The measures include an FMI reform package, relief for foreign financial service firms, changes to the superannuation system, and a new commencement date for the CCIV regime.
Australia’s Treasurer Josh Frydenberg on Tuesday (11 May) announced the 2021‑22 Budget, saying it is aimed at securing the domestic recovery by creating jobs, rebuilding the economy and setting the country up for the future.
Since the onset of the COVID‑19 pandemic, the government has provided AUD 291 billion (USD 225 billion) in direct economic support to “keep businesses in business and Australians in jobs”. The Australian economy is forecast to grow by 5.25 percent in 2021 and 2.75 percent in 2022, outperforming every major advanced economy in 2020, Frydenberg said.
The measures for the financial sector included in the Budget announcement included:
Financial market infrastructures
- The government will introduce a regulatory reform package to provide regulators with sufficient power to pre-emptively identify and manage risks at for FMIs (Financial Market Infrastructures), and intervene in a failure or crisis when needed.
- The RBA (Reserve Bank of Australia) will be allowed to manage failures at clearing and settlement facilities, and gain access to a facility from which it can draw up to AUD 5 billion (as a last resort) to ensure the continued operation of clearing and settlement facilities
- The RBA and ASIC (Australian Securities and Investments Commission) will get enhanced supervisory and licensing power, and regulatory powers will be streamlined to improve efficiency
Foreign financial service providers
- The government will consult on options to restore regulatory relief for FFSPs (Foreign Financial Service Providers) who are licensed and regulated in jurisdictions with comparable financial service rules and obligations, or have limited connection to Australia, from holding an AFS Licence, in order to reduce duplicate regulatory requirements. The relief will be limited to FFSPs that deal with wholesale clients and professional investors.
- The government will consult on options to create a fast-track licensing process for FFSPs who wish to establish more permanent operations in Australia. This is intended to shorten application timeframes and reduce barriers to entering the Australian market.
Legacy life insurance and managed investment scheme products
- The government will provide AUD 2.5 million over two years to establish an industry working group to develop and consult on the design of a streamlined mechanism to facilitate the transfer of policyholders from closed life insurance products and managed investment scheme products to new products.
- Approximately 1.6 million Australians are currently in outdated life insurance products, the Financial Services Council says.
- The government will provide AUD 11.2 million over four years to support stronger consumer outcomes for members of superannuation funds – to be partially funded by higher levies on financial institutions
- This includes funding for APRA (Australian Prudential Regulation Authority) to supervise and enforce increased transparency and accountability under the Your Future, Your Super reform, and for Super Consumers Australia to support stronger consumer outcomes on behalf of superannuation fund members
- The government will remove the current AUD 450 per month minimum income threshold for compulsory superannuation payments to employees, starting from 1 July 2022. This will expand the superannuation guarantee coverage and increases retirement savings for an estimated 300,000 individuals, 63 percent of whom are women.
- The government will finalise the CCIV (corporate collective investment vehicles) regime first announced in the 2016-17 Budget, with a revised commencement date of 1 July 2022. The new corporate structure will provide a more tax-efficient investment vehicle that is more familiar to overseas investors.
- An ‘early engagement service’ will be established to give investors fast track tax advice on large investments.
- The government will consult on broadening tax residency rule changes to trusts and corporate limited partnerships.
- A review will be conducted on the tax treatment of venture capital to examine whether current arrangements incentivise investment.
- Tax hedging rules for financial arrangements will be amended to ensure taxpayers are not subject to unrealised taxation on FX gains and losses unless this is elected, to take effect from 1 July 2022.
ASIC budget reduction
- ASIC will have its budget reduced by over seven percent and asked to reduce staff by ten percent due to the transfer of its business registration function to the new ABRS (Australian Business Registry Services) under the ATO (Australian Tax Office). ASIC’s budget will drop from AUD 772 million to AUD 717 million. Its staff will drop from 2,096 to 1,878.
- The government has finalised the deadline for FASEA (Financial Adviser Standards and Ethics Authority) to continue operating – 31 December 2021. Following this, ASIC’s Financial Services and Credit Panel will take over the disciplinary function for advisers from FASEA, while responsibilities tied to the body’s ethics and education settings will go to Treasury.
Digital economy strategy
- The government will invest AUD 1.2 billion over six years to support Australia to be a leading digital economy and society by 2030
- This includes AUD 111 million to accelerate the roll out of the Consumer Data Right (CDR), starting with banking and energy, then telecommunications.
- This also includes AUD 124.1 million to be spent on building Australia’s capability in artificial intelligence, including through the launch of a National Artificial Intelligence Centre, to be led by CSIRO’s Data 61 business unit.
Other measures included in the Budget include tax relief for individuals, job creation incentives, more affordable childcare to boost workforce participation, and investments in skills and training, infrastructure, and the manufacturing sector – among other measures.
The ABA (Australian Banking Association), AFMA (Australian Financial Markets Association) and FSC (Financial Services Council) – among others – have issued statements welcoming the Budget initiatives.
More information on the Budget is available here.