Sunsuper was reported to have declared an $11,000 payment to the Queensland Labor Party to sponsor a corporate breakfast event last year.
During a Senate estimates hearing in March, Mr Bragg had grilled the prudential regulator on its views of political donations from super funds, pointing to the Sunsuper case.
At the time, APRA deputy chair Helen Rowell said the regulator does not have a view on funds making political donations, considering the $11,000 payment in the context of a $60 billion fund as “immaterial”.
The sole purpose test, as outlined in the SIS Act, requires a super fund is maintained for the sole purpose of providing retirement benefits to members.
Mr Bragg had argued political donations should be considered a breach of the test, given that funds that do not hold shareholder capital would be using members’ contributions to fuel the payments.
While APRA had deemed it would be difficult to prove the Sunsuper payment had breached the sole purpose test, the fund has now stated that the payment breached its own policy and it will not be making political donations in future, as reported elsewhere.
Sunsuper did not respond to Investor Daily before deadline.
Mr Bragg told Investor Daily he welcomes Sunsuper’s statement, but his focus is primarily on APRA and its interpretation of the sole purpose test, calling it the most “troubling part” for him.
“I’m surprised by the letter they’ve sent me, which effectively… gives a green light to political donations even though the fund itself has pulled back” he said.
“We as a government and a country are heavily invested in this scheme. I don’t want to see breaches of the sole purpose test and APRA’s judgement that this is not a breach… I think is wrong. And if that is their position based on the current law, then we clearly need [a] new law.”
In his book, Bad Egg, Mr Bragg has published projections based on Australian Electoral Commission data on the superannuation sector’s donations to trade unions, forecasting industry funds are set to become the largest political donors.
There needs to be clarity around what the “sole purpose test is designed to do and how it operates”, Mr Bragg said, commenting the government has a duty to constituents to ensure retirement savings are not “funnelled off to political parties”.
“I think it is inappropriate for super funds, particularly those without shareholder capital to be making these sorts of donations. It’s very hard to see how a political donation could satisfy the sole purpose test,” Mr Bragg said.
“If APRA’s view of the sole purpose test is that it permits political donations, that is wrong. And it shows that either APRA or the law, or both, are failing superannuation members, the people of Australia.”
In a letter sent to APRA chair Wayne Byres in May, Mr Bragg pointed to Ms Rowell’s comment that the Sunsuper payment had been immaterial, saying: “Based on this logic, APRA is implying that small donations to political parties do not matter.
“Yet the sole purpose test does not refer to materiality,” he said.
In her responding letter to Mr Bragg, Ms Rowell said the regulator had sought information from Sunsuper and understood the payment was related to the fund’s involvement in a business liaison event.
“Based on the information available, and taking into account all of the circumstances, APRA’s view is that it would be difficult to demonstrate objectively that the payment breached the sole purpose test,” Ms Rowell wrote to the senator in June.
Ms Rowell had also stated in the letter that under its supervisory work, the regulator routinely assesses whether the “material actions by RSE licensees meet the requirements of the sole purpose test”.
“Licensees need to weigh up the cost of any proposed expenditure and the benefits the expenditure is proposed to deliver and be able to demonstrate such consideration,” she wrote.
“In circumstances where an RSE licensee expends or invests members’ money in good faith, and can point to analysis that supports the outcome the expenditure or investment is expected to provide and its connection to superannuation purposes, the RSE licensee’s action is unlikely to breach the sole purpose test.”
An APRA spokesperson told Investor Daily the regulator is investigating the Sunsuper matter and is awaiting a response from the fund.
Meanwhile Sunsuper is in the midst of completing due diligence on its potential merger with QSuper.
The consolidation of the two funds could result in one of Australia’s largest superannuation funds, with more than $195 million in funds under management.
Compare this letter to the one APRA sent to super funds, putting the fear of god into them regarding adviser fees. On one hand there is an extreme, draconian view of the sole purpose test despite the payment being endorsed by the member and with a clear link to improving wealth and therefore retirement outcomes, and on the other hand a payment with zero benefit for the member and not signed off by the client is ok???? This shocking bias against financial advisers and in favour of industry funds.
Yes. It’s very simple. You have to provide ongoing informed consent to feed your family, and they don’t. Time to get rid of ongoing Opt-Ins & enjoy what your competitors are drilling you to death with.
The Union based super funds should stop whinging. The new USA Cares Act allows eligible individuals to make a coronavirus-related withdrawal of up to US$100,000 (A$143,000) per person from their retirement accounts between Jan. 1 and Dec. 31 without the 10% early-withdrawal penalty that would typically apply to those under age 59½.
It also permits retirement plans to suspend loan repayments that are due from March 27 through Dec. 31, 2020, and raises the limit on loans made between March 27 and Sept. 22, 2020, to $100,000 from $50,000.
Under the act, those qualified for the provisions include individuals who were diagnosed with Covid-19, the disease caused by coronavirus, or whose spouse was diagnosed; those who have experienced adverse financial consequences as a result of being quarantined, furloughed, laid off or having their work hours reduced; and those unable to work due to lack of child care or closures related to the pandemic.
Based on this I have devised a new strategy for early release of super. It’s Called the Helen Rowell and is endorsed by APRA.
Step 1 – setup faux political party for your client
Step 2 – Pay all their super to political party
Done.
If you’re incensed over this and have a SMH subscription, check out his article which goes further into this – however also then please comment in their comments section as it is obvious the unions and industry super have had their lackeys write in criticising him for calling them out.
Was not a Bragg fan from his days at the FSC. But on this one he is SPOT ON ! I have still not recovered from watching Mr Silk at the RC get away from a serious whack on his “Fox in the Henhouse Adverts” on Sky TV
If I took $11,000 out of my SMSF to donate to a political campaign (I’m not in pension mode yet), the ATO would deem my fund to be non-complying, due to a breach of the sole purpose test. These large insto/union based funds are fast becoming a law unto themselves.
Full marks for Senator Bragg taking these bureaucrats on. The entire Fed Govt red tape brigade are simply shrills for the Union based Super Funds. End of story. For proof, why doesn’t the Fed Govt put the AustralianSuper mandate for the Parliamentary Employees Scheme out to tender? All animals are equal, but some are more equal than others.
Um, you are aware that they have them as the default fund but it is not mandated that people use it. Parliamentarians are still able to choose any fund they want. The appointing of AustralianSuper happened after they took over AGEST.
Maybe find something else to complain about.
How does spending $11,000 of Sunsuper’s member’s money on a Labor Party corporate breakfast provide retirement benefits to it’s members ?
That is the only question that needs a clear and concise answer.
No waffle, no bullshit, no avoidance…..just a straight, direct and quantifiable response that can demonstrate a financial benefit to the members retirement.
Let’s see how that goes.
Agree, it fails the pub test. However, does this also mean that every fund (industry and retail) can’t do any advertising?
APRA don’t seem to know how to address this issue and don’t want to address it.
You get the feeling this is just something that if they really start a full blown investigation, it’s not going to look good and so best to avoid it altogether.
The number of breaches of the sole purpose test over the last 10 years would be immense.
That is absolutely ridiculous how can any one argue making a political donation will achieve the goals of the sole purpose test. How is donating money going to provide for retirement benefits to a member or provide for death benefits to beneficiaries.
Imagine if we created gave advice that breached the sole purpose test in this way ASIC and AFCA would be all over us and probably ban us for life.
Why do we as advisers have higher standards put on us than the regulators, maybe it’s the morons that run the regulatory bodies who need to get a degree in financial planning and pass a FASEA exam because they obviously do not understand super law at all.
Google this Helen Rowell she has never worked in superannuation or financial planning her life no wonder she doesn’t understand super law and are tax money is paying this idiots salary talk about fee for no service
How on earth can APRA Deputy Chair, Helen Rowell have answered a question by stating the regulator does not have a view on political donations by super funds !
This is extraordinary.
If the regulator does not have a view on it, then who does ??
Secondly, by dismissing the fact that the amount contributed to the Queensland Labor Party breakfast as some meaningless amount when compared to the overall size of the fund !
So, what would would happen if a super fund made a political donation every single week of a smaller amount, but over the year calculated that the total political donations were significant.?
It appears that if super fund members monies are used to buy eggs and bacon for political breakfasts it doesn’t breach the sole purpose test because this expenditure of members funds will provide retirement benefits for those members and/or their families if they die.
What a complete (and concerning) joke the regulator’s response has been.
In light of the FASEA standards, APRA’s view of the world is a disgrace. Two sets of rules. Bad luck if you are an adviser.
APRA does seem surprisingly weak on the sole purpose test – consider silky Australian Super and their use of funds of existing members to attract new members through Qantas points.
Agree with your point, but is it any different to the $24 million spent by the retail funds on their advertising?
Is this an different to the millions spent by the retail funds on advertising?
What ?? Industry funds can do what ever they like, their APRA, ATO, ASIC buddies will NEVER pull them up as they all swap jobs between the Govt and Industry Super regularly and ALL Support each other, regardless of breaking the law.