AS THE financial services regulator continues to keep mum about its investigation into one of the country's biggest super funds, MTAA Super, it can be revealed that the MTAA Limited trade association is embroiled in another investigation relating to conflicting information it has lodged with different bodies in relation to wages and directors' fees. A letter, written in March by the department of treasury's ACT Revenue Office, with a subject heading: national payroll tax investigation of MTAA, reveals the investigation is ongoing.
The contents of the letter reveal that the ACT Revenue Office was having trouble reconciling two sets of accounts that exist in relation to the amount the motor trade association MTAA paid to MTAA Super directors. For instance, the total directors' fees MTAA declared in its payroll tax returns between 2005 and 2010 totalled $1.17 million, compared with a total of $2.9 million stated in its profit and loss accounts filed with ASIC.
Sound confusing and complicated? It is. The information supplied was so confusing that it prompted the ACT Revenue Office to say it had "grave concerns" about MTAA's ability to provide year to date payroll and superannuation summaries from the payroll system that are required by the notice of investigation dated September 6, 2010.
The letter also draws attention to fringe benefits and states that the information supplied by MTAA does not identify the recipients of all benefits. The letter gave MTAA until March 18 this year to supply it with more information. "All information and records supplied by March 18 will be reviewed and considered prior to the national payroll tax investigation being finalised."
It is not known why different sets of numbers exist in relation to the payment of directors fees over the past few years because nobody will comment. However, it epitomises the need for more transparency among super funds. It also shows why it is important for super funds to publicly release the remuneration of directors and senior executives.
Few super funds release details of how much they pay directors because they don't have to. Indeed, some super funds don't even bother to inform members who the directors are, how long they have been on the board, how many times they attend board meetings, or give details of their background.
MTAA Super's chairman John Brumby, the former premier of Victoria, decided earlier this month to introduce changes aimed at improving its "transparency, accountability and governance".
This included publicly releasing its annual accounts as well as the remuneration of directors and executives.
But it has taken a huge amount of controversy to get MTAA Super to this point. It is one of the worst performing funds over one, three, five and seven years, it is being investigated by APRA (Australian Prudential Regulation Authority) and earlier this month its chief executive Michael Delaney announced he would step down just weeks after a meeting of MTAA Limited directors expressed a no-confidence motion in him.
Until a restructure last December, the motor trade association was the service provider to the MTAA Super fund trustee. Since then most of the staff have moved across to MTAA Super and MTAA remains the owner of the super fund trustee company, which gives it the right to nominate three of the nine directors of the super fund.
This column revealed that in August last year Delaney wrote a letter to trustees that said the trustee of the fund had been "bedevilled by APRA" for years, had been subject to "lurid" allegations by the Australian Prudential Regulation Authority and had been issued with a show cause notice.
APRA is yet to make an official statement about its investigation, but the silence has left the $1.3 trillion superannuation industry and members of the $5.8 billion MTAA Super Fund confused and angry about the lack of transparency in an industry that manages their retirement savings.
The MTAA saga has cast the spotlight directly on the opaqueness of super funds and the importance of knowing how much directors are paid. Unfortunately change won't come from recommendations about to be released in a draft report into superannuation by an industry panel headed by Paul Costello. The draft report is expected to be released next week and it is expected to focus on My Super.
It wasn't the fault of Costello or his fellow panellists that corporate governance was largely ignored. It was the fault of the Gillard government which excluded most issues related to transparency and corporate governance from the terms of reference. The upshot is directors' fees, transparency of financial reporting and addressing the need for an overhaul of the structure of super boards was carved out.
With super funds making decisions on the fourth-largest pool of managed money in the world, largely built from compulsory savings, more needs to be done to direct the spotlight on governance, board composition, conflicts of interest and the standard of education of board and trustee members.
MTAA's poor performance raises questions about the country's default super fund scheme. The regulatory separation between APRA and the Fair Work Australia framework for default super means that APRA cannot remove a super fund from an award as Fair Work Australia has legislative power over default fund selection.
aferguson@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
What was the payroll tax investigation involving MTAA and MTAA Super about?
The ACT Revenue Office opened a national payroll tax investigation after finding conflicting numbers in MTAA Limited’s filings about payments to MTAA Super directors. Payroll tax returns between 2005 and 2010 showed about $1.17 million in directors’ fees, while profit and loss accounts filed with ASIC showed about $2.9 million. The discrepancy prompted requests for more payroll and superannuation records and an ongoing investigation.
Why does transparency about directors’ fees matter for super fund members?
Transparency about directors’ remuneration helps members understand potential conflicts of interest and whether board decisions are fair and cost-effective. The article highlights that few super funds publish director pay or board details, and discrepancies in MTAA’s reporting illustrate why clearer disclosure of directors’ fees and executive pay is important for accountability.
What transparency and governance changes did MTAA Super introduce after the controversy?
MTAA Super’s chairman, John Brumby, announced changes aimed at improving transparency, accountability and governance. Specifically, MTAA Super began publicly releasing its annual accounts and the remuneration of directors and executives — steps the article says were prompted by prolonged controversy and poor performance.
How has MTAA Super been performing, and has that affected leadership?
The article reports MTAA Super as one of the worst-performing funds over one, three, five and seven years. The fund was under APRA investigation, and its chief executive Michael Delaney announced he would step down shortly after MTAA Limited directors expressed a no-confidence motion — developments tied to the fund’s governance and performance concerns.
What is APRA doing about MTAA Super and has it said anything publicly?
APRA (the Australian Prudential Regulation Authority) is investigating the MTAA Super trustee, but according to the article it has not made an official public statement. The lack of public detail from APRA has left industry participants and MTAA Super members frustrated about the transparency of the process.
How does the regulatory separation between APRA and Fair Work Australia affect default super fund decisions?
The article explains that APRA cannot remove a super fund from a workplace award because Fair Work Australia has legislative authority over default fund selection. That separation means regulators’ powers are split: APRA supervises prudential matters, while Fair Work Australia governs which funds can be nominated as a default in awards.
What broader governance issues in the superannuation industry does the MTAA case expose?
The MTAA saga highlights shortcomings in governance across the super industry: limited disclosure of board composition and pay, potential conflicts of interest where employers or associations nominate board members, varying standards of trustee education, and a lack of focus on corporate governance in some policy reviews. The article argues more oversight of board structure, conflicts and reporting standards is needed.
As an everyday investor, what should I look for to assess a super fund’s transparency and governance?
Look for funds that publish clear annual accounts, disclose directors’ and executives’ remuneration, list board members with backgrounds and attendance records, and provide consistent performance reporting. The article notes few funds do this routinely, and it praises MTAA Super’s move to publish accounts and pay details as a step toward better transparency.
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