Glossary

Purpose and structure of the Bill

The Bill gives legislative effect to four separate policy measures that are designed to improve the regulation and competition of Australia’s financial industries.[1]

The Bill has four Schedules:

• Schedule 1 amends the Corporations Act 2001 to prohibit schemes designed to avoid the application of product intervention orders in relation to a credit facility.[2]
• Schedule 2 amends the Corporations Act to deliver the Government’s election commitment to recognise the experience of existing financial advisers as equivalent to tertiary qualifications.[3]
• Schedule 3 amends the Australian Securities and Investments Commission Act 2001 (ASIC Act) , the Corporations Act, and the Competition and Consumer Act 2010 to give additional powers to ASIC and the Australian Competition and Consumer Commission (ACCC) for the purpose of facilitating competition in the provision of clearing and settlement services for Australian cash equities.[4]
• Schedule 4 amends the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953 to improve the operation of the First Home Super Saver Scheme by increasing flexibility in some parts of the legislation and clarity in others.[5]

As the policy measures are independent of each other, the relevant background and the position of major stakeholders are set out under each Schedule number.

Committee consideration

At the time of writing, the Bill had not been referred to, or reported on by, any committees.

Financial implications

According to the Explanatory Memorandum, the four schedules of the Bill are not expected to have a financial impact on the Government’s bottom line.[6]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[7]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights has not yet considered the Bill.

Schedule 1 – Prohibition of avoidance activities to circumvent product intervention orders

Background

What are product intervention orders?

Some financial products – for example, products that charge excessive fees or lead to predatory lending – can put consumers under onerous financial burden.

Since April 2019, the National Consumer Credit Protection Act 2009 (NCCP Act) and the Corporations Act 2001 give ASIC (Australia’s corporate regulator) the power to intervene when it identifies significant problems with a financial product or class of products.[8] In other words, ASIC can issue product intervention orders (PIOs) to ban or impose conditions on financial products if it believes the products have caused or are likely to cause significant detriment to consumers.

For example, in September 2019 ASIC issued a PIO (by way of legislative instrument) to ban a form of short-term lending offered by a number of firms.[9] Then ASIC Commissioner Sean Hughes argued the businesses had provided short-term loans (also known as short-term credit contracts)[10] that charged excessive fees and caused harm to vulnerable consumers:

ASIC will take action where it identifies products that can or do cause significant consumer detriment. In this case, many financially vulnerable consumers incurred extremely high costs they could ill-afford, often leading to payment default that only added to their financial burden.[11]

What are ‘avoidance schemes’?

Some financial businesses undertake activities to intentionally evade or circumvent PIOs. These activities are known as ‘avoidance schemes’. By way of example, a firm could restructure the financial products in question to fall outside the scope of PIOs. The new products may still cause harm to consumers without triggering regulatory sanctions.

The Financial Sector Reform Act 2022 contains anti-avoidance provisions to deter businesses from undertaking avoidance schemes to circumvent PIOs made under the authority of the NCCP Act. In effect, businesses are prohibited from trying to circumvent PIOs in relation to payday loans and consumer leases.[12]

Schedule 1 of the Bill supplements the Financial Sector Reform Act by extending anti-avoidance provisions to PIOs that are made under the Part 7.9A of the Corporations Act, which specifically covers PIOs in relation to a credit facility.

In other words, if enacted, Schedule 1 will prohibit people and corporations from trying to circumvent the application of PIOs regarding a credit facility. For the purpose of the Bill, credit facility refers to certain types of loans – including short-term loans and employee loans – that are not regulated under the National Credit Code.[13]

Key issues and provisions

General prohibition on undertaking avoidance schemes

Schedule 1 of the Bill provides a general prohibition that a person or a constitutional corporation (alone or with others) must not enter into a scheme, begin to carry out a scheme, or carry out a scheme to avoid the application of a credit product intervention order (proposed subsections 1023S(1) and (2) of the Corporations Act).

A credit product intervention order is defined as a PIO made in relation to a credit facility (proposed subsections 1023S(11)).

When determining whether a scheme breaches the prohibition, an assessment must be made as to whether it is reasonable to conclude that the purpose of the scheme is to avoid the application of a credit PIO (proposed subsection 1023S(8)). In the Explanatory Memorandum to the Bill, the Government argues:

The reference to whether it would be ‘reasonable’ to make such a conclusion ensures that the prohibition applies objectively. This is because having to prove the subjective intention of the person in question would otherwise not be feasible or would allow a person to artificially document the purpose of a scheme as being other than to avoid the application of a credit product intervention order. Using objective criteria of reasonableness ensures the integrity of the Corporations Act and ensures that the effectiveness of the anti-avoidance provisions are not undermined.[14]

Furthermore, the Bill gives ASIC regulation-making power to prescribe matters that must be considered in determining whether the purpose of a scheme is to avoid the operation of a PIO (proposed subsection 1023S(8)). The Government argues:

In addition to the objective criteria required under the amendments, regard must be had to any matters prescribed in the regulations if they are made. The regulation-making power recognises that industry participants may develop new avoidance practices which may require the law to specify additional matters that must be considered in determining whether the avoidance purpose exists. This flexibility is therefore necessary to ensure the prohibitions remain fit for purpose as entities prepared to engage in avoidance purposes will respond to legislative changes by identifying gaps in its scope and changing their practices accordingly.[15] [emphasis added]

Position of major interest groups

In March 2023, the Treasury released an Exposure Draft of the Treasury Laws Amendment (Measures for Consultation) Bill 2023: Anti-avoidance rule for product intervention orders.[16] The content of the Draft Bill is almost identical to Schedule1 of the Bill. As such, stakeholders’ comments for the Draft Bill should reflect their position regarding Schedule 1.

Consumer advocacy groups

Five consumer advocacy groups made a joint submission to the Treasury in support of the Draft Bill. They recommended that the Government should finalise and present the Draft Bill to the Parliament as a matter of priority because:

As Treasury is well aware, there has been a lending model in use for over four years, by Cigno Pty Ltd, a pseudo credit broker, that is causing significant harm to people on low incomes experiencing vulnerability. The model has been adapted multiple times to avoid existing PIOs made by ASIC under the Corporations Act in relation to credit facilities. …

The fact that Cigno have managed to lend for years demonstrates the need for anti-avoidance provisions to support ASIC’s PIOs.[17]

The consumer advocacy groups argued that the scope of the Draft Bill should be expanded to cover all PIOs made under the Corporations Act:

… we question why Treasury proposes in the Draft Bill to limit the application of anti-avoidance provisions to avoidance of PIOs made under the Corporations Act relating to credit facilities only. While this would ensure consistency with the NCCP Act reforms, there is no good reason to stop the anti-avoidance provisions applying to other forms of financial products or services. If a scheme is designed to avoid a PIO and is causing significant consumer detriment, why should it matter what kind of financial product is involved? Many other aspects of financial services legislation are also complex and rife with exceptions. The same logic and consistent approach should apply.[18]

Law Council of Australia

The Law Council of Australia (LCA) expressed concerns about the ‘suitability of relatively unconstrained regulation making powers, particularly in circumstances where the regulations are able to effectively impose a very substantial sanction’. The LCA argued:

… it is essential for good governance that legislative requirements which are given effect receive appropriate scrutiny, particularly where those requirements impose substantial sanctions. The [LCA] submits having substantive penal enactments made only by regulation, without effective parliamentary scrutiny, has the potential to jeopardise the good governance of Australia. …

The [LCA] has expressed its concerns, as a matter of principle, about implementing anti-avoidance mechanisms through the use of regulation-making powers in the section above.[19]

Policy position of non-government parties/independents

At the time of writing, the position of non-government parties and independents in relation to Schedule 1 of the Bill could not be identified.

Schedule 2 – Recognition of financial advice experience

Background

Professional, ethical and educational requirements for financial advisers

Financial advisers can have a significant impact on people’s financial well-being. To ensure competency, financial advisers are legally obligated to meet certain professional, ethical and education standards.

In December 2014, the Parliamentary Joint Committee on Corporations and Financial Services published the report of its inquiry into proposals to lift the professional, ethical and education standards in the financial services industry.[20] The inquiry report made a series of recommendations including:

• increasing the mandatory minimum educational standard for financial advisers to a degree qualification
• listing a person on the Financial Advisers Register only if they have satisfactorily completed a structured professional year and passed the assessed components; and passed a registration exam set by the Financial Professionals’ Education Council
• requiring mandatory ongoing professional development for financial advisers
• establishing a code of ethics.[21]

In the aftermath of the inquiry report, the Coalition Government introduced the Bill for the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017. The legislation adopted many (but not all) of the recommendations outlined in the inquiry report.[22]

From 1 January 2019 onwards, new financial advisers entering the industry must pass a financial adviser exam and hold a relevant degree that is Australian Qualifications Framework Level 7 (equivalent to a bachelor’s degree) or higher.[23] The bachelor’s degree must cover key knowledge areas (for example, taxation) to meet the Financial Adviser Standards set by the Australian Government Treasury.[24]

Veteran financial advisers who are already in the industry but do not hold a relevant degree, have until 1 January 2026 to meet the tertiary qualification requirement if they wish to continue working as advisers.[25]

Labor’s election promise to ease the education requirement for existing advisers

In December 2021, the Australian Labor Party announced its election promise to ease the education requirement for veteran financial advisers.[26]

Then Shadow Minister for Financial Services, Stephen Jones, said a Labor Government would remove the requirement for financial advisers to hold a bachelor’s degree if they have at least 10 years of relevant experience and a clean disciplinary record.[27] However, veteran financial advisers would still need to pass the financial adviser exam and comply with the code of ethics.

Mr Jones argued:

Requiring financial planners with years, even decades, of experience to complete a bachelor’s degree or lose their licence doesn’t make sense. It is a waste of public and private resources. It is driving the best and wisest heads out of the industry. It’s adding cost and removing valuable time from businesses that would otherwise be healthy. And it’s treating mid-career professionals like undergraduates. We need a system that recognises the wealth of knowledge held by experienced advisers.[28]

Commentators believe Labor’s announcement was a response to the growing concern about the rising cost of financial advice.[29] Over the past five years, many advisers have left the profession and this has made financial advice less affordable for consumers.[30]

The Australian Financial Review reported that a week after Labor announced its policy, the Coalition Government ‘backed down on financial adviser education’.[31] The Coalition Government released a policy paper in December 2021 to propose that individuals who have 10 or more years of full-time experience as a financial adviser in the last 12 years would only need to complete a tertiary level course on the Code of Ethics in order to continue providing financial advice.[32]

The Liberal–National Coalition lost the 2022 federal election, and the new policy was not legislated.

Key issues and provisions

Schedule 2 of the Bill amends the Corporations Act to deliver Labor’s election promise to ease the education requirement for veteran financial advisers who have at least 10 years’ experience and an unblemished disciplinary record.

If enacted, Schedule 2 will allow veteran advisers to access the ‘experienced provider pathway’ by making a self-declaration confirming that they meet all the criteria to be an experienced financial advice provider (proposed subsections 1684AA(1) and (2)).

The Explanatory Memorandum provides a comparison of the new law and the current law:

Source: Explanatory Memorandum, Treasury Laws Amendment (2023 Measures No. 3) Bill 2023, 16 –17.

Position of major interest groups

In April 2023, the Treasury released an Exposure Draft of the Treasury Laws Amendment (Measures for Consultation) Bill 2023: Recognising experience in the financial advice industry.[33] The content of the Draft Bill is similar to Schedule2 of the Bill. As such, stakeholders’ comments for the Draft Bill should broadly reflect their position regarding Schedule 2.

Financial advice industry

According to the Australian Financial Review, the financial advice industry is divided about Labor’s policy to ease the education requirement.

On the one hand, many veteran advisers, particularly those in rural and regional communities, welcome Labor’s policy.[34] For example, Eugene Ardino, chief executive of Lifespan Financial Planning, says the Labor election promise showed ‘respect’ to more experienced advisers. Deborah Di Trapani, another financial adviser, argues experienced advisers ‘have life skills over a 22-year-old university graduate’.[35]

Data from Adviser Ratings, a research firm, suggests 40% of veteran advisers with at least 10 years’ industry experience do not hold a tertiary degree. In comparison, only 27.5% of less experienced (typically younger) advisers are without a degree.[36]

On the other hand, some stakeholders believe Labor’s policy will undermine the professionalism of the financial advice industry. The Professional Planner, an industry newspaper, has published an article that argues:

One of the reasons more people don’t seek advice is that they don’t trust financial advisers; trust would be greater if advisers were held to the same education and professional standards as other professionals. Grandfathering experienced but unqualified advisers into the profession isn’t going to help improve trust.[37]

Tertiary education providers

The Explanatory Memorandum to the Bill acknowledges that the easing of education requirements could mean a loss in potential revenue for education providers:

The cost to education providers will be the lost revenue from advisers no longer taking their courses. An upper estimate, assuming education providers pocket 100 per cent of their course fees, of this cost would be between $44 and $62 million…[38]

Nevertheless, the Government also points out that:

Education providers might lose revenue, but this policy is unlikely to place a large cost on them. The existing adviser cohort was finite so this as a revenue source was time limited, even without the election commitment.[39]

Unsurprisingly, many education providers and academics oppose Labor’s policy. For example, Western Sydney University’s Associate Dean Dr Michelle Cull told the Professional Planner that she is disappointed with Minister Stephen Jones’ proposal:

I just can’t believe how far we’ve come and now it’s gone backwards… We put a lot of resources into ensuring that our current programs met the accreditation requirements. For example, we had to have the compulsory ethics subject.[40]

Gurbinder Gill, a researcher at Deakin University, argues:

Hitting the brakes on professionalisation exposes clients to greater risk and lays the foundation for another royal commission into financial services…

Watering down these education requirements as proposed will not improve the quality of financial advice. It will only slow the path to professionalising the industry.[41]

Consumer advocacy groups

When the election commitment was announced in December 2021, the Australian Financial Review reported that consumer advocacy groups have argued against winding back the education requirement reform, warning that the traditional qualifications required to provide financial advice were too low.[42]

Policy position of non-government parties/independents

As discussed above, the Australian Financial Review reported that a week after Labor announced its election commitment to ease education requirements for veteran advisers, the Coalition Government ‘backed down on financial adviser education’.[43]

Then Shadow Minister Stephen Jones said the Coalition Government was ‘shamed into action on something that they have been rejecting for a decade’.[44]

At the time of writing, it is unclear whether the Coalition Opposition will support Schedule 2 of the Bill. The position of other non-government parties and independents could not be identified.

Schedule 3 – Competition in the clearing and settlement of cash equities

Background

What is clearing and settlement in finance?

The Australian Securities Exchange (ASX) is a monopolistic provider of clearing and settlement services for Australia’s cash equity market.[45] If enacted, Schedule 3 of the Bill gives additional powers to ASIC and ACCC (corporate regulator and competition regulator, respectively) for the purpose of facilitating competition in the provision of clearing and settlement services for cash equities traded in Australia.[46]

Although largely invisible to the public, the clearing and settlement of cash equities are critically important to the operation of Australia’s financial markets.[47] Without the adequate provision clearing and settlement services, Australia’s financial markets would break down.

In finance, cash equities refer mostly to common stocks.[48] The term ‘cash equity market’ is used interchangeably with stock market or equity market, where publicly-listed companies can raise cash by selling shares of ownership (stocks) to investors.[49]

By way of example, Ian wants to purchase 100 shares of an ASX-listed company for $20 via ASX Trade, a trading platform operated by ASX where investors can buy and sell shares. At the same time, Emily wants to sell her 100 shares of the same company for $20 on ASX Trade.

Unbeknownst to each other, Ian and Emily placed their respective trade orders (instructions) on the ASX trading platform, where almost 80% of Australia’s shares trading volume occurs.[50] The trade was executed successfully. In other words, Emily has entered into a legally binding agreement to transfer her 100 shares to Ian in exchange for $20.

Clearing and settlement is what follows a trade.[51] Clearing refers to the process of double checking and confirming the terms of the deal – for example, it is important to check that Ian has sufficient money in his trading accounts.

A clearing house acts as a ‘middle man’ between the buyer and the seller to ensure transactions happen in an accurate and timely manner.[52] ASX Clear is a monopolistic clearing house for Australia’s cash equity market. This means all trades executed on the ASX trading platform and rival trading platforms are submitted to ASX Clear for clearing.[53] At the moment, ASX provides rival trading platforms non-discriminatory access to its clearing and settlement facilities through commercial arrangements (known as ‘Trade Acceptance Service’).[54]

Settlement is the final step in the transfer of ownership involving the exchange of shares and payment.[55] In other words, the trade between Ian and Emily is deemed ‘settled’ when Emily receives her payment and Ian becomes the new owner of the shares.[56]

ASX conducts settlement through the Clearing House Electronic Subregister System (CHESS), a computer system used by ASX to record and manage the clearing and settlement of stock trading transactions (Figure 1).[57]

Put simply, in return for service fees, ASX performs clearing and settlement services for Ian and Emily and millions of other investors on a daily basis.[58]

Figure 1: ASX clearing and settlement processes

Source: ASX, ASX’s Replacement of CHESS for Equity Post-Trade Services, Consultation paper, September 2016, 19.

ASX’s monopoly of clearing and settlement services for Australia’s cash equity market

As discussed, ASX – through its subsidiaries ASX Clear and ASX Settlement – is the sole provider of clearing and settlement services for Australia’s cash equity market (Figure 2).[59]

ASX’s monopoly in the provision of clearing and settlement services stems from the fact that the ASX clearing system, CHESS, is already well-established and widely adopted by market participants. Cboe Australia (formerly known as Chi-X) is a rival trading exchange to ASX and it claims that the clearing and settlement fees charged by ASX are expensive and ASX has pocketed significant profits by providing monopolistic services.[60]

Figure 2: ASX organisational structure

Source: Reserve Bank of Australia, Assessment of ASX Clearing and Settlement Facilities, Assessment report, October 2020, 50.

ASX’s monopolistic position has come under heavy criticism in recent years, particularly in the wake of ASX failure to replace its decades-old system CHESS.[61] In 2016, the ASX enlisted an American startup company to build a blockchain replacement for CHESS. However, after years of delays and setbacks, in November 2022 ASX announced that its CHESS replacement project had failed to meet expectations.[62]

It has been reported that the corporate regulator ASIC is investigating ASX directors for breaches of corporate laws in their handling of the failed project.[63] The Australian Financial Review reported that:

ASX’s monopoly on clearing and settling cash equity market trades is under threat amid political and investor fury over the exchange’s failure to deliver a critical project to update the technology underpinning the sharemarket.

… Queensland Liberal Senator Paul Scarr put the heat back on the regulators [ASIC and RBA], suggesting they consider whether ASX’s control of the critical national infrastructure creates a conflict of interest that should force a change to market structure. Market participants said this could be a reversion back to mutual ownership of the clearing facilities.[64]

Support for more competition in the provision of clearing and settlement services

The Council of Financial Regulators (CFR), in cooperation with the ACCC, has been developing a policy framework to support competition in clearing and settlement of Australian cash equities.[65] The CFR is the coordinating body for Australia’s main financial regulatory agencies.[66]

Reviews of policy positions regarding competition in the provision of clearing and settlement services were carried out in 2012, 2015 and 2017.[67] Many stakeholders in the financial sector made submissions to the Government to outline the potential benefits that competition may bring (discussed below in the ‘Position of major interest groups’ section below).

The CFR acknowledged the potential benefits of competition but also pointed out the importance of maintaining a stable and resilient clearing and settlement infrastructure.[68]

In December 2022, Treasurer Jim Chalmers and Financial Services Minister Stephen Jones criticised the Coalition Government for the lack of legislative reform in this area:

The Albanese Government supports competition in the clearing and settlement of cash equities. We will introduce legislation to facilitate competitive outcomes, should a competitor emerge and in the event of ongoing monopoly provision, in clearing and settlement by providing ASIC and the ACCC with additional powers…

The previous Government announced in 2016 that it would implement the recommendations of the CFR to introduce these powers but did not consult on, or introduce, legislation.[69]

Key issues and provisions

Schedule 3 of the Bill amends the ASIC Act, the Corporations Act, and the Competition and Consumer Act to facilitate competition in the provision of clearing and settlement services for cash equities traded in Australia.[70]

To that end, ASIC will be given a rule-making power to facilitate competitive outcomes in the provision of clearing and settlement services (Part 1 of Schedule 3).[71] Specifically, ASIC will be able to make rules that deal with the activities, conduct or governance arrangements of companies that provide clearing and settlement services (these companies are known as ‘CS facility licensees’).[72] By way of example, ASIC will be able to make rules regarding a licensee’s governance arrangements such as the composition of its board of directors.[73]

Part 2 of Schedule 3 provides the ACCC with a new arbitration power to arbitrate disputes about the terms and conditions of access to clearing and settlement services subject to a Ministerial Declaration. The arbitration power is to provide for resolution of disputes where parties are unable to agree on the terms of access to those clearing and settlement services through commercial negotiation.[74]

Position of major interest groups

In April 2023, the Treasury released an Exposure Draft of the Financial Sector Reform (Competition in Clearing and Settlement) Bill 2023.[75] The content of the Draft Bill is almost identical to Schedule3 of the Bill. As such, stakeholders’ comments for the Draft Bill should reflect their position regarding Schedule 3.

Cboe Australia

Cboe Australia, a rival trading exchange to ASX, is strongly supportive of the Government’s proposal to give ASIC and ACCC additional powers for the purpose of facilitating competition in clearing and settlement services.[76] Cboe Australia (formerly known as Chi-X) is a local subsidiary of the Chicago Board Options Exchange.

At the moment, ASX provides Cboe Australia non-discriminatory access to its clearing and settlement facilities through commercial arrangements (known as ‘Trade Acceptance Service’).[77] However, the Australian Financial Review speculates that ‘Cboe plots ambitious plan to erode ASX dominance’ in regard to clearing and settlement services.[78]

In its submission to the Treasury, Cboe Australia commends the Government’s proposed legislation:

Cboe Australia commends the Government and those who have worked on the bill for delivering an innovative and effective regulatory framework for Australia’s unique clearing and settlement environment…

Cboe Australia is strongly of the view that it is in the interests of investors and the broader financial system that there is effective competition in clearing and settlement. In our view, the existing monopoly paradigm has resulted in increased costs to investors, has acted as a handbrake on innovation and has locked the industry into expensive, cumbersome, and proprietary systems.

By giving the regulators powers to enforce the CFR [Council of Financial Regulators] policy statements, Cboe Australia is hopeful that these issues can begin to be resolved. In our experience, the inability of the regulators to enforce the policy statements to this point has had clear negative outcomes…[79]

ASX

The ASX is broadly supportive of the legislation and seeks clarity about particular aspects of the proposed regulatory regime.[80] In its submission to the Treasury, the ASX said:

ASX broadly supports the policy rationale underlying the [Draft Bill] and key elements of the proposed framework, including the consultative process for development of ASIC rules and the broad architecture of the ACCC arbitration regime.

Our comments and suggestions in this submission are directed at ensuring that the regulatory regime is targeted to achieve the objectives, includes appropriate checks and balances for all stakeholders, and reflects best regulatory practice.[81]

The Australian Financial Review speculates that despite the ASX’s overt support for the Draft Bill, ASX ‘will do everything it can to hold on to its monopoly’:

Treasurer Jim Chalmers will have a fight on his hands if he intends to use new legislative powers to end the ASX’s monopoly on clearing and settlement.

… he will face formidable opposition from an organisation [ASX] that has successfully fought off the reform efforts of two previous treasurers – Wayne Swan and Scott Morrison.

ASX, which is still reeling from the $250 million failure to implement a new clearing and settlement system to replace the 29-year-old CHESS platform, will do everything it can to hold on to its monopoly.[82]

The Financial Review also acknowledges the argument that Australia’s cash equity market may be too small in size for multiple clearing and settlement service providers to co-exist:

Serious questions also have to be asked about the structure of Australia’s market infrastructure. Our equity markets may be too small for multiple settlement and clearance competitors – although Chicago-owned Chi-X, now Cboe Australia – does provide competition. The ASX may therefore be operating something close to a natural monopoly, which needs to be regulated in a similar way as utilities.[83]

Financial Services Council

The Financial Services Council (FSC), a peak body for Australia’s financial services industry, is supportive of the Draft Bill. The FSC said:

The FSC is a supportive of the regulatory settings supporting competitive outcomes in clearing and settlement services and providing ASIC and the ACCC with the requisite powers to enable this to occur.[84]

The FSC also noted that multiple clearing houses tend to increase complexity in the financial sector and recommended further consultation be undertaken to identify requirements and any issues which need to be addressed.[85]

Policy position of non-government parties/independents

At the time of writing, non-government parties and independents have not made official comments about the Draft Bill or Schedule 3 of the Bill.

However, Senator Paul Scarr, a Liberal Party Senator representing Queensland, told the Australian Financial Review that the Draft Bill is ‘a move in the right direction’:

This is a move in the right direction… It is important as many market participants as possible engage in consultation process because ultimately, we want to be in a position where we have a regulatory framework that promotes competition and new participants in clearing and settlement.[86]

It is unclear if the above remarks by Senator Scarr reflects the official position of the Coalition.

Schedule 4 – Improving the flexibility of the First Home Super Saver Scheme

Background

The First Home Super Saver Scheme (FHSS) was introduced in 2017 by the First Home Super Saver Tax Act 2017 and the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017.

Under the FHSS prospective first home buyers can make personal contributions to superannuation of up to $15,000 a year. Up to $50,000 of these contributions[87] can then be withdrawn to finance a first home. The Australian Taxation Office (ATO) administers FHSS withdrawals.

Should an individual decide not to buy a home, personal contributions can be withdrawn but the person is liable for additional tax to compensate for contributions being made at a concessional rate of tax.[88]

Individuals who chose to save for a house deposit via this program have been able to withdraw their deposit from the scheme since 1 July 2018. Problems with the administration of the scheme developed due to the inflexibility in the governing legislation. The amendments contained in Schedule 4 were first proposed in Budget 2021-22.[89] As is the case now, the proposed solutions were designed to be retrospective to 1 July 2018 so that all users of the scheme can receive equal treatment.[90]

Key issues and provisions

Schedule 4 proposes amendments to the Income Tax Assessment Act 1997 (ITAA) and the Taxation Administration Act 1953 (TAA) to make technical changes to the FHSS Scheme to improve flexibility.

Items 1 to 13 amend the ITAA.

Items 1 to 9 describe how amounts released under the FHSS are to be treated for tax purposes.

Items 10 to 13 give more flexibility to the scheme by allowing the first home buyer to vary a request for release and allowing a longer period (90 days as opposed to the current 14 days) for individuals to request release of funds after they enter into a contract to purchase or construct a first home.

Items 14 to 30 amend the TAA.

These provisions complement the earlier provisions by giving the Commissioner of Taxation greater authority to revoke or amend applications made under the FHSS.

These include provisions allowing funds held by the Commissioner of Taxation (that is, funds requested by, but not yet released to individuals) to be recontributed to superannuation and clarification surrounding the tax treatment of these amounts.

Items 29 and 30 are transitional provisions which allow 3 years from the commencement of the Act for individuals who may have encountered difficulties with the administration of the FHSS to make new or amended release requests under the improved rules.

Policy position of non-government parties/independents

The amendments contained in Schedule 4 were first announced by the Morrison Government in the 2021–22 Budget.[91]

Treasury undertook consultation on the draft legislation, but there are no available submissions.[92]