Super news for April 2024

Government targets cheaper financial advice

The Federal Government has introduced the first tranche of legislation designed to ensure Australians have access to quality and affordable financial advice.

“The [Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024] implements reforms which reduce unnecessary red tape that adds to the time and cost of preparing financial advice,” Assistant Treasurer and Minister for Financial Services, Stephen Jones, said in a statement.

The legislation outlines how financial advice fee documents for ongoing fee arrangements are to be consolidated into one simplified document and allows more flexibility in how financial services guides are provided.

“The rules for conflicted remuneration will be simplified by making clear that benefits paid by clients, including from their superannuation accounts, are not conflicted remuneration,” Jones said.

The amendments also make clear in the law that Australians can use their super accounts to pay for financial advice about their super, but it does not expand the scope of fees which can be charged to super accounts.

The Joint Associations Working Group (JAWG) of a coalition of 12 industry and professional bodies – which includes Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, the Financial Advice Association of Australia (FAAA) and the Financial Services Council (FSC) – welcomed the Government’s overall efforts to reform financial advice.

However, they called on the government to reduce red tape when it comes to setting up an ongoing adviser arrangement with superannuation trustees to pay for advice.

“Under the proposed legislation, superannuation trustees that allow fee deductions will need to check every piece of advice individually and duplicate valid checks already undertaken by financial advisers and their licensees,” the JAWG said in a statement.

“The Government needs to make urgent changes to the legislation to make advice more accessible and affordable to consumers to provide a way forward that is not unworkable and worse for all than the current situation at law.”

SMSF trustees disqualified

The Australian Taxation Office (ATO) disqualified 149 SMSF trustees in the December quarter of 2023, bringing the total number of disqualified trustees in the six months to 31 December 2023 to 374.

ATO disqualifies individuals from acting as a trustee of an SMSF if they don’t comply with the superannuation laws or if they are concerned about their suitability to be a trustee.

Consequences for disqualified trustees include never being allowed to be an SMSF trustee again and their name going on public record. This means details of the disqualification can come up in background checks which can affect a trustee’s personal and professional reputation.

“If you are a trustee who has breached the superannuation laws, we recommend you rectify the contravention as soon as possible. Otherwise, you are putting your retirement savings and fund’s complying status at risk,” the ATO says.

Super access would not help housing affordability

Allowing early access to super for housing would not make home ownership more attainable for the majority of aspiring first-home buyers, according to new research by the Association of Superannuation Funds of Australia (ASFA).

“While superannuation may seem like a tempting pot to raid [for housing], our analysis shows it will only benefit those young people who are already more likely to be able to afford a home, and not solve the crippling supply-side deficit that is fuelling our housing crisis,” ASFA chief executive officer, Mary Delahunty, said.

In the research ASFA analysed an ATO sample of 300,000 taxpayers, in combination with ABS data, to assess the distribution of super balances for prospective first-home buyers aged 25–34 across Australia’s major capital cities. It then charted that against the housing deposits required for a median-priced houses and units (equivalent to 20% of home valuation).

The data show no-one in this age group in Sydney, whether single or in a couple, could raise enough money for the deposit on an average house or unit by using their super alone, even if they drained their retirement savings.

Similar results were revealed for Melbourne. In Melbourne, only a couple in the top 20% of super balance holders could gather a deposit for a unit by using all their retirement savings.

These kinds of policies would likely only benefit a minority of people with high super balances who would be more likely to be able to afford housing anyway and, in the process, would only push house prices up more by increasing demand-side pressure on the market.

AustralianSuper to develop new income for life retirement option

AustralianSuper has partnered with life insurer TAL to develop a new ‘income for life’ retirement option tailored for the fund’s membership.

“This is a major step forward for AustralianSuper and one that will go a long way in helping members to have the confidence to plan for and enjoy their retirement,” AustralianSuper’s chief retirement officer, Shawn Blackmore, said.

Blackmore said AustralianSuper’s Retirement Income Strategy had identified a cohort of members who could benefit from a lifetime income option supplementing an account-based pension and the Age Pension.

“A lifetime income option not only ensures members, and their partners, are able to have an income as they live, it may also enable a higher Age Pension entitlement through favourable asset and income test treatment,” Blackmore said.

“A great feature of our new proposition will be that members only need to invest a proportion of their savings into this option to give them a sense of security about their financial future.”

ASIC wins first greenwashing civil penalty action

Vanguard Investments Australia has been found guilty of making misleading claims about certain environmental, social and governance (ESG) exclusionary screens in a Vanguard index fund.

The decision by the Federal Court is the Australian Securities and Investments Commission’s (ASIC) first greenwashing case result.

“As ASIC’s first greenwashing court outcome, the case shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry. It sends a strong message to companies making sustainable investment claims that they need to reflect the true position,” ASIC deputy chair Sarah Court said.

On 28 March 2024, Justice O’Bryan found that Vanguard contravened the ASIC Act numerous times when it made false or misleading representations about the ESG exclusionary screens applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.

“In this case, Vanguard promised its investors and potential investors that the product would be screened to exclude bond issuers with significant business activities in certain industries, including fossil fuels, when this was not always the case,” Court said.

APRA to publish more info on super fund expenses

The Australian Prudential Regulation Authority (APRA) has announced it will publish new data on how super fund members’ funds are being spent and invested by trustees.

APRA has said that the new data will be published from August 2024 when it will provide more detailed expense categories including administration, advice, member services, marketing, trustee board (including director remuneration), and other corporate overheads (such as travel and entertainment).

It will also include recipients of payments made by each fund to industrial bodies and related parties, in relation to promotion, marketing or sponsorship expenses and any political donations.

“The new data will shed further light on how trustees are spending and investing the funds entrusted to them by members,” APRA deputy chair Margaret Cole said.

“I am pleased to acknowledge that the industry has been broadly supportive of APRA’s proposals to provide greater transparency on the use of member funds.”