Australia Reforms Target Superannuation Conduct

The Australian government has announced a comprehensive package of reforms aimed at strengthening consumer protections across the superannuation sector.

The reforms follow significant consumer losses stemming from what the government termed “poor conduct” and systemic vulnerabilities. In announcing the package, Assistant Treasurer and Minister for Financial Services Daniel Mulino pointed to the 2024-2025 collapses of the Shield and First Guardian Master Funds, which affected nearly 12,000 individuals and approximately A$1 billion in retirement savings, as having “exposed profound risks and vulnerabilities in parts of the financial system.”

The reforms target deficiencies across the financial ecosystem, from lead generation and financial advice to trustee governance and compensation mechanisms. Mulino noted that consumer harm can emerge “where poor conduct at one point in the chain can be amplified as consumers move between lead generators, advisers, trustees, investment products and compensation arrangements.”

A key pillar of the reform package is a heightened focus on the duties and accountability of superannuation trustees. The government will legislate a new obligation for trustees to compensate consumers for financial losses resulting from a failure to meet their existing investment governance obligations. To support this, the Australian Prudential Regulation Authority (APRA) will be empowered to set risk-based capital requirements for trustees that offer higher-risk investment options, to ensure they have the financial capacity to meet potential compensation claims.

The reforms will dramatically increase the consequences of misconduct, lifting the maximum civil penalties for core breaches of trustee obligations from A$873,600 to A$18.2 million. The government will also ban unlicensed real-time communication with consumers about superannuation, strengthen anti-hawking provisions, and require licensees to take reasonable steps to ensure their lead generation activities comply with regulatory and legal requirements.