Super is undoubtedly highly complex and ever-changing. Some of the most significant changes in recent times are those that were announced in the 2006 and 2016 Federal Budgets, and then legislated.
Despite this, most working Australians, and many retirees, have super savings. For many people this is the largest asset they will have outside of owning their main residence. Therefore, it’s vital to be aware of the main super concepts—from contributing money during your working life, to receiving an income stream during retirement.
With the above in mind, we would like to share an important change to super that has occurred through the recent passing of the Treasury Laws Amendment (Your Future, Your Super) Bill 2021.
For context, this Bill serves to partially implement the proposed policy measure ‘Superannuation Reform—Your Future, Your Super’ that was announced by the Government on 6 October 2020 in the 2020 Federal Budget.
Below is a high-level overview of several changes contained in the Bill, which may be relevant to you.
Treasury Laws Amendment (Your Future, Your Super) Bill 2021
Single default account
Broadly speaking, this section of the Bill amends super legislation to limit the creation of multiple super accounts for employees who don’t choose a super fund when they start a new job.
If a new employee has an existing ‘stapled’ super fund and doesn’t choose a fund to receive contributions, their employer is required to make contributions on behalf of the employee into the stapled fund.
Moreover, there will be ‘tie-breaker rules’ for selecting a single fund for stapling where an employee has multiple existing funds—for example, consideration given around recent activity and account balances.
For context, the Government has advised that this amendment seeks to increase members’ retirement savings by ensuring unnecessary fees and insurance premiums aren’t paid on unintended multiple super accounts.
Importantly, this amendment applies in relation to an employee’s employment where that employment starts on or after 1 November 2021.
Addressing underperformance in super
Broadly speaking, this section of the Bill amends super legislation to require the Australian Prudential Regulation Authority (APRA) to conduct an annual performance test for MySuper products and other products to be specified in regulations.
A trustee providing such products will be required to give notice to its beneficiaries who hold a product that has failed the performance test. And, where a product has failed the performance test in two consecutive years, the trustee is prohibited from accepting new beneficiaries into that product, unless APRA lifts the prohibition.
Please note: This prohibition doesn’t apply in relation to a person who becomes a beneficiary as a result of a payment split within the meaning of the Family Law Act 1975.
It’s also important to note that a ‘YourSuper comparison tool’ will be made available on an ATO interactive website designed to make it easy for beneficiaries to choose a super product based on fees and performance information.
For context, the Government has advised that this amendment seeks to ensure that super products have their performance assessed against an objective, consistently-applied benchmark, giving greater transparency to beneficiaries and protecting beneficiaries from underperforming products.
Importantly, this amendment applies to MySuper products on and after 1 July 2021 and to other products specified in the regulations on and after 1 July 2022.
Best financial interests duty
Broadly speaking, this section of the Bill amends super legislation to require each trustee of a registrable super entity, and each trustee of a self-managed super fund, to perform the trustee’s duties and exercise the trustee’s powers in the best financial interests of the beneficiaries. And, directors of the corporate trustee of a registrable superannuation entity are required to perform the director’s duties and exercise the director’s powers in the best financial interests of the beneficiaries.
Moreover, the evidential burden of proof for the best financial interests duty is reversed so the onus is on the trustee of a registrable superannuation entity, instead of the regulator. Please note: The reverse onus does not apply to additional best financial interest duty requirements prescribed by regulations.
For context, the Government has advised that this amendment seeks to increase the accountability of super trustees in the execution of their fiduciary duties in relation to the many actions trustees take in operating a super entity. These include incurring day-to-day essential operational expenditure and investing the beneficiaries’ money, to less frequent strategic decisions and discretionary expenditures.
Importantly, this amendment applies from 1 July 2021.
If you have any questions regarding this article, please contact us.