Welcome to the latest issue of the KHQ Super Alert. This week, ASIC released its latest breach reporting statistics, APRA published its data on super funds’ expenditure and ASIC and the OAIC both published guidance materials about AI adoption.

ASIC – Latest insights from reportable situations regime

On 31 October 2024, ASIC released a report summarising the breach reporting trends in the last financial year. This is the third report that ASIC has published since the reportable situations regime came into effect in 2021. The report notes that there was an increase in reports relating to superannuation, being 7% of breach reports (across all financial services licensees and credit licensees) compared to 4% during the previous financial year.

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APRA – Transparency of super fund expenses

On 30 October 2024, APRA released its first publication of ‘fund level data on expenditure covering a broad range of categories, including investment-related expenses, as well as administration and other expenditure’. As referred to in our Super Alert of 25 October 2024, the publication of this data was anticipated in a recent letter sent by APRA to superannuation trustees.

According to APRA, the new fund expenditure data includes ‘a more granular set of classifications which break down the RSE’s total expenses’ and ‘superannuation entities total expenses at an industry aggregate level’.

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ATO – Reforming transfer balance cap for SFTs

On 29 October 2024, the ATO announced that it is putting in place the changes introduced by the Income Tax Assessment Amendment (Superannuation) Regulations 2024 (which commenced on 6 July 2024) ‘to ensure that individuals with a capped defined benefit income stream (CDBIS) aren’t negatively impacted by an SFT’. The ATO has advised that funds which have been part of an SFT since 1 July 2017 in which CDBIS members were negatively impacted should lodge an enquiry through the ATO’s Super Enquiry Service if the ATO has not already been in touch to discuss remediation.

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ASIC – First report on AI adoption by licensees

On 29 October 2024, ASIC issued a media release announcing the publication of Report 798 Beware the gap: Governance arrangements in the face of AI innovation. This was ASIC’s ‘first state of the market review of the use and adoption of AI by 23 licensees’, and ASIC has now urged financial services and credit licensees ‘to ensure their governance practices keep pace with their accelerating adoption’ of AI.

According to ASIC, its ‘findings revealed nearly half of licensees did not have policies in place that considered consumer fairness or bias, and even fewer had policies governing the disclosure of AI use to consumers’. ASIC Chair Joe Longo said ‘[w]e want to see licensees harness the potential for AI in a safe and responsible manner—one that benefits consumers and financial markets. This can only happen if adequate governance arrangements are in place before AI is deployed’.

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APRA – Deputy Chair’s speech

On 29 October, APRA published a speech delivered by its Deputy Chair, Margaret Cole. Ms Cole’s main message was to remind superannuation trustees that ‘[f]und expenditure will be reviewed and scrutinised with intensity’.

In Ms Cole’s words, ‘central to the [2021 Your Future Your Super] reforms was the best financial interests duty…’, which requires ‘trustees to put the financial interests of fund members at the centre of every expenditure decision and all operational decisions as well’. Ms Cole highlighted that APRA continues to see ‘questionable expenditure decisions and variable compliance with the duty by trustees’ and explained how the issue will be approached by collecting more data through the Superannuation Data Transformation project, which has ‘significantly enhanced the volume, accuracy and relevance of APRA’s superannuation data collections’.

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Government – Assistant Treasurer’s speech

On 29 October, a speech delivered by the Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services was published. Mr Jones summarised the government’s strategy to deliver its promise of a ‘dignified retirement for all Australians’ in the following points:

• ‘[o]n current trends, the superannuation sector will exceed $4 trillion in the next term of government’;
• ‘more and more, [investment performance] is not going to be the only marker against which success is judged. The superannuation industry will be judged by the standard of member service received throughout a person’s working life and retirement’; and
• ‘financial advice laws in the country are not fit‑for‑purpose’ so ‘the next tranche of [advice] reforms is being drafted and prepared for introduction’.

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OAIC – New AI guidance for businesses

On 21 October 2024, the Office of the Australian Information Commissioner (OAIC) published two new AI guides for businesses. According to the OAIC, the guides ‘articulate how Australian privacy law applies to [AI] and set out the regulator’s expectations’. The aim of the first guide is to ‘make it easier for businesses to comply with their privacy obligations when using commercially available AI products and help them to select an appropriate product’, while the second guide ‘provides privacy guidance to developers using personal information to train generative AI models’.

Privacy Commissioner Carly Kind acknowledged that ‘[h]ow businesses should be approaching AI and what good AI governance looks like is one of the top issues of interest and challenge for industry right now’.

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