should be revised accordingly’.
Click here for details.
Legislation – Payment Times Reporting Scheme legislation passes Parliament
On 3 July 2024, the Payment Times Reporting Amendment Bill 2024 passed both Houses of Parliament. As reported in our Super Alert of 7 June 2024, the Bill amends the Payment Times Reporting Act 2020 (Cth) in order ‘to implement the Government’s response to the Statutory Review of the Act, improve the operation of the Scheme and to better achieve its objectives’.
Click here for details.
ASX – Closure of mFund
In November 2023, the ASX announced that it would be winding down and closing the Managed Fund Settlement Service (mFund). The service was launched in 2014 and allowed investors to trade in managed funds that were not listed on any particular exchange. However, investor preference has shifted more towards trading in ETFs, meaning that interest in mFund has waned significantly.
The ASX still maintains its target date of 31 May 2026 for the complete closure of the fund, and has advised it will share its plans to achieve an orderly wind down with brokers and fund managers who own mFund holdings.
Click here for details.
This Super Alert was written by George Smart, Sanela Osmanovic, Jenny Taing and Natalie Cambrell.
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