More super changes are on the way with the release of draft legislation to implement super reforms announced in the 2020-21 Budget including single default account, best financial interests duty, and tackling fund under-performance. The reforms are designed to ensure that the super system deliver better outcomes for members.
Under the proposed rules:
employers will be required to make contributions on behalf of employees to the employee’s existing “stapled” fund in certain circumstances, including where the employee has not chosen a fund. It will apply to employees who started their employment on or after 1 July 2021;
trustees of registrable super entities, directors of the corporate trustee of a registrable super entity, and trustees of SMSFs must perform their duties and exercise their powers in the best financial interests of the beneficiaries, which reverses the evidential burden of proof. It may also prohibit certain payments, or prohibit certain payments unless certain conditions are met, regardless of whether the payment is considered to be in the best financial interests of beneficiaries;
APRA will conduct an annual performance test for MySuper products, and other products specified in regulations. Trustees of the super entities will be required to give notice to members when a product fails the test. In addition, where a product has failed the performance test in 2 consecutive years, the trustee will be prohibited from accepting new beneficiaries into that product. It is envisaged that APRA may be able to lift the prohibition if circumstances specified in the regulations are satisfied. To allow taxpayers to make more informed decisions and increase transparency, APRA will also be able to rank various super products according to specified metrics including fee levels and investment returns. The results of which will be published on an interactive website by the ATO. These reforms will ensure underperforming super products are held to account.