Superannuation Alert 20.10.16
Financial Services eBulletin - 20 October 2016
- On 12 October 2016, the "Working Holiday Maker" reform package was introduced into the House of Representatives. This package includes the Superannuation (Departing Australia Superannuation Payment Tax) Amendment Bill 2016, which, according to the Explanatory Memorandum, increases "the rate of the departing Australia superannuation payments tax to 95 per cent for working holiday makers".
- On 12 October 2016, ASIC released Report 498 - Life insurance claims: An industry review containing "the findings of an industry-wide review of claims handling in the life insurance industry". The review considered life insurance products obtained through superannuation group policies as well as retail policies. The review "did not find evidence of cross-industry misconduct across the life insurance sector in relation to life insurance claims payments and procedures". However, ASIC identified a number of "issues of concern in relation to declined claim rates and claims handling procedures". ASIC is concerned that "in some cases, claims are being declined on technical or contractual grounds that are not in accordance with the ‘spirit’ or ‘intent’ of the policy" and considers that "fairness should be given greater consideration by insurers". The report states that ASIC is currently undertaking projects "which specifically consider issues associated with insurance in superannuation".
- On 12 October 2016, the Minister for Revenue and Financial Services, Kelly O'Dwyer, issued a media release in response to ASIC's Report 498. The Minister has asked Treasury to undertake "targeted consultations" in relation to ASIC's recommendation to remove "the current exemption for ‘insurance claims handling’ from the definition of a ‘financial service’ in the Corporations Act, and [introduce] more significant penalties for misconduct in relation to claims practices".
- On 12 October 2016, APRA released a letter to the Chairs of RSE licensees which identifies "areas where both RSE licensees and insurers could improve [insurance] practices to better meet expectations", including:
- "closer co-operation and alignment between RSE licensees, insurers and reinsurers to optimise outcomes for beneficiaries";
- "clarifying the approach to claims… to improve claimants’ understanding of how claims will be managed";
- "better sharing of information between RSE licensees and insurers"; and
- "reviewing insurance benefit design and definitions with a stronger focus on providing sustainable insurance arrangements that meet member needs at an appropriate cost".
- On 14 October 2016, the Treasury released the third round of exposure draft legislation and explanatory material in relation to its "Superannuation Reform Package" to implement measures announced in the 2016-17 Federal Budget for public consultation. The exposure draft for the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 sets out schedules 3 and the second half of schedule 10 (as the other schedule 10 measures were set out in the second round). According to the Explanatory Material:
- schedule 3 "amends the annual non-concessional contributions cap from $180,000 to $100,000", "introduces a requirement that an individual must have a total superannuation balance each year of less than the general transfer balance cap ($1.6 million in the 2017-18 financial year) to be eligible to make non-concessional contributions up to the cap" and " prevents payment of the government co-contribution in respect of an individual who is not eligible to make non-concessional contributions"; and
- schedule 10 "amends the tax law to simplify and consolidate the range of existing processes for the release of amounts from individuals’ superannuation using a release authority". It is proposed that "[u]nder the new approach, release authorities will be issued by the Commissioner directly to superannuation providers. Superannuation providers will have a standard seven day period to comply".
- On 18 October, APRA released an information paper on risk culture. According to APRA's media release, the information paper "provides a snapshot of current practice in risk culture in a range of banking, insurance and superannuation businesses". The information paper states that APRA’s future focus will be "on the supervision of institutions’ risk culture, rather than the regulation of risk culture". APRA states that "[i]n the medium term, it may be appropriate to refine the regulatory framework, including both prudential standards and guidance material, in relation to risk culture. At the present point in time, however, no specific changes to regulatory requirements beyond the general alignment of prudential requirements across regulated sectors are planned".
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