FSC Unveils Proposals to Boost Australia’s Financial Services Sector Ahead of Federal Election
The Financial Services Council (FSC) has outlined a comprehensive set of policy proposals aimed at enhancing the competitiveness of Australia’s financial services industry, with a particular emphasis on fund managers. These proposals are designed to promote economic growth, improve tax efficiency, and streamline regulatory processes.
FSC chief executive Blake Briggs highlighted that the council’s recommendations could significantly boost Australia’s financial services sector, potentially adding $19 billion to GDP over the next decade. In addition, the sector could see nearly $2 billion in annual export revenue by attracting more capital into the country, alongside an $800 million yearly increase in productivity, driven by reduced costs, lower fees, and improved returns for consumers.
Key Reforms for Fund Management:
Simplification of Breach Reporting Framework
The FSC has proposed simplifying the breach reporting (reportable situations) system, arguing that breaches that do not cause financial harm or consumer damage should be exempt from the regime. This change is expected to alleviate pressure on the Australian Securities and Investments Commission (ASIC) and industry resources. The reform could save businesses an estimated $183 million in compliance costs over 10 years and reduce administrative burdens by 34,000 hours annually. ASIC Chair Joe Longo has acknowledged the complexities of the current regime, noting that it has inadvertently become more cumbersome than intended, complicating its enforcement and undermining its objectives.
Rationalising Legacy Superannuation and Managed Investment Products
The FSC advocates for the creation of a product modernization mechanism that could be legislated within the first year of the new government. This initiative would allow the closure of outdated managed investment products and facilitate the transition of consumers into more modern, high-performing alternatives. It is estimated that this reform could generate $16 billion in consumer outcomes by 2050, while also mitigating tax and social benefit complications.
Sustainable Investment Product Labelling
A new product labelling framework for sustainable and responsible investments would provide clarity for issuers and promote growth in ethical investment products. This initiative aims to empower consumers to invest in alignment with their values, while also supporting Australia’s broader sustainability and net-zero objectives. In line with this, the government has proposed establishing minimum standards for marketing investment products as “sustainable.”
Level Playing Field for Foreign Investmen
The FSC has called for a more level playing field under the Foreign Investment Review Board (FIRB) framework, particularly for global fund managers operating in Australia. Exempting trusted fiduciaries from FIRB application fees and reversing the recent decision to double fees for low-risk investors would help alleviate regulatory barriers that currently hinder foreign investment. These changes are seen as essential to fostering a more competitive financial ecosystem.
Reducing Uncertainty in DDO Compliance
The council has identified issues with the current Design and Distribution Obligations (DDO) regime, which has led to uncertainty for financial services businesses. Technical changes to clarify the scope of DDO obligations are necessary to ensure greater product choice for consumers and to address challenges such as fund managers withdrawing from the retail market. The FSC recommends refining the definition of “excluded conduct” and simplifying distribution conditions for Exchange Traded Funds (ETFs).
Promoting Australia as a Global Financial Hub
Finally, the FSC urges measures to position Australia as a leading regional and global financial centre. Despite managing $3.9 trillion in assets under management (AUM), only $170 billion is managed on behalf of overseas investors. The council argues that complex and uncompetitive tax settings remain a significant barrier to the export of Australian funds management expertise. Recommendations include extending the qualification timeframe for start-up funds to qualify as Managed Investment Trusts (MITs), improving tax rules for foreign exchange hedging, and simplifying withholding taxes for passport funds.
By implementing these reforms, the FSC believes Australia can unlock the full potential of its financial services sector, attracting global investment and bolstering its position on the international financial stage.
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