Government Issues Financial Services Royal Commission Implementation Roadmap

On 19 August 2019, the Government released its plans on how it would respond to the recent Royal Commission into financial services.

The Treasurer, the Hon Josh Frydenberg MP, described how the comprehensive reform package would become the largest since the Corporate Law Economic Reform Program (CLERP) in the 1990’s, with 24 streams of work currently underway within Treasury to bring amendments to legislation before the Parliament. An additional $9.3 million has been allocated to Treasury to ensure the Government’s timetable can be met.

The Commission’s made 76 recommendations, in its final report released in February 2019, many of which (approx. 40) will require amendments to legislation. The Government in its response announced a further 18 commitments to address issues raised in the Final Report.


  • the Treasurer stated that by the end of the 2019, more than 20 commitments will either have been implemented or legislation will be before the Parliament;
  • By mid 2020, more than 50 commitments will have been implemented;
  • by the end of 2020 all commitments will have had legislation introduced into Parliament.

In three years’ time the Government has committed to a post implementation review to assess how well the reforms have been implemented and to help determine if further changes might be required.

APRA Chairman, Wayne Byres says Boards should not rely on financial targets to set executive remuneration

Boards have struggled to gain acceptance that new approaches are needed“.

27 March 2019, AFR Banking & Wealth Summit

Speaking at the AFR Banking & Wealth Summit in Sydney on Wednesday 27 March 2019, APRA Chair, Wayne Byres said APRA had concluded many of the institutions it regulates had failed to adequately address executive pay. He declared that regulatory intervention would now be inevitable.

Referring to the banking royal commission’s findings outlined in Commissioner Hayne’s final report, Byres agreed that APRA had to implement more intrusive supervision and robust regulatory frameworks.

Over reliance on executive bonuses tied to short term financial targets would need to adjust with non-financial considerations being used as a more prominent benchmark of performance in the future.

The Banking Executive Accountability Regime (BEAR), would be viewed as the minimum standard but Byres would expect most institutions to put in place a higher standard and aspire for better practice. This would likely include longer term deferrals on bonus payments and claw back provisions where emerging risks later resulted in breaches and restitution.

While Byres admitted APRA could not regulate good culture into existence, Boards would have to take responsibility for tidying things up.

How can boards and management give themselves a pass mark, when they have identified a wide range of weaknesses in a number of key areas? Do boards and management have a blind spot – that blind spot being themselves?”

Wayne Byres, APRA, Chairman, 27 March 2019

Speaking at the same Summit, David Murray, Chair of AMP, criticised the over-zealous crackdown on banking culture, describing it as ‘over the top’, stating there was a risk of returning to the Pre-Campbell 1980’s before deregulation which will erode competition. Mr Murray argued we won’t solve current problems by trying to regulate culture but by focusing more on systems.

Productivity Commission Inquiry Report

On 10 January 2019, the Productivity Commission Inquiry Report: ‘Superannuation; Assessing Efficiency & Competitiveness’ was publicly released after being handed to Government on 21 December 2018.

Key points from the Commission’s Report include:

  • Australia’s superannuation system needs to improve its adaptation to the modern workforce and the growing number of retirees. Structural flaws are resulting in: a) unintended multiple accounts; and b) entrenched under-performance
  • The above ‘harmful’ outcomes are the result of inadequate a) competition; b) governance; and c) regulation.
  • While Policy initiatives have made progress at ‘chipping’ away at some of the problems, ‘architectural change’ is now required
  • Implementation needs to commence now, to protect ‘member interests’ rather than the interests of superannuation funds.

The Inquiry found, that while under-performance spanned both default and choice funds, the majority of under-performance had been identified in the retail sector, as opposed to industry funds.

Concerns noted include:

  • excessive and unwarranted entrenched fees remaining despite trending down;
  • cost savings from realised scale have not been handed down to members as lower fees or higher returns;
  • very few mergers have been implemented following the introduction of the ‘Scale Test’;
  • 93 APRA Regulated funds (half the RSE Licensees) still have assets less than $1 billion;
  • a third of all accounts (approx 10 million) are unintended multiple accounts;
  • members still lack access to ‘simple and salient information, ‘ including impartial advice;
  • unhealthy competition in the choice sector, has led to the proliferation of products;
  • Regulators have focused too much on the interests of superannuation funds as opposed to the interests of their members.

Recommendations include:

  • members should be only defaulted once, and moved to a new fund only when they choose;
  • members should be allowed to choose their fund from a ‘best in show’ or ‘Top Ten’ shortlist set by an independent committee/panel;
  • all MySuper and Choice products must earn their right to remain in the superannuation system, under an elevated ‘Outcomes Test’ to improve safety for members;
  • all trustee boards must steadfastly appoint skilled board members, better manage conflicts of interests and promote member interests without fear or favour;
  • regulators require clearer: a) roles; b) accountability; and c) powers to confidently monitor trustee conduct and enforce the law.

Address to the Financial Services Council Leaders’ Summit, International Convention Centre, Sydney

On 26 July 2017, the Hon Kelly O’Dwyer, the Minister for Revenue and Financial Services delivered an address in Sydney outlining the Government’s role in promoting the Australian financial services sector, it’s latest superannuation reform initiatives and the strengthening of regulatory supervision.

Citing an ANZ report forecasting that the Asian financial system would be larger than those of the USA and Europe combined by 2030, Ms O’Dwyer said the Government would be committed to facilitating Australian opportunities for the export of financial services to the Asian region.  This included providing regulatory certainty regarding tax residency for investment managers including a “Corporate Collective Investment Vehicle” (CCIV) regime, to assist in the export of Australian financial services and to ensure a level playing field with fund managers operating out of hubs such as Singapore and Hong Kong.

Australian Financial Complaints Authority (AFCA)

The Minister announced that the Government had established a transition team to bring the AFCA into existence. This one stop shop for disputes, will replace the current narrower focused complaints bodies such as the Financial Ombudsman Services, (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT.) The transition team will be led by  former Reserve Bank of Australia Assistant Governor Dr Malcolm Edey with a target implementation date of 1 July 2018.

The AFCA will reduce the restricted jurisdiction which often limited what the previous bodies could review and will also be granted the power to review complaints of higher value, and, the Minister stated, will benefit from expanded access remaining as a fair and free avenue for the resolution of disputes.

Superannuation Reform Package

The ‘Superannuation Accountability and Member Outcomes‘ package announced by the Government in July 2017, involves a proposed bill to amend legislation to require higher standards of transparency and accountability from superannuation fund trustees.  Initiatives include:

  • replacing the current ‘scale test’ with an ‘outcomes test’ that requires trustees to undertake an annual determination considering a number of features to ensure the outcomes being delivered are in the financial interests of their members;
  • providing the Australian Prudential Regulation Authority (APRA) with enhanced capacity to refuse or cancel a MySuper authorisation, where it believes that the registrable superannuation entity (RSE) licensee may not comply with its obligations;
  • providing APRA with improved directions powers to enable it to intervene at an early stage to address prudential concerns;
  • requiring trustees to seek approval from APRA prior to a change in ownership or control of an RSE licensee occurring;
  • requiring RSE licensees to hold annual members’ meetings to enable members to ask questions about all areas of their RSEs performance and operation; and
  • enabling APRA to gather more information on the operational and managerial expenses of RSE’s.

Submissions from industry have been invited on the proposed bill, due by Friday 11 August 2017.

Making it easier for members to opt-out of automatic insurance in Super

Commenting on the Insurance in Superannuation Working Group, the Minister said the Government was committed to making superannuation more consumer friendly and would ensure members could opt out of insurance cover in a ‘simple and straight forward way’, reducing hurdles for those who wish to optimise their retirement savings.  The Minister referred to the antiquated requirement for signed, written letters to be provided before cessation of insurance cover, when an on-line or phone call should be sufficient to action a request.

Strengthening Supervision and Enforcement

The Government will introduce fines and or criminal penalties on directors that breach their duties to members. APRA will be granted powers to direct a trustee where it has prudential concerns about a superannuation fund and APRA will have the power to reject a change in the ownership of a corporate trustee.

Fund Performance

With MySuper products (simple, cost effective super funds) which are often used as default funds, trustees will  be required to assess their MySuper products against a broader range of features and metrics each year. Trustees will also need to sign-off on the quality of their MySuper products and how the operation of the fund, including fees and expenses, is in the interests of members.


Insurance in Superannuation Working Group (ISWG) calls for Submissions and issues Discussion Papers

On 15 March 2017, the Insurance in Superannuation Working Group (ISWG), issued a series of Discussion Papers inviting submissions on a range of matters, including extending the Life Insurance Code of Practice to superannuation trustees.

ISWG Chairman Mr Jim Minto said too many people have multiple superannuation accounts and while insurance benefits are valuable to members, there is more rapid erosion of retirement savings if a person has too many insurance benefits. “Ideally people would consolidate their insurances and avoid this, but we must provide solutions now to address the reality of multiple, automatically provided life insurance arrangements..

Industry and stakeholder feedback will help shape an enforceable Code of Practice and Good Practice Guidance for Trustees, to be published by the ISWG later this year.

Submissions should be sent to no later than 7 April 2017.

Government Review of Australian Dispute and Resolution of Complaints Framewok

In 2016, the Australian Federal government appointed an expert independent panel to review the existing dispute resolution and complaints framework of the financial system. This includes the existing Financial Ombudsman Service (FOS), Credit and Investments Ombudsman (CIO) and Superannuation Complaints Tribunal (SCT). On Tuesday 6 December, the Review Panel released an Interim Report containing draft recommendations which include:

  • The formation of a single industry ombudsman scheme for financial, credit and investment disputes to replace FOS and CIO;
  • The replacement of the SCT with an industry ombudsman scheme for superannuation disputes, along with the development of a Superannuation Code of Practice;
  • Increases to the monetary limits and compensation caps for the new financial, credit and investment disputes scheme, for both consumer and small business disputes;
  • Enhanced accountability and oversight over the two new schemes, including by strengthening the Australian Securities and Investments Commission’s powers and more frequent independent reviews.

Once the two new ombudsman schemes are fully operational the Panel sees merit in further integrating the schemes to create a single dispute resolution body for all financial system disputes.

The SCT Chairperson Helen Davis welcomed the report’s while acknowledging the pressure on the SCT, and the opportunity the Review provides to improve external dispute resolution for superannuation consumers.  Ms Davies stated, “Superannuation is unique. The superannuation guarantee means that it is a mandated purchase by all working Australians. We agree with the panel’s observation that consumers should have access to a viable, low cost, quick and flexible alternative to the court system.”

SCT’s key focus as it engages with the Review is ensuring that the strength of consumer protection afforded by a statutory model is maintained in any future model.

The SCT received additional funding of $5.2 million in 2016, which helped with operational resources, and improved internal processes for complaint handling.

ASFA CEO Dr Martin Fahy cautioned that the government should increase funding for the SCT rather than replace it with a Superannuation Ombudsman.  Citing the complexity in superannuation where many parties may be involved, Mr Fahy said it was crucial to have deep specialist knowledge and expertise in any dispute resolution body.

A copy of the interim report has been made available on the Treasury website:

Interim Report

Government Passes Changes to the Superannuation System


The changes to the superannuation system have passed through Parliament today, following compromises reached, after the initial announcement in the 2015-16 Budget.

Changes include:

  • A $1.6 million cap on the amount of tax free savings a member can have in retirement from 1 July 2017. (The cap will be indexed and will rise each year in line with CPI);
  • After tax contributions will be capped at $100,000 per year;
  • The primary objective of the superannuation system is to be enshrined in legislation as “to provide income in retirement to substitute or supplement the Age Pension”;
  • From 1 July 2017, the threshold at which income earners pay an additional contributions tax will be lowered from $300,000 to $250,000;
  • The annual cap on concessional (before-tax) contributions will be lowered  to $25,000 from 1 July 2017 (previously $30,000 for those aged less than 49, and $35,000 for those aged over 49);
  • From 1 July 2017, the Government will introduce the Low Income Superannuation Tax Offset (LISTO) replacing the previous scheme known as the Low Income Superannuation Contribution (LISC). The new scheme will refund the tax paid on concessional contributions up to a cap of $500 for individuals with a taxable income up to $37,000;
  • From 1 July 2017, the Government will allow all members under the age of 65, and those aged between 65 and 74 who meet the work test, to claim a tax deduction up to the concessional contributions cap;
  • From 1 July 2018, new catch up contributions will be allowed for those with a total super balance of less than $500,000 to carry forward unused concessional cap space (for up to 5 years);
  • The spouse tax offset (currently $540) will be extended to partners who are earning up to $40,000 (currently $10,800);
  • From 1 July 2017, the anti-detriment rule will be removed which previously allowed superannuation funds to claim a tax deduction for a proportion of the death benefits paid to eligible dependants (effectively the 15% contributions tax paid by the deceased during their lifetime);

Treasurer, the Hon Scott Morrison MP, issued a joint media release, while stating: “This represents the most significant change to protect the flexibility and ensure the sustainability of superannuation in more than a decade.

The changes are forecast to save the Federal Budget $3 billion over 4 years.



Professional Standards for Financial Advisers Introduced

On 23 November 2016, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP introduced legislation into Parliament to mandate professional standards for financial advisers.



The Bill will require:

  • Compulsory education requirements for both new and existing financial advisers;
  • Supervision requirements for new advisers;
  • A code of ethics for the industry;
  • An exam that will represent a common benchmark across the industry; and
  • An ongoing professional development component.

The Government’s reforms will significantly increase the education, training and ethical standards of financial advisers, who will need to be qualified to a standard equivalent to a degree,” Minister O’Dwyer said.

When will the new Standards Commence?

The new professional standards regime will commence on 1 January 2019. From this date, new advisers entering the industry will be required to hold a relevant degree. Existing financial advisers will have access to transitional arrangements, allowing them two years, until 1 January 2021, to pass the exam, and five years, until 1 January 2024, to meet the education requirements. The transition period recognises that existing advisers may need to complete the education requirements on a part-time basis, while continuing to service their existing clients.

These reforms will deliver significant benefits to consumers by building trust and confidence in the financial advice industry, by ensuring that people have access to financial advisers who will put their interests first, and who are professionally competent and ethical,” Minister O’Dwyer said.


Melbourne Mercer Global Pension Index 2016

The Melbourne Mercer Global Pension Index: 

The index measures 27 retirement income systems against more than 40 indicators, covering 60% of the world’s population.  It is considered the world’s most comprehensive comparison of pension systems.

The retirement income systems of Denmark and the Netherlands have taken the top two spots in 2016, with Australia placing third.

Index Top 5

  1. Denmark
  2. Netherlands
  3. Australia
  4. Finland
  5. Sweden

Calculations for the index are based on ‘Adequacy’, ‘Sustainability’ and ‘Integrity’.  Rated as a B+ system, the Australian Retirement Income system is currently viewed as having a sound structure, with many good features, but has some areas for improvement.


A link to the Report may be found here:

Melbourne Mercer Global Pensions Index Report 2016

FSC welcomes changes to non-concessional superannuation caps

On 15 September 2016, the Financial Services Council (FSC) welcomed the Government’s revised proposal on superannuation taxation following industry consultation.

Under the revised rules, it will be possible to contribute up to $125,000 into superannuation each year until a limit of $1.6 million is reached.  This comprises $25,000 concessional contributions (before tax) and $100,000 non-concessional (after tax) contributions.

Sally Loane, CEO of IFSA states, “In order to get long-term certainty, we urge the Government to remove superannuation from the annual Budget cycle, and instead tie it to the five-yearly Intergenerational report, which would enable sound policy to be built based on demographic shifts.

Age-Pension Consumes 10% of Federal Budget…

Superannuation is our only truly intergenerational public policy, the purpose of which is to provide adequate self-funded retirement incomes for all of us, and equally importantly, to reduce pressure on the age pension system, which at $44.7 billion a year and rising at a rate of seven per cent each year, already consumes 10 per cent of the Federal Budget.”