In a letter on Friday APRA-advised superannuation trustees that the government expects to make legislative changes mandating minimum independence requirements for super fund boards by 1 July 2016.
On the same day Assistant Treasurer Josh Frydenberg announced legislation that will put into law policy changes the government took to the last federal election around board independence.
Specifically, super fund boards will be required to have a board comprised of at least one-third independent directors, as well as an independent chair.
Mr Frydenberg said the government's proposed legislation, which is currently at the exposure draft legislation stage, was in line with the findings of the 2010 Cooper Review and last December's Financial System Inquiry final report.
"While the government has carefully considered this FSI recommendation, we consider that the proposal for one-third independent directors and an independent chair, will substantially strengthen governance arrangements for the benefit of fund members," Mr Frydenberg said.
APRA's letter to trustees carefully defined what 'independence' would mean.
"The proposed SIS Act definition of independence states that a person who has a material relationship with the RSE licensee, including through an employer that has such a relationship, cannot be an independent director on that RSE licensee’s board," APRA said.
APRA said there should be regular checks of a super board's independence.
The transition requirements proposed by the prudential regulator involve ongoing board effectiveness; minimum requierments of trustees for transition plans; and guidance to support the transition.
Mr Frydenberg's announcement of the new independence rules were welcomed by retail superannuation fund providers, but Industry Super Australia (ISA) deputy chief executive Robbie Campo said the changes were "unnecessary" and "unjustified".
"In response to the government's announcement today to impose one-size-fits-all governance arrangements on the best performing sector, ISA has questioned why the most significant changes are reserved for successful not-for-profit super funds," Ms Campo said.
"It is astounding that anyone would be seeking to interfere with the governance model of the “all profits to members” super funds that have driven two decades of strong returns for members, nearly two per cent higher than “for profit” funds, on average.
"The watchful eyes and questioning minds of industry super fund directors have not only delivered the best performing funds, they have avoided the widespread consumer losses and scandals which have engulfed the major banks and wealth managers over recent years," Ms Campo said.
