APRA launches formal investigation into industry super

Australian Prudential Regulation Authority tells Senate estimates hearing it is prepared to enforce legal action against industry super funds.

Stephen Jones MP during Question Time at Parliament House in Canberra. Picture: NCA NewsWire / Martin Ollman

Australia’s financial regulator has launched a formal investigation into millions of dollars that have flowed between industry super funds and trade unions and flagged a potential crackdown.

The Australian Prudential Regulation Authority (APRA) on Wednesday told a senate estimates hearing it was prepared to enforce legal action against industry super funds if its probe found payments were not in the financial interests of their members.

The investigation follows reports in The Australian revealing unions had pocketed nearly $9m in payments from industry super funds in 2021-22, sparking accusations that funds were making non-commercial payments adverse to members’ best interests.

NSW Liberal Senator Andrew Bragg said the action was long overdue and suggested a crackdown had been delayed by Labor’s push to amend the best ­financial interest test.

The Coalition has heaped pressure on industry super funds and unions in recent years, accusing them of financially backing the ALP via millions of dollars in services and directors fees.

APRA chair John Lonsdale said the financial regulator was prepared to take law enforcement action against certain entities.

“I want to assure you we have an appetite to take enforcement where we need to and we have a public enforcement strategy out there, one that is risk-based, outcome-focused and we’re very keen to be transparent to the extent we can to provide deterrent effects where it’s necessary,” Mr Lonsdale said.

Senator Bragg said industry super funds had been “emboldened” by the lack of action and welcomed the “long overdue law enforcement action”.

“I believe this action has taken longer than it needed to because APRA feared Labor would try and water down the best financial interest test,” Senator Bragg said.

“Over $13m was paid out by super funds to unions in 2020-21. This will balloon to $30m by 2030. APRA can now stop this. I look forward to the outcome of the investigation.”

Analysis by The Australian of Australian Electoral Commission donations data last month found the CFMEU collected more than half of the $9m paid from super funds to unions.

The largest payment declared by industry super funds was by First Super, co-chaired by former CFMEU national secretary Michael O’Connor, to the CFMEU for more than $2.5m.

APRA deputy chair Margaret Cole said the superannuation, banking and insurance watchdog was investigating AEC transparency register disclosures and whether payments made were value for money for members. She said investigators had sought further detail from some entities.

“This whole issue of members’ best financial interest and what super funds are spending members’ money on is absolutely critical to us. It’s at the heart of what we do, we care enormously that the money that members have in super funds should be there for their retirement future,” Ms Cole said. “We are pushing into issues and expenditure and what is right, what‘s appropriate and in certain cases we are pushing into the details of that where we feel we have to look into further.”

Industry Super Australia (ISA), which represents some of the largest funds in the country, has consistently rejected the claims.

ISA chief executive Bernie Dean did not respond directly to questions about APRA’s formal investigation, but said payments were made from trade funds to unions for director fees, sponsorship, marketing arrangements or returns on investments. Mr Dean accused Senator Bragg of “peddl(ing) false and misleading claims about industry funds”.

Financial Services Minister Stephen Jones said he was supportive of ensuring all funds making payments for a service were made in the best financial interest of members. “I am supportive of a strong regulator upholding the law,” Mr Jones said.

Before the former Coalition government passed the Your ­Future, Your Super legislation in 2021, funds would make “sponsor” payments to unions.