Enhancing member protections in the superannuation system

Platform trustees in the spotlight 9 min read

In the wake of the Shield Master Fund and First Guardian Master Fund collapses, Treasury has released three consultation papers:

• Enhancing member protections in the superannuation system
• Compensation Scheme of Last Resort – reform options to support ongoing sustainability
• Curbing lead generation activity.

The consultations each close on 22 May 2026.

This Insight focuses on the Enhancing member protections in the superannuation system consultation paper, which sets out five proposals in relation to superannuation platform governance, 'superannuation switching' and member compensation.

The proposals are:

• Strengthen the governance requirements for platform trustees
• Increase the penalties under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act)
• Introduce a waiting period for inter-fund superannuation switches
• Limit fee deductions for switching-related financial advice
• Require platform trustees to compensate members for eligible losses.

While some of the proposals are focused on 'platform trustees' (with the concept to be defined), others will have broader application to all RSE licensees.

In this Insight, we provide an overview of these proposals and the key issues for superannuation trustees.

These consultations follow an earlier consultation by Treasury, Enhancing oversight and governance of managed investment schemes, which closed on 27 February 2026. This included five proposals relating to registered managed investment scheme governance, and one proposal to require superannuation trustees to alert ASIC about 'superannuation switching'. Please refer to our Insight, 'Enhancing oversight and governance of managed investment schemes' for further detail. The Government has not yet announced a response to this consultation.

Key takeaways

• Stricter governance standards are on the horizon. Treasury is proposing reforms targeted at platform trustees, including mandatory holding limits on investment options, codified due diligence requirements, restrictions on conflicted arrangements and payments, and restrictions on certain operating models—including the 'trustee for hire' model.
• Platform trustees may be personally liable for member compensation. Treasury is proposing an obligation for Platform Trustees to compensate members for 'eligible losses'—being financial losses arising from external fraud or theft that result in the collapse of an investment product, to be funded from trustee capital.
• Tighter switching rules. Treasury is consulting on a mandatory waiting period for inter-fund switching (meaning rollovers from one fund to another), under which members would be required to confirm their rollover request after a waiting period and after being warned of relevant risks.
• Significantly higher penalties. Treasury considers the current maximum civil penalties under the SIS Act—capped at $792,000—may be immaterial for large superannuation funds relative to funds under management. Treasury is considering doubling the maximum civil penalty or increasing penalties to align with those in the Corporations Act 2001 (Cth) (Corporations Act).

Defining 'Platform Trustee' and 'Platform Product'

The consultation paper proposes to introduce three new legislative definitions. A 'Platform Trustee' would be defined to mean the trustee of a 'Platform RSE', which would in turn be defined as a superannuation entity that offers one or more 'Platform Products'.

The 'Platform Product' definition is proposed to capture superannuation products which allow members to construct a bespoke superannuation portfolio by choosing directly from a wide and diverse menu of investment options that offer a broad range of member flexibility and exposure to specific investments. It would exclude products that exclusively offer pre-mixed trustee-directed options and do not include specific financial products as investment options.

Treasury has suggested that the definition of a Platform RSE could differentiate fund offerings by the type, number or risk-profile of investment options available to members via these menus, including by specifying thresholds, and is seeking feedback on how the concept should be defined. These definitions will be important not just for trustees that currently consider themselves as offering platform products, but also any trustees that may offer investment options other than a small number of pre-mixed trustee-directed options and which could be caught up in the definitions.

Notably, the consultation paper does not mention the existing definition of 'platform operator' in s964 of the Corporations Act, which includes RSE licensees that are or offer to be the provider of a 'custodial arrangement' within the meaning of s1012IA of the Corporations Act.

Proposal 1: strengthen governance requirements for platform trustees  

Treasury says in the consultation paper that the existing legislative and prudential framework establishes baseline expectations for trustee conduct and governance, however the collapses of the Shield and First Guardian Master Funds have highlighted that, in practice, strong obligations do not always translate into consistently robust platform investment governance outcomes. Four reform options are identified:

• Mandatory holding limits: a 'minimum diversification requirement' would be established by requiring platform trustees to apply and enforce holding limits on investment options. These limits could either be principles-based or could contain prescriptive elements.
• Codified due diligence: platform trustees would be required to undertake initial due diligence when onboarding a product to offer as an investment option. Treasury says minimum requirements could be legislated, including requirements to maintain a documented onboarding framework, apply consistent product assessment criteria and retain evidence demonstrating how onboarding decisions were reached.
• Limiting conflicted arrangements: this option would restrict certain conflicted arrangements and payments. Treasury calls out payments (including fees and rebates) linked to product listing or continued availability on a platform and payments that operate like volume incentives, including payments that increase as member flows increase. Currently, 'volume-based shelf-space fees' are prohibited under the Corporations Act (with exceptions for reasonable fees for services and discounts/rebates)—this proposal appears intended to fill the gap by prohibiting shelf-space fees that are not 'volume-based' or which may be similar, however the volume-based shelf-space fee prohibition is not mentioned in the consultation paper.
• Restricting certain trustee operating models: the 'trustee-for-hire' model, where an external RSE licensee is engaged to provide the legal trusteeship function, would be prohibited or restricted. Treasury cites concerns that this model can in practice increase the 'operational separation' between the trustee and key elements of the day-to-day activities of the platform. Restrictions could range from targeted requirements (such as 'conditions', which we understand to mean RSE licence conditions) to an outright prohibition on particular arrangements.

Proposal 2: increase penalties under the SIS Act

The maximum civil penalty under the SIS Act is 2,400 penalty units (currently $792,000). Treasury states that the Shield and First Guardian collapses 'have renewed attention on whether existing penalty settings under the SIS Act are proportionate to the potential harm to members and are sufficient to incentivise compliance'.

Treasury proposes two options: to double the maximum penalties under the SIS Act, or to increase them to align with those in the Corporations Act, which, for obligations such as the efficiently, honestly and fairly obligation, is the greater of 50,000 penalty units, three times the benefit obtained or detriment avoided, or 10% of annual turnover, up to 2.5 million penalty units. Treasury says this second option would potentially calibrate penalties to the scale of superannuation funds to 'ensure proportionality of penalties, so as to minimise potential detriment to members'.

Proposal 3: introduce a waiting period for inter-fund superannuation switching

This proposal would require members who make certain rollover requests to confirm their request with the transferring fund after a period of delay—eg five days. If confirmation is not received after the waiting period, the request would lapse after a further three business days (why it would not simply lapse after the waiting period is not clear in the paper). The transferring trustee would be required to inform the member of the relevant risks involved in making the switch, after receiving the initial request.

Two options are proposed: first, for the waiting period to apply to all rollovers between superannuation funds; or second, for the waiting period to only apply where a rollover meets prescribed criteria, which could include rollovers to self-managed superannuation funds, to superannuation platforms or to superannuation funds that offer 'higher-risk products'. There is discussion in the consultation paper about how 'higher-risk products' could be defined, including by reference to the definition of 'lower risk' managed investment schemes considered in the Compensation Scheme of Last Resort (CSLR): Reform options to support ongoing sustainability consultation paper.

Proposal 4: limit fee deductions for switching-related financial advice

The consultation paper notes that the collapses of the Shield and First Guardian Master Funds highlighted conduct where switching advice was provided at scale, facilitated by the availability of superannuation balances as a funding source for advice fees. Treasury notes that the ability to deduct the cost of super-switching advice may make members more likely to agree to larger advice fees, creating incentives that increase the risk of adverse outcomes. The following options are proposed:

• Prohibit trustees from allowing advice fee deductions where the associated statement of advice recommends the client switch superannuation funds.
• Prohibit advice fee deductions in prescribed circumstances, including from superannuation platforms (which, we note, may be fatal to the superannuation platform industry), or where the member has not been a member of the fund for a prescribed period, or based on age or balance thresholds.
• Codify obligations for receiving superannuation funds in relation to deducting fees for personal financial advice, building on existing expectations and the sole purpose test.
• Require trustees to review advice fee deductions in defined circumstances, such as following a switch and potentially requiring the trustee be 'satisfied that a switching-related advice fee is reasonable, having regard to the nature and scope of the advice, the member’s circumstances and the fee relative to the member’s balance'.
• Impose mandatory fee caps on switching-related advice fee deductions.
• Require trustees to implement adviser and licensee onboarding and monitoring processes in relation to switching-related advice fee deductions.

Proposal 5: require platform trustees to compensate members for eligible losses

Treasury is consulting on two alternative options under this proposal: requiring platform trustees to compensate members for 'eligible losses' incurred on their platform; or, alternatively, granting ASIC a power to direct a platform trustee to commence a remediation process where ASIC 'has reason to suspect a trustee has engaged or will engage in conduct that would constitute a contravention of a financial services law, and which may have led to member losses'.

The consultation paper focuses primarily on the first of these options. 'Eligible losses' under this option would mean financial losses arising from external fraud or theft resulting in the collapse of an investment product, excluding losses attributable to ordinary investment performance or market volatility. Treasury says 'eligible losses' would not be intended to cover losses arising from internal events and says that operational risk events would usually be able to be addressed through the financial resources held to meet the operational risk financial requirement.

An independent third party would be responsible for 'activating' the obligation by determining whether an eligible loss has occurred and then directing the trustee to provide compensation. Compensation would be funded via trustee capital rather than fund assets, and the consultation paper states that platform trustees would be required to maintain or be able to raise a dedicated pool of capital for the purpose of paying compensation. Treasury is consulting on whether this should be a pre-funded capital requirement or a post-event funding obligation.

Treasury says this would likely reduce pressure on the compensation scheme of last resort 'arising from mass-loss events in platform products' and would reframe the responsibility for 'losses on superannuation platforms from the broader superannuation and financial services sector to the entities responsible'. We note there is a large assumption in that sentence that it is the trustee which is the entity responsible for such losses.

In relation to what exactly would need to be compensated, Treasury is consulting on whether this should be the initial capital invested, that capital indexed against a benchmark or a capped amount or proportion of the loss.

In relation to the alternative option (of ASIC directing the platform trustee to commence a remediation process), there is little detail provided, however Treasury notes this might be 'more responsive than waiting for final court outcomes' but would give greater discretion to the trustee in respect of the compensation payable, potentially resulting in inconsistent outcomes. 

Next steps

Submissions close 22 May 2026. Treasury has asked 46 questions for consultation in relation to the proposals put forward in the paper. Please get us in touch with us if you have any questions or would like to discuss the proposals.