Overview of the Tax Office’s compliance approach

Overview of the Tax Office’s compliance approach
The Tax Office is responsible for ensuring that employers offer their eligible employees the opportunity to choose a superannuation fund and make superannuation contributions to their employees’ chosen fund/s.

Working with ASIC and Treasury, the Tax Office will help employers, employees, superannuation funds and financial advisers to understand and meet their obligations. The Tax Office also works in close cooperation with other regulatory agencies to ensure employers meet their obligations.

During the first year of the new system, the Tax Office will focus on ensuring that employers are aware of, and understand, their new obligations.

The Tax Office recognises that most employers will support choice of superannuation fund and make a genuine effort to meet their obligations within the time frames required. It also understands that some employers may initially experience difficulties in fully understanding and meeting their new obligations, and may make mistakes despite a genuine effort to comply.

Accordingly, where the Tax Office identifies mistakes that result from genuine misunderstandings, it will generally not apply penalties for breaches of choice of superannuation fund, provided that the employer commits to correcting the mistakes within an acceptable time frame. This approach will continue until the end of June 2006.

However, penalties will not be reduced where the employer has not made any attempt to comply or has deliberately or recklessly avoided their obligations. Normal penalties will continue to apply to employers who do not comply with other related obligations, such as providing minimum levels of superannuation support.

From July 2006, the Tax Office expects that the choice of superannuation fund arrangements will be well understood and that employers will comply with their obligations. It will accordingly re-balance its compliance approach to reflect a stronger emphasis on verification activities, with non-compliance penalised in line with normal penalty guidelines.

Overview of ASIC’s compliance approach
ASIC regulates company and financial services laws to protect consumers, investors and creditors. It licenses businesses that advise on, or deal in, financial products or provide financial services, including superannuation. It can also act against any misleading, deceptive and unconscionable conduct in relation to superannuation.

ASIC works with the Tax Office in joint investigations on superannuation, particularly on early access schemes.

Other than provisions prohibiting the offer of kickbacks to employers and requiring disclosure of fees and costs in product disclosure statements and periodic statements, there are no significant new obligations for trustees or advisers around choice of superannuation fund. Therefore, ASIC expects them to be ready to comply with their legal obligations.

In the lead-up to the initiative’s introduction, ASIC has been working with the financial services industry to ensure it understands its compliance obligations. ASIC therefore expects the industry to act responsibly, in the best interests of consumers, and comply with existing obligations relating to disclosure, advice and conduct (including advertising).

Because most employers are new to the financial services regime, ASIC will take a balanced approach with employers who inadvertently provide advice without a licence in the early stages of choice of superannuation fund. This does not apply to those who deliberately fail to comply with the law. ASIC will also consider action against other unlicensed people who breach financial services laws.

Where new obligations (for example, the Corporations Regulations Fee Template and the single fee measure) are imposed on other parties, ASIC will take a reasonable approach to those who are genuinely trying to comply with the law around choice of superannuation fund. However, it will consider enforcement action where there are deliberate or careless breaches, or where there is likely to be significant harm to the consumer.

ASIC will continue to publish guidance about choice of superannuation fund in the lead-up to, and after, 1 July 2005 so that the industry is aware of its ongoing compliance expectations. This will include guidance about advice on switching superannuation funds. ASIC will also monitor compliance, for example, through shadow shopping surveys.

Overview of APRA’s compliance approach
APRA regulates the prudent management of all complying superannuation funds (other than self managed superannuation funds, which are regulated by the Tax Office, and exempt public sector superannuation schemes).

As part of its prudential focus, APRA will examine the operational frameworks of funds for servicing choice of superannuation fund.

APRA is able to take up members’ concerns with the trustees of funds if members believe that their fund is not being prudently managed or that their employer is not forwarding any personal contributions to their fund on a timely basis. However, secrecy provisions prevent APRA from discussing fund-related issues with members who complain.