Please join me when I chair this highly topical Banking & Financial Services Law half day seminar at UNSW’s City Campus on Wednesday 21 October 2015.
The Australian superannuation industry is extremely diverse, and despite recent adverse investment markets, has grown rapidly in the past decade. There have been some prudential losses, but these are relatively small in the context of the several thousand funds and several hundred billion dollars subject to APRA supervision. Continue reading
This Wednesday 26 February 2014, the NSW Bar Association will host a CPD seminar “Optimising Your Superannuation” in the Bar Common Room from 5.15pm. To be presented by Vanessa Woodley, Financial Strategist at SentinelWealth, and chaired by Dominique Hogan-Doran, the presentation is designed to provide an informative overview of key superannuation concepts and strategies to optimise benefits to barristers. For full details, please click here. The seminar provides 1.5 points in the CPD Management Strand. Attendance is free and no registration is required.
Update: for Barristers, you can stream this CPD from the NSW Bar’s website: http://cpd-streaming.nswbar.asn.au/seminar/151
NSW Bar Association – CPD (Management Strand)
Please join me on Wednesday 26 February 2014 at 5.15pm in the NSW Bar Association Common Room when I chair this timely presentation by Vanessa Woodley of Sentinel Wealth.
The session is designed to provide an informative overview of key superannuation concepts and strategies to optimise your benefits. It will address:
– What are the benefits and traps of superannuation?
– How can you optimise your contributions and withdrawals?
– How much is enough to fund your retirement?
– Should you make superannuation contributions, repay your mortgage or invest elsewhere?
– What do you need to consider when consolidating your superannuation accounts?
– Is a Self-Managed Super Fund (SMSF) right for you?
The session is suitable for barristers of all ages who are interested in optimising their superannuation benefits.
The event is co-hosted by the NSW Women Barristers Forum.
A salutary reminder of the complexities of advising superannuation fund trustees per French CJ:
“On its face it sounds like a narrow field of practice. In truth it requires a generalist’s skills. It straddles private and public law. It involves the application of equitable doctrines, particularly the law relating to trusts and fiduciary obligations. It involves contractual relations between employers and employees and is affected by statutory regimes specific to superannuation and of more general application. Its development has been linked to that of industrial relations law. From time to time it engages with the Constitution. Overlapping regulatory arrangements affect the administration of superannuation funds and impact on the rights and duties of trustees and beneficiaries.The relevant regulators include APRA, ASIC, and the Commissioner of Taxation. The exercise of their powers may attract the application of that branch of administrative law which involves judicial review.”
29 July 2013
Dominique Hogan-Doran is an Australian barrister. As part of her practice, she routinely advises trustees including the corporate trustee of a major industry superannuation fund.
This blog post does not constitute legal advice. Read further the Disclaimer. Liability limited pursuant to a scheme approved under professional standards legislation.
Most Australian superannuation schemes are constituted by trust deeds, and thus are most often characterised as funds in which a member is interested. However, it is still necessary to determine what is the true nature of a member’s interest in a superannuation scheme, because:
- a member may have no interest (in a technical sense) in the fund
- not every superannuation scheme is actually a fund
- not every member who has an interest in a fund has the same kind of interest as every other member of every other fund.
The question whether an interest in a superannuation fund is an interest in property may arise in varied contexts, including when determining:
- whether stamp duty is payable after a member transfers or agrees to transfer their interest in the fund, or declares a trust of that interest
- whether there is a taxable capital gain under the income tax acts arising from a taxable event
- whether the member has a right to approach a Court for relief for example in the event of non-payment of a benefit, or to compel the due administration of the fund
- adjustment of property interests between separating married or de-facto couples
- whether the interest becomes an asset in the member’s bankruptcy.
Because superannuation trusts are express trusts, the existence of the fiduciary relationship is unambiguous, so attention is rather directed towards the content of the relationship. The trust instrument will define the rights, obligations and expectations. This can lead to some complex issues of attribution of responsibility where members are offered a role in investment choice. Most defined contribution superannuation funds offer their members a choice of alternative sub-funds into which their contributions can be placed; those alternatives may differ by risk level (conservative/balanced/aggressive), or by investment strategy (sustainable/ethical or passive/active/multi-manager). APRA has weighed in on the attribution of responsibility in that decision making, reminding trustees that a member’s investment direction does not relieve the trustee of the requirement to act prudently, nor divest the trustee of its duty to have regard to diversification, risk, liquidity and other factors when setting investment strategies.
Generally speaking, an employee’s interest in a superannuation scheme, whether the scheme be contributory or non-contributory, accumulation or defined end benefit, will be a beneficial interest in a trust estate governed wholly by the law of trusts, subject only to legislative intervention or administration action (see further The Hon. Justice Graham Hill, “The True Nature of a Member’s Interest in a Superannuation Fund” (2002) 5(1) Journal of Australian Taxation 1).
That is not to say that the member has any direct interest in the underlying assets of the trust fund. Usually each employee intended to benefit from a fund is neither the legal nor the beneficial owner of the amount that stands to the credit of his or her account from time to time with the fund until the happening of a prescribed event, such as retirement or death, that will crystallise the member’s “account” into an actual beneficial entitlement. (Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 32 FCR 250). This in turn proves problematic in the event of the fund itself (or a division of it) becoming insolvent.
Even where the member’s interest in the fund is properly to be characterised as an equitable interest, the member may also have a contractual right in relation to the scheme, particularly where the member is an employee. For example, provision of superannuation benefits may be a term of the contract of employment, although it is unusual for employees to be parties to the actual superannuation scheme deed. The status of members as employees generates “interesting wrinkles” in the regulatory framework (see eg Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 (Cth) which permits most employees to choose a more suitable fund, although the Cooper Review revealed that the initiative has achieved only partial success).
In addition to the characterisation of the fund member as beneficiary or employee, they may also be characterised as a consumer or an investor, with superannuation funds only recently routinely exercising their voting rights.
Others go so far as to characterise them as a “financial citizen”, noting that a typical member is all of these at once (see further M Scott Donald, “What’s in a Name? Examining the Consequences of Inter-legality in Australia’s Superannuation System” (2011) 33 Sydney Law Review 295 at 298).
Superannuation is increasingly a privatised version of social security. Members have an individual and collective interest in ensuring that the compulsory superannuation system secures the financial benefits they expect will flow from their fund’s investments. Self-managed superannuation funds are on the rise, but with no assurance that financial literacy rates will keep apace.
Unfortunately, the notion of members becoming the engaged financial consumer of the type assumed in the Wallis reforms, responsible for contributing to the governance of the systems in which they participate, still seems a long way off. Until then, the trustee’s central role as decision maker and communicator within the system will have the regulatory supervision of APRA and ASIC, and presumably the ever present spectre of (political) legislative intervention.
5 May 2013
Dominique Hogan-Doran is an Australian barrister specialising in commercial litigation, regulatory investigations and public inquiries. As part of her practice, she has advised superannuation trustees in relation to their equitable and statutory obligations, and assisted them in relation to investigations by APRA and ASIC. All opinions expressed are her own.
Liability limited pursuant to a scheme approved under professional standards legislation.
On 13 December 2012, ASIC finally released its final guidance for two critical aspects of the Future of Financial Advice (FOFA) reforms – the new statutory fiduciary duty known as the “best interests” duty and scaled advice.
Best interests duty
The guidance in relation to the new “best interests” duty is contained in an update to Regulatory Guide 175 Licensing: Financial product advisers – conduct and disclosure (RG 175).
The best interests duty and related obligations in Div 2 of Pt 7.7A of the Corporations Act 2001 (Cth) require advice providers when providing personal advice to retail clients to:
- act in the best interests of their clients (see RG 175.225–RG 175.343);
- provide appropriate advice (see RG 175.344–RG 175.362);
- warn the client if advice is based on incomplete or inaccurate information (see RG 175.363–RG 175.366); and
- prioritise the client’s interests (see RG 175.367–RG 175.390).
ASIC indicates that when assessing whether an advice provider has complied with the best interests duty, it will consider “whether a reasonable advice provider would believe that the client is likely to be in a better position if the client follows the advice“.
The importance of the obligations in Div 2 of Pt 7.7A is highlighted by the fact that a failure to comply with them may result in a civil penalty against an authorised representative or AFS licensee: see s961K and 961Q. An advice provider and their licensee and authorised representative may be subject to administrative sanctions for a breach of the obligations in Div 2 of Pt 7.7Afor example, being banned from providing financial services for a period of time.
A client, or ASIC, may also take civil action for any loss or damage suffered as a result of a failure to comply with the best interests duty and related obligations: see s961M.
Often consumers want specific advice on a single issue or a limited number of issues, not a comprehensive financial plan. In Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244) ASIC has sought to provide specific and practical guidance and examples about giving scaled advice while complying with the best interests duty. It includes worked examples of scaled advice by:
- general insurers
- superannuation funds
- financial planners, and
Liability limited by a scheme approved under Professional Standards Legislation.