{"id":1549,"date":"2020-10-08T00:10:01","date_gmt":"2020-10-08T00:10:01","guid":{"rendered":"https:\/\/insight.thomsonreuters.com.au\/business\/posts\/budget-super-trustees-new-best-financial-interests-duty"},"modified":"2023-05-15T14:20:42","modified_gmt":"2023-05-15T04:20:42","slug":"budget-super-trustees-new-best-financial-interests-duty","status":"publish","type":"post","link":"https:\/\/insight.thomsonreuters.com.au\/business\/posts\/budget-super-trustees-new-best-financial-interests-duty","title":{"rendered":"Budget: Super trustees \u2013 new best \u201cfinancial\u201d interests duty"},"content":{"rendered":"\n

The Government has announced that it will legislate to compel trustees of APRA-regulated superannuation funds to act in the best \u201cfinancial\u201d interests of their members.<\/h4>\n\n\n\n

<\/p>\n\n\n\n

This measure was announced as part of the Your Future, Your Super<\/em><\/strong><\/a> reforms released in the 2020-21 Federal Budget on 6 October.<\/p>\n\n\n\n

The proposed best financial interests duty will give effect to recommendation 22 of the Productivity Commission report. Overall, the measure seeks to remove ambiguity on how trustees should be spending members’<\/em> money.<\/p>\n\n\n\n

The onus on demonstrating compliance with the new duty will be reversed. From 1 July 2021, trustees will be required to establish a \u201creasonable basis\u201d to support their actions being consistent with the duty.<\/p>\n\n\n\n

Anti-avoidance measures will ensure any super fund payments to third parties, such as interposed or related entities, do not undermine the intent of the new duty.<\/p>\n\n\n\n

What exactly is this new trustee duty about?<\/strong><\/strong><\/h2>\n\n\n\n

Covenants in s 52 of the SIS Act already require trustees to act in the best interests of the members. In addition, trustees are currently required to determine each year whether the financial interests of the members are being promoted by the trustee.<\/p>\n\n\n\n

Rather, the proposed new duty appears to be aimed at addressing the Government\u2019s concerns about some funds spending money on things like political advertising, and possibly sporting sponsorships, where any benefit to the fund members is more indirect.<\/p>\n\n\n\n

It is also worth noting that the Banking Royal Commission concluded that the “Fox and Henhouse”<\/em> political advertising did not contravene the sole purpose test or the best interests duty, and did not amount to misconduct.<\/p>\n\n\n\n

So the proposed new duty seems to be aimed at tightening up this area by requiring trustees to establish a “reasonable basis” for such expenditure in the \u201cfinancial\u201d interests of the members.<\/p>\n\n\n\n

Date of effect<\/strong><\/strong><\/h2>\n\n\n\n

The proposed duty with apply to trustee decisions taken on or after 1 July 2021. As with all super reforms, the commencement date is likely to be a moving target. Especially as the Government is yet to undertake industry consultation about the proposal and any unforeseen consequences.<\/p>\n\n\n\n

Other super reforms<\/strong><\/strong><\/h2>\n\n\n\n

The other reforms announced as part of the Your Future, Your Super<\/em> package include:<\/p>\n\n\n\n