Welcome to Issue 72 of the FSC Policy Update. This article outlines legislative and regulatory developments in the financial advice, technology and innovation, investments and superannuation sectors, plus more. Learn about what’s impacting the financial services industry below.
.
Click on the topic of interest below to read more.
Government finalising changes for Superannuation Performance Test for 2023
Government moves to mandate Payday Superannuation
Retirement Income Policy Roadmap Release member-only event
ASIC Report 763 and FSC Responsible Investment Labelling Guidance
Parliamentary Joint Committee on Corporations and Financial Services appearance
Financial Adviser Registration extended to October 2023
Government continues its focus on consumer protections from scams, fraud and cybersecurity in the Budget
FSC considers the responsible use of Artificial Intelligence in Financial Services in Australia
Government releases Payments Strategic Plan
New consumer information resources released
Design and Distribution Obligations
FSC Investment Management Agreement
ASIC consultation on sunsetting class orders on unit pricing discretions
.
PARLIAMENT, LEGISLATION AND REGULATION
.
.
The Government is expected to introduce legislation in the next coming fortnight (i.e. before 23 June) to implement its changes to multinational taxation. It is expected that the legislation will include changes to the rules for interest limitation (or thin capitalisation) and public Country-by-Country reporting. The FSC made submissions on both these issues. The FSC will inform members when the legislation is introduced to Parliament.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
Government finalising changes for Superannuation Performance Test for 2023
.
Public consultation has closed in May 2023 on Exposure Draft regulations that would amend the current performance test for MySuper products and apply the same test to Trustee-Directed Products (TDPs) this year. Industry is now awaiting the Government’s finalisation of changes to the annual superannuation performance test which is expected imminently.
These changes follow the Government’s response to the review run by Treasury of the Your Future, Your Super (YFYS) laws over the past year. In the Government’s response, the Assistant Treasurer Stephen Jones has made clear that the scope of changes is focused on fine tuning the performance test and updating the benchmarks that can be implemented by finalising the regulations in July so that the test can be applied at the end of August.
It is likely that performance test regulations will be finalised with changes to the prescribed notification for failing products as well as the performance test methodology, given the deficiencies identified in the exposure draft regulations that would mean a significant number of false positives for TDPs offered on a wrap platform.
Please contact Aidan Nguyen for more information.
.
SUPERANNUATION
.
Government moves to mandate Payday Superannuation
.
Following a pre-Budget announcement that from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages, the Government has advised it will begin consultation on the technical requirements for mandating payday superannuation.
The FSC is supportive of the principle of the measure and will work with its members to come to an industry position on the technical requirements, barriers, and impacts.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
Retirement Income Policy Roadmap Release member-only event
.
As compulsory superannuation enters into its third decade and the retirement income covenant marks its one year anniversary, now is the time for Australia and its superannuation industry to focus on meaningful reform for the retirement drawdown phase that empowers Australians with more confidence for how to spend their superannuation savings in retirement.
The FSC invites members to join the conversation at an in person event that will see senior industry leaders Duncan Rawlinson, RGA Australia; Louise Elliot, NMG Consulting; Ben Hillier, AMP and Esther Kerr, Australian Unity discuss and debate practical policy solutions for how to optimise the superannuation drawdown phase to get the best outcomes for retiring Australians and for all stakeholders.
DATE: Thursday 20 July
TIME: 4:00pm - 6:00pm
VENUE: AMP - 50 Bridge Street, Sydney (online streaming available for interstate members)
RSVP: Email: This email address is being protected from spambots. You need JavaScript enabled to view it. with your details and your preference to attend either in person (include any dietary requirements) or online.
.
INVESTMENTS
.
.
The FSC has welcomed the 2023/24 Federal Budget announcement that the Government will exempt ‘interfunding transactions’ from the associated fees and mandatory screening under the foreign investment framework. This was in response to sustained industry advocacy.
Treasury has begun a targeted consultation with stakeholders to determine the definition of ‘interfunding transaction’. Following this consultation, Treasury will develop draft regulations for further public consultation later this year.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
ASIC Report 763 and FSC Responsible Investment Labelling Guidance
.
The FSC’s Environmental, Social and Governance (ESG) Working Group continues to develop FSC guidance for labelling responsible investment products.
This work is in the context of ASIC’s continued focus on combatting greenwashing in product claims. ASIC has recently released Report 763 outlining key themes from its recent greenwashing interventions.
The report highlights four key areas that ASIC has focussed on:
- Net zero statements and targets not having a reasonable basis or being factually incorrect.
- Terms like ‘carbon neutral’, ‘clean’ or ‘green’, not underpinned by reasonable grounds.
- The scope or application of sustainability-related investment screens being either overstated or inconsistently applied.
- The use of inaccurate labelling or vague terms in sustainability-related funds.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
Parliamentary Joint Committee on Corporations and Financial Services appearance
.
The FSC appeared before the Parliamentary Joint Committee (PJC) on the 8 June to support the continued investment in the Clearing House Electronic Subregister System (CHESS) to ensure this key market infrastructure does not fall behind whilst the ASX continues to explore the CHESS replacement system. Evidence provided to the Committee noted that making the system changes identified in the FSC’s submission of 4 May would assist Exchange-Traded Fund (ETF) issuers to smooth system frictions or to facilitate contemporary electronic communication between product issuers and investors. This includes:
- Removing the ASX-stagged open process, or moving ETF’s to the end of the ASX market open framework an interim measure.
- With the USA moving to T+1 settlement next year, giving consideration to later settlement matching (which is presently 11:30) or having an efficient mechanism to adjust the settlement when the value is not finalised in time for matching.
- The provision of investor email addresses for new and existing clients via CHESS be mandated rather than voluntary, requiring brokers to pass these to CHESS, to facilitate electronic communication with investors.
The FSC understands the Committee will continue to hold public hearings in June 2023 and that the reporting date has not yet been finalised.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
.
The FSC has issued the third iteration of the Diversity Survey to fund manager members for completion. The FSC encourages fund manager members to participate in the survey, to enable aggregated insights to be provided back to members.
Feedback is requested by COB 30 June 2023.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
ADVICE
.
Financial Adviser Registration extended to October 2023
.
The deadline for the registration of financial advisers has been extended to 1 October 2023. It follows advocacy in the form of several representations to Government ahead of the passage of Treasury Laws Amendment (2023 Measures Number 1) Bill 2023 (the Bill). The Bill has been reported back by the Senate Economics Committee to the Senate and is likely to pass in coming weeks.
Unamended, and without intervention from the regulator, the legislation poses a risk of non-compliance for a segment of advisers and restricted the ability of the regulator to support the industry to prepare for the commencement of obligations. Extension of the date to register is designed to mitigate against an unintended consequence of advisers potentially not meeting their registration requirements under the Bill which has yet to pass, and to allow the regulator to prepare the industry for the incoming requirements (e.g. the provision of webinars, information sheets).
ASIC’s media release announcing the extension indicates the following:
- ASIC will extend the date by which relevant providers – that is, financial advisers who provide personal advice to retail clients on relevant financial products (including time share advisers) – must be registered. Relevant providers will now need to be registered by 1 October 2023.
- A further delay to the registration requirement will allow time for:
- Parliament to consider the improvements proposed by the Bill.
- ASIC to assist the financial advice industry to understand and comply with the registration requirement by issuing regulatory guidance and conducting webinars.
- Australian financial service (AFS) licensees to understand the registration requirement and to make necessary applications to register their relevant providers with ASIC.
- The registration requirement is new. It is separate, and in addition to, the pre-existing requirements for an AFS licensee to appoint a relevant provider to the Financial Advisers Register after they have been authorised. Provisional Relevant Providers cannot be registered.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
TECHNOLOGY AND INNOVATION
..
Government continues its focus on consumer protections from scams, fraud and cybersecurity in the Budget
.
The Federal Government maintains its focus on scams, fraud, and cybersecurity in the Federal Budget. Some of the key announcements include:
- Establishing the National Anti-Scam Centre within the ACCC to improve scam data sharing across government and the private sector, and to establish public-private sector 'fusion cells' that will each target different types of scams.
- Funding for ASIC to identify and take down phishing websites and websites promoting scams.
- Establishing a Coordinator for Cyber Security to ensure that the Commonwealth’s cyber security efforts are strategic, coordinated, timely and effective.
- Funding for building the policy and legislative foundations to transition to an economy-wide Digital ID ecosystem with an independent regulator.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
The FSC welcomes pausing the rollout of the Consumer Data Right to superannuation to focus on getting the banking and energy sectors right
.
The Government released its response to the ACCC’s recent Review of the Data Quality in the Consumer Data Right (CDR). Pleasingly, in its response, the Government resolved to pause the roll-out of CDR to the superannuation, insurance, and telecommunications sectors to allow time for the CDR to mature across the banking and energy sectors and to implement lessons learned to date.
The FSC welcomes this decision which will allow the Government time to improve the value proposition for consumers and iron out any kinks in the system before extending the program any further.
.
FSC considers the responsible use of Artificial Intelligence in Financial Services in Australia
.
The Department of Industry have recently released a Discussion Paper regarding Safe and Responsible Artificial Intelligence (AI) in Australia. This is following the release of a recent Rapid Research Paper on Generative AI by Australia’s Chief Scientist.
The paper is a broad discussion on how to improve trust in AI in Australia by assessing and mitigating the risks associated with its use. It draws the conclusion that improved trust will encourage further innovation.
The FSC will be making a submission to this consultation in consultation with the Board Committees, the Technology and Innovation Experts Group, and the Scams, Fraud, and Cybersecurity Working Group.
.
Government releases Payments Strategic Plan
.
The Government released its response to the Payments Strategic Plan Consultation. The response includes the finalised, forward looking Strategic Plan for Australia’s Payment System which outlines a vision for a modern, world-class and efficient payments system that is safe, trusted, and accessible, and enables greater competition, innovation and productivity across the economy.
Some of the key priorities from the response are:
- Reducing the prevalence of scams and fraud by introducing the National Anti-Scams Centre and scam ecosystem codes of practice.
- Establishing a new payments licensing framework for payment service providers. The government simultaneously released a consultation on this licensing framework which the FSC will look to make a submission to.
- Phasing out cheques by 2030. A consultation on this process is expected to take place in the final quarter of calendar year 2023.
- Winding down the Bulk Electronic Clearing System (BECS) which has been replaced by the New Payments Platform. The Government will be consulting on the shutting down of BECS and the FSC will look to engage with this process as well.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
LIFE INSURANCE
.
New consumer information resources released
New information for consumers has been released on the FSC website in advance of the new Life Insurance Code of Practice entering into force at the start of next month (1 July 2023).
The Consumer Guide to Life Insurance Law supports the new Life Code by outlining the most important obligations of life insurance law, while highlighting that commitments made by Life Code subscribers exceed these requirements in many aspects. It has been developed to sit alongside the new Life Code and help consumers as an accessible statement of the law, pointing them to further sources of information and assistance if required.
The Life Insurance Premiums Fact Sheet provides consumers with key information on different types of premium their life insurance policy may offer. It provides a single-page description of the two main types of premium structure, the key difference between them in how premiums are calculated, and other features that both types have in common.
.
In response to an application made by the FSC, ASIC has issued legislative instruments granting regulatory relief from transaction confirmation obligations under Section 1017F of the Corporations Act 2001 in certain circumstances.
The relief applies in relation to providing transaction confirmations to third-party beneficiaries where a policyholder is deceased, and to allow for confirmation of claims payments to be made in the form of a statement in advance of transactions for recurring benefit claims for a period of no more than six months.
These instruments can be accessed on the ASIC website.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
LEGAL, TAX AND CROSS-PORTFOLIO
.
Design and Distribution Obligations
.
The FSC formally launched version 2.0 of the template Target Market Determination (TMD) for funds management. The media release on the announcement is available here. The template is available for free for FSC members. The FSC has provided a copy of the revised template to ASIC, along with a detailed response to ASIC’s comments on previous drafts of the template.
The FSC hosted an event with ASIC to discuss their recently released Report 762: Design and Distribution Obligations (DDO): Investment Products. ASIC provided detailed insights into its thinking in the report, and answered a number of questions from FSC members about the details of the report. ASIC indicated they would engage further with FSC on a number of issues, including their next steps for enforcement. A detailed summary of the event was provided to members.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or Ashley Davies for more information.
.
FSC Investment Management Agreement
.
The FSC Working Group has concluded its review of the FSC Investment Management Agreement (IMA) and proposed a number of improvements to update the document in line with changes in law and practice since the current version was last updated.
The final revised draft document is now going through a process of internal approval.
Please contact Ashley Davies for more information.
.
ASIC consultation on sunsetting class orders on unit pricing discretions
.
ASIC has announced a consultation on sunsetting class orders on unit pricing discretions for managed investment schemes. Subject to feedback received, ASIC proposes to issue a new legislative instrument which will simply follow the position in the existing class orders. ASIC is only proposing one substantive change, which is to simplify the requirements to document exercises of discretion that affect the pricing of interests and reduce the level of prescription in the provisions.
ASIC invites submissions on the proposal to remake the class orders. In particular, ASIC is seeking feedback on:
- ASIC’s proposal to simplify the drafting of the duty to maintain written policies and records in relation to the exercise of pricing discretions in CO 13/657.
- Whether the broad existing requirement that pricing discretions be consistent with commercial practice and result in a current value/price requirement in CO 13/657 (see new s601FC(1A)), remains appropriate.
- Whether ASIC should continue to maintain a separate unit pricing regime for the relevant schemes that were registered before 1 October 2013.
Depending on member interest, the FSC may prepare a submission.
See here for further background: 23-154MR ASIC consults on remaking ‘sunsetting’ class orders on unit pricing discretions for managed investment schemes | ASIC
.
Australian Law Reform Commission – superannuation and the Legislative Framework for Financial Services (FSL11) and post-legislative scrutiny
.
The Australian Law Reform Commission (ALRC) published a background paper discussing superannuation and the legislative framework for financial services, as well as a background paper on post-legislative scrutiny. These background papers have been released by the ALRC as part of its Review of the Legislative Framework for Corporations and Financial Services Regulation.
The ALRC is also required to publish one further Interim Report during the Inquiry, and this Report C will include specific questions and proposals for public comment. The ALRC has mentioned to the FSC that this Interim Report C could come as early as June, although it is not due until 25 August.
The FSC expects to make a submission in due course on this topic.
Please contact David McGlynn or Ashley Davies for more information.
.
.
- The FSC has discussed a number of Budget tax measures, including:
- The proposed changes for new Build-to-Rent projects, including a reduction in the MIT withholding tax rate from 30 per cent to 15 per cent and an increase in depreciation rate from 2.5 per cent to 4 per cent.
- The Senate Economics Committee released its final report into the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 which covered issues including the franking of equity distributions funded by capital raisings (in Schedule 5). The majority report recommended Schedule 5 be amended to be better targeted at the mischief; while the minority (Coalition) report recommended this change be abandoned. A detailed brief on these recommendations was sent to members.
- The ATO provided the FSC with their final guidance for 2023 on foreign capital gains, foreign income tax credits, and the Burton decision. The guidance was circulated to members.
- A meeting with the ATO to discuss the enduring (post 2023) guidance on these issues has been set for August.
- The Victorian Budget contained a number of tax changes, including increases in payroll tax and land tax, and plans to phase out land stamp duty for commercial property. There were also changes to make the Corporate Collective Investment Vehicle (CCIV) have similar land tax and stamp duty treatment as Managed Investment Trusts (MITs). Legislation to implement many of these changes is currently before the Victorian Parliament. FSC members are requested to provide feedback on these changes.
- The FSC met with the Australian Custodial Services Association (ACSA) to discuss issues of common interest, including the Budget tax changes (noted above), the ATO’s final guidance on the Burton decision for 2023 (also noted above), and the ACSA/FSC Fund Tax Data Standard.
- The FSC co-hosted an event with ACSA on the Fund Tax Data Standard, with about 130 participants, providing the details of the standard, the need for the standard, the use cases and benefits of the standard. A recording of the event is available here.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.