APRA needs to legally validate its super guidance

Mike Taylor

Managing Editor/Publisher, Financial Newswire

6 December 2022

Superannuation funds want the Australian Prudential Regulation Authority (APRA) to legally own the regulatory guidance its provides to funds in the same fashion as the Australian Taxation (ATO) owns the advice it provides to taxpayers.

As things stand, APRA provides practice guides to superannuation funds accompanied by a caveat that the guides not represent legal advice and that the funds should obtain their own professional advice.

According to the Association of Superannuation Funds of Australia (ASFA) this stands in contrast to the ATO which treats advice that it has provided to taxpayers as legally and administrative binding.

The superannuation funds organisation has told the Australian Law Reform Commission (ALRC), on this basis, it believed “APRA should take an approach more like that taken by the ATO”.

“If APRA provides guidance or advice to superannuation funds (and others), then the recipients of such guidance or advice should be entitled to rely on that material,” ASFA said.

“In addition, there should be greater clarity on the implications of ‘recommendations’ in guidance material.

“If they are requirements then this should be clearly specified. As well, if there are differences between good practice and best practice this should also be made clear.”

The ASFA submission said that the APRA disclaimer with respect to its prudential practice guides was very specific stating:

This prudential practice guide is not legal advice and users are encouraged to obtain professional advice about the application of any legislation or prudential standard relevant to their particular circumstances and to exercise their own skill and care in relation to any material contained in this guide. APRA disclaims any liability for any loss or damage arising out of any use of this prudential practice guide.

It said that, in contrast, the ATO stated:

We provide you with advice on how the laws we administer apply to you. We generally provide this advice in the form of a ruling. This advice provides you with the highest level of protection if you rely on it. Our advice includes parts which are legally binding on us, and parts which are not. We clearly identify which parts of our advice are binding and non-binding.

Where you rely on the binding parts, the law protects you from having to pay a tax shortfall if the advice turns out to be incorrect and you then make a mistake. In addition, because we will apply the law as set out in the ruling, the false and misleading penalty and interest on the tax shortfall will not apply.

Where you rely on the non-binding parts, we will apply those parts to you as if we were administratively bound by them, unless we have good and substantial reasons not to. For example, if you rely on a ruling knowing that it is not appropriate for your circumstances