The 2024 Budget: An important step in the right direction

The 2024 Budget: An important step in the right direction

by | May 27, 2024 | blog, Resources

Don’t underestimate the importance of super on paid parental leave

Much of the industry response to the Federal Budget has been centered on what it didn’t deliver. But amidst the chatter, let’s not overlook the critical move towards supporting gender equity within superannuation.

In March, the government announced that it will continue its reform of Paid Parental Leave (PPL) by paying superannuation on the government PPL payment. This isn’t a casual decision, it’s a significant step the Government wouldn’t have taken lightly.

Commencing July 2025, eligible parents with children born or adopted on or after 1 July will receive a superannuation guarantee equivalent to 12% of parental leave payments. These contributions will be taxed at the superannuation tax rate of 15% and count towards the individual’s concessional contributions cap. This move, allocating $1.1 billion over four years, demonstrates a tangible commitment by the government in addressing the gender super gap.

This reform is the latest in a series of changes over the past few years by both Labor and Coalition governments that improve superannuation for women, and low-middle-income workers. Previous changes included removing the $450 per month threshold for super (thanks to senator Hume) and eliminating duplicated accounts and insurance. However, unlike these, the changes to paid parental leave come at a real and substantial financial cost to the Government.

The Super Members Council estimates that a mother of two will have $14,500 more in retirement thanks to this benefit. This helps mitigate the retirement income impact of taking parental leave, especially for women, and normalises parental leave as a workplace entitlement alongside annual and sick leave.

It is essential that super funds develop communication platforms to educate members, particularly mothers, about the new entitlement and its long-term benefits. This may involve interactive online tools and targeted messaging through member portals.

As a result of superannuation being based on your income level and the duration of your working life, it has an inherent bias towards advantaging people who are better off. This must be tempered by tax and policy settings to provide more equity and super on PPL is one of these, therefore we should pause and acknowledge this.

Otherwise, not much to see here…

Federal Budgets generally include a slew of announcements about superannuation. Mostly these result in improvements to the system and better outcomes for most Australians who have superannuation – but they also involve implementation challenges and costs.

This year’s budget was the exception. Beyond super on paid parental leave, there wasn’t much about super at all.

But as it turns out, this is a mixed blessing as the industry is also awaiting greater clarity about the way forward for payday super, financial advice reforms, and the retirement phase.

Waiting on payday super

The 2023 Budget highlighted the need to pay superannuation guarantee contributions at the same time as wages and salaries starting July 2026, but the steps to implementation remain unclear. This uncertainty affects super funds and employers, who need time to develop the necessary technological infrastructure and adjust payroll systems to cater to more frequent super contributions.

Reducing the incidence of unpaid super, increasing retirement incomes, and putting super on a level basis with other employer expenditure, means this initiative is worth it, and it’s great the government continues to be committed to it.

Planning better financial advice solutions

The other big initiative where we’re waiting for legislation to materialise is making financial advice simpler, more affordable, and more accessible. From allowing contact centres to provide more meaningful engagements with members, to new robo-advice platforms, and introducing different levels of financial advisors, there are lots of plans to turn legislative plans into a practical reality. This isn’t strictly a budget measure, but it’s eagerly awaited, nonetheless.

At IQ Group we understand the importance of preparedness and compliance to regulatory change and its impact. With our team’s deep domain experience and knowledge of regulations, systems, data, and process re-engineering, we assist clients to effectively plan for, adapt, and implement regulatory change.

Feel free to contact one of our friendly team members if you have any questions, or would like to learn more on how IQ can help you navigate regulatory change.

By David Haynes, Head of Industry Insights

Navigating Accountability in the Age of AI

Navigating Accountability in the Age of AI

by | May 20, 2024 | Uncategorised

In the evolving landscape of financial services and technology, executives find themselves under growing scrutiny. The Financial Accountability Regime (FAR) calls for transparency, ethical behaviour, and personal responsibility. But with Artificial Intelligence (AI) integration at an all-time high within organisations a key challenge arises: How do we ensure AI integration aligns with FAR obligations?

As AI continues to evolve, its implementation presents both promise and risk, with generative AI and predictive AI at the forefront of these discussions. These technologies can revolutionise financial operations, yet they also introduce complex ethical considerations and privacy concerns. This isn’t just about compliance—it’s about maintaining trust and integrity in an increasingly digital landscape.

Fred Kofman aptly said; “Power is the prize of responsibility; accountability is its price”.

Amidst the buzz surrounding AI, it’s crucial to recognise that rapid adoption and its potential benefits don’t absolve organisations from their duty to uphold ethical standards and accountability. Key risk mitigations to maintain accountability, trust, and integrity in the AI landscape are humans involved and high data quality:

  • AI is used to accelerate decision-making and the resultant outcomes. Under FAR, the executive remains the accountable person for the outcome no matter the process to get there. Adopting AI solutions ensures that there is a human involved to approve decisions and mitigates the risk of unwanted and potentially catastrophic outcomes.
  • The speed to decision as a feature of all AI places an even greater emphasis on data quality. Poor-quality data is the enemy of automation. Bad data in the AI era is (Bad data)2 and can lead to catastrophic outcomes. Accountability in the AI era increases the diligence required to ensure high data quality, again mitigating risk.

Enter the role of governance, the supporter of FAR frameworks.

Governance plays the vital role of embedding accountability into the core of all projects, including AI projects. Governance ensures transparency, ethics, fairness, and responsible decision-making are at the foundation of these projects. Governance can navigate the balance between innovation and risk, striving to prevent unintended consequences and optimise processes without compromising members.

At the end of the day, visibility over risk demands governance. At IQ Group we understand this need as well as the shifts AI demands and can provide comprehensive insight over activities, aligning them with FAR obligations.

Written by Angie Perry, John Hogan, and Mal Collins