CareSuper has proposed to transfer a portion of its assets to a newly-created reserve account held by the trustee company that would be used in the event of any future penalties.
The proposal came after recent media reports regarding the potential impact of the ‘Section 56 amendment’ that would affect all profit-to member super funds from January 2022.
Under the legislation, if a super fund’s trustee governing company becomes liable for a penalty, the money could not be paid from the super fund and the trustee company would become liable for such payments.
Senator Jane Hume, minister for superannuation, financial services and the digital economy, had pushed for the new legislation which she said would prevent super funds from “milking” its members through fees to pay for the fund’s fines.
Speaking to CareSuper members, Julie Lander, chief executive, clarified CareSuper’s trustee company was not facing any penalties but that it wanted to ensure its current and future members were protected from the potential impact of the legislation.
Over the last few months, Cbus, Hostplus and QSuper had applied to supreme courts around the country requesting for power to charge its members to prevent non-profit boards from becoming insolvent due to trustee fines.
Super funds were already prohibited from dipping into member’s funds to pay for civil, criminal or administrative penalties where the directors acted dishonestly. However, under the amendment, federal law breaches, including infringements to Corporations Act or Australian Securities and Investments Commission (ASIC) acts, would also be included in the prohibition.
A multi-million dollar fine following the introduction of the amendment would threaten industry super funds as these profit-to-member funds would only have token levels of shareholder capital as all profits funnel back into the fund.
Lander said CareSuper’s proposal would be the best way to protect members’ interests and that advice had been sought from the Supreme Court of Victoria.
“In the meantime, please be assured that CareSuper is in good financial health, and we’ve built strong reserves,” said Lander.
“The Trustee is committed to meeting its legal obligations and upholds a high standard of Governance.
“We’ll be writing to you with more details in the coming weeks.”