Welcome to Issue 38 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
In the issue, the FSC team analyses the Government’s Economic Update, the Parliamentary Inquiry into Diversifying Australia's Trade and Investment Profile, the 2021 Exam timetable for financial advisers and the FSC's new Fund Management Board Committee.
Blake Briggs, FSC Deputy CEO
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Click on the topic of interest below to read more
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Government announcements – extension of JobKeeper
Australia as a Financial Centre
Design and Distribution Obligations (DDO) update
Parliamentary Inquiry into Diversifying Australia's Trade and Investment Profile
Extension of COVID-19 early release scheme
Consultation on Growth/Defensive definitions
Amendments to Eligible Rollover Funds Bill
APRA FAQ on Pandemic Data Collection
FSC - KPMG LS Experience Analysis Event
FSC Life Insurance Summit 2020 webinar event starts this morning
2021 Exam timetable for financial advisers released
Three months additional continuing professional development (CPD) relief in effect
ASIC Competition Review in Managed Funds
Fund Management Board Committee
Fee and cost disclosure: the end of the Saga? A new one begins?
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PARLIAMENT, LEGISLATION AND REGULATION
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On 23 July the Government released its Economic and Fiscal Update. The Government is forecasting a significant 2.5% decline in GDP in 2020-21, and for unemployment to peak at 9.25% in the December quarter of 2020.
The Government has announced a range of amendments to the JobKeeper and JobSeeker schemes to continue to support the economy (see more detail below), along with an extension to tranche 2 of the COVID-19 superannuation early release scheme to 31 December.
The Government has also announced the parliament will not sit for the originally scheduled two-week period from 4 - 14 August. This will disrupt the Government’s ‘Your Super, Your Choice’ reforms, and may potentially impact the Royal Commission bills that were scheduled to be introduced in August.
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Government announcements – extension of JobKeeper
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On 21 July, the Government announced the JobKeeper payment will be extended to March 2021:
- The payment of $1,500 per fortnight will be reduced to $1,200 from October and to $1,000 from January, with lower payment rates will apply to employees who worked fewer than 20 hours per week ($750 from October and $650 from January).
- Businesses will be eligible based on actual GST turnover (previously projected GST turnover).
- Businesses will need to reapply the turnover test at several points, reducing the number of businesses (and employees) who are eligible.
- Other eligibility criteria for businesses and employees remain unchanged. In particular, the Government has retained the use of the GST turnover test, so the issues with using GST turnover in financial services remain.
For more details, see here.
The Government also announced the Coronavirus supplement to income support payments will be extended to end December 2020 and be reduced from $550 per fortnight to $250 per fortnight, with the reinstatement of some means tests and adjustment to some means tests. Mutual obligation requirements are also being gradually reinstated. See here.
The Government also released its review of the JobKeeper payment. It appears that the review has not considered the financial services specific issues – specifically the problems with using GST turnover in financial services. For more details see here.
The Government also announced a new investment incentive and the expansion of existing instant asset write-off. See the tax section for details.
The Government also announced an extension of the COVID-19 early access scheme for superannuation. See the superannuation section for details.
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Australia as a Financial Centre
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There have been a number of media reports encouraging the Government to promote Australia as an international financial centre. In response to these reports, the FSC issued a media release strongly supporting these calls and arguing to achieve this goal, Australia needs to:
- to help significant investors and skilled employees move to Australia,
- remove excessive taxes that penalise investors in financial services, and
- prioritise the development of corporate collective investment vehicles that are familiar to investors in Asia
The media release is available here.
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Design and Distribution Obligations (DDO) update
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The FSC provided template Target Market Determinations (TMDs) for life insurance to ASIC. This follows the earlier provision of the funds management template TMD to ASIC (see previous update). While the templates have been shared with ASIC, they are not finalised and will continue to be developed.
ASIC have indicated it will take the templates into consideration as it finalises its Regulatory Guide (RG) on the DDO regime. The final RG is expected to be released in August and ASIC has indicated they are open to having a workshop with FSC members on the templates once the RG has been released.
FSC Templates for wraps/platforms, superannuation and retirement products are under development, as a are template definitions of key DDO terms.
A workshop to discuss the DDO treatment of retirement products, including Account Based Pensions (ABPs), Group Self Annuitisation (GSA) products, term annuities and lifetime annuities will be held on Thursday 30 July from 2.00pm - 4.00pm (online only). If members wish to attend this meeting and have not received an invitation, please email This email address is being protected from spambots. You need JavaScript enabled to view it..
ASIC have advised that the intend to have further consultation with FSC on the application of the DDO regime to Exchange Traded Products (ETPs). The FSC will engage with members on this consultation through the DDO Funds Management working group. The consultation was originally intended for the week starting 13 July but has been delayed. If you wish to participate in the consultation and are not a member of the DDO Funds Management working group, please email This email address is being protected from spambots. You need JavaScript enabled to view it..
The FSC DDO templates are being amended to include legal text indicating that the templates the copyright of FSC (on behalf of FSC members). This is in preparation for the FSC providing the templates to other industry associations, with a view to the FSC licensing the use of the templates by non-members. This will facilitate the wider adoption of the templates by the industry, while ensuring the FSC retains (on behalf of members) control of the templates.
The FSC is developing a proposal for the development of a centralised IT solution to facilitate the information flows mandated by the DDO regime: the flow from issuers to distributors and back from distributors to issuers. Once the proposal is developed, the DDO working groups will review the proposals with a view to requesting proposals from potential solution providers. This is (initially) being progressed through the DDO information working group.
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Parliamentary Inquiry into Diversifying Australia's Trade and Investment Profile
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Members of the FSC’s tax committees and members interested in the Asia-Region Funds Passport have been consulted on a draft FSC submission to this inquiry, being conducted by the Joint Standing Committee on Trade and Investment Growth.
The submission argues there is substantial potential for Australia to diversify its export destinations in financial services, including through the Asia-Region Funds Passport, if the Corporate Collective Investment Vehicle (CCIV) is prioritised and tax issues for funds management are addressed.
The submission notes the large decline in Australian business indicates it is important to boost the supply of investment funds, including through reducing barriers to foreign investment and lowering the company tax rate.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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SUPERANNUATION
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Extension of COVID-19 early release scheme
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In last week’s Economic and Fiscal Update, the Government announced an extension of the current COVID-19 early release of superannuation initiative.
The second round of applications, currently scheduled to close on 24 September, will remain open until 31 December. Members will still only be permitted one application in this time period.
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Consultation on Growth/Defensive definitions
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An industry working group has released for consultation a proposal for growth/defensive asset categorisation.
The working group includes representatives from both retail and industry funds and has the goal of developing a single standard that can be applied consistently across the superannuation sector.
The FSC will convene a sub-group of the Superannuation Technical Working Group to respond to the proposals. Submissions are due by 28 September 2020.
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Amendments to Eligible Rollover Funds Bill
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The Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020, which is intended to wind up Eligible Rollover Funds (ERFs), was introduced to Parliament earlier this year and is currently before the Senate.
In its Economic and Fiscal Update last week, the Government announced that it would amend this legislation to address the fact that several of the original dates for compliance have now passed. The Government will amend the Bill to:
- defer by 12 months the start date of the measure that prevents superannuation funds transferring new amounts to eligible rollover funds (ERFs)
- defer the date by which ERFs are required to transfer accounts below $6,000 to the ATO to 30 June 2021
- defer the date by which ERFs are required to transfer remaining accounts to the ATO to 31 January 2022
- allow all superannuation funds to voluntarily transfer amounts to the ATO in circumstances where the trustee believes it is in the best interests of that member, such as amounts that would otherwise have been transferred to an ERF.
It is not yet clear when this legislation will be debated in the Senate.
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On 23 July, APRA wrote to registrable superannuation entity (RSE) licensees in relation to outcomes for superannuation members.
The letter reminds trustees of their obligations to undertake a Business Performance Review by the end of 2020, and an outcomes assessment by 28 February 2021.
The letter asks RSE licensees to focus on the design of both MySuper and Choice product offerings and highlights the importance of data capabilities across the industry.
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APRA FAQ on Pandemic Data Collection
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On 23 July, APRA published a new FAQ relating to its new Pandemic Data Collection.
The FAQ covers questions relating to both the quarterly and monthly reporting, as well as general information about reporting timelines and requirements.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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LIFE INSURANCE
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FSC - KPMG LS Experience Analysis Event
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The FSC and KPMG will be presenting an insights session on the new 2016-2018 Lump Sum (LS) Investigation results. This is the first look into lump sum experience since the data was collected up to 2012.
Full life insurance members are invited to attend the following session scheduled for Friday 7 August from 3:00pm – 4:30pm. Please click on the following link to register and attend here.
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Please contact Aidan Nguyen for more information.
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FSC Life Insurance Summit 2020 webinar event starts this morning
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The FSC's Life Insurance Summit commences this morning with Senator the Hon Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, addressing delegates at 9.10am. The Summit runs for 1.5 hours across every morning this week - with over 35 industry leading expert speakers participating in a range of conversations, including: Group Insurance, Direct Insurance and Mental Health.
The program can be viewed here. Yesterday's media release can be viewed here.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ADVICE
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2021 Exam timetable for financial advisers released
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FASEA has released its exam sitting schedule for 2021 - there will be six Exam sittings in the year. Face-to-face sittings will be offered at metropolitan and regional locations throughout Australia and will be run over multiple days, up to twice a day. The full timetable can be accessed here.
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Three months additional continuing professional development (CPD) relief in effect
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FASEA has confirmed its Legislative Instrument implementing the three-month CPD relief for financial advice. The Legislative Instrument is available here.
FASEA has produced an FAQ that has been circulated to members about how the relief can be applied by licensees and advice businesses.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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TAX
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- The Government announced an expansion to a previously announced instant asset write-off policy. The threshold for instant write-off will be expanded to businesses with aggregated turnover of less than $500m (previously $50m) and will be available for assets of up to $150,000 (previously $30,000).
- This measure applies until end December 2020 and is expected to cost $300m over the forward estimates.
- A new investment incentive will be introduced, allowing businesses with aggregated turnover of less than $500m to take an immediate deduction of 50% of the costs of assets that can be depreciated.
- This does not apply to secondhand assets, buildings, or capital works.
- This applies for assets installed by 30 June 2021.
- The cost of this measure is $3.2bn over the forward estimates.
- For more details of the instant asset write-off and investment incentive, see here.
- The FSC provided additional information to the ATO in relation to our request for an administrative solution to address the issues with the rollover of death benefits. The FSC is requesting that that a transferring fund is not required to determine an untaxed element with respect to a death benefit rollover.
- The FSC Tax Expert Group has reviewed a proposed change to ATO third party reports for shares and units.
- The UK Government is conducting a review of Capital Gains Tax (CGT). The FSC is has raised this review with other international funds management associations to see if there is value in putting in a joint submission on CGT issues relevant to non-UK fund managers, including the CGT rules for UK non-residents impacting investments in UK REITs.
- The ATO has provided the FSC with a paper proposing a solution to deal with the issues the FSC has raised with the taxation of death benefit rollovers. The ATO paper has been circulated to FSC tax and superannuation experts for comment.
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The FSC is finalising a submission on the draft report of the New South Wales Review of Federal Financial Relations. The draft submission argues:
- The FSC strongly supports the Review’s recommendation for insurance duties to be abolished and submits that the arguments should be bolstered by arguments about why duties on life insurance are very problematic.
- The FSC supports the proposed abolition of stamp duty on land transfers, noting implementation issues need to be addressed.
- The Review’s proposal for reducing or removing the payroll tax exemption threshold is unlikely to get adequate public support, so other more targeted reforms should be identified, including removing payroll tax from the payments by financial advice licensees to financial planning businesses.
- The Review’s modelling of taxes seems broadly consistent with other evidence, although life insurance taxes may be more inefficient than the Review’s modelling suggests; and the Review’s modelling understates the inefficiency of company tax.
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See the previous FSC update for details of the draft report of the Review of Federal Financial Relations.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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INVESTMENTS
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ASIC Competition Review in Managed Funds
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As part of the ASIC competition in funds management review, the survey which Deloitte Access Economics (Deloitte) has asked fund managers, superannuation funds, platforms and advice licensees to complete, is due to close by close of business 31 July 2020. Member firms are encouraged to complete the survey which will inform Deloitte’s analysis of how competition is working in funds management.
This is a voluntary survey; however, member input will be important for this piece of work and the FSC encourages member participation.
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Fund Management Board Committee
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On 23 July, the newly established Fund Management Board Committee (FMBC) held its inaugural meeting. There was great substantive discussion about the policy direction and emerging issues for funds management.
Thank you to Jen Driscoll and Bryce Doherty for acting as Co-Chairs of this Committee.
The FMBC will be supported by the Investment Expert Group (IEG) which is composed of Chief Investment Officers and a mix of senior executives from funds management. The IEG will have a greater focus on technical funds management issues and the FMBC will focus on the strategic direction and funds management focus at the FSC.
Four new fund managers, all members of the FMBC, have been appointed to the FSC Board – Bryce Doherty, Jen Driscoll, Andrew Landman and Liz Hastilow.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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LEGAL
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Fee and cost disclosure: the end of the Saga? A new one begins?
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On 24 July, ASIC issued what were referred to as “minor amendments” to RG 97. ASIC indicated that the amendments were in response to COVID-19 and to provide greater clarity and confirm ASIC’s policy position on issues that were raised by industry.
The Changes
Transition period for PDSs: The update makes amendments to the PDS transition arrangements to allow issuers more time and flexibility in light of COVID-19. An issuer may choose to apply the new requirements to a PDS dated on or after 30 September 2020. PDSs given on or after 30 September 2022 must comply with the new requirements.
Note that there has been no change to the periodic statement transition arrangements in relation to timing. There has been an amendment however to clarify that only the issuer can elect to apply the periodic statement requirements early.
Other amendments: ASIC has made what are referred to as minor amendments. These are said to be amendments to confirm ASIC’s policy position on:
- the disclosure of buy-sell spreads in a periodic statement for collective investment products under [CO 14/1252].
- the disclosure of performance fees;
- the treatment of derivatives costs; and
- the significant event notice requirements.
Other amendments include consequential amendments, correction of cross referencing errors and minor inconsistencies between the templates in the RG and legislative instrument.
FSC Response
The FSC is considering these changes and will work with other industry participants in the Industry Working Group to update the cross-industry guidance note on RG 97.
On the whole, the changes appear to be consistent with the positions the FSC has advanced to ASIC concerning the 2019 iteration of the material. However, implementation of the new regime may give rise to further and new issues. We will be monitoring progress in this respect.
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We understand from recent discussions with Treasury that it is anticipating that the Financial Accountability Regime (FAR) legislation will be introduced in the 2021 winter sittings of Parliament. Accordingly, Treasury will not be consulting on draft legislation until early 2021. Treasury has caveated the advice with the warning that given all the COVID-19 impacts and consequent uncertainty, there is a risk that this timing will alter.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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