Change in laws
Commissioner Kenneth Hayne recommended changing super laws to prohibit the “treating of employers”. He cited the $21.44 million that Hostplus spent on corporate hospitality in 2017, which included entertaining chief executives at the Australian Open.
Hostplus said it supported the change so long as it served to prevent banks from offering inducements.
“Any legislative re-design must also apply to bank-owned retail funds that have been found to offer a significant number of small and medium-sized businesses benefits for switching their default funds,” a spokesman said.
The inducement ban would probably also affect retail funds, according to Industry Super Australia deputy chief executive Matthew Linden.
“The amendments are likely to capture retail funds where they offer to bundle default super with a range of benefits to employers, including discounts on overdrafts and insurance, or free financial advice,” he said.
“We previously outlined that the existing provision is ineffective so we’re very happy to see it strengthened.”
Defending Hostplus’ corporate entertainment spend, Hostplus chief executive David Elia told public hearings of the royal commission that encouraging more businesses to sign up to the fund was in the best interests of members.
“Unashamedly we utilise entertainment, corporate hospitality in order to strengthen the relationships we have with our employers,” he said last year.
“I wish I didn’t have to do it. The reality is it is a very competitive landscape we are dealing with.”
The government circulated amendments to Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures) on Tuesday.
Along with the ban on corporate entertainment, a failure to act in the best interests of members will carry civil penalties for both directors and super trustees.
Separately, a legislative logjam means the complementary “Protecting Your Super” (PYS) package the government has been pressing Labor on is at risk of not being voted on before the April 2 federal budget, putting in jeopardy reforms to save young and low-income workers more than $3 billion in excessive super fees and insurance premiums.
Shadow treasurer Chris Bowen said the Liberals were “losing control of the government’s legislative program.”
“Mr Frydenberg should explain to Australians why he’s spent the last few weeks beating his chest and demanding a vote for PYS only to be so incompetent he won’t bring it on for a vote,” Mr Bowen said.
Commissioner Hayne noted in his final report that Hostplus “spends a significant amount each year on marketing and entertainment”.
“Part of this money is spent on corporate entertainment, where Hostplus senior executives ‘informally entertain current and prospective employers’,” he noted.
“For example, the Commission heard that Hostplus spent approximately $260,000 on corporate entertainment for employers to attend the Australian Open tennis competition in 2018.”
The government’s amendments appear particularly to target union and employer-aligned industry funds, who have suggested providing hospitality to employers to win default fund mandates is required, because many operate without the benefit of established banking relationships with employers like for-profit retail funds.
“Even if that were so, I do not accept that trustees should be permitted to attempt to influence employers’ decisions through irrelevant considerations,” commissioner Hayne noted in his final report.
Commissioner Hayne said the super law should be amended to prohibit trustees from providing inducements to have the recipient nominate the fund as a default fund or have employees agree to become members of the fund.
Treasurer Josh Frydenberg said: “The government agrees to amend the Superannuation Industry Supervision Act 1993 to facilitate this provision.”
More broadly, the “member outcomes” bill enhances the Australian Prudential Regulation Authority’s powers to deal with underperforming funds, including an outcomes test for MySuper products.