Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012-2013
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SUPERANNUATION LEGISLATION AMENDMENT (SERVICE PROVIDERS
AND OTHER MEASURES) BILL 2012
SUPPLEMENTARY EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Explanation of amendments .......................................... 5
Chapter 2 Statement of Compatibility with Human Rights ............ 11
Index ..................................................................................................... 13
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
APRA Australian Prudential Regulation Authority
Bill Superannuation Legislation Amendment
(Service Providers and Other Governance
Measures) Bill 2012
Corporations Act Corporations Act 2001
Further MySuper and Superannuation Legislation Amendment
Transparency Measures Act (Further MySuper and Transparency
Measures) Act 2012
PJC Parliamentary Joint Committee on
Corporations and Financial Services
RSE Registrable Superannuation Entity
SIS Act Superannuation Industry (Supervision)
Act 1993
1
General outline and financial impact
On 29 November 2012, the Minister for Superannuation and Financial
Services, the Hon Bill Shorten MP, introduced the Superannuation
Legislation Amendment (Service Providers and Other Governance
Measures) Bill 2012 (Bill).
The Bill is the fourth tranche of legislation implementing the
Government's MySuper and governance reforms.
There are several amendments to the Bill.
Four of the amendments were recommended by the Parliamentary Joint
Committee on Corporations and Financial Services (PJC) in the report on
its inquiry into the Bill. These relate to the infringement notice and
service provider provisions.
Additional amendments to MySuper measures are also necessary as a
result of further industry consultation, clarification and to ensure the
legislation functions as intended. These amendments relate to the
collection and disclosure of information, the MySuper administration fee
rules, and the characteristics of a MySuper product.
There are also some consequential amendments that are necessary due to
the renaming of Fair Work Australia to the Fair Work Commission.
Date of effect: Amendments related to the collection and disclosure of
information, and to the infringement notice and service provider
provisions commence on 1 July 2013. Amendments related to the
renaming of Fair Work Australia will generally commence on
1 January 2014. All other amendments commence the day after Royal
Assent.
Proposal announced: On 16 December 2010, the Assistant Treasurer and
Minister for Financial Services and Superannuation, the
Hon Bill Shorten MP, announced the Stronger Super reforms. On
21 September 2011, he announced the Government's decisions on the key
design aspects of the Stronger Super reforms.
Financial impact: Nil.
Human rights implications: Nil.
Compliance cost impact: Nil.
3
Chapter 1
Explanation of amendments
Outline of chapter
1.1 The amendments to the Bill:
· respond to recommendations of the PJC in relation to
infringement notices and the use of service providers;
· allow a single cap to be applied to percentage based
administration fees for MySuper products, and clarify the
application of the MySuper administration fee rules;
· make changes to the product dashboard requirements and
delay the commencement of portfolio holding disclosure
requirements;
· clarify that no member who holds a MySuper product can be
precluded from holding a choice product, and vice versa; and
· make consequential amendments to reflect the change in title
of Fair Work Australia to the Fair Work Commission.
Infringement Notices
Detail to be included in an infringement notice
1.2 The PJC inquiry into the Bill examined the provisions in
Part 22 that will allow the Australian Prudential Regulation Authority
(APRA) to issue infringement notices for certain alleged
contraventions of the Superannuation Industry (Supervision) Act 1993
(SIS Act). In particular, the PJC noted that paragraph 224A(1)(e) to be
inserted in the SIS Act would require that infringement notices give
brief details of the alleged contravention.
1.3 The PJC suggested that the level of detail to be included in
the infringement notice should be broadened to include further details
about the circumstances of the alleged breach. The PJC suggested that
the word `brief' in the requirement that APRA `give brief details of the
alleged contravention...' should be omitted.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
1.4 The PJC suggested that if this is accepted, then as a
complement, when further offences are made subject to an
infringement notice by the regulations, the Bill should require APRA
to include any additional information as required by the regulations.
1.5 Paragraph 224A(1)(e) is amended to omit `brief' and a new
paragraph 224A(1)(o) is added to require that an infringement notice
must contain any other information specified by the regulations.
[Amendments 23 and 24]
1.6 These changes will enable more information to be included
in an infringement notice, which will help recipients in understanding
the nature of the problem.
Penalty amounts
1.7 The PJC examined the amount payable under an
infringement notice and suggested further consideration should be
given to the penalties that would apply in the event civil penalty
provisions are included in the infringement notice scheme in the future.
1.8 The PJC noted that for contraventions of civil penalty
provisions, the court may order a penalty that does not exceed
2,000 penalty units. Whilst the PJC acknowledged that an
infringement notice fine of an amount equal to one-fifth of the
maximum penalty a court could impose for the contravention is
appropriate for strict liability offences, it suggested that it is unlikely to
be appropriate for civil penalties.
1.9 Therefore, the PJC recommended that in the case of civil
penalty provisions, the amount to be stated in an infringement notice
should be equal to one-fortieth of the maximum penalty a court could
impose for that contravention.
1.10 Subsection 224A(2) to be inserted in the SIS Act is amended
to provide that for civil penalty provisions, the amount to be stated in
an infringement notice must be equal to one-fortieth of the maximum
penalty a court could impose for that contravention. [Amendment 25]
1.11 This change will limit the maximum amount of fines in civil
penalty cases and will be consistent with other legislation such as the
National Consumer Credit Protection Act 2009.
6
Chapter 1 - Explanation of amendments
Updated reference
1.12 The PJC identified a typographical error in the provisions of
the Bill that establish the infringement notice regime.
1.13 Accordingly, subparagraph 223A(1)(i) to be inserted in the
SIS Act is amended by omitting `subsection 242M(1)' and substituting
`subsection 242P(1)'. [Amendment 22]
Service Providers
1.14 The PJC inquiry examined section 58A which will void any
provisions in a fund's governing rules that require the trustee to use a
specified service provider, investment entity or financial product.
1.15 The PJC recommended better targeting of section 58A to
ensure only the rules which contravene the service provider provisions
are rendered void.
1.16 The amendment limits section 58A so that a governing rule is
only void to the extent it is contrary to that section. That is, to the
extent it provides that the trustee may or must use a particular service
provider or investment entity, or invest in a particular financial
product. [Amendments 19 to 21]
Administration fee rules
1.17 The MySuper fee rules in section 29VA of the SIS Act
require that where a fee is charged, in whole or in part, as a percentage
of each member's account balance, all members of the MySuper
product must be charged the same percentage.
1.18 Following consultation with industry a change is being made
to the MySuper fee rules where percentage administration fees are
applied. New section 29VE to be inserted in the SIS Act allows
trustees to have a single cap on percentage based administration fees.
The amount of the administration fee can be capped at a specified
amount, and must be the same for all members of that MySuper
product. [Amendments 17 and 27]
1.19 The amendments also clarify the application of the fee rules
in circumstances where an administration fee exemption for employees
of an employer-sponsor applies. Where an administration fee
exemption for employees of an employer-sponsor is relied on for some
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
members, the administration fee charged to the remaining members in
the MySuper product (who are not eligible for the administration fee
exemption) must satisfy one of the general administration fee rules in
subsection (2), (3) or (4) of section 29VA of the SIS Act.
[Amendment 15]
1.20 In addition, paragraph 29VB(1)(b) of the SIS Act is amended
to clarify that all relevant `employee members' (that is, members who
hold the MySuper product who are employees of the relevant
employer-sponsor associate, and relatives or dependants of those
employees) must obtain the benefit of any administration fee
exemption. [Amendment 16]
1.21 These amendments commence the day after the Bill receives
Royal Assent. [Amendment 4]
Product Dashboard
1.22 The Superannuation Legislation Amendment (Further
MySuper and Transparency Measures) Act 2012 (Further MySuper
and Transparency Measures Act) inserted a requirement into the
Corporations Act 2001 (Corporations Act) for trustees of Registrable
Superannuation Entities (RSEs) to make a product dashboard publicly
available on their fund's website in respect of each of their MySuper
products, and each investment option for a choice product.
1.23 The product dashboard provisions are being amended to
ensure the data published by trustees provides members with
meaningful and useful information that can be easily understood, and
to allow members to compare a fund's performance across different
products.
1.24 Paragraph 1017BA(1)(c) of the Corporations Act is changed
to remove the obligation on trustees to update information set out in
each product dashboard about fees and other costs within 14 days after
the end of each quarter. This information will now need to be updated
within 14 days after the end of a period to be prescribed in the
regulations. [Amendment 7]
1.25 Subsections 1017BA(2) and (3) of the Corporations Act,
which set out the requirements for a product dashboard for a MySuper
product or an investment option of a choice product, will be repealed
and replaced with subsections which provide greater flexibility around
the key information to be disclosed. The new subsections identify the
key product dashboard information in general terms, with detail of the
8
Chapter 1 - Explanation of amendments
requirements (for example, how the information is to be worked out,
and any other information that is required), able to be prescribed in the
regulations. [Amendment 7]
1.26 Rather than merely requiring a product dashboard to show
the number of times the return target for the product or investment
option has been achieved, the changes to subsections 1017BA(2)
and (3) will allow for the reporting of information on the product's (or
option's) annual net return, the moving average return achieved, and
the moving average return target. This will address concerns raised by
industry that the initial requirement was too narrow and did not
provide an accurate representation of a product's historical
performance.
1.27 The changes to subsections 1017BA(2) and (3) also provide
flexibility around the reporting of average fees and costs. Regulations
will be able to be made requiring the reporting of average fees and
costs for a representative member and on a dollar basis, rather than just
as a percentage.
1.28 The requirement to include a statement in the product
dashboard about the liquidity of member's investments in the relevant
product or investment option is being removed. This will allow time
for further consultation to be undertaken to develop a suitable liquidity
metric. Once a suitable measure has been developed, a liquidity
statement will be able to be added back into the product dashboard by
way of regulation.
1.29 The amendment also adds new paragraph 1017BA(4A) to the
Corporations Act. This paragraph introduces a regulation making
power for the specific purpose of clarifying the effect of the `single
asset investment' exemption from the product dashboard requirements
in paragraph 1017BA(4)(c). [Amendment 7]
1.30 As the amendments provide for relevant time periods to be
prescribed in regulations, the definition of `quarter' in
subsection 1017BA(5) is no longer relevant, and is therefore repealed.
[Amendment 7]
1.31 These amendments commence on 1 July 2013. [Amendment 1]
Portfolio Holding Disclosure
1.32 The Further MySuper and Transparency Measures Act
inserted a requirement into the Corporations Act for RSEs to make
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
available to the public information relating to their portfolio holdings.
The requirement was to apply from 31 December 2013.
1.33 Section 1540 of the Corporations Act is amended to defer the
application of this requirement, so it will now apply from the
30 June 2014 reporting day and later reporting days. This will provide
industry with more time to implement the changes required under the
new disclosure regime. [Amendment 8]
1.34 However, there is no impediment to RSEs providing this
information earlier if they are able to do so. Provision of this
information is important to improving transparency in the
superannuation system and RSEs are encouraged to provide the
information earlier.
1.35 This amendment commences on 1 July 2013. [Amendment 2]
MySuper and choice products
1.36 Amendments to subsection 29TC(1) of the SIS Act will
ensure that no member who holds a MySuper product can be precluded
from holding a choice product, and vice versa.
1.37 The amendment will prohibit an RSE licensee from
structuring a MySuper product in such a way that it precludes a
member from having some of their superannuation in a MySuper
product and some in a choice product. [Amendment 13]
1.38 This amendment commences the day after the Bill receives
Royal Assent. [Amendment 4]
Fair Work Act consequential amendments
1.39 Minor consequential amendments to the Fair Work Act 2009,
the SIS Act, and the Further MySuper and Transparency
Measures Act, are necessary to reflect the recent change of Fair Work
Australia's title to the Fair Work Commission. [Amendments 9 to 12, 14,
18 and 26]
1.40 These amendments generally commence on 1 January 2013.
The consequential amendment to subsection 29U(4) of the SIS Act
commences on Royal Assent. [Amendments 3 to 6]
10
Chapter 2
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Superannuation Legislation Amendment (Service Providers and Other
Governance Measures) Bill 2012
2.1 These amendments are compatible with the human rights and
freedoms recognised or declared in the international instruments listed in
section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
2.2 The amendments to the Superannuation Legislation
Amendment (Service Providers and Other Governance Measures)
Bill 2012 seek to:
· respond to recommendations of the PJC in relation to
infringement notices and service providers;
· allow a single cap on percentage based administrative fees
for MySuper products and clarify when an administration fee
exemption applies;
· make changes to the product dashboard requirements and
delay the commencement of portfolio holding disclosure
requirements;
· clarify that no member who holds a MySuper product can be
precluded from holding a choice produce, and vice versa; and
· make consequential amendments to reflect the change in title
of Fair Work Australia to the Fair Work Commission.
Human rights implications
2.3 The amendments do not engage any of the applicable rights
or freedoms.
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Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Conclusion
2.4 The amendments are compatible with human rights as they
do not raise any human rights issues.
Minister for Financial Services and Superannuation and
Minister for Employment and Workplace Relations, the
Hon Bill Shorten
12
Index
Amendments
Bill reference Paragraph number
Amendments 23 and 24 1.5
Amendment 25 1.10
Amendment 22 1.13
Amendments 19 to 21 1.16
Amendments 17 and 27 1.18
Amendment 15 1.19
Amendment 16 1.20
Amendment 4 1.21, 1.38
Amendment 7 1.24, 1.29, 1.30
Amendment 7 1.25
Amendment 1 1.31
Amendment 8 1.33
Amendment 2 1.35
Amendment 13 1.37
Amendments 9 to 12, 14, 18 and 26 1.39
Amendments 3 to 6 1.40
13
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