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Accelerating Australia’s economic recovery
A Financial Services Council’s (FSC’s) report released early this month offers new ideas and solutions to help Australia’s long-term economic recovery.
The report’s key proposal is to introduce a new investment vehicle to promote a wider range of investment into infrastructure. Called Australian Superannuation and Infrastructure Investment Vehicles (ASIIVs), the new structures would help people manage their own financial challenges.
Currently, most infrastructure investment by super funds is from the larger institutional funds. ASIIVs would open up this investment to a broader range of super funds, including self-managed superannuation funds (SMSFs).
FSC CEO Sally Loane said the initiative would utilise the nation’s $2.7 trillion pool of retirement savings. “The new ASIIVs will unlock a large chunk of funds – around $1.7 trillion in choice and self-managed superannuation funds – for infrastructure projects from investors who today have limited access to them,” Ms Loane said.
“ASIIVs will allow National Cabinet to turbocharge asset recycling programs by selling assets into a common vehicle to finance new job-creating infrastructure projects. They will also enable the creation of tailored vehicles for greenfield projects, such as community housing.”
The report also recommends the establishment of a co-contribution scheme for Australians who have accessed the ‘early release’ hardship scheme and need to top up their super. The government would give $1 for every $5 a member contributes, up to a maximum $10,000.
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Older Australians would also be offered a once-off higher superannuation cap of $50,000 that would be ‘carried forward’ if unused and business investment would be encouraged to modernise outdated financial products through a specialised tribunal, aimed at lowering the cost of financial advice.
“By implementing the reforms raised in this report, the National Cabinet and Commonwealth Government can get the biggest bang for the nation’s buck and get Australia back up on its feet,” Ms Loane said.
More financial advice sought
As the impact of COVID-19 on our personal finances continues to be felt, more consumers are taking an active interest in their insurance and superannuation.
New research by leading insurance provider Metlife Australia shows one in four Australians (28%) have undertaken some form of activity relating to life insurance since the outbreak of COVID-19, and this number increases to 40% for people aged 18–34.
Consumers are also actively thinking about their superannuation, with two-thirds (66%) of people still wanting to hear from their fund about their investments and what they can do to protect their super. More than half (52%) want more information regarding life insurance inside their super.
James Carey, Head of Group Insurance at Metlife Australia, said the spike of interest is understandable given the financial stress many have experienced during the coronavirus pandemic, but it is good news for the industry.
“Financial providers, including super funds and advisers, have a key role to play in helping consumers navigate this uncertainty,” said Mr Carey.
“While it’s encouraging to see so many Australians, particularly those in the younger age bracket, take active steps to secure their financial situation, the increase in enquiries we’ve experienced over the past few months suggests many don’t fully understand what is and isn’t covered by different insurance products.”
ACCR examines voting records
The Australasian Centre for Corporate Responsibility (ACCR) has analysed the proxy voting decisions of Australia’s 50 largest superannuation funds on 686 shareholder proposals filed at companies in Australia, Canada, Norway, the UK and the US between 2017 and 2019.
The purpose of the research is to highlight the clear correlation between funds with responsible investment practices and support for shareholder proposals.
Ahead of the significant declines in global stock markets in early 2020, Australia’s superannuation industry controlled close to $3 trillion including SMSFs. Yet, despite the sector’s size and influence, the research reveals disclosure practices of the majority of funds remain inadequate.
As major shareholders in listed companies, share funds are entitled to vote at company AGMs on all items on the agenda, including broad shareholder proposals that focus mainly on issues such as climate change, workers’ rights, human rights and corporate political influence.
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These issues are relevant to super fund members and the society they live in and will retire into. Yet many of Australia’s largest super funds do not disclose how or why they vote on such proposals, or if they vote at all.
ACCR says the report highlights a number of critical issues. First, the significant increase in support for shareholder proposals in 2018 was followed by a decline in support in 2019. Secondly, there is a vast gap between ‘leaders’ and ‘laggards’, both in terms of voting disclosure and support for shareholder proposals.
Thirdly, retail funds continue to disclose less information and support fewer shareholder proposals than the rest of the industry. Finally, while the disclosure of voting records improved overall in 2019, the disclosure of international voting records remains poor, and the majority of funds still do not disclose complete voting records.
Streamlined support for SMSFs
The Australian Tax Office (ATO) is implementing a temporary email service for SMSF trustees and their agents to help streamline support where a commutation authority has been issued.
Commutation notices are usually issued when a SMSF member has exceeded their transfer balance cap or made an error. Common errors include duplicate reporting and failing to report the commutations that occur when a member rolls over their pension interest to another fund.
The email service can be used to explain why a penalty has been issued and what needs to be done in response. SMSF trustees and their agents can email the early engagement and voluntary disclosure mailbox any time between now and 31 August 2020.
ATO’s mailout bungle
Some SMSF trustees have mistakenly been sent a letter from the ATO regarding a reporting requirement that doesn’t apply to them.
The ATO asks trustees and members of SMSFs to ignore any letters from the regulator regarding claims for a personal superannuation contribution deduction that would need to be reported via its Member Account Transaction Service (MATS).
Letters were mailed out to almost 25,000 people who had claimed the deduction in their 2019 tax return but not reported a notice of intent via MATS.
This reporting requirement is only for funds regulated by the Australian Prudential Regulation Authority (APRA) and not for SMSFs.
Investment funds on notice
The Australian Securities and Investments Commission (ASIC) has put responsible entities (REs) of all managed investment schemes on notice this month saying they must ensure their advertising is clear, balanced and accurate.
This follows ASIC’s risk-based surveillance of advertising material, website disclosure and product disclosure documents from managed funds during COVID-19.
ASIC says some funds are giving consumers inadequate information, such as unbalanced comparisons, safety and stability representations that promote the fund as having no or little risk of capital loss, and withdrawal information that gives the impression it’s easy to withdraw funds at short notice, when this is not the case.
ASIC Deputy Chair Karen Chester says seven REs have been contacted about their advertising in relation to 13 funds, collectively managing $2.5 billion. All have since corrected the information.