Explanatory Memorandum
(Circulated by the authority of the Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)General outline and financial impact
General background
This Bill amends the trustee company provisions in Chapter 5D of the Corporations Act 2001 (the Corporations Act) to make the provisions more effective, in particular by facilitating the consolidation of the industry through voluntary transfers, but also by clarifying certain powers of trustee companies and strengthening compliance.
Chapter 5D, which took effect on 6 May 2010, was the outcome of a Council of Australian Governments (COAG) decision to create national regulation of trustee companies. The creation of a single national regulatory regime has created a need to allow corporate groups with multiple trustee company subsidiaries to transfer the business of those subsidiaries into one licensed entity. Accordingly, the Bill provides an administrative process for the voluntary transfer of estate assets and liabilities as a whole (rather than individually).
The Bill will also improve the existing 'compulsory' transfer of business provisions by enabling such a transfer to State and Territory Public Trustees, provided (amongst other things) the Public Trustee agrees to accept the transfer.
A number of other concerns have also been raised by industry participants and the Trustee Corporations Association of Australia (TCA) regarding the operation of Chapter 5D since commencement. These measures will address these concerns by:
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- requiring that a prospective licensee write to the Minister responsible for administering Chapter 5D explaining how it satisfies certain criteria before the Governor-General considers making a regulation to list the applicant as a licensed trustee company;
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- clarifying and strengthening the operation of Chapter 5D by increasing the magnitude of penalties; and
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- clarifying the powers of trustee companies to charge for preparing tax returns and to draw management fees and common fund administration fees from capital (as a last resort).
The Bill also amends the Payment System Regulation Act 1998 (PSRA) to provide ongoing protection for payment system participants, from Part IV of the Competition and Consumer Act 2010 (CCA), when complying with the ATM Access regime as determined by the Reserve Bank of Australia (RBA).
Under its mandate for promoting competition and efficiency in the payments system, the RBA has put in place reforms in the ATM system which are designed to promote competition and efficiency in the payments system by putting in place transparent pricing and improving ease of access into the ATM system.
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- This measure will allow participants in the payments system to continue to comply with the RBA ATM reforms, as prescribed through the ATM Access regime, without breaching Part IV of the CCA.
Dates of effect:
Sections 1 to 3 of the Bill commence on Royal Assent.
Items 1 to 7, of Schedule 1 commence the day after Royal Assent.
Items 8 and 13 to 36 of Schedule 1 (which impose penalties) commence on the 28th day after Royal Assent.
Item 12 of Schedule 1 has been backdated to the commencement date of Schedule 2 of the Corporations Amendment Legislation (Financial Services Modernisation) Act 2009 , to put beyond doubt that a Commonwealth licensed trustee company has always been authorised to charge a reasonable fee for the work involved in the preparation and lodging of returns for the purpose of assessments of any duties or taxes related to the trustee company's performance of estate management functions. The retrospective operation of this item is not expected to cause detriment to consumers because the previous State and Territory (State) trustee company acts allowed trustee companies to charge such fees and it was always intended that trustee companies should be able to charge such fees whenever it prepares and lodges tax returns for a client.
Proposal announced:
The measures were not publicly announced, although the trustee company provisions in the draft Bill were released for both public consultation and targeted consultation with the Ministerial Council for Corporations and industry participants on 27 January 2011.
Financial impacts:
The Bill has no significant financial impact on Commonwealth expenditure or revenue.
Compliance cost impacts:
Low. The trustee company measures will mainly affect industry participants with operations in more than one jurisdiction. The ATM measure will allow entities to continue to comply with the existing regime. There is no ongoing compliance cost impact and a minimal transitional impact.