This Determination revokes the earlier Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 1 of 2021 and replaces Prudential Standard CPS 511 Remuneration with a new CPS 511 Remuneration, as set out in the Schedule. The instrument is dated 28 September 2023 and commences on 1 January 2024 (preamble; commencement clause). It is made by APRA under the statutory heads of power listed in the Authority section: s 11AF of the Banking Act 1959, s 32 of the Insurance Act 1973, s 230A of the Life Insurance Act 1995, s 92 of the Private Health Insurance (Prudential Supervision) Act 2015 and s 34C of the Superannuation Industry (Supervision) Act 1993 (Authority, para 1).

Mechanically, the Standard applies to defined classes of APRA-regulated entities (Application, para 2): ADIs (including foreign ADIs, excluding purchased payment facility providers), general insurers (including Category C), life companies (including friendly societies and eligible foreign life insurance companies), private health insurers and RSE licensees. The Standard divides entities into two operational categories for application: significant financial institutions (SFIs) and non-significant financial institutions (non-SFIs) (para 4). Paragraphs 1-20 apply to all entities; paragraphs 21-73 apply only to SFIs; paragraphs 74-98 apply only to non-SFIs (para 4). Entity-specific commencement dates are set out (para 10): ADI SFIs and groups headed by ADI or authorised banking NOHC SFIs , 1 January 2023; insurer/life/private-health/RSE SFIs or groups headed by an authorised insurance NOHC/parent entity/registered NOHC that are SFIs , 1 July 2023; all other APRA-regulated entities , 1 January 2024 (para 10). Disclosure obligations commence for an entity’s first full financial year beginning on or after 1 January 2024 (para 11).

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Commonwealth Coat of Arms

Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 3 of 2023

Prudential Standard CPS 511 Remuneration

Banking Act 1959

Insurance Act 1973

Life Insurance Act 1995

Private Health Insurance (Prudential Supervision) Act 2015

Superannuation Industry (Supervision) Act 1993

I, John Lonsdale, a delegate of APRA:

(a) under subsections 11AF(3) of the Banking Act 1959, 32(4) of the Insurance Act 1973, 230A(5) of the Life Insurance Act 1995, 92(5) of the Private Health Insurance (Prudential Supervision) Act 2015 and 34C(6) of the Superannuation Industry (Supervision) Act 1993 REVOKE Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 1 of 2021, including Prudential Standard CPS 511 Remuneration made under that determination;

(b) under subsection 11AF(1) of the Banking Act 1959 DETERMINE the prudential standard, which applies to all ADIs, excluding ADIs referred to in paragraph 2 of the prudential standard, and authorised banking NOHCs;

(c) under subsection 32(1) of the Insurance Act 1973 DETERMINE the prudential standard, which applies to all general insurers and authorised insurance NOHCs, and subsidiaries of general insurers or authorised insurance NOHCs where those subsidiaries are parent entities of Level 2 insurance groups;

(d) under subsection 230A(1) of the Life Insurance Act 1995 DETERMINE the prudential standard, which applies to all life companies, including friendly societies, and registered NOHCs;

(e) under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 DETERMINE the prudential standard, which applies to all private health insurers; and

(f) under subsection 34C(1) of the Superannuation Industry (Supervision) Act 1993 DETERMINE the prudential standard, which applies to all RSE licensees.

This instrument commences on 1 January 2024.

Dated: 28 September 2023

John Lonsdale

Chair

APRA

Interpretation

In this Determination:

ADI has the meaning given in section 5 of the Banking Act 1959.

APRA means the Australian Prudential Regulation Authority.

authorised banking NOHC has the meaning given to the expression authorised NOHC in section 5 of the Banking Act 1959.

authorised insurance NOHC has the meaning given to the expression authorised NOHC in subsection 3(1) of the Insurance Act 1973.

friendly society has the meaning given in section 16C of the Life Insurance Act 1995.

general insurer has the meaning given in section 11 of the Insurance Act 1973.

Level 2 insurance group has the meaning given in Prudential Standard GPS 001 Definitions.

life company has the meaning given in the Schedule to the Life Insurance Act 1995.

parent entity has the meaning given in Prudential Standard GPS 001 Definitions.

private health insurer has the meaning given in section 4 of the Private Health Insurance (Prudential Supervision) Act 2015.

registered NOHC has the meaning given in the Schedule to the Life Insurance Act 1995.

RSE licensee has the meaning given in subsection 10(1) of the Superannuation Industry (Supervision) Act 1993.

subsidiary has the meaning given in Prudential Standard GPS 001 Definitions.

the prudential standard means Prudential Standard CPS 511 Remuneration in the form set out in the Schedule.

Schedule

Prudential Standard CPS 511 Remuneration comprises the document commencing on the following page.

Commonwealth Coat of Arms

Prudential Standard CPS 511

Remuneration

Objectives and key requirements of this Prudential Standard The objective of this Prudential Standard is to ensure that APRA-regulated entities maintain remuneration arrangements which appropriately incentivise individuals to prudently manage the risks they are responsible for, and that there are appropriate consequences for poor risk outcomes. The key requirements of this Prudential Standard are that: the Board of an APRA-regulated entity is responsible for the remuneration framework and its effective application, consistent with the size, business mix and complexity of the entity;an entity must maintain a remuneration framework that promotes effective management of financial and non-financial risks;remuneration outcomes must be commensurate with performance and risk outcomes; higher standards must be met for key roles and certain large, complex entities; andan APRA-regulated entity must make clear, comprehensive, meaningful, consistent and comparable public disclosures on remuneration.

Table of Contents

Authority

Application

Interpretation

Adjustments and exclusions

Previous exercise of discretion

Definitions

A. Requirements for SFIs

Remuneration framework

Role of the Board

Board Remuneration Committee

Remuneration design

Deferral

Remuneration outcomes

Specified roles

Review of the remuneration framework

Other requirements

Disclosures

B. Requirements for Non-SFIs

Remuneration framework

Role of the Board

Remuneration design

Remuneration outcomes

Specified roles

Other requirements

Disclosures

Authority

This Prudential Standard is made under:

(a) section 11AF of the Banking Act 1959 (Banking Act);

(b) section 32 of the Insurance Act 1973 (Insurance Act);

(d) section 92 of the Private Health Insurance (Prudential Supervision) Act 2015 (PHIPS Act); and

(e) section 34C of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Application

2. Subject to paragraphs 3 and 4, and in accordance with paragraphs 9 to 11, this Prudential Standard applies to all APRA-regulated entities, defined as:

(a) authorised deposit taking institutions (ADIs), including foreign ADIs, and non-operating holding companies authorised under the Banking Act (authorised banking NOHCs) but excluding purchased payment facility providers;

(b) general insurers, including Category C insurers, non-operating holding companies authorised under the Insurance Act (authorised insurance NOHCs) and parent entities of Level 2 insurance groups;

(c) life companies, including friendly societies, eligible foreign life insurance companies (EFLICs) and registered NOHCs;

(d) private health insurers registered under the PHIPS Act; and

(e) registrable superannuation entity licensees (RSE licensees) under the SIS Act in respect of their business operations.[1]

3. The obligations imposed by this Prudential Standard on, or in relation to, a foreign ADI, a Category C insurer or an EFLIC apply only in relation to the Australian branch operations of that entity.

4. For the purposes of this Prudential Standard, an APRA-regulated entity is either a significant financial institution (SFI) or a non-significant financial institution (non-SFI). Unless APRA determines otherwise in a particular case, [2] this Prudential Standard applies to these two classes of APRA-regulated entities as follows:

(a) paragraphs 1 to 20 apply to both SFIs and non-SFIs;

(b) paragraphs 21 to 73 apply only to SFIs; and

5. Subject to paragraph 7, where an entity is the ‘Head of a group’,[3] it must comply with an applicable requirement of this Prudential Standard:

(a) in its capacity as an APRA-regulated entity;

(b) by ensuring that the requirement is applied appropriately throughout the group, including in relation to entities that are not APRA-regulated; and

6. In applying the requirements of this Prudential Standard on a group basis, references in paragraphs 18 to 98 to an ‘APRA-regulated entity’ must be read as ‘Head of a group’ and references to ‘entity’ must be read as ‘group’.

7. Unless otherwise determined by APRA, an APRA-regulated entity within a group is not required to make the disclosures required by this Prudential Standard on an individual entity or a Level 2 basis where:

(a) the APRA-regulated entity is part of a group headed by another APRA-regulated entity; and

(b) the other APRA-regulated as the Head of a group makes the required disclosures on a Level 2 basis or Level 3 basis, as applicable.

8. This Prudential Standard does not apply to the extent it would require any entity to act (or not act) in a manner contrary to:

(a) the Fair Work Act 2009; and

(b) in relation to any employment contract or contract of appointment or engagement governed by foreign law, any applicable foreign legislation.

9. For an ADI, by operation of the Legislation Act 2003, this Prudential Standard is to be read and construed subject to the Banking Act, including Part IIAA which imposes requirements relating to remuneration.

10. Subject to paragraphs 11, 12 and 13, this Prudential Standard applies:

(a) to an ADI that is an SFI, or a group headed by an ADI or authorised banking NOHC that is an SFI, on 1 January 2023;

(b) to a general insurer, life company, private health insurer or RSE licensee that is an SFI, or a group headed by such an SFI, or a group headed by an authorised insurance NOHC, a parent entity of a Level 2 insurance group or a registered NOHC that is an SFI, on 1 July 2023; and

11. The disclosure requirements of this Prudential Standard, specified in paragraphs 63-73 and paragraphs 91-98, apply to an APRA-regulated entity’s first full financial year that commences on or after 1 January 2024.

12. This Prudential Standard does not apply to a person’s variable remuneration if the opportunity to earn the variable remuneration arose before the relevant commencement dates specified in paragraph 10.

13. Despite paragraph 12, if:

(a) the person’s variable remuneration is payable under a contract entered into before the previous version of this Prudential Standard came into effect; and

(b) apart from this paragraph, the application of this Prudential Standard to the variable remuneration would result in an acquisition of property from the person other than on just terms (within the meaning of paragraph 51(xxxi) of the Constitution);

this Prudential Standard does not apply to the variable remuneration to the extent it would result in such an acquisition.[4]

Interpretation

14. Terms that are defined in Prudential Standard 3PS 001 Definitions, Prudential Standard APS 001 Definitions (APS 001), Prudential Standard GPS 001 Definitions (GPS 001), Prudential Standard LPS 001 Definitions (LPS 001) or Prudential Standard HPS 001 Definitions (HPS 001) appear in bold the first time they are used in this Prudential Standard.

15. In this Prudential Standard, unless the contrary intention appears, a reference to an Act, Regulations, Rules or Prudential Standard is a reference to the Act, Regulations, Rules or Prudential Standard as in force from time to time.

16. Where this Prudential Standard provides for APRA to exercise a power or discretion, the power or discretion is to be exercised in writing.

17. For the purposes of this Prudential Standard:

(a) group – means a Level 2 group, Level 3 group or a group comprising the RSE licensee and all connected entities[5] and all related bodies corporate[6] of the RSE licensee, as relevant;[7]

(b) Head of a group – means a Level 2 Head or Level 3 Head, as relevant;

(i) Level 2 as defined in APS 001; or

(ii) a Level 2 insurance group as defined in GPS 001;

(d) Level 2 Head – means:

(i) where an ADI that is a member of a Level 2 group is not a subsidiary of an authorised banking NOHC or another ADI, that ADI;

(ii) where an ADI that is a member of a Level 2 group is a subsidiary of an authorised banking NOHC, that authorised banking NOHC; or

(iii) the parent entity of a Level 2 insurance group as defined in GPS 001;

Adjustments and exclusions

18. APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to an APRA-regulated entity.

Previous exercise of discretion

19. An APRA-regulated entity must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion by APRA under Prudential Standard CPS 510 Governance or Prudential Standard SPS 510 Governance (SPS 510).

Definitions

20. The following definitions are used in this Prudential Standard:

(a) Board – for an RSE licensee, means a reference to the Board of directors or group of individual trustees of an RSE licensee where ‘group of individual trustees’ has the meaning given in subsection 10(1) of the SIS Act;

(b) clawback – means the recovery of an amount corresponding to some or all variable remuneration subject to recovery that has been paid or vested to a person;

(d) consequence management – means the approach to managing performance, risk and conduct outcomes, which may include downward adjustments to variable remuneration;

(e) executive director – means a director that is not a non-executive director;

(f) financial measures – means measures that are based on revenue, sales, profit, the entity’s share price, or other measures that directly affect these;

(g) highly paid material risk-taker – means a material risk-taker whose total fixed remuneration (which includes salary, superannuation, allowances and benefits) plus actual variable remuneration is equal to or greater than 1 million AUD in a financial year of the entity;

(h) in-period adjustment – means an adjustment made to variable remuneration during the period set for measuring the performance under a variable remuneration arrangement;

(i) independent director – means a director defined as independent in Prudential Standard CPS 510 Governance and in subsection 10(1) of the SIS Act;

(j) malus – means an adjustment to reduce the value of all or part of deferred variable remuneration before it has vested;

(k) material risk-taker – means a person whose activities have a material potential impact on the entity’s risk profile, performance and long-term soundness, and in addition for an RSE licensee, means a person whose activities have a material potential impact on performing its duties and exercising its powers in the best financial interests of beneficiaries;

(l) misconduct – means an action or inaction by a person covered by an entity’s remuneration policy that does not meet applicable:

(i) legal and prudential obligations;

(ii) requirements or standards of a recognised professional body; or

(iii) policies and procedures covering conduct and ethical standards set by the entity;

(m) non-executive director – has the meaning given in Prudential Standard CPS 510 Governance and for an RSE licensee, Prudential Standard SPS 510 Governance;

(n) non-financial measures – means measures that are not financial measures;

(o) non-significant financial institution (non-SFI) – means, in relation to RSE licensees, an RSE licensee that is not an SFI;[8]

(p) relevant oversight function – means for foreign ADIs and Category C insurers, the senior officer outside Australia, and for EFLICs, the Compliance Committee;

(q) remuneration arrangement – means an arrangement that includes measures of performance, the mix of forms of remuneration (such as fixed and variable components, and cash and equity-related benefits) and the timing of eligibility to receive payments. All forms of remuneration are captured by this Prudential Standard, regardless of where, or from whom, the remuneration is sourced;

(r) remuneration framework – means the totality of systems, structures, policies, processes and people within an entity that identify, measure, evaluate, monitor, report and control or mitigate all internal and external sources of risks relating to remuneration;

(s) risk and financial control personnel – means persons whose primary role is in risk management, compliance, internal audit, financial control or actuarial control;

(t) senior manager –

(i) in relation to ADIs, has the meaning given in the Banking Act;

(ii) in relation to general insurers, has the meaning given in the Insurance Act;

(iii) in relation to life insurers, has the meaning given in the Life Insurance Act;

(iv) in relation to private health insurers, means any person specified in paragraph (c) of the definition of officer in the PHIPS Act; and

(v) in relation to RSE licensees, has the meaning given in Prudential Standard SPS 520 Fit and Proper;

(u) significant financial institution (SFI) – means, in relation to RSE licensees, an RSE licensee that either:

(i) has total assets in excess of AUD $30 billion in the case of a single RSE operated by an RSE licensee, or if the RSE licensee operates more than one RSE where the combined total assets of all RSEs exceed this amount; or

(ii) is determined as such by APRA, having regard to matters such as complexity in its operations or its membership of a group;[9]

(v) specified role – means a person who is a senior manager, executive director, material risk-taker (including highly-paid material risk-takers) and risk and financial control personnel;

(w) third-party service provider – means an entity that provides, under a compensation arrangement, a service to an APRA-regulated entity that is not a related body corporate or connected entity of the APRA-regulated entity;

(x) variable remuneration – means the amount of a person’s total remuneration that is conditional on objectives, which include performance criteria, service requirements or the passage of time; and

(y) vesting – means, in relation to variable remuneration, the process by which a person becomes the legal owner of the variable remuneration.

A. Requirements for SFIs

Remuneration framework

21. An APRA-regulated entity must maintain a remuneration framework that:

(a) aligns with the entity’s business plan, strategic objectives and risk management framework;[10]

(b) promotes effective management of both financial and non-financial risks, sustainable performance and the entity’s long-term soundness;

(c) for an RSE licensee, promotes performing its duties and exercising its powers in the best financial interests of beneficiaries; and

(d) supports the prevention and mitigation of conduct risk.

22. The remuneration framework must include a documented remuneration policy which at minimum sets out:

(a) how the remuneration framework addresses paragraph 21 of this Prudential Standard;

(b) at a high level, the structure and terms of remuneration arrangements that apply to a person who is:

(i) employed directly by the APRA-regulated entity;

(ii) retained directly by the APRA-regulated entity under contract; and

(iii) employed by, or is a contractor of a body corporate (including a service company) that is a related body corporate or connected entity, of the APRA-regulated entity;

(c) the approach to identify and mitigate material conflicts to the objectives of the remuneration framework, as specified in paragraph 21 of this Prudential Standard, that may result from third-party service provider compensation arrangements; and

(d) the systems and processes that support the implementation of the entity’s remuneration arrangements, including those that cover the assessment and management of performance, conduct and consequences.

Role of the Board

23. The Board, or relevant oversight function, of an APRA-regulated entity is ultimately responsible for the entity’s remuneration framework and its effective application.

24. The Board, or relevant oversight function, must approve the remuneration policy required under paragraph 22 of this Prudential Standard.

25. The Board must establish a Board Remuneration Committee that:

(a) oversees the design, operation and monitoring of the remuneration framework;

(b) is appropriately composed to enable it to exercise competent and independent judgment when fulfilling requirements under paragraph 25(a) above; and

Board Remuneration Committee

26. The Board Remuneration Committee must have at least three members and all members must be non-executive directors of the entity.

27. For an entity that is not an RSE licensee, a majority of members of the Committee must be independent and the chairperson of the Committee must be an independent director of the entity.

28. For an RSE licensee, the chairperson of the Board may sit on the Board Remuneration Committee, but may not chair the Committee except where the chairperson of the Board is the only independent director on the Board.

29. The Board Remuneration Committee must have a written charter that sets out its roles, responsibilities and terms of operation.

30. The Board Remuneration Committee, or relevant oversight function, must consult the Board Risk Committee[11] and Chief Risk Officer or person in a similar role, to enable risk outcomes to be appropriately reflected in remuneration outcomes for persons in specified roles. This consultation must follow a documented process.

31. The Board Remuneration Committee, or relevant oversight function, must obtain comprehensive reporting that will allow it to determine whether remuneration outcomes of all remuneration arrangements align with paragraph 21 of this Prudential Standard.

32. The Board Remuneration Committee, or relevant oversight function, in carrying out its duties must:

(a) have free and unfettered access to other Board committees;

(b) have free and unfettered access to risk and financial control personnel and other relevant parties (internal and external); and

(c) if choosing to engage third-party experts, have the power to do so in a manner that ensures that the engagement, including any advice received, is independent.

Remuneration design

33. An APRA-regulated entity must design all variable remuneration arrangements to align with paragraph 21 of this Prudential Standard and must incorporate in its variable remuneration arrangements:

(a) financial and non-financial risks that could materially impact the entity’s risk profile, sustainable performance, long-term soundness, and in addition for an RSE licensee, those risks that could materially impact on performing its duties and exercising its powers in the best financial interests of beneficiaries;

(b) payout and vesting schedules that are commensurate with the possible range of risk and performance outcomes and that are sensitive to the time horizon of risk; and

(c) appropriate variable remuneration adjustment tools, that include but are not limited to overriding board discretion at each decision point, in-period adjustments, malus and, where appropriate, clawback, which are supported by a downward-adjustments process:

(i) with clearly identified triggers to make a downward-adjustment;

(ii) that determines the appropriate adjustment tools to use; and

(iii) that determines the amount of downward-adjustment, proportionate to the severity of risk and conduct outcomes, to nil if appropriate.

34. The determination of each component of a person’s variable remuneration must:

(a) give material weight to non-financial measures[12] where the remuneration is performance related; and

(b) be adjusted downwards, potentially to nil, for adverse risk and conduct outcomes, based on clearly defined risk criteria, as specified in paragraph 37 below.

35. An APRA-regulated entity must subject a person’s variable remuneration arrangement to malus.

36. An APRA-regulated entity must also subject the variable remuneration arrangement of a senior manager, executive director or a highly-paid material risk-taker to clawback. Clawback arrangements must include the following features:

(a) a period of at least two years from the date of payment or vesting of variable remuneration within which clawback may apply; and

(b) the application of clawback whether or not the employment or engagement of the person has ceased.

37. An APRA-regulated entity must set specific criteria for the application of variable remuneration adjustment tools, including at least the following:

(a) misconduct leading to significant adverse outcomes;

(b) a significant failure of financial or non-financial risk management;

(d) a significant error or a significant misstatement of criteria on which the variable remuneration determination was based; and

(e) significant adverse outcomes for customers, beneficiaries or counterparties.

38. An APRA-regulated entity must take reasonable steps to appropriately adjust variable remuneration downwards when, as a minimum, any of the criteria specified in paragraph 37 are satisfied. The total downward-adjustment to variable remuneration must be proportionate to the severity of the risk and conduct outcome.

39. In circumstances involving a person under investigation for criteria specified in paragraph 37, variable remuneration must not vest until the investigation is closed.

40. An APRA-regulated entity must take appropriate steps to assess and mitigate conflicts of interest in the design of its remuneration arrangements, including conflicts that may arise from service contracts.

Deferral

41. An APRA-regulated entity must defer variable remuneration as follows:

(a) for a Chief Executive Officer (CEO), at least 60 per cent of the CEO’s total variable remuneration must be deferred over a minimum deferral period of six years, vesting no faster than on a pro-rata basis and only after four years;

(b) for a senior manager and executive director other than a CEO, at least 40 per cent of that person’s total variable remuneration must be deferred over a minimum deferral period of five years, vesting no faster than on a pro-rata basis and only after four years; and

(c) for a highly-paid material risk-taker who is not a senior manager, at least 40 per cent of that person’s total variable remuneration must be deferred over a minimum deferral period of four years, vesting no faster than on a pro-rata basis and only after two years.

42. The deferral period must include the period over which performance is assessed. The deferral period must also include any required service, retention and holding periods.

43. Paragraph 41 does not apply in respect of any person with deferred variable remuneration of less than AUD $50,000 in a financial year of the APRA-regulated entity.

Remuneration outcomes

44. An APRA-regulated entity must:

(a) align variable remuneration outcomes with performance and risk outcomes; and

(b) reflect the appropriate application of variable remuneration adjustment tools in variable remuneration outcomes, as specified in paragraph 33(c) of this Prudential Standard.

45. An APRA-regulated entity may only pay or vest variable remuneration to a person if payment or vesting:

(a) supports the entity’s compliance with paragraph 21 of this Prudential Standard;

(b) is justified on the basis of the effectiveness of risk management of the entity and the relevant business unit; and

46. An APRA-regulated entity’s variable remuneration outcomes must link to and be supported by the entity’s performance management system, code of conduct and consequence management processes.

47. An APRA-regulated entity must not accelerate the vesting of unvested variable remuneration for a person in a specified role no longer employed or engaged by the entity, unless specific exceptions[13] have been included in the remuneration policy. If that person is eligible for any unvested variable remuneration, it must be subject to the same vesting conditions as those for a person employed or engaged by the entity.

Specified roles

48. An APRA-regulated entity must prudently manage the variable remuneration arrangements of all persons in specified roles.

49. The Board Remuneration Committee, or relevant oversight function, must provide clear guidance to senior management on its expectations in determining the appropriate level and timing of risk adjustment to the variable remuneration outcomes for persons in specified roles.

50. The Board Remuneration Committee must make recommendations to the Board annually on the remuneration arrangements and variable remuneration outcomes for persons in specified roles as follows:

(a) individually for senior managers and executive directors;[14] and

(b) on a cohort basis for highly-paid material risk-takers, other material risk-takers and risk and financial control personnel.

51. When forming its recommendations under paragraph 50 of this Prudential Standard, the Board Remuneration Committee must:

(a) obtain sufficient information to enable remuneration outcomes to be commensurate with performance and risk outcomes; and

(b) determine whether the variable remuneration arrangement, individually and on a cohort basis:

(i) is appropriate to meet its intended purpose and expected remuneration outcomes; and

(ii) supports the entity’s compliance with paragraph 21 of this Prudential Standard.

52. The Board, or relevant oversight function, must approve the variable remuneration outcomes for persons in specified roles as follows:

(a) individually for senior managers and executive directors;[15] and

(b) on a cohort basis for highly-paid material risk-takers, other material risk-takers and risk and financial control personnel.

53. The variable remuneration arrangements for risk and financial control personnel must:

(a) reflect the independence and authority of those personnel in carrying out their functions;

(b) reflect the purpose of their functions; and

Review of the remuneration framework

54. An APRA-regulated entity must review compliance of the remuneration framework against the requirements of this Prudential Standard at least annually.

55. In addition to the annual review of compliance, the effectiveness of the remuneration framework must be subject to a comprehensive review by operationally independent, appropriately experienced and competent persons at least every three years.

56. An APRA-regulated entity must document and report the results of the reviews required under paragraphs 54 and 55 of this Prudential Standard to the Board Remuneration Committee, or relevant oversight function, in a timely manner. The Board Remuneration Committee, or relevant oversight function, must take appropriate and timely action to ensure the findings of these reviews are adequately considered and addressed.

57. An APRA-regulated entity’s effectiveness review required under paragraph 55 of this Prudential Standard must assess:

(a) compliance of the remuneration framework with paragraph 21 of this Prudential Standard;

(b) whether the remuneration framework and its elements are operating as intended;

(d) the alignment of remuneration outcomes with the performance and risk outcomes achieved.

58. Where an APRA-regulated entity identifies a material change to the size, business mix and complexity of the operations outside the review required in paragraph 55, it must consider and address the need to amend or review the remuneration framework to take account of these developments at that time.

Other requirements

59. In relation to the requirements for a Board Remuneration Committee and remuneration policy, where an APRA-regulated entity is part of a group, or corporate group in the case of a private health insurer, the Board of the APRA-regulated entity may:

(a) use a group Board Remuneration Committee as the Board Remuneration Committee for the APRA-regulated entity, provided that:

(i) the requirements set out in this Prudential Standard are met;

(ii) all members of the group Board Remuneration Committee are non-executive directors of the Head of the group in the context of an ADI, general insurer or life company;[16] and

(iii) the Board of the entity has free and unfettered access to the group Board Remuneration Committee; and

(b) adopt and apply a group remuneration policy that is also used by a related body corporate or a connected entity provided that the group remuneration policy:

(i) meets the requirements of this Prudential Standard;

(ii) has been approved by the Board or relevant oversight function; and

(iii) gives appropriate regard to the entity’s business activities, its specific requirements and its remuneration framework.

60. An APRA-regulated entity may apply to APRA for approval of alternative Board Remuneration Committee arrangements that meet the objectives of this Prudential Standard. APRA may approve alternative arrangements for the entity if satisfied that those arrangements will, in APRA’s opinion, achieve the objectives of this Prudential Standard.

61. Except in circumstances permitted by law, an APRA-regulated entity must not pay any remuneration (whether directly or indirectly) to, or for the benefit of, a person through vehicles or methods that undermine the effect or intent of the requirements of this Prudential Standard. An APRA-regulated entity must at minimum prevent the following:

(a) the entity indemnifying or insuring (whether directly or through arrangements with another person) the relevant person against the consequences of:

(i) breaching an obligation under this Prudential Standard; or

(ii) applying in-period adjustment, malus or clawback under this Prudential Standard; and

(b) hedging by any person in a specified role who receives equity or equity-linked deferred variable remuneration, of their economic exposure to the resultant equity price risk before the equity-linked remuneration is fully vested and able to be sold for cash by the recipient. The entity must have a prohibition for such hedging, whether in its remuneration policy, contractual or other documentation, and, define and document the process and actions to be taken where any person in a specified role is in breach of the prohibition.

62. Paragraph 61 does not apply in respect of a liability for legal costs.

Disclosures

63. An APRA-regulated entity must make clear, comprehensive, meaningful, consistent and comparable public disclosure of information on its remuneration framework and practices, as set out in this Prudential Standard.

64. An APRA-regulated entity must publish the disclosures required under this Prudential Standard in a standalone document on its website or, provided the information is clearly identified as disclosures made for the purpose of complying with the requirements of this Prudential Standard, as part of other disclosures made by the entity that are available on its website. Tables 2, 3 and 4, must be disclosed in a machine-readable format to facilitate the use of the data, such as in the form of a comma-separated values (CSV) file.

65. An APRA-regulated entity must make disclosures on a financial year basis for each full financial year of the APRA-regulated entity. For the purposes of disclosures, relevant employees must be counted on a full-time equivalent basis.

66. An APRA-regulated entity must make the disclosures under this Prudential Standard as soon as possible after it lodges its annual financial statements with the Australian Securities and Investments Commissions (ASIC), and not more than six months after the end of the financial year to which the disclosures relate. If an entity is not required to lodge financial statements with ASIC, it must make the required disclosures not more than six months after the end of the financial year to which the disclosures relate.

67. For the purposes of disclosing Tables 2, 3 and 4:

(a) where a person in a specified role is a material risk-taker and a senior manager or executive director, they must be disclosed as part of the senior manager cohort;

(b) where a particular cohort of specified roles, with the exception of the CEO, comprises less than five individuals, an APRA-regulated entity is not required to disclose information for that particular cohort.

Remuneration framework

68. An APRA-regulated entity must disclose information on its remuneration framework as set out in Table 1.

Table 1 Remuneration framework

	Governance of the remuneration framework
1	Name, composition and mandate of the main bodies overseeing remuneration.
2	Number of meetings held by the main bodies overseeing remuneration during the financial year.
3	An overview of reviews of the remuneration framework performed during the financial year, including any consequential changes, the reasons for those changes and the intended impact on remuneration outcomes.
4	A description of how the Board:<br>(i) oversees remuneration policies;<br>(ii) oversees the input provided by:<br>- the Board Risk Committee or other Board committees; and<br>- the risk function, including the Chief Risk Officer; and<br>(iii) exercises its discretion in determining remuneration outcomes, including remuneration outcomes for variable remuneration awarded in prior financial years.
5	A description of external consultants whose advice has been sought on remuneration, the body by which they were commissioned and in what areas of the remuneration framework.
	Remuneration Framework
6	An overview of the key features and objectives of the remuneration framework, including how it:<br>(i) aligns to the APRA-regulated entity’s business plan, strategic objectives and risk management framework;<br>(ii) promotes effective management of both financial and non-financial risks, sustainable performance and long-term soundness;<br>(iii) supports the prevention and mitigation of conduct risk; and<br>(iv) for an RSE licensee, promotes the RSE licensee performing its duties and exercising powers in the best financial interests of beneficiaries.
7	A description of the scope of the APRA-regulated entity’s remuneration policy (such as by regions or business lines), including the extent to which it is applied to foreign subsidiaries and branches (if applicable).
8	A description of the types of positions included in specified roles as defined in paragraph 20(v)20(u) of this Prudential Standard.
9	A description of how the APRA-regulated entity aligns remuneration outcomes with performance. This must include:<br>(i) an overview of the main financial and non-financial performance measures for the entity, key business lines, the CEO and other specified roles on a cohort basis;<br>(ii) a description of how material weight is applied to non-financial measures in the determination of performance related variable remuneration, including the proportion (level or range) of variable remuneration that would be impacted by non-financial measures, where this is possible to define; and<br>(iii) a discussion of how a person’s remuneration is linked to entity-wide and individual performance.
10	Where no variable remuneration is offered (excluding one-off payments), a description of the method used to ensure risk management outcomes are assessed and consequence management applied in the event of a material breach or misconduct.
11	A description of variable remuneration of risk and financial control personnel for the financial year covering: [17]<br>(i) remuneration arrangements, including how variable remuneration arrangements reflect their independence, authority and the purpose of their functions, and are not unduly influenced by the performance of the business activities they control;<br>(ii) the remuneration outcomes, including variable remuneration outcomes as a proportion (level or range) of fixed remuneration and the nature and proportion of any adjustments made to reflect risk performance; and<br>(iii) any special payments made.[18]
	Design of variable remuneration plans
12	For the variable remuneration plans applicable to specified roles, a description of the plan design, including:[19]<br>(i) forms of remuneration offered;<br>(ii) the persons eligible to participate in the plan, as a percentage of their respective cohort of specified role;<br>(iii) how it is aligned with the business strategy and effective risk management;<br>(iv) how cohort and individual outcomes are determined, including how material weight is given to non-financial measures;<br>(v) if the mix of variable remuneration differs across persons within a specified role cohort, a description of the factors that determine the mix and their relative importance;<br>(vi) how the variable remuneration pool (if any) is determined, including performance and risk measures used;<br>(vii) deferral periods and vesting schedules; and<br>(viii) any adjustment measures that may differ from Table 1, row 13.
	Deferrals and adjustments
13	A description of the ways in which the APRA-regulated entity defers and adjusts variable remuneration to take account of longer-term performance, including risk performance. This must include:<br>(i) an overview of the processes and tools for adjusting variable remuneration, including criteria and triggers for each tool; and<br>(ii) an overview of the policy for deferral and vesting of variable remuneration.

Remuneration outcomes

69. An APRA-regulated entity must disclose remuneration outcomes for the financial year as set out in Table 2. Disclosure for the purposes of Table 2 must be on the basis of:

(a) current financial year awards that are not subject to conditions, and includes payments for the current financial year made following the end of the financial year; and

(b) prior financial year awards that satisfied all conditions during the financial year.

Table 2 Remuneration outcomes for the financial year

A$m CEO Other senior managers Highly paid material risk-takers Other material risk-takers
Fixed remuneration
1 Number of employees paid fixed remuneration -
2 Total fixed remuneration
3 of which: cash-based
4 of which: share-based awards[20]
5 of which: other
6 Average percentage increase in total fixed remuneration (row 2) on previous financial year
Variable remuneration
7 Number of employees eligible for variable remuneration -
8 Number of employees that received variable remuneration
9 Total variable remuneration
10 of which: cash-based
11 of which: share-based awards
12 of which: other
13 Total variable remuneration (row 9) that has been deferred
14 of which: cash-based
15 of which: share-based awards
16 of which: other
17 Average percentage increase in total variable remuneration (row 9) on previous financial year
18 Total remuneration (sum of rows 2 + 9)

Special payments

70. An APRA-regulated entity must disclose any special payments made in the financial year as set out in Table 3.[21]

71. A special payment is a one-off :

(a) guaranteed bonus;

(b) sign-on award to a newly appointed employee upon recruitment; or

Table 3 Special payments

	A$m	CEO
1	Number of employees paid a guaranteed bonus	-
2	Total guaranteed bonuses
3	Number of employees paid a sign-on award	-
4	Total sign-on awards
5	Number of employees paid a severance payment	-
6	Total severance payments

Deferred and adjusted variable remuneration

72. An APRA-regulated entity must disclose deferred and adjusted variable remuneration in Table 4. Disclosures for the purposes of Table 4 must include:

(a) for column A: total deferred variable remuneration net of downward-adjustments as at the end of the financial year. This must reflect current financial year awards and prior financial years’ awards that have not yet satisfied all conditions; and

(b) for column B: total paid and vested variable remuneration outcomes (i.e. not deferred) net of downward adjustments during the financial year. This must reflect current financial year payments and awards that are no longer subject to conditions (this includes payments and awards for the current financial year made following the end of the financial year); and prior financial years’ awards that satisfied all conditions during the financial year. This excludes deferred amounts; and

(c) for column C: total downward adjustments applied to variable remuneration that have been included under columns A and B during the financial year.

73. For each of the cohort of specified roles in Table 4, an APRA-regulated entity must provide a description of the main triggers leading to downward-adjustments to variable remuneration as a result of consequence management.

Table 4 Deferred and adjusted variable remuneration

A$m A Total amount of outstanding deferred variable remuneration post adjustments BTotal amount of variable remuneration not deferred post adjustments CTotal amount of downward adjustments to variable remuneration reported in columns A and B
CEO
1 Total CEO
2 of which: cash
3 of which: share-based awards
4 of which: other
Other senior managers
5 Total other senior managers
6 of which: cash
7 of which: share-based awards
8 of which: other
Highly paid material-risk takers
9 Total highly paid material risk-takers
10 of which: cash
11 of which: share-based awards
12 of which: other
Other material risk-takers
13 Total other material risk-takers
14 of which: cash
15 of which: share-based awards
16 of which: other
17 Total (sum of rows 1 + 5 + 9 + 13)

B. Requirements for Non-SFIs

Remuneration framework

74. An APRA-regulated entity must maintain a remuneration framework that:

(a) aligns with the entity’s business plan, strategic objectives and risk management framework;[22]

(b) promotes effective management of both financial and non-financial risks, sustainable performance and the entity’s long-term soundness;

(c) for an RSE licensee, promotes performing its duties and exercising its powers in the best financial interests of beneficiaries; and

(d) supports the prevention and mitigation of conduct risk.

75. The remuneration framework must include a documented remuneration policy which at minimum sets out:

(a) how the remuneration framework addresses paragraph 74 of this Prudential Standard;

(b) at a high level, the structure and terms of remuneration arrangements that apply to a person who is:

(i) employed directly by the APRA-regulated entity;

(ii) retained directly by the APRA-regulated entity under contract; and

(iii) employed by, or is a contractor of a body corporate (including a service company) that is a related body corporate or connected entity, of the APRA-regulated entity;

(c) the approach to identify and mitigate material conflicts to the objectives of the remuneration framework, as specified in paragraph 74 of this Prudential Standard, that may result from third-party service provider compensation arrangements; and

Role of the Board

76. The Board, or relevant oversight function, of an APRA-regulated entity is ultimately responsible for the entity’s remuneration framework and its effective application.

77. The Board, or relevant oversight function, must approve the remuneration policy required under paragraph 75 of this Prudential Standard.

Remuneration design

78. An APRA-regulated entity must design all variable remuneration arrangements to align with paragraph 74 of this Prudential Standard and must incorporate in its variable remuneration arrangements:

(b) payout and vesting schedules that are commensurate with the possible range of risk and performance outcomes and that are sensitive to the time horizon of risk; and

(i) with clearly identified triggers to make a downward-adjustment;

(ii) that determines the appropriate adjustment tools to use; and

(iii) that determines the amount of downward-adjustment, proportionate to the severity of risk and conduct outcomes, to nil if appropriate.

79. An APRA-regulated entity must subject a person’s variable remuneration arrangement to malus.

80. An APRA-regulated entity must set specific criteria for the application of variable remuneration adjustment tools, including at least the following:

(a) misconduct leading to significant adverse outcomes;

(b) a significant failure of financial or non-financial risk management;

(d) a significant error or a significant misstatement of criteria on which the variable remuneration determination was based; and

(e) significant adverse outcomes for customers, beneficiaries or counterparties.

81. An APRA-regulated entity must take reasonable steps to appropriately adjust variable remuneration downwards when, as a minimum, any of the criteria specified in paragraph 80 are satisfied. The total downward-adjustment to variable remuneration must be proportionate to the severity of the risk and conduct outcome.

82. In circumstances involving a person under investigation for criteria specified in paragraph 80, variable remuneration must not vest until the investigation is closed.

83. An APRA-regulated entity must take appropriate steps to assess and mitigate conflicts of interest in the design of its remuneration arrangements, including conflicts that may arise from service contracts.

84. Despite paragraph 4, a foreign ADI, Category C insurer or EFLIC with total assets in excess of the threshold set out in the definition of SFI under APS 001, GPS 001 or LPS 001 respectively must defer variable remuneration of highly-paid material risk-takers in accordance with paragraphs 41(c), 42 and 43 of this Prudential Standard.

Remuneration outcomes

85. An APRA-regulated entity must:

(a) align variable remuneration outcomes with performance and risk outcomes; and

(b) reflect the appropriate application of variable remuneration adjustment tools in variable remuneration outcomes, as specified in paragraph 78(c) of this Prudential Standard.

86. An APRA-regulated entity must not accelerate the vesting of unvested variable remuneration for a person in a specified role no longer employed or engaged by the entity, unless specific exceptions[23] have been included in the remuneration policy. If that person is eligible for any unvested variable remuneration, it must be subject to the same vesting conditions as those for a person employed or engaged by the entity.

Specified roles

87. The Board, or relevant oversight function, must approve the variable remuneration outcomes for persons in specified roles as follows:

(a) individually for senior managers and executive directors;[24] and

(b) on a cohort basis for highly-paid material risk-takers, other material risk-takers and risk and financial control personnel.

Other requirements

88. In relation to the requirements for a remuneration policy, where an APRA-regulated entity is part of a group, or corporate group in the case of a private health insurer, the Board of the APRA-regulated entity may adopt and apply a group remuneration policy that is also used by a related body corporate or a connected entity provided that the group remuneration policy:

(a) meets the requirements of this Prudential Standard;

(b) has been approved by the Board or relevant oversight function; and

(c) gives appropriate regard to the entity’s business activities, its specific requirements and its remuneration framework.

89. Except in circumstances permitted by law, an APRA-regulated entity must not pay any remuneration (whether directly or indirectly) to, or for the benefit of, a person through vehicles or methods that undermine the effect or intent of the requirements of this Prudential Standard. An APRA-regulated entity must at minimum prevent the following:

(a) the entity indemnifying or insuring (whether directly or through arrangements with another person) the relevant person against the consequences of:

(i) breaching an obligation under this Prudential Standard; or

(ii) applying in-period adjustment, malus or clawback under this Prudential Standard; and

90. Paragraph 89 does not apply in respect of a liability for legal costs.

Disclosures

91. An APRA-regulated entity must make clear, comprehensive, meaningful, consistent and comparable public disclosure of information on its remuneration framework and practices, as set out in this Prudential Standard.

92. An APRA-regulated entity must publish the disclosures required under this Prudential Standard in a standalone document on its website or, provided the information is clearly identified as disclosures made for the purpose of complying with the requirements of this Prudential Standard, as part of other disclosures made by the entity that are available on its website.

93. An APRA-regulated entity must make disclosures on a financial year basis for each full financial year of the APRA-regulated entity.

94. An APRA-regulated entity must make the disclosures under this Prudential Standard as soon as possible after it lodges its annual financial statements with ASIC and not more than six months after the end of the financial year to which the disclosures relate. If an entity is not required to lodge financial statements with ASIC, it must make the required disclosures not more than six months after the end of the financial year to which the disclosures relate.

95. APRA may determine that a non-SFI comply with the quantitative disclosure requirements set out in paragraphs 63 to 73 of this Prudential Standard.[25]

Qualitative disclosures

96. An APRA-regulated entity must disclose information on the governance of the remuneration framework. This must include:

(a) information on the main bodies that oversee remuneration and the number of meetings held by those bodies during the financial year;

(b) information on how the Board exercises its discretion in determining remuneration outcomes; and

(c) a description of how the Board oversees remuneration policies and the input provided by the Board Risk Committee, other Board committees, or the risk function, including the Chief Risk Officer.

97. An APRA-regulated entity must disclose information on the design and structure of its remuneration framework. This must include a description of how it:

(a) aligns to the entity’s business plan, strategic objectives and risk management framework;

(b) promotes the effective management of both financial and non-financial risks, sustainable performance and long-term soundness;

(d) for an RSE licensee, promotes the RSE licensee performing its duties and exercising powers in the best financial interests of beneficiaries.

98. An APRA-regulated entity must disclose information on its remuneration policy, including:

(a) how the entity aligns variable remuneration outcomes with performance, where relevant;

(b) a description of the types of positions included in specified roles, as defined in paragraph 20(v) of this Prudential Standard;

(d) a description of the different forms of variable remuneration offered to employees in specified roles and the rationale for using these different forms (if offered);

(e) where no variable remuneration is offered (excluding one-off payments), a description of the method used to ensure risk management outcomes are assessed and consequence management applied in the event of a material breach or misconduct; and

(f) a description of the ways in which the APRA-regulated entity defers and adjusts variable remuneration to take account of longer-term performance, including risk performance.

[1] For the purposes of this Prudential Standard, an ‘RSE licensee’ has the meaning given in subsection 10(1) of the SIS Act. An ‘RSE licensee’s business operations’ includes all activities of an RSE licensee (including the activities of each RSE of which it is the licensee), and all other activities of the RSE licensee to the extent that they are relevant to, or may impact on, its activities as an RSE licensee.

[2] This power is to be exercised under paragraph 18.

[3] Where a Level 2 group operates within a Level 3 group, a requirement expressed as applying to a Head of a group is to be read as applying to the Level 3 Head. For the avoidance of doubt, the reference to ‘Head of a group’ does not apply to an RSE licensee.

[4] Given this paragraph prevents this Prudential Standard from giving rise to such an acquisition of property in relation to variable remuneration payable under such a contract, compensation will not be payable under section 69E of the Banking Act, section 127A of the Insurance Act, section 251 of the Life Insurance Act or section 8 of the PHIPS Act. Equally, compensation would not be payable in respect of the superannuation sector noting section 349B of the SIS Act.

[5] A reference to a ‘connected entity’ has the meaning given in subsection 10(1) of the SIS Act.

[6] A reference to a ‘related body corporate’ has the meaning given in section 50 of the Corporations Act 2001 (Corporations Act).

[7] For the avoidance of doubt, a reference to ‘group’ also includes a group as defined in APS 001; For an RSE licensee, ‘group’ includes where an RSE licensee is part of a corporate group.

[8] APS 001, GPS 001, LPS 001 and HPS 001 define this term in relation to other APRA-regulated entities.

[9] APS 001, GPS 001, LPS 001 and HPS 001 define this term in relation to other APRA-regulated entities.

[10] As required under Prudential Standard CPS 220 Risk Management and for an RSE licensee Prudential Standard SPS 220 Risk Management.

[11] For an RSE licensee, as set out in SPS 510, another Board Committee may carry out this function with respect to risk management. Consultation with a Board Risk Committee does not apply to a foreign ADI or Category C insurer.

[12] No component of variable remuneration may be entirely dependent on share price performance or profitability.

[13] For the purposes of paragraph 47 of this Prudential Standard, a reference to ‘specific exceptions’ is limited to death, serious incapacity, serious disability and serious illness.

[14] For the avoidance of doubt, paragraph 50(a) of this Prudential Standard applies to a senior manager who is a senior officer outside Australia of a foreign ADI or of a Category C insurer.

[15] Paragraph 52(a) of this Prudential Standard does not apply to a senior manager who is a senior officer outside Australia of a foreign ADI or of a Category C insurer.

[16] In the case of a private health insurer, all members of the group Board Remuneration Committee must also be non-executive directors of the Head of the corporate group.

[17] For the purposes of this paragraph, an APRA-regulated entity is required only to disclose information relating to those risk and financial control personnel that report directly to senior managers, rather than information on the entire cohort of risk and financial control personnel.

[18] Special payments are defined in paragraph 71 of this Prudential Standard.

[19] Where there may be minor variations in variable remuneration plans across specified roles, an APRA-regulated entity may disclose the plan once and note the minor variations.

[20] Share-based awards that are conditional on objectives, which include performance criteria, service requirements or the passage of time must be disclosed as variable remuneration.

[21] Exclude specific exceptions under paragraph 47 of this Prudential standard.

[22] As required under Prudential Standard CPS 220 Risk Management and for an RSE licensee Prudential Standard SPS 220 Risk Management.

[23] For the purposes of paragraph 86 of this Prudential Standard, a reference to ‘specific exceptions’ is limited to death, serious incapacity, serious disability and serious illness.

[24] Paragraph 87(a) of this Prudential Standard does not apply to a senior manager who is a senior officer outside Australia of a foreign ADI or Category C insurer.

[25] Refer to paragraph 4 of this Prudential Standard.

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Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 3 of 2023

Prudential Standard CPS 511 Remuneration

Banking Act 1959

Insurance Act 1973

Life Insurance Act 1995

Private Health Insurance (Prudential Supervision) Act 2015

Superannuation Industry (Supervision) Act 1993

I, John Lonsdale, a delegate of APRA:

(d) under subsection 230A(1) of the Life Insurance Act 1995 DETERMINE the prudential standard, which applies to all life companies, including friendly societies, and registered NOHCs;

(e) under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 DETERMINE the prudential standard, which applies to all private health insurers; and

(f) under subsection 34C(1) of the Superannuation Industry (Supervision) Act 1993 DETERMINE the prudential standard, which applies to all RSE licensees.

This instrument commences on 1 January 2024.

Dated: 28 September 2023

John Lonsdale

Chair

APRA

Interpretation

In this Determination:

The Standard organises its requirements around several core concepts, each defined in the instrument and then deployed to determine scope and obligations.

Remuneration framework and remuneration arrangement (paras 21-22; definitions para 20(q)-(r)):

A remuneration framework is the “totality of systems, structures, policies, processes and people” that identify, measure, evaluate, monitor, report and control or mitigate all internal and external sources of risks relating to remuneration (definition, para 20(r)). The framework must align with business plan, strategy and the entity’s risk management framework and promote prudent management of financial and non‑financial risks (paras 21 and 74).
A remuneration arrangement is any arrangement that includes measures of performance, mix of forms (fixed/variable; cash/equity) and timing of eligibility. The Standard captures “all forms of remuneration” regardless of source (definition, para 20(q)).

Specified roles and materiality concepts (definitions para 20(v), (k), (g)):

Specified roles comprise senior managers, executive directors, material risk‑takers (including highly-paid material risk-takers) and risk and financial control personnel (definition, para 20(v)). Material risk-taker is defined by potential impact on the entity’s risk profile, performance and long‑term soundness; for RSE licensees this includes performing duties in beneficiaries’ best financial interests (para 20(k)).
Highly-paid material risk-taker is a material risk‑taker whose fixed remuneration plus actual variable remuneration is ≥ AUD 1 million in a financial year (para 20(g)).

Adjustment tools: malus, clawback, in‑period adjustment, overriding board discretion (paras 33-39, 78-83):

Malus is defined as an adjustment to reduce the value of deferred variable remuneration before vesting (definition para 20(j)); the Standard mandates that an entity must subject a person’s variable remuneration arrangement to malus (para 35 and 79).
Clawback is defined as recovery of amounts already paid or vested (definition para 20(b)); the Standard requires clawback for senior managers, executive directors and highly-paid material risk-takers and prescribes features: minimum two-year look-back for clawback and application whether or not employment has ceased (para 36).
In‑period adjustments and overriding board discretion are required elements of the toolkit (paras 33(c), 78(c)), and the Standard requires explicit documented downward-adjustment processes, triggers, selection of tools and proportionality of outcome (para 33(c)(i)-(iii), para 37).

Deferral and vesting mechanics (paras 41-43):

Minimum deferral percentages and minimum deferral periods are role-specific: CEOs , 60% deferred over at least six years with vesting no faster than pro rata and only after four years; senior managers and executive directors (other than CEO) , 40% deferred over at least five years with vesting no faster than pro rata and only after four years; highly-paid material risk-takers not senior managers , 40% deferred over at least four years with vesting no faster than pro rata and only after two years (para 41).
Exemption: paragraph 41 does not apply to any person whose deferred variable remuneration is less than AUD 50,000 in the entity’s financial year (para 43).
Deferral period must include the performance assessment period and any service/retention/holding periods (para 42).

Governance and Board responsibilities (paras 23-32; 76-77):

The Board (or relevant oversight function) has ultimate responsibility for the framework and must approve the remuneration policy (paras 23-24, 76-77).
The Board must establish a Board Remuneration Committee with at least three non-executive directors, majority independent members and an independent chair unless specific conditions for RSEs (paras 26-29). The committee must have a written charter and free access to Board committees, risk and financial control personnel, and, where necessary, independent third-party advisers (paras 29, 32).

Disclosure and transparency (paras 63-73, 91-98):

Entities must make “clear, comprehensive, meaningful, consistent and comparable” public disclosures on remuneration, with quantitative and qualitative requirements detailed in Tables 1-4 (paras 63, 68, 69, 72).
Tables 2-4 (remuneration outcomes, special payments, deferred/adjusted variable remuneration) must be disclosed in a machine-readable format such as CSV (para 64).
Timing: disclosures on a financial year basis and as soon as possible after lodging annual financial statements with ASIC, and in any event not more than six months after the end of the financial year (para 66; para 94 for non-SFIs).

Group/head of group application (paras 5-7, 59):

If an entity is Head of a group it must apply applicable requirements as Head in its capacity as an APRA-regulated entity and ensure application across the group, including non‑APRA-regulated entities, on a group basis (paras 5-6).
The Standard permits group-level Board Remuneration Committees and group remuneration policies subject to conditions (para 59).

Constraint mechanisms and exceptions (paras 8, 12-13, 18, 60):

The Standard is not to be applied in a way that contravenes the Fair Work Act or applicable foreign law governing an employment contract (para 8).
Variable remuneration opportunities arising before the relevant commencement dates are not subject to the Standard (para 12); a further limitation applies where the Standard would otherwise effect an acquisition of property other than on just terms (para 13 and footnote 4).
APRA may adjust or exclude specific requirements in relation to an entity (para 18) and may approve alternative arrangements where it is satisfied objectives are met (para 60).

These concepts combine prescriptive governance and compensatory mechanics with mandated transparency and APRA discretion. The Standard embeds a risk-sensitivity logic: align pay to risk and long-term soundness (paras 21, 33(a), 78(a)), require longer-term deferral for senior and highly paid roles, and provide for remediation of poor risk or conduct outcomes via malus and clawback.

The Standard defines the universe of addressees broadly as “APRA-regulated entities” and then differentiates according to entity type, size (SFI or non-SFI), group position and domicile.

Entity types (Application, para 2):

Authorised deposit-taking institutions (ADIs), including foreign ADIs, and authorised banking non-operating holding companies (NOHCs), but excluding purchased payment facility providers (para 2(a)).
General insurers (including Category C insurers), authorised insurance NOHCs, and parent entities of Level 2 insurance groups (para 2(b)).
Life companies, including friendly societies, eligible foreign life insurance companies (EFLICs) and registered NOHCs (para 2(c)).
Private health insurers registered under the PHIPS Act (para 2(d)).
Registrable superannuation entity licensees (RSE licensees) in respect of their business operations (para 2(e); footnote 1 expands the RSE licensee definition and scope of business operations).

SFI and non-SFI distinction (para 4; definitions paras 20(u), 20(o)):

The Standard applies differently to significant financial institutions (SFIs) and non-SFIs. Paragraphs 21-73 apply to SFIs; paragraphs 74-98 apply to non-SFIs. The SFI definition for RSE licensees is specified in para 20(u) (assets > AUD 30 billion or APRA determination for complexity/member-of-group). For other entity types SFI is defined in other Prudential Standards (APS 001, GPS 001, LPS 001, HPS 001) and those definitions are cross-referenced (para 20(u), footnotes 8-9).

Geographical and branch-level limits (para 3; para 4 footnote):

For foreign ADIs, Category C insurers and EFLICs, obligations apply only to the Australian branch operations (para 3).
For foreign ADIs and Category C insurers, consultation with a Board Risk Committee does not apply (footnote 11), and for senior managers who are senior officers outside Australia some approvals and application are limited (footnotes 14-15, 24).

Group heads and subsidiary chains (paras 5-7, 59):

Where an entity is Head of a group (Level 2 or Level 3 Head as defined), the Head must ensure applicable requirements are applied throughout the group, including entities that are not APRA-regulated, and must comply on a group basis (paras 5-6). Where the Head makes Level 2 or Level 3 disclosures, APRA-regulated entities within that group may not need to make separate Level 2 or individual entity disclosures (para 7).
The Board of an APRA-regulated entity may use a group Board Remuneration Committee as the entity’s committee so long as the Standard’s requirements are met and members are non-executive directors of the Head in ADI, general insurer or life company contexts (para 59).

Covered personnel (definition para 20(v); paras 48-53, 87):

The Standard’s substantive obligations focus on “specified roles”: senior managers, executive directors, material risk-takers (including highly-paid material risk-takers) and risk and financial control personnel (para 20(v)). The Board Remuneration Committee must make individual or cohort recommendations for these cohorts (paras 50-52, 87).
Risk and financial control personnel get specific treatment (para 53), including that their remuneration “must reflect the independence and authority” of those roles and not be unduly influenced by the business activities they oversee.

Small cohorts and quantitative disclosure thresholds (para 67):

For disclosure purposes, if a cohort of specified roles (except the CEO) has fewer than five individuals, the entity need not disclose information for that particular cohort (para 67(b)). Full‑time equivalent counting applies (para 65).

Exclusions and special handling:

Purchased payment facility providers are excluded (para 2(a)).
The Standard does not apply to the extent it would require actions contrary to the Fair Work Act 2009 or applicable foreign law governing employment contracts (para 8).
Variable remuneration that arose before the commencement dates is out of scope (para 12), and paragraph 13 creates a further constitutional safeguard for particular contracts (para 13; footnote 4).

Who decides and who pays:

The Board has ultimate responsibility and must approve policy; the Board Remuneration Committee must oversee design and decisions; for specified roles the Board or relevant oversight function must approve outcomes individually or on a cohort basis, depending on role (paras 23-25, 50-52, 87). Entities pay the administrative and disclosure costs; where group-level compliance is used, Heads of group carry obligations to ensure appropriate application across the group (paras 5-7).

In short, the Standard targets prudentially regulated firms across banking, insurance, life, private health and superannuation sectors, and focuses its substantive operational obligations on senior, executive and materially risk‑sensitive personnel, with differentiated mechanics for SFIs versus non-SFIs and group heads versus subsidiaries.

The Standard prescribes a set of duties (positive obligations) for APRA-regulated entities, and establishes procedural rights or protections for employees and entities in a narrow range of circumstances. The most concrete duties are governance, remuneration design, adjustment mechanisms, deferral, disclosure and review obligations.

Governance duties (paras 21-32; 74-77):

Duty: maintain a remuneration framework aligned with business plan, strategic objectives and risk management framework and that promotes effective management of financial and non‑financial risks, sustainable performance and long‑term soundness (paras 21, 74). For RSE licensees the duty is cast in terms of acting in the best financial interests of beneficiaries (paras 21(c), 74(c)).
Duty: document and maintain a remuneration policy that addresses the framework’s objectives, scope of application (direct employees, direct contractors, employees of related/connected entities), conflicts from third-party service provider compensation and the systems/processes supporting assessment and consequence management (paras 22, 75).
Duty: Boards must approve the remuneration policy (paras 24, 77). Boards are ultimately responsible (paras 23, 76).
Duty: establish a Board Remuneration Committee with at least three non-executive directors, majority independent and independent chair (except some RSE exceptions), with a written charter and powers to access other Board committees, risk functions and independent advisers (paras 26-32).

Remuneration design duties (paras 33-41, 78-83):

Duty: design variable remuneration to incorporate financial and non-financial risks that could materially affect the entity’s risk profile and long-term soundness, include payout and vesting schedules commensurate with the risk time horizon, and include appropriate adjustment tools (paras 33(a)-(c); 78(a)-(c)).
Duty: give material weight to non‑financial measures where remuneration is performance-related (para 34(a); footnote 12 prohibits any component of variable pay being entirely dependent on share price or profitability).
Duty: subject a person’s variable remuneration to malus (paras 35, 79).
Duty: subject senior managers, executive directors and highly-paid material risk-takers to clawback arrangements that include a minimum two-year clawback look-back and application whether or not employment has ceased (para 36).
Duty: set specific criteria for application of adjustment tools; the Standard lists minimum triggers including misconduct with significant adverse outcomes, significant failures of financial or non-financial risk management, breaches of accountability/fitness/compliance, significant errors or misstatements in criteria used to determine remuneration and significant adverse outcomes for customers/beneficiaries/counterparties (para 37).

Deferral duties (paras 41-43):

Duty: impose minimum deferral percentages and deferral periods by role (CEO 60% over ≥6 years with earliest vesting after four years; senior managers/executive directors 40% over ≥5 years with earliest vesting after four years; highly-paid material risk-takers 40% over ≥4 years with earliest vesting after two years) (para 41).
Duty: include the performance assessment period and any service/holding periods in the deferral period (para 42).
Exception: deferral thresholds do not apply where deferred variable remuneration is < AUD 50,000 in a financial year for that person (para 43).

Outcome and consequence duties (paras 44-47, 48-53):

Duty: align variable remuneration outcomes with performance and risk outcomes; variable remuneration must be commensurate with performance and risk outcomes (paras 44-46).
Duty: not to accelerate vesting of unvested variable remuneration for a specified role no longer employed or engaged, except in specific limited exceptions (death, serious incapacity, disability, illness) (para 47; footnote 13).
Duty: prudently manage variable remuneration arrangements for all persons in specified roles; the Board Remuneration Committee must provide guidance and make recommendations on outcomes (paras 48-52).
Duty: ensure remuneration of risk and financial control personnel reflects independence and is not unduly influenced by the business activities they control (para 53).

Disclosure duties (paras 63-73, 91-98):

Duty: make public disclosures that are clear, comprehensive, meaningful, consistent and comparable in formats specified, include specified tables and content (Table 1: governance and framework; Table 2: remuneration outcomes; Table 3: special payments; Table 4: deferred and adjusted variable remuneration) and publish them on the entity’s website as a standalone document or clearly identified part of other disclosures (paras 63-66, 68-73, 91-94).
Duty: disclose Tables 2-4 in a machine‑readable format (para 64).
Duty: count relevant employees on a full-time equivalent basis and adhere to timing limits linked to lodging financial statements with ASIC or six months after financial year end (para 65-66).

Review and record-keeping duties (paras 54-58):

Duty: review compliance with the Standard at least annually (para 54).
Duty: conduct a comprehensive effectiveness review by operationally independent, experienced and competent persons at least every three years (para 55), document and report results to the Board Remuneration Committee and take appropriate action (paras 56-57).
Duty: assess alignment of remuneration outcomes with performance and risk and whether the framework is fit for purpose (para 57).

Rights and protections (paras 8, 12-13, 61-62, 89-90):

Protection: the Standard does not require entities to act contrary to the Fair Work Act 2009 or foreign governing law for employment contracts (para 8).
Transitional right: variable remuneration opportunity that arose before the relevant commencement date is not subject to the Standard (para 12).
Constitutional safeguard: paragraph 13 limits application where it would result in an acquisition of property other than on just terms (para 13; fn 4).
Limitations on employer actions: entities must not indemnify or insure persons against consequences of breaching the Standard or the application of malus/clawback (para 61(a)). Entities must prohibit hedging of equity-linked deferred remuneration and have processes where breaches occur (para 61(b)). Paragraph 61 excludes liability for legal costs (para 62).
For non-SFIs, APRA may require compliance with quantitative disclosure requirements (para 95), and APRA may exercise discretion under para 18 to adjust or exclude specific requirements.

Procedural obligations in APRA interaction (paras 16, 18-19, 60):

APRA’s exercise of a power or discretion under the Standard must be in writing (para 16).
Entities must contact APRA before relying on prior exemptions under CPS/SPS 510 Governance (para 19).
Entities may apply for alternative Board Remuneration Committee arrangements; APRA may approve alternatives if satisfied they meet the Standard’s objectives (para 60).
APRA may allow adjustments or exclusions in relation to a specific entity (para 18).

The Standard thus imposes prescriptive governance, design, adjustment and disclosure duties on regulated entities while carving specific limited protections for pre-existing arrangements and statutory or contractual legal constraints. Rights are largely procedural or protective rather than conferring affirmative private rights against APRA.

The Standard itself is a prudential instrument made under APRA’s statutory powers; it does not in its text list criminal sanctions or civil penalty amounts. The Authority section identifies the statutory bases for the determination (s 11AF Banking Act; s 32 Insurance Act; s 230A Life Insurance Act; s 92 PHIPS Act; s 34C SIS Act) (Authority, para 1). Enforcement of prudential standards more broadly arises from the enabling Acts and APRA’s supervisory powers; the Standard incorporates mechanisms that enable supervisory oversight and remedial action by APRA.

Direct enforcement‑relevant features in the Standard:

APRA’s discretion to adjust or exclude: APRA may adjust or exclude specific requirements in relation to an entity (para 18). That discretion is an instrument of supervisory flexibility and suggests APRA can tailor obligations case by case.
Procedural requirement for APRA decisions: where the Standard provides for APRA to exercise a power or discretion, the power/discretion must be exercised in writing (para 16). This creates an administrative record for supervisory decisions.
Reporting and disclosure deadlines: entities must lodge public disclosures within fixed timeframes , as soon as possible after lodging annual financial statements with ASIC and in any event not more than six months after the end of the financial year (para 66; para 94 for non-SFIs). Failure to publish required disclosures would be a non-compliance with a prudential standard and is the type of conduct APRA oversees.
Requirement to contact APRA where prior exemptions are relied upon: entities must contact APRA if they seek to rely on a previous exemption or exercise of discretion under CPS/SPS 510 Governance for the purposes of complying with this Standard (para 19).
APRA’s ability to approve alternative arrangements: the Standard allows entities to apply for alternative board committee arrangements and for APRA to approve them if the objectives will be achieved (para 60).

Limitations and constraints:

The Standard expressly recognises statutory and contractual constraints: it does not require entities to act contrary to the Fair Work Act 2009 or foreign law applicable to employment contracts (para 8). It also protects pre-existing variable remuneration opportunities that arose before the commencement dates (para 12) and provides a safeguard where application would effect an acquisition of property other than on just terms (para 13 and fn 4).
Paragraph 61 prohibits indemnifying persons against consequences of breaching the Standard or against malus/clawback; paragraph 61(b) requires hedging prohibitions. These obligations limit how entities can structure arrangements and provide APRA with substantive expectations about contractual terms; again, failure to comply is non-compliance with the prudential standard.

What the Standard does not do in this text:

The Standard does not itself set out fines, civil penalty provisions, criminal sanctions or APRA’s corrective tools. Any specific enforcement powers or sanctions would derive from the enabling Acts and APRA’s broader supervisory toolkit, but those are not elaborated here. The Standard also does not specify a routine administrative enforcement process within its text.

Practical enforcement consequences (derived from the instrument):

Non-compliance is a matter of prudential supervision under the relevant Acts. APRA’s written decisions, powers to adjust/exclude, and obligations to provide disclosures and reviews create administrative touchpoints for supervisory engagement. Entities should assume that APRA will expect written evidence of policy, committee charters, review outcomes and published disclosures, and that APRA can exercise discretion or require corrective action under the statutory regime that enabled this Standard.

All claims above reference the Standard’s own text (Authority; paras 16-19; paras 61-66; paras 54-57). Absent express sanction provisions in CPS 511 itself, readers must look to the enabling Acts for the form of sanctions APRA may exercise; those Acts are cited in the Authority section as the statutory bases for the Prudential Standard.

The Standard cross-references, limits and is subordinated to other legislation and APRA Prudential Standards. The instrument itself specifies several interactions and cross-references which materially constrain and shape its operation.

Banking Act and Part IIAA (para 9):

For ADIs, by operation of the Legislation Act 2003, the Standard is to be read and construed subject to the Banking Act, including Part IIAA which imposes requirements relating to remuneration (para 9). Practically, this means APRA’s remuneration standards for ADIs operate alongside and subordinate to the prescriptive or statutory provisions in the Banking Act and that the Banking Act’s remuneration-specific provisions take precedence where there is interaction.

Fair Work Act and foreign law (para 8):

The Standard does not apply to the extent it would require an entity to act contrary to the Fair Work Act 2009 or, in relation to employment or engagement contracts governed by foreign law, any applicable foreign legislation (para 8). This creates an explicit statutory limitation protecting minimum employment law entitlements and respecting applicable foreign contractual law.

Other Prudential Standards (paras 14, 19; footnotes):

The Standard relies on definitions and concepts in other Prudential Standards: APS 001, GPS 001, LPS 001, HPS 001 and 3PS 001 Definitions and CPS/SPS 510 (para 14; Definitions para 20 and multiple footnotes). For example, terms such as Level 2 group, Level 3 Head and SFI are defined in other Prudential Standards (paras 16-17; footnotes 8-9).
Entities seeking to rely on prior exemptions or discretionary relief under CPS 510 Governance or SPS 510 Governance must contact APRA (para 19). The Standard therefore sits alongside governance standards and references prior supervisory exercises of discretion.

Corporations Act interactions (footnote 6):

The Standard’s “related body corporate” concept cross-references s 50 of the Corporations Act 2001 (footnote 6). That affects who is within an entity’s group and therefore covered by group-level application and disclosures.

SIS Act and superannuation law (Authority and definitions):

The Standard applies to RSE licensees under the SIS Act, and uses SIS Act definitions for terms such as RSE licensee and connected entity (Authority; para 2(e); definition para 20(u); footnote 5). For RSE licensees the Standard explicitly ties the remuneration framework to performing duties in beneficiaries’ best financial interests (paras 21(c), 74(c)).

ASIC/financial reporting timetable (paras 66, 94):

Disclosure timing obligations are linked to ASIC financial statement lodgement and otherwise capped at six months after the financial year end (paras 66, 94). Entities that are not required to lodge financial statements with ASIC are still required to publish disclosures within six months after year end (paras 66, 94).

Other Prudential Standards requiring risk alignment (footnotes 10, 22):

The Standard requires alignment with Prudential Standard CPS 220 Risk Management (for ADIs and insurers) and SPS/CPS 220 for RSE licensees (footnotes 10, 22). Consequently, remuneration frameworks must be integrated with broader enterprise risk management obligations.

Prior constitutional protection and statutory compensation cross-references (para 13; footnote 4):

Paragraph 13 limits application where this Standard would otherwise result in an acquisition of property from a person other than on just terms; footnote 4 states that because of this paragraph compensation will not be payable under sections identified in the Banking, Insurance, Life Insurance, PHIPS and SIS Acts. That footnote shows the drafters considered constitutional acquisition exposure and cross-checked compensation provisions in the enabling Acts.

APRA’s discretion and written exercise (paras 16, 18, 60):

APRA’s power to adjust/exclude requirements (para 18), its requirement to exercise power in writing (para 16), and its ability to approve alternative arrangements (para 60) create a statutory administrative interface between entities and APRA that overlays the prescriptive rules in the Standard.

In sum, the Standard is designed to sit within APRA’s existing prudential architecture and to be read in light of the Banking Act (for ADIs), the Fair Work Act, foreign law constraints and other Prudential Standards. Entities will need to harmonise their remuneration policies with CPS/SPS 220 risk management, CPS/SPS 510 governance, definitions in APS/GPS/LPS/HPS 001 and Corporations Act group definitions, and time disclosures to ASIC filing cycles.

The instrument itself provides a narrow and explicit amendment history limited to the immediate replacement. The relevant textual material is:

The preamble revokes the earlier Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 1 of 2021, including Prudential Standard CPS 511 Remuneration made under that determination (preamble (a)). This is the explicit revocation action: the 2023 Determination repeals the 2021 Determination and replaces CPS 511 with the version in the Schedule.
The Determination is dated 28 September 2023 and specifies commencement as 1 January 2024 (preamble and commencement clause). The Application section sets out staggered effective dates by entity type and SFI status (para 10): some SFIs are noted as having earlier operational dates (1 January 2023 or 1 July 2023) while the general commencement for remaining APRA-regulated entities is 1 January 2024. These dates reflect transitional arrangements rather than history of prior amendments.
There is no historical legislative amendment timeline recorded within this instrument beyond the explicit revocation of the 2021 Determination. The instrument does not catalogue prior versions of CPS 511 beyond the 2021 Determination it revokes.
Footnote 4 addresses a constitutional legal point relating to acquisition of property and cross-references compensation provisions in the Banking, Insurance, Life Insurance, PHIPS and SIS Acts; while not an amendment history, it records that the drafters considered the property/acquisition consequences of imposing the Standard and stated that compensation will not be payable under specified sections because of the paragraph limiting application in that constitutional context.
No textual record is included in the Schedule of any earlier amendments to the 2021 Standard, any consultation history, or legislative history for the enabling Acts. The document does not list any prior substantive changes to the Standard before the 2023 instrument beyond the revocation.

Therefore, the amendment history that can be read from the instrument is limited and specific: the 2023 Determination revokes Determination No. 1 of 2021 and replaces CPS 511; it is dated 28 September 2023 and largely takes effect from 1 January 2024 with certain categories operated earlier as specified in paragraph 10. Any earlier iterations or consultation documents are not reproduced in or appended to this Determination.

Entities needing a full legislative amendment track or consultation chronology will need to consult APRA releases, earlier determinations and the legislation registers for archives of Determination No. 1 of 2021 and any intermediate guidance documents, because CPS 511’s instrument contains only the single replacement event and commencement timings.

The Standard and the Schedule do not refer to, cite or summarise any litigation, court decisions or administrative appeals. The document contains no case references. The text contains footnotes that explain legal cross-references (for example, to the Corporations Act or to provisions in the enabling Acts), but none of those footnotes identify or cite judicial decisions or any litigation history.

Consequently, based on the instrument as published:

There is no litigation history recorded in the Standard itself.
No prior judicial or tribunal rulings are cited as explanatory authorities or as interpretive foundations for the provisions in CPS 511.
The instrument is silent as to whether any prior versions (including the 2021 Determination) were subject to judicial review, dispute or enforcement action that resulted in litigation-driven changes.

For legal practitioners or compliance officers requiring litigation context , for example, precedents on APRA’s use of discretion, constitutional challenges under the acquisition clause, or disputes about the interplay with the Fair Work Act , this instrument does not provide that material. Those seeking litigation history will need to search external databases for decisions involving APRA, the enabling Acts, CPS/SPS prudential standards, or specific disputes referenced in other regulators’ records. The absence of litigation references in this Standard does not imply there has been no litigation related to remuneration regulation in the sector; it simply indicates that CPS 511 itself does not incorporate or summarise such material.

Practical pitfalls and traps are concentrated where the Standard prescribes specific quantitative thresholds, interaction constraints with other law and narrow exceptions. These are the items that commonly cause downstream operational, contractual and disclosure risk.

Deferral percentages, minimum periods and the AUD 50,000 carve-out (paras 41-43):

The Standard mandates substantial long deferral profiles for senior roles: CEO 60% deferred over at least six years (earliest vesting after four years); senior managers/executive directors 40% over at least five years (earliest vesting after four years); highly-paid material risk-takers (non-senior managers) 40% over at least four years (earliest vesting after two years) (para 41). Entities must ensure contract and plan mechanics capture these timelines.
Exemption: para 41 does not apply to persons with less than AUD 50,000 of deferred variable remuneration in a financial year (para 43). Entities must track deferred amounts to determine applicability; mis‑classification risks are material.

Clawback and malus design specifics (paras 35-36, 37-39):

Clawback must apply to senior managers, executive directors and highly-paid material risk-takers and include a minimum two-year look-back period from payment/vesting and apply post-employment (para 36). Entities cannot limit clawback to employment periods.
Malus must be available and applied; triggers must be specific and cover misconduct, significant risk management failures, breaches of accountability/fitness/propriety or significant errors/misstatements and adverse customer outcomes (paras 35-37).
In investigations, variable remuneration must not vest until the investigation concludes (para 39). Entities need investigation timelines, governance and recordkeeping aligned to avoid vesting while matters are open.

Hedging and indemnity prohibitions (para 61):

Entities must prevent indemnification or insurance that would shield persons from consequences of violating the Standard or of malus/clawback measures (para 61(a)). That can conflict with common employment contract arrangements (for example, third-party D&O insurance) and will require contractual redrafting or tighter policy language.
Entities must prohibit hedging of economic exposure to equity-linked deferred remuneration until fully vested and tradable (para 61(b)). The Standard requires a prohibition, documentation of process for breaches and enforcement. Many existing incentive plans permit or do not expressly forbid hedging; remediation will be necessary.

Disclosure machine‑readable requirement and cohort rules (paras 64, 67):

Tables 2-4 must be disclosed in a machine-readable format, such as CSV (para 64). Entities with legacy reporting systems must prepare data pipelines to meet this requirement and the six-month timeline (para 66). Failure to produce machine-readable data can be a technical compliance breach.
Small cohort disclosure exception (para 67(b)): if a cohort (except CEO) has fewer than five individuals, an entity need not disclose for that cohort. Entities must be careful aggregating or splitting roles to avoid inadvertent exposure or, conversely, to avoid inadvertently triggering the disclosure obligation.

Group disclosures and Head of group delegation (paras 5-7, 59):

Heads of group must ensure remuneration requirements are applied across group entities, including non-APRA-regulated subsidiaries, and are responsible on a group basis (paras 5-6). Entities that are part of groups must decide whether to produce entity-level disclosures or rely on Head-of-group Level 2/3 disclosures; para 7 permits entities within a group to avoid separate Level 2 disclosures only if the Head makes the required disclosures. Misalignment between Head-level and subsidiary practice may create superficial compliance.

Interaction with Fair Work Act, foreign law and pre-existing contracts (paras 8, 12-13):

The Standard cannot override Fair Work Act obligations or applicable foreign law governing employment contracts (para 8). Entities must reconcile new deferral/clawback clauses with employment law and collective agreements.
Variable remuneration opportunities that arose before commencement are excluded (para 12), and paragraph 13 provides a constitutional protection where application would create an acquisition of property other than on just terms. Entities with legacy contractual arrangements should map timing of opportunities to determine which awards are in or out of scope.

Board Remuneration Committee composition and powers (paras 26-32):

The Board Remuneration Committee must have at least three non-executive directors and majority independence (paras 26-27). RSE licensees have a limited exception for the Board chair sitting on the committee but not chairing it in most cases (para 28). Entities with smaller boards or governance models relying on executive directors may need to reconstitute committees.
The Committee must have free access to risk and control personnel and ability to engage independent third-party experts (paras 30-32). Entities must ensure resources and reporting lines to satisfy this requirement.

Non-SFI treatment for foreign entities with high assets (para 84):

A foreign ADI, Category C insurer or EFLIC that otherwise is a non‑SFI but has total assets above the SFI threshold under APS 001, GPS 001 or LPS 001 must apply deferral for highly-paid material risk-takers in accordance with the SFI deferral rules (para 84). Entities operating internationally must check thresholds under referenced Prudential Standards to confirm applicability.

Recordkeeping and review cadence (paras 54-57):

Entities must perform annual compliance reviews and a triennial independent effectiveness review (paras 54-55) and report results to the Board Remuneration Committee (para 56). Operational independence and competence of review personnel are mandated. Entities must ensure documentation to support APRA review.

APRA discretion and pre-existing exemptions (paras 18-19, 60):

APRA can adjust or exclude requirements and approve alternative arrangements if objectives are met (paras 18, 60). Entities that previously had exemptions under CPS/SPS 510 must contact APRA before relying on those exemptions for CPS 511 compliance (para 19). Failure to do so risks APRA finding non‑compliance even where an earlier exemption existed.

No direct penalties in the Standard (see Penalties and enforcement):

The Standard does not enumerate civil or criminal penalties; enforcement arises under the enabling Acts (Authority) and APRA’s supervisory powers. Entities must assume non‑compliance will trigger supervisory action and remediation.

These are operational “gotchas” because they are concrete, quantitative, or involve cross‑system reconciliations (legal, HR, payroll, treasury, disclosure systems). Entities should map contract clauses, hedging policies, plan mechanics, committee charters and data systems against the enumerated paragraphs to identify gaps.

This section sets out a practical compliance roadmap that follows the Standard’s structure. Each step references the relevant paragraphs so compliance teams can map obligations to actions.

Establish applicability and timeline

Identify whether the entity is an APRA-regulated entity as defined in para 2 and whether it is an SFI or non-SFI (para 4; para 20(u) and footnotes 8-9). For RSE licensees check the RSE SFI asset threshold (para 20(u)).
Confirm applicable commencement date per para 10 and whether any variable remuneration opportunities predate the relevant commencement so they are excluded under para 12. Review paragraph 13 and footnote 4 where acquisition/just terms issues may arise.

Update governance structures and Board oversight

Ensure the Board approves a revised remuneration policy meeting the Standard’s minima (paras 22, 75). Document how the policy addresses alignment with business plan and risk management (paras 21, 74).
Establish or reconstitute the Board Remuneration Committee to meet composition rules: at least three non-executive directors, majority independent and independent chair (paras 26-29). For RSE licensees note the chair exceptions (para 28).
Draft and adopt a written charter for the Board Remuneration Committee setting roles, responsibilities and operational terms (para 29).
Ensure the committee has unfiltered access to Board committees, risk and financial control personnel and, where needed, the power and budget to engage independent third-party advisers (paras 30-32).

Draft or revise a compliant remuneration policy

Ensure the remuneration policy minimally addresses the items in para 22/75: scope, structure and terms for employees, contractors and employees of related/connected bodies; approach to conflicts from third-party service provider compensation; systems and processes for performance, conduct and consequence management (para 22 and para 75).
Explicitly adopt definitions that align with CPS 511 (para 20) and cross-reference relevant Prudential Standard definitions (APS/GPS/LPS/HPS 001 per para 14 and footnotes).
Prohibit indemnities or insurance that would shield persons from the consequences of malus/clawback/application of the Standard and include a hedging prohibition for equity-linked deferred remuneration (para 61). Exclude liability for legal costs per para 62.

Design variable remuneration plans to be risk-sensitive

Incorporate financial and non-financial risk measures into plan design and ensure payout and vesting schedules are sensitive to the time horizon of risks (paras 33(a)-(b); 78(a)-(b)).
Ensure no component of variable remuneration is entirely dependent on share price or profitability (footnote 12).
Give material weight to non‑financial measures when remuneration is performance-related and record the rationale (para 34; Table 1 row 9).

Implement malus, clawback and adjustment processes

Draft a documented downward-adjustment process that identifies triggers, determines appropriate tools (in-period adjustment, malus, clawback, overriding board discretion), and sets proportionality and potential reduction to nil (paras 33(c), 37).
Ensure clawback arrangements meet the required features: minimum two-year period from payment/vesting and application irrespective of employment cessation for senior managers, executive directors and highly-paid material risk-takers (para 36).
For any person under investigation, ensure systems prevent vesting until investigations are closed (para 39).
Create procedures to apply consequence management consistently for triggers listed in para 37/80 (misconduct causing significant adverse outcomes, risk management failures, breaches, material errors, customer harm).

Set deferral and vesting logistics

Implement deferral mechanics that meet the minimum percentages and schedules in para 41. Ensure the deferral period includes performance assessment and service/holding periods (para 42).
Apply the AUD 50,000 exemption in para 43 where applicable and ensure year-by-year calculations support that determination.
Ensure plan documentation prohibits hedging of deferred equity until fully vested and tradable, and include processes for enforcement (para 61(b)).

Remuneration for risk and financial control personnel

Make variable remuneration arrangements for risk and financial control personnel reflect the independence and authority of those roles and avoid undue influence from the business activities they control (para 53). Document arrangements and disclose details as required by Table 1 row 11 and paragraph 68.

Prepare disclosures and data pipelines

Prepare qualitative disclosures per Table 1 (governance, framework design, scope, measures and external consultants) and ensure those are approved and published (para 68).
Build data extraction and reporting pipelines to produce Tables 2-4 (remuneration outcomes, special payments, deferred and adjusted variable remuneration) in machine-readable format such as CSV (para 64; paras 69-73). Confirm employee counts on a full-time equivalent basis (para 65).
Address small-cohort aggregation rules (para 67) in reporting logic. Ensure timing: publish disclosures as soon as possible after lodging annual financial statements with ASIC and in any event no later than six months after year end (para 66).

Review and independent effectiveness testing

Conduct annual compliance reviews against the Standard (para 54) and arrange a comprehensive effectiveness review at least every three years by operationally independent, experienced and competent persons (para 55). Document and report results to the Board Remuneration Committee and ensure action is taken (paras 56-57).
Where material changes in size, business mix or complexity occur outside of the triennial review, consider a triggered review (para 58).

Group and third-party considerations

Where the entity is part of a group assess whether to use group Board Remuneration Committee and group remuneration policy, ensuring conditions in para 59 are met (non-exec membership, Head-of-group non-exec status where applicable, Board’s free access to the group committee).
Map third-party service provider compensation arrangements and address conflicts in the remuneration policy (paras 22(c), 75(c), 40, 83). Document steps taken to mitigate such conflicts.

Engage APRA where necessary

If relying on prior APRA exemptions under CPS/SPS 510 Governance, contact APRA (para 19).
Consider applying to APRA for approval of alternative Board Remuneration Committee arrangements if current governance structures cannot be reconstituted to meet requirements; APRA may approve alternatives if it is satisfied the objectives will be achieved (para 60).
If seeking an adjustment or exclusion to a specific requirement, apply under para 18; APRA must exercise discretion in writing (paras 16, 18).

Contract and employment law reconciliation

Review employment contracts, incentive plan terms and service agreements to ensure changes do not contravene the Fair Work Act or applicable foreign law nor inadvertently create acquisitions of property issues that could trigger constitutional objections (paras 8, 12-13).
Where contract amendments are required to insert malus/clawback provisions, chart transitional application for awards that arose before commencement (para 12) and ensure any changes respect the limitation in para 13 and footnote 4.

Operationalise investigations and consequence management

Implement a documented investigation protocol that meets the Standard’s requirement that variable remuneration does not vest while an investigation is open (para 39).
Embed consequence management processes in performance management and codes of conduct (para 46; Table 1 rows 4, 9, 11).

Maintain audit trail and documentation

Keep written records of APRA communications and any written discretion or approvals per para 16. Maintain committee minutes, committee charters, policy approvals, review outcomes, disclosure publication logs and CSV files for audit readiness.

Monitor APRA guidance and cross-references

The Standard cross-references CPS/SPS 220, CPS/SPS 510 and definitions in APS/GPS/LPS/HPS 001; ensure these linked standards are incorporated into policies and that any updates to those standards are monitored and addressed.

This compliance roadmap maps to the Standard’s paragraphs and tables: governance (paras 22-32), design and adjustments (paras 33-41, 78-83), deferral (paras 41-43), disclosures (paras 63-73, 91-98), review (paras 54-57), group application (paras 5-7, 59) and APRA interaction (paras 16-19, 60). Legal review is required to reconcile employment contract law, hedging and indemnity prohibitions and transitional application.

Deep Dive

What it does

Current sections

Banking, Insurance, Life Insurance, Health Insurance and Superannuation (prudential standard) determination No. 3 of 2023

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Authority

Application

Interpretation

Adjustments and exclusions

Previous exercise of discretion

Definitions

A. Requirements for SFIs

Remuneration framework

Role of the Board

Board Remuneration Committee

Remuneration design

Deferral

Remuneration outcomes

Specified roles

Review of the remuneration framework

Other requirements

Disclosures

Remuneration framework

Remuneration outcomes

Special payments

Deferred and adjusted variable remuneration

B. Requirements for Non-SFIs

Remuneration framework

Role of the Board

Remuneration design

Remuneration outcomes

Specified roles

Other requirements

Disclosures

Qualitative disclosures

Source text: opening excerpt

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Main concepts

Who it affects

Key duties and rights

Penalties and enforcement

How it interacts with other laws

Amendment history

Litigation history

Gotchas

How to comply

Authority

Application

Interpretation

Adjustments and exclusions

Previous exercise of discretion

Definitions