Michelle Rowland (Greenway, Australian Labor Party) Share this | Hansard source

I also rise to speak in support of the Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011 and I know the member for Casey could not resist a dig. He knows he holds a very special place in my heart for being the author of the coalition’s telecommunications policy, and I thank him very much for that today.

This is a significant piece of legislation that builds on the reforms introduced in 2009 and which took effect last year with the establishment of chapter 5D of the Corporations Act. Those reforms created a single national regulatory regime for private trustee companies in Australia and, in the process, eliminated the inconsistencies between the then state and territory based trustee companies’ legislation. The various public trustee entities also had the ability to opt in to the new regime with the consent of their respective state or territory government.

In a moment I will elaborate on some important aspects of the bill, in particular the provision of a mechanism for trustee companies to consolidate their existing state based operations into one licence—this, of course, was in response to industry calls for such a mechanism—as well as clarifying some aspects of the operation of chapter 5D of the Corporations Act. Before I do so, I would like to bring to the attention of this place some very interesting statistics regarding trustee companies in Australia to underscore the importance of the reforms associated with this bill.

The Trustee Corporations Association of Australia, the peak industry body for trustee companies, notes that trustee companies employ over 3,600 staff in more than 80 offices around the country. These trustee companies have over $500 billion of assets under administration or management. Members of the Trustee Corporations Association of Australia include many household names in the industry, including ANZ Trustees, Equity Trustees, National Australia Trustees, Perpetual, and The Trust Company.

Almost two million Australians have wills recorded with trustee companies. Each year, trustee companies write approximately 60,000 wills and powers of attorney, administer about 9,000 deceased estates, manage assets under agency agreement or court orders for about 44,000 people and prepare about 42,000 tax returns.

These statistics serve to highlight the important role played by trustee companies in the financial services sector in Australia. They clearly have a proud tradition within the sector and I congratulate them on their contribution. I know that many of the constituents in my own electorate of Greenway benefit from the services provided by both public and private trustee companies.

The move towards a national framework for the regulation and operation of trustee companies was brought about by the government as a response to a number of issues with the former state-based system for the authorisation and regulation of trustee companies. Previously, trustee companies that wished to operate in more than one jurisdiction were required to comply with differing and often inconsistent authorisation and reporting requirements imposed under respective state and territory legislation. The previous regime also imposed unjustifiable barriers to entry for trustee companies, as well as unnecessary compliance costs and burdens.

It was these issues and others that led to the introduction and passage of the Corporations Legislation Amendment (Financial Services Modernisation) Act in 2009. A key feature of that act was the introduction of chapter 5D into the Corps Act. The new regime put in place under chapter 5D provides for Commonwealth regulation of the ‘traditional trustee company services’. This term covers several personal trust and deceased estate administration services, such as: acting as a trustee of a trust, applying for probate of a will, acting as executor of a deceased estate, acting as a financial guardian of the estate of a minor, or acting as a manager or administrator of an estate of an individual who lacks capacity.

Under the new Commonwealth system, there is now a single licensing regime administered by a single regulator—the Australian Securities and Investments Commission. It is anticipated that these changes will ultimately lead to a national market for trustee company services and significant efficiencies and savings.

The traditional services of trustee companies are also now deemed to be financial services for the purposes of chapter 7 of the Corps Act. This means that such services are now covered by the consumer protection and disclosure requirements of the Corps Act and also the ASIC Act. This ensures that, in providing those services, trustee companies are bound by the financial product disclosure, licensing, conduct, advice and dispute resolution provisions of those acts.

For consumers of trustee services this was a positive development. It now means that the relevant trustee company as service provider is providing services that are efficient, honest and fair; that the trustee company has adequate resources to carry out its function; that it provides cost-effective dispute resolution; and that it has adequate compensation arrangements as required under chapter 7 of the Corps Act. Although some state systems met some of these criteria, others did not.

I would now like to turn to some specific aspects of schedule 1 of the bill before us and why I see it as an important step forward in supporting the activities of trustee companies in Australia. I do not propose to comment on the amendments in schedule 2 of the bill relating to the payments system industry.

When introducing this bill to the House, the Assistant Treasurer and Minister for Financial Services and Superannuation noted that since the introduction of a national regime for the regulation of trustee companies the government has received representations from the industry, in particular from the Trustee Corporations Association of Australia, which, as I said, acts as the peak representative industry association for trustee companies. The government also received representations from state and territory governments. Those representations suggested that the new regime under chapter 5D could be enhanced by some refinements to the legislation.

It is against this backdrop that the government has been prompt to respond with the introduction of this bill. Prior to the introduction of chapter 5D, many trustee companies operated in corporate groups with multiple operating subsidiaries in order to comply with the former state and territory regimes. The industry has long been frustrated by this inefficiency and it has called for a realistic and cost-effective process to allow for the consolidation of their subsidiaries into one national licensed entity. It has also made it clear to the government that industry would prefer an administrative as opposed to a judicial mechanism for this consolidation to take place.

Amongst other things, schedule 1 of the bill provides an administrative process for the voluntary transfer of estate assets and liabilities from a transferring entity, typically a trustee company previously authorised under state or territory legislation, to a trustee company prescribed by the Corporations Regulations 2001.

As I mentioned, under the former regime many corporate groups operating across various states and territories operated multiple subsidiaries whose purpose was to hold a trustee company authorisation in a particular jurisdiction. It is therefore not surprising that, following the introduction of a national licensing regime, many corporate groups wish to transfer the traditional business of these subsidiaries—that is, the management of trusts and estates—to a single Australian financial services licensee with a trustee company authorisation.

The government supports the rationalisation of the trustee companies industry as an important way of reducing compliance and administration costs. To adopt the words of the Trustee Corporations Association of Australia, as set out in the explanatory memorandum for the bill, the industry is seeking an administrative process to:

… allow existing trustee companies to expeditiously, and at minimum cost, rationalise their operations by transferring all estate management functions to one licensed trustee company.

At present, chapter 5D of the Corporations Act provides for compulsory, but not voluntary, transfers of business. The change foreshadowed under the bill is to extend the existing compulsory transfer provisions in chapter 5D to include voluntary transfers.

Another enhancement, which features in schedule 1 of the bill, relates to the proposed introduction of a formal procedure under which a prospective licensee applies to the government to be listed as a licensed trustee company. This is important because it increases transparency, certainty and accountability in the licensing process. Under the amendments being proposed, a prospective licensee will need to write to the minister responsible for administering chapter 5D explaining how it satisfies certain criteria before the Governor-General is able to make a regulation listing the applicant as a licensed trustee company.

Governments very early on realised that trustee companies could provide greater expertise, resources and reliability than an individual in the management of an estate. Trustee companies in Australia have come a long way from their original charter as solely an executor or administrator of a deceased estate. Indeed, in the present day, many of our trustee companies in Australia have expanded their activities beyond traditional services and into diverse areas of financial services such as wealth creation, wealth management and custody.

The government recognised the merits of moving towards a uniform national regime for regulating trustee companies by introducing specific legislation in 2009. We have responded to more recent industry calls to further enhance the regime. There is a lot to be said for the government’s ongoing commitment to consultation with key stakeholders in this area and its desire to continue to improve on the design of regulatory regimes. This is critical in many sectors of the Australian economy, and the financial services sector in which trustee companies operate is certainly no different. I commend the bill to the House.

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