Welcome to Issue 53 of the FSC Policy Update. Parliament sat for two weeks in June and passed three separate pieces of superannuation legislation, including the ‘Your Future, Your Super’, ‘More Flexible Super’ and ‘SMSF’ Bills. Their passage represents a win for the Government, given the hard-fought nature of the reforms, and will result in significant reform to the superannuation, funds management and life insurance sectors.
The ‘Your Super’ Bill will progressively commence from 1 July this year, with the operation of some provisions, including the performance assessment for MySuper and ‘trustee directed’ products, dependent on the final regulations. The FSC does not expect the regulations to be released for at least another month as the Government considers detailed industry feedback.
The FSC supports the reforms as they deliver material benefits to consumers, however there remain design issues to resolve, including finalising an assessment methodology that ensures ‘like-for-like' comparison of superannuation products.
The Government also committed to reviewing exclusions in group insurance policies, and the FSC intends to take a proactive position on this issue over coming weeks.
Parliament has now entered a long winter recess, with the next sitting not until Tuesday 3 August.
Blake Briggs, FSC Deputy CEO
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Watch more here.
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Click on the topic of interest below to read more
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Design and Distribution Obligations (DDO) update
4 weeks until the inaugural Investment and Retirement Incomes Summit
Your Future, Your Super legislation passes Parliament
More Flexible Super and SMSF legislation passed
New FAQ and worked examples for APRA Superannuation Data Transformation
Single disciplinary body legislation introduced to Parliament
Relief for ongoing fee disclosure obligations
Green Paper on financial advice launched – submissions close 1 July
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PARLIAMENT, LEGISLATION AND REGULATION
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In the 2021–22 Budget, the Federal Government announced its intention to allow for the modernisation of legacy managed investment schemes and life insurance products.
Treasury has had an initial meeting with the FSC. The process of designing a proposed legal mechanism for product modernisation will run until the end of the year and will involve the setting up of a small technical industry working group. From this work, a consultation paper will be released for wider industry comment.
The FSC has set up a cross industry working group to help shape the development of the appropriate legal mechanism. The group involves members with expertise in life insurance, funds management and tax.
This group has commenced meeting and has had initial discussions about the shape of the legal tests that could be applied when a firm decides to undertake product modernisation.
We are encouraging fund manager members to participate in this working group to ensure funds management issues are considered and incorporated into further consultation.
If you are interested in getting involved from a funds management perspective, please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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For other queries, please contact Aidan Nguyen for more information.
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Watch more from Blake Briggs here.
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Design and Distribution Obligations (DDO) update
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The FSC has now completed version 1.0 of the Target Market Determination (TMD) templates for the following products:
- Funds management, including Exchange Traded Products (ETPs) and Listed Investment Companies (LICs)
- Managed accounts
- Superannuation platform/wrap
- Superannuation choice product, non-wrap
- Life insurance cover (retail)
- Trauma insurance cover (retail)
- TPD insurance cover (retail)
- Income protection insurance cover (retail)
The products are available to members from the FSC website, including two examples for the funds management template, from here (login required).
The FSC is working with friendly societies to develop a TMD template for investment bonds, funeral bonds and education bonds, based on the FSC’s template for superannuation.
The FSC has also completed version 1 of the FSC’s data standards for:
- Target Market Determinations for funds management
- Dealings (transactions), including significant dealings
- Complaints
These data standards have been circulated to members, and a publicly available version is being updated here.
The FSC held several meetings with stockbrokers to discuss how the DDO applies to ETPs and mFunds, and the potential for stockbrokers to use the FSC’s data standard for DDO complaints.
The FSC is developing questions and issues to discuss with ASIC relating to how DDO applies to funds management products, platforms, wraps and Investor Directed Portfolio Service (IDPSs). Meetings with ASIC to discuss these issues will be organised shortly.
The FSC is preparing requests for ASIC to provide no action relief and an exemption from the DDO regime for the reissue of legacy life insurance products. The FSC is working with certain members on the draft documentation and discussing the parameters with ASIC, it is expected that the no action relief application will be filed with ASIC first, with the exemption application to be lodged shortly thereafter.
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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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4 weeks until the inaugural Investment and Retirement Incomes Summit
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It's one month until industry professionals from across the superannuation, wealth, advice and investment spheres gather at Crown Sydney for the FSC's first Investment and Retirement Incomes Summit on Tuesday 27 July. The Summit is the best opportunity for the sector to come together to discuss, analyse and solve the challenges and opportunities on the horizon.
With Senator the Hon Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy & Minister for Women's Economic Security; Scott Hartley, CEO, AMP Australia; Alva Devoy, Managing Director Australia, Fidelity International; Dr Stuart Palmer, Head of Ethics Research, Australian Ethical Investment; Michelle Segaert, Partner - Financial Services Law, EY and Stephen Jones, MP, Shadow Minister for Financial Services and Superannuation speaking, our program is industry-leading.
The event is also the ideal opportunity to reward your team and celebrate achievements – make a booking today for cocktails and dinner after the Summit at Crown Sydney. Recognise your high achievers after a tough year with some special celebratory treatment. Make a day and night of it!
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EVENT DETAILS
DATE: Tuesday 27 July, 2021
TIME: 8.30am - 4.30pm / 4.30pm - 6.30pm Cocktail Function
VENUE: Crown Sydney, 1 Barangaroo Ave, Barangaroo
REGISTRATION COSTS - Standard Rates
IN PERSON
Group Member (4): $1,050 + GST per person
Member: $1,150 + GST per person
Non Member: $1,550 + GST per person
VIRTUAL
Member: $600 + GST per person
Non Member: $750 + GST per person
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ASIC updates class order that allows Exchange Traded Funds (ETF) issuers to use overseas market makers
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ASIC has updated its class order on ETFs that remove residency requirements and enables ETF issuers to use overseas market makers.
This removes a regulatory barrier to entry for offshore market making entities which would like to participate in the Australian ETF market and may encourage new marker makers to the sector.
ASIC noted in its update that it recognises that authorised participants perform an essential market making function in the market for ETFs, and that competition between market makers facilitates market efficiency and can produce benefits for retail investors.
The revised Instrument is available here and further information on the background of this issue and the announcement is available at the following link.
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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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Your Future, Your Super legislation passes Parliament
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On 17 June, the Senate passed the Treasury Laws Amendment (Your Future, Your Super) Bill 2021.
The Bill was passed through the Senate with two key amendments:
- A delay in the commencement of the stapling provisions to 1 Nov 2021; and
- Removal of all regulation making powers related to the best financial interests duty.
These amendments were in addition to the amendment made by the House of Representatives to remove the Ministerial veto power originally included in the Bill.
The FSC’s media release in response to passage of the Bill can be found here.
The regulations supporting the legislation have not yet been finalised. The regulations will include the detailed methodology and timing for the performance assessment process.
The FSC is continuing to engage with the Government and Treasury in relation to the detail of the regulations.
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More Flexible Super and SMSF legislation passed
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On 17 June, the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 and Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 have passed the Parliament.
The More Flexible Super reforms were passed with two amendments from One Nation, which were supported by the Government:
- Removing excess contributions charge for those who exceed their cap; and
- Higher caps for those that participated in the COVID early release scheme, to allow catch up contributions.
The FSC will provide more information about the implementation of these reforms as it becomes available.
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New FAQ and worked examples for APRA Superannuation Data Transformation
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On 18 June, APRA released new FAQs and worked examples to support Phase 1 of the Superannuation Data Transformation.
The new additions include worked examples for:
- SRS 550.0 Asset Allocation
- SRS 705.0 Components of Net Return
- SRS 705.1 Investment Performance and Objectives and
- SRS 706.0 Fees and Costs
The FSC’s APRA Data Transformation Working Group is meeting regularly to discuss issues relating to the implementation of the new reporting 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 Standard 26 is a standard consent wording for getting medical information that comes into full effect on 1 July this year. It is an agreement between the FSC and the Royal Australian College of GPs (RACGP) following a Parliamentary Joint Committee (PJC) recommendation to get that agreement.
The RACGP has published an article on GPNews which can be accessed by clicking here. The FAQ is also available on the RACGP website which can be accessed by clicking here.
Watch an overview from Nick Kirwan here.
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Please contact Nick Kirwan for more information.
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The Life Code Working Group is working through some further late stage comments provided by the Financial Rights Legal Centre and others in respect of Life Code 2.0. The FSC has also begun work with relevant subject matter experts on exploring enforceable code provisions. It is expected that a public consultation draft will be released in early July and roundtables and bilateral meetings with stakeholders will commence soon after that.
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Please contact Ashley Davies for more information.
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ADVICE
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Single disciplinary body legislation introduced to Parliament
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The Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Bill 2021 has been introduced to Parliament (available here: Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021).
This legislation implements a single disciplinary regime for financial advisers. The FSC has submitted to Treasury on the Exposure Draft. The FSC will keep Members updated on developments as the legislation progresses through the Parliament and ahead of it commencing on 1 January 2022.
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Relief for ongoing fee disclosure obligations
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The Federal Government announced relief ahead of incoming ongoing fee disclosure obligations that take effect on 1 July 2021. The Government, by regulation, will allow financial advisers to provide an estimate of fees for the 60 days prior to a Fee Disclosure Statement (FDS) being issued for the transition year (1 July 2021 to 30 June 2022). Under the current legislation, that implements Recommendation 2.1 of the Financial Services Royal Commission, fees are required to be reported up to the day before an FDS is issued posing considerable difficulty for industry to comply with.
The FSC has been engaging the Government on this issue. ASIC has updated its FAQ for ongoing fee arrangements here.
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Green Paper on financial advice launched – submissions close 1 July
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In April the FSC launched Affordable and accessible advice: FSC Green Paper on financial advice. The Green Paper outlines for public discussion bold proposals to reduce the cost and complexity of financial advice which include:
- Simplifying the definitions of advice into categories of personal advice and general information and separating product from advice;
- Removing the safe harbour steps so that the Code of Ethics is the single tool to meet the Best Interests Duty;
- Abolition of the Statement of Advice and in its place enable a scalable Letter of Advice that empowers consumers and is responsive to their needs
Submissions from the public are open until 1 July 2021 and these should be emailed to This email address is being protected from spambots. You need JavaScript enabled to view it.. The below videos provide more information on the Green Paper that you can share across your networks.
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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 Life Tax Expert Group met with Treasury to discuss the tax issues relating to the implementation of IFRS17. A note of the outcomes from the meeting was circulated to members.
- FSC members met with key advisory firms to discuss the issues members are facing with foreign capital gains, Foreign Income Tax Offset and Burton's case.
- FSC members met with the Australian Custodial Services Association (ACSA) to discuss issues of common interest, including Burton’s case (see previous point), Swiss tax refunds, the member tax statements, and the 2021-22 Budget measures including foreign exchange (forex) hedging and the Corporate Collective Investment Vehicle (CCIV).
- ACSA and the FSC have agreed to work together on raising issues relating to the Burton case with Government and the ATO.
- ACSA have provided an initial list of forex hedging tax issues to FSC for comment.
- The Life Tax Experts are developing a paper for consideration by members on whether withholding tax should be applied to income protection claim payments.
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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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