The Australian Prudential Regulation Authority (APRA) appears to have confirmed that the creation of Industry Super Australia (ISA) has allowed its sponsoring industry superannuation funds to side-step any worries about the sole purpose test when it comes to politically-oriented campaigns.
The regulator has even suggested that with respect to any questions that might be raised about possible breaches of the sole purpose test it would simply be up to the industry funds to cogently argue “good faith” and the betterment of member outcomes.
Asked a direct question on notice about whether the ISA’s involvement in an advertising campaign against a number of Federal Government Budget initiatives might give rise to breaches of the Superannuation Industry (Supervision) Act (SIS Act), APRA has made clear it does not believe issues arise.
The questions were placed on notice by Tasmanian Liberal Senator, David Bushby who asked whether “as ISA is wholly-owned by super funds and funded from levies ultimately sourced from members accounts, is such advocacy contrary to the sole purpose test applicable to the respective superannuation funds represented by ISA?”
However APRA seemed to respond that the industry funds had succeeded in getting the necessary firewalls in place to handle any such problems and liked the activities and funding of ISA to that of the activities and funding of the Financial Services Council (FSC) and the Association of Superannuation Funds of Australia (ASFA).
It said, “APRA understands that ISA receives payments from a range of stakeholders including some industry superannuation funds. The payments from superannuation funds are generally sourced from administration fees that are charged by the trustee to members of these superannuation funds”.
The APRA response said that if an individual fund was to advocate on certain policy issues, and the cost of such advocacy was funded with members’ monies, the issue of whether or not such an activity was in breach of the sole purpose test would require an assessment of the activity and its connection with the superannuation purposes.
“If the activity is characterised as an expenditure or investment made in good faith and the trustee puts forth cogent reasons for believing that this will result in an improved retirement income outcome for the members (or the protection of that retirement income), then the trustee’s conduct would be unlikely to be in breach of the sole purpose test (even if others might disagree with the trustee’s reasoning),” the regulator’s response said.
