AICD submission on the Your Future, Your Super review

The AICD's submission focuses on the 'best financial interests duty' (BFID) aspect of the review, which is particularly relevant to AICD members that are directors of registrable superannuation entities (RSEs).

The AICD participated in the Government’s previous consultation on the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 (Your Future, Your Super Bill) in 2021. At the time, we did not consider the changes to the former best interests duty were necessary and opposed the introduction of the BFID.

Our submission made the following key points:

• In feedback to the AICD since the introduction of the BFID, superannuation trustee directors have expressed concerns about the impact that the BFID is having on RSE licensees’ practices. Recording compliance with the BFID has led to significant additional costs , slowed both strategic and routine decision-making on expenditure as well as led to a number of RSE licensees withdrawing community sponsorships and grant funding arrangements with charities, due to concerns that those activities may not directly result in financial gain for the fund or for the financial gain of individual members.

• If the BFID is to be retained in its current form, further clarification and guidance on what is considered ‘material’ expenditure for the purposes of complying with the BFID would be welcome. More broadly, a clear articulation from government that incorporating ESG considerations into investment decision-making is consistent with the duty would be useful, and that there is no need for the fund to take a short-term approach.

• The AICD continues to have strong concerns about the reversal of the evidential burden on trustees and encourages Government to reconsider the changes that were made in 2021. While the reversal emphasises to trustees that they need to have strong systems and processes in place to ensure that all actions they take can be demonstrated to be in the best financial interests of beneficiaries, the requirement for strong systems and processes are already directly and specifically imposed on the trustees of registrable superannuation entities through the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Australian Prudential Regulation Authority’s (APRA) prudential standards. The reversal of the evidential burden, together with the lack of a materiality threshold, increases the liability risk for trustee directors and is resulting in an excessive focus on documentation when RSE licensees are making routine spending decisions.