Super news for August 2023

The Assistant Treasurer and Minister for Financial Services, Stephen Jones, has suggested his government will consider potential uses of the superannuation system for funding the growing cost of aged care.

“The purpose of superannuation is to provide for retirement income and of course those last stages in a person’s life have got to be taken into account,” the minister told Madeleine Morris during an interview on ABC’s News Breakfast program.

The question followed the release of an issues paper by the Aged & Community Care Providers Association (ACCPA) that called for further exploration of the use of the superannuation system for funding of aged care costs, including a ring-fenced scheme.

“It strikes me as odd in a system which is about retirement income that a third of the cheques being written by superannuation funds by value, so a third of the value of cheques that superannuation funds are writing at the moment, are bequests,” Jones said.

“It’s not the purpose of superannuation to have a tax-preferred estate planning mechanism. It’s about providing for people at the end stages and in their retirement. We’ve got a crisis of funding in aged care and at the same time we’ve got onethird of the value of superannuation funds being written out in bequests. That doesn’t square. So, it is a conversation that we need to have.”

ATO penalty unit amount increases for second time in 2023

On 1 July 2023, the penalty unit amount for infringements and SMSF breaches rose for the second time this year, increasing to $313 per penalty unit. In January the amount rose 23% to $275.

“Penalty provisions are there to encourage all taxpayers to take reasonable care in complying with their tax obligations,” the ATO says.

Self-managed super fund (SMSF) trustees incurring the lowest administrative penalty of five penalty points will now have to pay $1565, while those incurring the maximum 60 penalty points will now be up for $18,780.

ASIC sues Dixon Advisory & Super Services director

The Australian Securities and Investment Commission (ASIC) has commenced civil penalty proceedings against a director of Dixon Advisory & Superannuation Services, Paul Ryan, for alleged breaches of directors’ duties.

In the proceedings in the Federal Court, ASIC alleges Ryan breached his duties as a director by his involvement in decisions ASIC alleges were to the advantage of Dixon Advisory’s holding company, E&P Operations, and by failing to properly consider the interests of Dixon Advisory’s creditors. Ryan was also a director of E&P Operations.

“Directors have responsibilities under the law to act in the best interests of their company, and this includes considering the interests of creditors when the company is facing insolvency,” ASIC deputy chair Sarah Court said.

“The creditors included thousands of financial advice clients who had invested in the US Masters Residential Property Fund and financial products operated by entities related to Dixon Advisory. These creditors suffered significant losses.”

…and commences greenwashing case against Vanguard and Active Super

In more civil penalty proceedings by the regulator, ASIC is alleging misleading conduct in relation to claims about certain environmental, social and governance (ESG) exclusionary screens applied to investments in a Vanguard fund by Vanguard Investments Australia.  

ASIC alleges Vanguard engaged in conduct liable to mislead the public in representing that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) were screened against certain ESG criteria, whereas this was not the case for a significant proportion of issuers of bonds in the Index the fund was based on.

“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,” ASIC deputy chair Sarah Court said.

“We consider that the screening and research undertaken on behalf of Vanguard was far more limited than that being promised to investors and we consider this constitutes another example of greenwashing.”

In the case of Active Super, ASIC alleges it exposed its members to investments it claimed to restrict or eliminate, including gambling, tobacco, oil tar sands and coal mining.

“There is much competition among super funds for new members, and we know that funds seek to attract members with promises their investments will not be exposed to certain industries. When making these claims super funds must have evidence to back their claims and ensure they are not promising exclusions that they cannot guarantee,” Court said.

Aware Super rolls out term deposits option

Aware Super has made a term deposit option available to members, one of the few industry super funds to offer such a standalone option.  

The term deposits are for three, six, nine or 12 months at rates currently ranging from 4.85% to 5.25% per annum.

“Term deposits have been growing in popularity as interest rates have increased and, while they won’t suit members who want all their super invested in growth assets, we know many people value the certainty of a fixed rate of return,” Steve Travis, Aware Super’s group executive, member growth, said.

“There’s a very real risk that a significant group of Australians is saving for retirement in part outside the super system, using bank-issued term deposits to do so, and inadvertently missing out on [tax concession] benefits.” 

While interest earned on term deposits held outside super is taxed at an investor’s marginal rate, interest is taxed at just 15% in super and tax free in retirement phase.

APRA calls on funds to lift their retirement game

The Australian Prudential Regulation Authority (APRA) has called on superannuation fund trustees to make better strategic decisions to best serve their members across both accumulation and retirement phase.

“Leading a superannuation fund that focuses on providing strong outcomes to members in both the accumulation phase and in retirement requires a fundamental step-change in mindset and capability. As trustees evolve the strategies for their funds, some may recognise that they do not currently have the requisite capability to do both successfully, nor do they plan to develop ‘success in retirement’ as a core competency,” APRA deputy chair Margaret Cole told the Conexus Retirement Conference.

“In some cases, this may even necessitate helping members move to other funds that better meet their needs in retirement,” she added.  

She also said that no individual trustee had fully cracked the three elements of:

·      Understanding members’ needs in retirement 

·      Designing fit-for-purpose retirement assistance

·      Overseeing retirement income strategy implementation. 

Colonial First State’s launches new CFS Edge platform

Colonial First State has launched another wealth management platform – CFS Edge – the first major new platform in Australia in almost a decade.

The platform was developed in collaboration with global wealth management company FNZ and can integrate with financial planning software, including Iress XPlan and AdviserLogic  

“CFS Edge …  utilises the best global wealth management technology and has been uniquely co-developed with financial advisers from the very start,” chief executive officer of Colonial First State Superannuation, Kelly Power, said.

“Our approach is to have an open platform that allows for seamless, secure integration with leading advice technology providers. This enables advisers to set up new clients in seconds, eliminates the risk of errors and significantly improves the user experience to give advisers more time to focus on their clients,” Power said.