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Overview of inquiry
Referral of the bills
On 24 May 2012 the House of Representatives introduced the
Superannuation Legislation Amendment (Stronger Super) Bill 2012 and the Superannuation
Supervisory Levy Imposition Amendment Bill 2012. It subsequently referred the
bills to the Parliamentary Joint Committee on Corporations and Financial
Services for inquiry.
The committee set a reporting date of 13 June 2012.
Conduct of inquiry
Details of the committee's inquiry were made available on the
committee's website. In addition the committee wrote directly to a range of
members of the financial services and superannuation industry inviting written
submissions. The committee received eight submissions, which are listed at
The committee also held a public hearing in Sydney on 4 June 2012 and
heard from Treasury and Australian Taxation Office officials and a number of
industry members. The names of the witnesses who appeared are at Appendix 2.
The committee thanks the organisations and individuals who contributed
to the inquiry.
Context of inquiry
The bills are part of the package of SuperStream measures which are
designed to 'improve the productivity of the superannuation system and make the
system easier to use'.
The SuperStream measures were recommended by the independent Super System
(Cooper) Review in 2009–10. The Explanatory Memorandum (EM) for the bills stated:
The purpose... is to improve the administration and management
of super accounts making the processing of everyday transactions easier,
cheaper and faster for members and employers.
The Regulation Impact Statement (RIS) provided an overview of the scale
of the superannuation system:
As at 30 June 2010, the superannuation system comprises over
$1.23 trillion in assets. It is estimated that the Australian superannuation
system processes more than 100 million transactions annually, at a cost of over
$3.5 billion annually to process. These include member support (e.g. call
centre) activities ($1 billion), contribution management ($1.25 billion),
reporting ($250 million), and benefit payment services ($1 billion).
Costs and savings of SuperStream
It is estimated that the SuperStream measures are expected to save $1
billion in processing costs per year. When averaged over the 33 million
superannuation accounts, this translates to a saving in the order of $30 per
account each year.
Research undertaken by the Financial Services Council (FSC) estimated that the
reforms would deliver savings of up to $20 billion by 2020 (based on current
The cost for implementing public sector capability for the SuperStream
reforms is $467 million over seven years. This will be paid by a SuperStream
levy on Australian Prudential Regulation Authority (APRA) regulated funds. The
Minister for Financial Services and Superannuation told the parliament:
If you averaged the full levy increase of $121 million to
apply in 2012–13 across the approximate 33 million accounts existing today, the
cost is roughly in the order of a mere $4 per account.
Impact on industry
In addition to the levy, industry will incur other capital costs to
implement the SuperStream reforms. The FSC estimate its members, who represent
around one third of the superannuation industry, will incur capital costs of
approximately $250 million.
It suggests this is a conservative estimate that 'does not include costs
related to member communications and product administration and it is based on
a survey of efficiency superannuation entities with high technological
The Australian Institute of Superannuation Trustees commented on the
productivity gains of the reforms for industry and employers:
During the Cooper review a number of studies were done about
the savings of these measures to the superannuation industry, and those
investigations suggested that there would be savings in the order of at least
$1 billion a year to the superannuation industry, representing administration.
Subsequently there have been other reports, and they tend to fall in between
the level of 20 per cent to 25 per cent savings in administration costs just
for the superannuation industry. Although this has not been quantified to my
knowledge, we would anticipate similar levels of savings to employers in the
long term through the implementation of this legislation. We would also expect
high levels of savings, in the hundreds of millions of dollars a year, to
This is a lot of short-term pain for a long-term gain.
Overview of the bills
The Superannuation Legislation Amendment (Stronger Super) Bill 2012
consists of two schedules:
- schedule 1 which introduces a framework of superannuation data
and payment standards for superannuation transactions; and
- schedule 2 which amends the Australian Prudential Regulation
Authority Act 1998 to enable costs associated with the implementation of
the SuperStream measures to be included in a levy that is payable to the
The Superannuation Supervisory Levy Imposition Amendment Bill 2012
contains one schedule, proposing one amendment.
The schedules to the bills are discussed below.
Superannuation Legislation Amendment (Stronger Super) Bill 2012
The Minister for Financial Services and Superannuation, the Hon. Bill
Shorten, MP, outlined the context of the amendments set out in the Superannuation
Legislation Amendment (Stronger Super) Bill 2012:
These amendments are part of the SuperStream package of
measures designed to enhance the back office of superannuation. The
superannuation industry is currently dominated by paper based transactions that
are inefficient in both processing costs and the time taken for transactions to
occur and superannuation to be deposited into member accounts...
It is estimated that the SuperStream proposals could save the
industry and, therefore, members of superannuation funds up to $1 billion per
year. Much of the benefit of these savings should flow through to members in
the form of lower fees and charges.
Schedule 1: superannuation data and
As outlined in the EM, Schedule 1 of the Superannuation Legislation
Amendment (Stronger Super) Bill 2012 amends the:
- Superannuation Industry (Supervision) Act 1993 (inserts a
new Part 3B); and
- Retirement Savings Accounts Act 1997 (inserts a new Part
The Superannuation Legislation Amendment (Stronger Super) Bill 2012 introduces
'a framework to support the implementation of superannuation data and payment
regulations and standards that will apply to specified superannuation transactions
undertaken by superannuation entities/retirement savings account providers ([Retirement
Savings Account] RSA providers) and employers'.
Schedule 1 also amends the Taxation Administration Act 1952 to 'introduce
an administrative penalty framework for non-compliance with the superannuation
data and payment regulations and standards'. The proposed framework provides a
graduated approach to dealing with contraventions by including an
administrative penalty regime and a strict liability offence regime.
The EM outlines:
The strict liability offences do not carry penalties of
imprisonment and most of the maximum penalties are 20 penalty units, except in
the case of a failure to comply with a direction of a Regulator in which case
the maximum penalty is 50 penalty units given the more serious nature of
failing to comply with a direction.
In addition to the compliance framework, the regulators (the Australian
Taxation Office (ATO) and APRA), will 'support the roll-out of the new data and
payment regulations and standards through help and education activities'.
As summarised in the EM, Schedule 1 of the Bill:
- enables superannuation data and payment regulations and standards to be
made relating to superannuation entities, RSA providers and employers;
- provides the Commissioner of Taxation (Commissioner) with the ability to
issue mandatory superannuation data and payment standards for superannuation
entities, RSA providers and employers;
- enables superannuation data and payment regulations and standards to
deal with payments and information related to superannuation transactions and
introduces a new penalty framework to ensure trustees of superannuation
entities, RSA providers and employers comply with the superannuation data and
payment regulations and standards...;
- provides the Regulators with the power to give directions to
superannuation trustees, RSA providers and employers in certain situations
where there is reason to believe contraventions of the superannuation data and
payment regulations and/or standards have occurred or are likely to occur; and
- amends the SIS Act and RSA Act to enable the Commissioner to correct and
rectify information in the Commissioner’s possession for the purpose of
ensuring the information complies with the superannuation data and payment
regulations and/or standards.
Transitional provisions are provided for in Schedule 1, item 20 of the
bill. The EM outlined that the amendments stipulated in Schedule 1 of the bill are
proposed to apply:
- to RSA providers and trustees of a superannuation entity in
relation to conduct that occurs on or after 1 July 2013;
- to an entity that is a medium to large employer on 1 July 2014 in
relation to conduct that occurs on or after 1 July 2014; and
to an entity that is a small employer on 1 July 2014 in relation
to conduct that occurs on or after 1 July 2015, unless the regulations
prescribe an alternate application date after 1 July 2015.
A medium to large employer is defined as employing 20 or more employees
as at 1 July 2014, and a small employer fewer than 20 employees.
The transitional provisions are in acknowledgement of the 'significant
change in systems and behaviour across the funds and employers'. The RIS
To mitigate risk and recognise the amount of change that will
be required to adopt the data and e-commerce standards, it is proposed that a
phased implementation occur. This approach will provide funds, employers and
service providers with certainty in terms of investment decisions and planning
Impact on employers
The EM for the bills outlines that the SuperStream reform measures 'will
temporarily increase compliance costs for superannuation funds... though the
impact will vary considerably and is dependent on whether compliance with the
data and payment standards is outsourced to a third party provider... or an
information system upgrade is undertaken'.
The RIS provided an impact analysis on the mandated use of data and
e-commerce standards. The analysis is based on the use of the Standard Business
Reporting (SBR) framework which contains many of the data terms needed to
support superannuation transactions. The SBR simplifies government-to-business
removing unnecessary or duplicated information from government forms;
adopting a common reporting language, based on international standards
and best practice;
- providing an electronic interface to agencies directly from accounting
software which will also provide validation and confirm receipt of reports; and
- making financial reporting a by-product of natural business processes.
The RIS proposed that data and e-commerce standards will use the SBR
framework for formatting transaction messages and utilise the eXtensible
Business Reporting Language (XBRL) which is an international standard for financial
reporting. The RIS outlined the impact of mandated standards on superannuation
funds and trustees will vary according to their current operating systems:
All funds and administrators will need to upgrade existing
systems in order to transmit and receive messages consistent with the data and
e-commerce standards. This is likely to impose the greatest cost on those funds
and administrators with a wide range of legacy systems that will need to
interact with the new data standards or who have recently made significant
systems expenditure inconsistent with the new standards. This is a
'transitional cost' which over time is expected to be recouped by ongoing
To mitigate costs associated with the adoption of the data
and e-commerce standards, superannuation funds and trustees have the
opportunity to determine to what extent they integrate required changes (in
particular the XBRL format) into their administrative systems. Funds will have
options ranging from the implementation of a low cost XBRL translation layer
(enabling them to send and receive XBRL messages) through to a high cost option
of fully integrating XBRL components across all systems (including legacy
systems) at a database level. Additionally, the use of third party providers
(such as administrators or clearing houses) provides an option to outsource the
requirement to send and receive messages in the new format.
The RIS highlighted that impact on employers will vary depending on
their existing use of technology, the number of employees and the degree to
which they adopt and outsource the data and e-commerce standards. Smaller
employers who rely on cheques and paper forms, for example, 'will be able to
utilise the free clearing house offered by the Medicare Small Business
Superannuation Clearing House' for processing information (discussed further in
Schedule 2: costs for SuperStream
included in levy
Schedule 2 of the Superannuation Legislation Amendment (Stronger Super)
Bill 2012 'amends the Australian Prudential Regulation Authority Act 1998
to enable costs associated with the implementation of the SuperStream measures
to be included in the determination specifying the amount of the levy that is
payable to the Commonwealth'.
The levy for the SuperStream costs will be collected through existing
collection mechanisms for the Superannuation Supervisory Levy. The EM outlined this
process and that APRA is funded primarily through industry levies that are
determined by the annual Portfolio Budget Statements:
Under subsection 50(1) of the APRA Act, the Minister is to
make, for each financial year, a determination specifying the amount of levy
money payable to the Commonwealth, in respect of levy (or each class of levy)
for that financial year. The amount specified in the determination is to cover
the costs to the Commonwealth of providing market integrity and consumer
protection functions for prudentially regulated institutions and administering
the function of making determinations about the release on compassionate
grounds of benefits that are in a superannuation entity or retirement savings
The APRA Act currently requires APRA to collect and return
the proportions collected on behalf of Australian Securities and Investments
Commission (ASIC), Department of Human Services (DHS) and the Australian
Taxation Office (ATO) to the Commonwealth in the first instance. Once the ATO,
DHS and ASIC amounts have been met in consolidated revenue, the APRA Act
provides that APRA receives the residual amounts collected through the levy to
fund its supervisory activities.
This disbursement method and the variation in the timing that
levies are paid by regulated institutions can cause cash flow difficulties for
The amendment in Part 2 of Schedule 2 to this Bill will
provide an amendment to the APRA Act to ensure that levies collected by APRA
are allocated on a proportionate basis between the Commonwealth and APRA’s special
account. This revised process will enable a more timely allocation of revenue
to support APRA’s regulatory functions.
Superannuation Supervisory Levy Imposition Amendment Bill 2012
The Hon. Bill Shorten, MP, Minister for Financial Services and Superannuation,
commented on the Supervisory Levy bill component of the SuperStream package and
the amendment proposed in the Superannuation Supervisory Levy Imposition
Amendment Bill 2012:
The superannuation supervisory levy will pay for
implementation costs to improve the administration and management of super
accounts, making the processing of everyday transactions easier, cheaper and
faster for both members of funds and employers...
This bill will provide the Treasurer increased flexibility in
determining the maximum restricted and unrestricted levy amounts, the
restricted and unrestricted levy percentages and the superannuation entity levy
base to be used in finalising the levy amount.
Schedule 1 of the Superannuation Supervisory Levy Imposition Amendment
Bill 2012 amends the Superannuation Supervisory Levy Imposition Act 1998
'to enable the Treasurer to make more than one determination for a financial
year'. This is a single amendment inserted at the end of section 7 of the Superannuation
Supervisory Levy Imposition Act 1998 and is intended to:
...provide flexibility for the Treasurer in the event that
amendments to the Australian Prudential Regulation Authority Act 1998 (APRA
Act), that provide for costs associated with the implementation of SuperStream
to be included in the Minister’s determination that specifies the amount of
levy money payable to the Commonwealth, are delayed beyond 30 June 2012.
The amendment in this schedule applies from 1 July 2012.
Structure of the report
Chapter 1 has provided an overview of the inquiry and the bills.
Chapter 2 will explore governance of the proposed data standards system
and transparency of the SuperStream levy costs.
Chapter 3 will discuss the compliance measures for the regime,
implementation and the impacts of the measures on small business. The chapter
concludes with closing comments from the committee and a recommendation that
the bills be passed.
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