Welcome to Issue 69 of the FSC Policy Update. 2023 will be a significant year for the financial services industry, with the new Government finding its feet and likely progressing a significant reform agenda across financial services.
Key reviews and regulatory changes underway at the start of the year include the Government’s release and response to the Quality of Advice Review final report, its Managed Investment Schemes review, and the finalisation and implementation of the ‘Your Future, Your Super’ review. The Government will also likely look to address policies that had not been finalised at the end of 2022, including the Financial Executive Accountability Regime and the Compensation Scheme of Last Resort.
The Minister is also beginning to build out an ambitious agenda in superannuation policy, including legislating the objective of the system and considering potential tax changes, as well as responding to pressures to review group life insurance policy parameters and strengthen the retirement income framework.
The FSC will continue to be at the forefront of these policy debates on behalf of members and has a detailed research agenda planned for the new year, supported by Board Committee and Working Group input.
The FSC will also play its important role creating linkages between the industry and regulators and policymakers, and disseminating key information to help you and your businesses stay connected and on top of the fast-moving regulatory environment.
Please contact me or the FSC team if you would like more information on any of the policy issues covered in this update.
Blake Briggs, CEO of the FSC
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Click on the topic of interest below to read more.
Financial Accountability Regime and Compensation Scheme of Last Resort
'Your Future, Your Super' review
Consultation on an objective of superannuation
Superannuation Data Transformation Project
Financial Regulator Assessment Authority review of APRA
FSC Standard for Claims Handling in Superannuation
APRA consultations on proposals to strengthen the superannuation prudential framework
Previously announced changes to reporting and disclosure
Access to Offenders’ Superannuation for Victims and Survivors of Child Sexual Abuse
ETF Product Issuer Working Group
Climate related financial disclosure - Treasury consultation paper
Federal Government Sustainable Finance Agenda
Corporate Collective Investment Vehicle
ASIC releases FAQs on tax (financial) advice
Modernising Business Communications
Treasury consultation on Non-Arm's Length Income and expenditure provision
Design and Distribution Obligations
Revising the FSC Investment Management Agreement
AUSTRAC standard identification options
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PARLIAMENT, LEGISLATION AND REGULATION
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Financial Accountability Regime and Compensation Scheme of Last Resort
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In the final sitting week of 2022, neither the Financial Accountability Regime (FAR) nor the Compensation Scheme of Last Resort (CSLR) were considered by the Senate. This means this legislation will be dealt with in 2023.
The Greens had been pushing the Government TO adopt amendments on the FAR to include individual civil penalties for executives who breach their FAR obligations (and prevent accountable entities and their significant related entities from indemnifying or insuring an accountable person against the consequences of breaching an obligation under the FAR). In late 2022 the press reported that Labor had made a deal with the Greens to include $1.1 million individual civil penalties for accountable persons, however this did not proceed and instead Labor indicated it would consult further on the matter. More recently, Labor has stated their preference is not to include individual civil penalties and hope to pass the FAR Bill by end of March 2023. The Coalition have publicly stated that they would support the FAR bill if it remained consistent with the Morrison government’s proposed legislation, which did not include individual civil penalties.
Independent Senator David Pocock has also proposed an amendment in the Senate to reduce the scope of the Minister’s ability to exempt accountable entities, requiring this to now be only by way of notifiable instrument (rather than written notice) and only where the Minister is satisfied that it would be unreasonable for the accountable entity to comply.
The earliest the FAR would apply for the banking sector is six months after the Financial Accountability Regime Bill receives Assent. For the insurance and superannuation sectors, it would be 18 months after the Financial Accountability Regime Bill receives Assent.
Please contact Ashley Davies (FAR) and This email address is being protected from spambots. You need JavaScript enabled to view it. (CSLR) for more information.
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SUPERANNUATION
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'Your Future, Your Super' review
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The Government is now considering changes to all of the Your Future, Your Super (YFYS) measures following Treasury’s public consultation last year. We understand Treasury will consult on exposure draft legislation as well as publish a summary of issues that arose during the public consultation process in the first quarter of 2023, likely in early March.
The FSC is continuing to advocate to Government on the need to provide as much advance notice to the changes as possible to manage implementation. This is particularly important for the changes to the performance test benchmarks and the extension of the performance test to trustee-directed investment options, given that the test would apply retrospectively for the period up to 30 June 2023.
Please contact Aidan Nguyen for more information.
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Consultation on an objective of superannuation
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The Assistant Treasurer has announced a consultation to enshrine an objective for superannuation will start shortly, with the intention that legislation would be passed by the first half of 2023. The Assistant Treasurer has also said that legislating an objective for superannuation would be a precondition before any changes to superannuation tax settings, such as a cap on very large balances, were made.
The FSC and ASFA are jointly advocating for a simple objective that reflects the expectations of everyday Australians that superannuation is for the purpose of providing an income to improve the quality of life in retirement. A simple definition that is commonly understood and that the superannuation industry is unified on will reduce the risk that any policy changes undermine confidence in the system.
The FSC also released consumer research which demonstrated that the objective of superannuation should focus on their retirement, and not towards other objectives such as investing in housing or projects of national significance.
Please contact Aidan Nguyen for more information.
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Superannuation Data Transformation Project
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Late last year, APRA consulted on minor amendments to Phase 1 of the Superannuation Data Transformation Project. The consultation was primarily concerned with the end of ‘best endeavours’ reporting for expenses, which is scheduled for 30 June this year and included a significant number of amendments to the reporting framework.
Following feedback from members, the FSC put to APRA that the scheduled end of best endeavours was not realistic within the scope of the significant number of amendments proposed.
Further, although APRA had proposed extending the reporting time frame for data collated from third parties, the FSC argued for a further increase to six months and for there to be no distinction between collating this data from connected and non-connected entities as arm’s length requirements mean that the time frames for data collection is fundamentally the same.
Finally, the FSC flagged that members had already incurred significant costs in relation to implementing Phase 1 of the SDT project, not including the proposed amendments, and that these costs were only going to grow with Phase 2 and the significant amount of reform that APRA has proposed for the coming years.
The consultation closed in early December and the FSC is expecting a response very shortly.
APRA will also begin consulting on Phase 2 of the project as well as confidentiality and publishing requirements in the first half of 2023.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Financial Regulator Assessment Authority review of APRA
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The Financial Regulator Assessment Authority (FRAA) is conducting a review of the effectiveness and capability review of APRA. This first review of APRA by the FRAA is a targeted assessment of the effectiveness and capability of APRA’s supervision and resolution functions, focusing on superannuation. The scope of the review excludes matters that are under consideration in other reviews or consultations, such as the review of the Your Future, Your Super laws.
The FSC prepared a confidential submission in December 2022. Following this, the FSC has been invited to attend a roundtable to be held virtually on 10 February with other peak bodies to discuss the FRAA consultation paper. We understand FRAA is willing to hold bilateral discussions with superannuation funds separately. Interested members should consult the FRAA secretariat directly at This email address is being protected from spambots. You need JavaScript enabled to view it. for further information. FRAA will prepare an agenda and discussion material to be circulated closer to the date.
Please contact Ashley Davies for more information.
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FSC Standard for Claims Handling in Superannuation
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The FSC has released an enforceable standard for handling of group life insurance claims in superannuation. The new standard replaces existing voluntary guidance and sets out the minimum level of service consumers should expect to receive from their superannuation fund when making a claim on their life insurance. The standard has commenced operation on 1 January 2023 on a voluntary compliance basis and will commence on a full mandatory compliance basis for FSC superannuation members from 1 July 2023.
A copy of the new FSC Standard 28 Claims Handling Standard for Superannuation Funds can be accessed here.
Please contact Aidan Nguyen or Ashley Davies for more information.
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APRA consultations on proposals to strengthen the superannuation prudential framework
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APRA is currently consulting on a number of proposals to strengthen the prudential framework of the superannuation sector:
- A Discussion Paper on ‘Superannuation transfer planning’, which proposes new requirements and enhanced guidance for superannuation trustees in the event they need to transfer members out of – or into – their fund. In particular for MySuper, APRA's proposals are intended to ensure that trustees are pre-positioned for the transfer of MySuper assets in a 90-day period, in the event that a MySuper license has been cancelled, and would commence by 1 July 2023. APRA’s other proposals are to ensure transfer planning is well integrated into each trustee’s member outcomes and strategic planning framework (SPS 515). Submissions to this discussion paper are due to APRA by 10 March 2023.
- A Discussion Paper on ‘Financial resources of superannuation funds’, which proposes to replace the existing SPS 114 Operational Risk Financial Requirement (ORFR) with increased requirements and more flexibility for trustees to manage their financial resources for operational risk. Of particular note is APRA’s proposal for trustees to hold a ‘base’ amount of capital to enable it ready access to financial resources to fund recovery and exit planning activities. APRA has proposed that these new capital requirements would start from 1 January 2025. Feedback on APRA’s proposals are due to APRA by 17 March 2023.
- Updated prudential guidance ‘SPG 530 Investment Governance’, which proposes guidance to assist trustees to implementing revised investment governance framework requirements (SPS 530) that come into effect from 1 January 2023. Feedback on the draft guidance is due to APRA by 17 March 2023.
APRA will shortly publish its 2023 Policy Priorities and 2023 Supervisory Priorities, where we expect to see each these items and their linkages set out in more detail.
Please contact Aidan Nguyen or This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Previously announced changes to reporting and disclosure
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Late last year, Assistant Treasurer Stephen Jones announced changes to reporting requirements that included requiring superannuation funds to file annual, publicly available financial reports with ASIC, as well as promising a consultation on a more streamlined reporting process.
The Bill was introduced in December but has been referred to the Senate Economics Committee for review. This process was expected to be complete by 25 January 2023, however, the Committee has tabled a progress report and sought an extension to 3 March 2023.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Access to Offenders’ Superannuation for Victims and Survivors of Child Sexual Abuse
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Treasury has released a consultation on proposed changes to superannuation early release rules. The proposal would allow victims of child sexual abuse who have unpaid court ordered compensation owing to them to sue for payment to be made from any “additional” superannuation contributions by the convicted party, or their spouse. The policy is designed to discourage people who may be convicted of child sexual abuse from hiding their assets within the superannuation system.
It is proposed that additional contributions mean any concessional or non-concessional contributions made above the Super Guarantee either six or 12 months before the commencement of proceedings, up to the day the court grants the compensation order. It would also cover additional contributions paid to a spouse’s account in that time frame.
These contributions would be paid through a court order and directed by the ATO and paid as is, that is, not “unwound” as in bankruptcy proceedings but paid net of any tax that may have already been paid on them.
A second proposal would allow for victims to apply to the courts for confirmation of superannuation assets, via the ATO, prior to suing for compensation from superannuation additional contributions.
In 2018 Treasury previously consulted on early release conditions for victims of crime, more generally. The FSC made a submission in support with much of its submission reflected in this proposal.
The FSC will again make a short submission in support of this proposal and covering any technical issues that may need to be attended to by Treasury.
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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ETF Product Issuer Working Group
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The ETF Product Issuer Working Group convened on 21 December 2022 to raise a number of ETF related matters with the ASX, such as moving ETFs to the end of the ASX market open. The Working Group is also giving further consideration to the amendments to ETF naming conventions following the update to ASIC INFO Sheet 230.
The next meeting of the Working Group is scheduled for 31 January 2023. The Working Group is open to members who issue exchange traded products.
If you would like to nominate a representative to the Working Group please contact This email address is being protected from spambots. You need JavaScript enabled to view it..
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Climate related financial disclosure - Treasury consultation paper
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Treasury released a consultation paper in December seeking initial views on the design and implementation of a standardised mandatory climate-related financial disclosure regime in Australia.
The paper has 19 high level questions on the architecture of the regime including:
- To which entities should the regime apply?
- What should the timing of implementation be?
- Should it be aligned with international standards like the ISSB?
- Should assurance be required?
- Should scope 3 be reported?
The proposed principles informing the Government’s design of the scheme are:
- Support Australia’s climate goals: reforms should assist Australia’s transition to net zero by 2050, adaptation to climate change and initiatives to promote a sustainable financial system.
- Improve information flows: reforms should deliver improvements in quantity, quality and comparability of disclosures to help with management of systemic risks and improve flow of useful information to investors.
- Well-understood: business, investors, regulators and public should have a clear and common understanding about obligations for entities to disclose climate risk.
- Internationally aligned: new requirements should be aligned with international reporting practices to minimise compliance cost and ensure it is viewed with credibility by international markets.
- Scalable and flexible: new requirements should build on the existing financial reporting system and flexible to accommodate future developments in sustainability reporting.
- Proportional to risk: requirements should be proportional to who they apply to and the cost and potential liabilities that entities will incur.
This paper is the beginning of the process. This consultation will be used to inform a more detailed draft of the proposed disclosure regime requirements later in 2023.
The FSC’s ESG Working Group is providing input into the FSC submission. Final submissions are due on Friday 17 February.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Federal Government Sustainable Finance Agenda
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On 12 December, in a speech to the Australian Sustainable Finance Institute, the Federal Treasurer The Hon Jim Chalmers MP announced a sustainable finance agenda for the Federal Government.
The Government’s agenda is centred around the need to set Australia’s financial system up so that it is an environment that attracts sustainable investment and that is resilient to international fluctuations and shocks. The Treasurer’s statement sees a key role for the financial system to mobilise capital and manage the risks and opportunities of the economic transition.
The Treasurer has written to the Council of Financial Regulators seeking their support for the sustainable finance agenda. Climate and sustainable finance will also be made a priority for cooperation through regular Australian Treasurers’ meetings.
The sustainable finance agenda aims to achieve a more coordinated policy approach. It involves the following pillars:
- Implementing climate risk reporting standards: the initial consultation paper has been released today. This will inform a more detailed proposal to be leased later next year once the final ISSB framework has been finalised. The speech also flagged they are watching closely the trends in nature-related reporting in line with their agenda on biodiversity and natural capital announced by The Hon Tanya Plibersek last week.
- Building a broader sustainable finance strategy to help the private sector finance the energy transition and other shifts required to meet Australia’s net zero commitment. The strategy will be led by Treasury. Treasury will work with the Council of Financial Regulators on initial recommendations, with a consultation paper to be released in early 2023. It will involve progressing priorities or potential reforms in 5 key areas:
- Improving transparency through a sustainable finance taxonomy – Treasury will consult with industry on the best option for Australia and role for the Government in leading and legislating a Taxonomy, drawing on work ASFI is doing.
- Keeping financial regulators and governance practices fit for purpose to manage risk.
- Combatting greenwashing by ensuring the credibility of sustainability-related targets, products and investments – The government will consider what further initiatives need to be undertaken to strengthen ESG labelling.
- Making sure the public sector leads by example.
- Elevating international engagement – Australia has joined the Coalition of Finance Ministers for Climate Action and the International Platform on Sustainable Finance.
The Government has also tasked Treasury and the Australian Office of Financial Management to look at the role Government green bonds can play.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Corporate Collective Investment Vehicle
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The FSC Working Group has met and finalised a 'term sheet' of key issues to include in a CCIV Constitution template. An associate member has started drafting a constitution template to be circulated and discussed by the wider Working Group and the FSC has scheduled a discussion meeting for early March.
Please contact Ashley Davies for more information.
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ADVICE
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ASIC releases FAQs on tax (financial) advice
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ASIC has updated its website with new FAQs on tax (financial) advice provision for relevant providers. You can access this information at the below links:
FAR to display whether financial advisers can provide tax (financial) advice | ASIC
FAQs: Relevant providers who provide tax (financial) advice services | ASIC
Flowchart: Can I provide tax (financial) advice services to retail clients as a relevant provider? | ASIC
This follows ongoing engagement the FSC has had with both ASIC and Treasury on tax (financial) advice and financial adviser registration more broadly.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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TECHNOLOGY
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Assistant Treasurer, Stephen Jones, recently outlined his preliminary view of crypto regulation in Australia which is that certain digital assets which act like financial products should be regulated as such. Treasury is expected to release a consultation on its Token Mapping Project, the results of which is expected to kick off the regulation of certain assets.
The former Liberal government began work on Crypto regulation with the Crypto Asset Secondary Service Providers consultation, that looked to regulate crypto custody arrangements for service providers that store or exchange crypto assets. The new government has yet to provide a response to that consultation.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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The FSC has been invited to be part of an industry Working Group on fraud risk within the superannuation sector. The working group is chaired by the ATO and APRA and also features representatives from ASIC, Treasury, AFSA, Super Consumers Australia, and AIST. The role of the Working Group is to assess fraud risk throughout the superannuation consumer lifecycle and suggest areas for improvement and potential regulatory oversight. The Working Group reports to the Superannuation Industry Stewardship Group.
The Labor government flagged early on that consumer protection against scams and fraud would be a large focus for its first term so members should expect a lot more in this space in 2023.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Modernising Business Communications
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Late last year, the Government re-introduced a slightly tweaked version of the Modernising Business Communications Bill that will allow for e-signatures and virtual meetings under the Corporations Act. The Bill was referred to the Senate Economics Committee with an expected report date of 25 January, however, the Committee has returned a progress report and requested an extension to the report date to 3 March 2023.
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, TAX AND CROSS-PORTFOLIO
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Treasury consultation on Non-Arm's Length Income and expenditure provision
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Last week Treasury released a consultation paper seeking feedback on proposed amendments to the Non-Arm’s Length Income (NALI) provisions as follows:
- Self-managed superannuation funds and small APRA-regulated funds would be subject to a factor-based approach set at an upper limit of 5 times the level of the general expenditure breach on the amount of fund income taxable as NALI due to a general expenses breach.
- Large APRA-regulated funds would be exempted from the NALI provisions for general expenses, although these funds would continue to remain subject to the provisions for specific expenses linked to specific asset and income sources.
Feedback on the consultation paper is due by 21 February 2023.
Please contact Michael Potter for more information.
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Design and Distribution Obligations
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ASIC issued another interim stop order in January 2023 under the Design and Distribution Obligations (DDO). As of 9 January, of the 22 DDO interim stop orders issued by ASIC to date, five remain in place.
The FSC’s DDO Working Group will continue to discuss the stop orders and how members should respond to the orders, particularly in relation to distribution conditions in Target Market Determinations (TMDs).
The work on revising the FSC’s template TMD for funds management is well progressed, and the proposed revisions are being shared with the wider FSC membership as well as ASIC who have been invited to review and comment. The proposed changes have been taking account of ASIC’s stop orders, ASIC feedback on the template, and feedback from users of the template.
Please contact Michael Potter or Ashley Davies for more information.
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Revising the FSC Investment Management Agreement
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The FSC has circulated a revised draft of the FSC IMA following feedback received from members. A drafting meeting will be scheduled for February 2023 to work through the document.
Please contact David McGlynn or Ashley Davies for more information.
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AUSTRAC standard identification options
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AUSTRAC has released a guide on “Assisting customers who don’t have standard identification” though the use of certain alternate identification options. More details can be found by following the AUSTRAC website link below.
In its recent media release, AUSTRAC advised:
AUSTRAC is committed to supporting financial inclusion and has worked with industry associations and community organisations to update guidance to support financial institutions to use a flexible and compassionate approach to customer identification processes.
The updated guidance will help financial institutions provide financial services to customers from diverse backgrounds and in challenging circumstances who have difficulty providing standard identification by using alternative forms of reliable and independent identification.
Some members of the community may have difficulty providing standard forms of identification documents or may have documents with inconsistent details, whether due to emergency, personal circumstances, location or structural barriers.
This can include Aboriginal and Torres Strait Islander peoples, those in remote communities, people who are incarcerated or recently released from prison and intersex, trans and gender diverse people whose documentation may not reflect their identity. For those fleeing domestic violence or evacuated from their home due to a natural disaster, gathering documentation before leaving is often not an option.
This guidance will help financial institutions to implement a risk-based, flexible approach, and provides examples of how this flexible approach can be applied.
Read the guidance on Assisting customers who don’t have standard identification.
What you can do
We encourage you to share the guidance with your members and through your communication channels.
If you have any questions, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..
In summary, the guide provides examples of acceptable alternate identification options, such as:
- referee statements – from an inclusive list of “suitable” individuals and the contents met prescribed minimum requirements;
- government correspondence, including from state and territory correctional service agencies where it involves persons in prison or recently released from prison
- a community ID or indigenous organisation membership card (for Aboriginal and Torres Strait Islander peoples), and
- a customer’s self-attestation (statement) of their identity as a last resort, in instances of assessed low ML/TF risk.
Please contact David McGlynn or Ashley Davies for more information.
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