Law firm claims cost of super disclosure regime ‘grossly underestimated’

The new Federal Labor Government is right to seek to change the rules around superannuation fund disclosure requirements under the Your Future, Your Super (YFYS) regime because the original rules would have imposed significantly higher regulatory costs on members.

That is the assessment of law firm Mills Oakley which has used a submission to Treasury to back the Labor Government’s move to have superannuation funds disclose information to members in aggregate rather than in intemised detail.

The Assistant Treasurer and Minister for Financial Services, Stephen Jones has faced criticism for moving for the changes with accusations the Government is attempting to obscure the financial relationships which exist between industry funds, trade unions and political parties.

However, the Mills Oakley submission argues that the previous Government had “grossly underestimated” the cost of the itemised disclosure regime and that ultimately the arrangements would have had little value to fund members.

The itemised approach advocated by the former Morrison Government was largely viewed as delivering greater visibility on the commercial relationships between superannuation funds and other entities, particularly those between industry superannuation funds and trade unions.

The Mills Oakley submission argues that “Itemised Disclosures are highly unlikely to have any value to fund members and, if they would have value to a particular member, there is an existing mechanism through which they can obtain it”.

“The regulatory impact of the Itemised Disclosure obligation was grossly underestimated, and its repeal would significantly reduce compliance costs on retirement savings of superannuation fund members and thousands of organisations affected through possibly unintended consequences,” the law firm’s submission said.

It said that the impact of the itemised disclosure obligation had been underestimated because it failed to take account of the time and cost involved in reporting by related parties and third parties which were extraordinarily onerous in application.

Explaining the onerous requirements, the law firm said superannuation funds would be required to request that Third Parties apply the complex legal and accounting concepts of “key management personnel” and “associated entity” to their organisations.

“If the Third Parties will not do this, they may be potentially liable to prosecution for being involved in a contravention by the RSE licensee of the SIS Act. The unreasonableness of this requirement can be illustrated by the example where an executive officer of an RSE licensee is a committee member of a local football club. The RSE licensee will be required to contact the local football club and request that they identify their “key management personnel” and “associated entities”. These are complex terms,” the submission said.