Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

The Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011 was introduced during the last sitting of the House on 23 February. It amends the trustee company provisions in chapter 5D of the Corporations Act 2001 to provide for some further improvements and refinements flowing from the 2009 reforms in the regulation of trustee corporations. On a separate issue, the bill gives a general exemption to part IV of the Competition and Consumer Act—formerly the Trade Practices Act—for participants in the ATM industry because of the interlinked nature of our payments system, which, of course, means that companies that would otherwise be competitors also have to rely on strong cooperative linkages to make the system friendly for consumers. Notwithstanding their competitive nature, the system, for obvious reasons, requires all of those companies to have some linkages, and that is why the exemption is required.

As I said, the changes in this bill—these amendments—flow from those reforms to trustee laws in 2009. That created the national regulation of trustee companies in addition to the system of regulation at a state and territory level, and the coalition, back in 2009, strongly supported those reforms. They have helped trustee companies that have needed to operate in multiple jurisdictions. At the time, the shadow minister for financial services, superannuation and corporate law, Chris Pearce, the former member for Aston, said that the reforms were an example of good and targeted reforms, and we in the coalition maintain that position. Consequently we support these amendments, which flow from those original reforms. They are amendments which respond to industry and stakeholder consultation.

Trustee corporations are required by law to always put the interests of clients first, and they owe fiduciary duties to the beneficiaries of the assets they administer. They offer high degrees of protection to clients. The coalition has long advocated the fiduciary duty of financial advisers, and we of course support the current fiduciary duties that exist in the financial services sector.

On a product level, I think that if people choose to have stronger fiduciary duties then they should, of course, be free to do so. A trustee company is one way of structuring a fund to ensure that the duty to put the interests of clients first always remains. There are only 11 licensed private trustee companies in Australia, but they play an important part in the financial services system. It is hoped that, with a national system and these subsequent reforms embodied within this bill, more trustee companies will voluntarily come under the federal system, which offers protections similar to those under state and territory regulatory regimes such as the Trustee Companies Act 1968 in Queensland and the Trustee Companies Act 1964 in New South Wales.

This bill is an example—I must, unfortunately, say a rare example—of the government listening to industry stakeholders: specifically, in this case, the Trustee Corporations Association of Australia, which is the peak body representing trustee corporations in Australia. It is a shame that government listening to stakeholders is the exception rather than the rule, but on the rare occasion that it does occur I think it is fair enough to highlight it as a welcome, albeit very rare, Halley’s-comet-like experience here in the House with this government.

The bill contains a number of specific measures, as I mentioned at the outset, to provide for some further refinements and maybe to correct some oversights and unintended consequences flowing from the original reforms. I say that not in a negative way. That is always the case when there are complex reforms in an area that requires follow-up, and that is what this bill does.

Specifically, the measures include a change which will now allow licensed trustee companies to apply to ASIC in order to transfer estate assets and liabilities from another ASIC-licensed trustee which was previously licensed under state or territory law. It will give ASIC the power to determine whether there is to be a transfer of estate assets and liabilities from a trust company which has had its licence cancelled to a public trustee of a state or territory. It will allow the establishment of a formal procedure under which prospective licensees will be able to apply to the government in order to be listed as a licensed trustee company. It will require trustee companies to hold an Australian financial services licence and prohibit them from holding themselves out to be a trustee company without one. It will also replace the term ‘authorised trustee corporation’ within the Corporations (Aboriginal and Torres Strait Islander) Act 2006 with the term ‘licensed trustee company in accordance with the meaning of Chapter 5D of the Corporations Act or the Public Trustee of a State or Territory’.

The bill also deals with amendments to the operation of common funds, drawing down an imposition of fees. This section allows a management fee to be drawn from the fund for its management and administration. However, in the spirit of openness and transparency, the fee must not give a financial benefit unless such a benefit would be as a reasonable arm’s-length transaction. These are all outlined, of course, in the minister’s tabling speech and the explanatory memorandum. I am advised that this requirement had existed under the Corporations Regulations 2001, but adding it to chapter 5D of the Corporations Act is a welcome move that is likely to encourage better prudential regulation.

As I said at the outset, the bill also amends the payment system to allow for a general exemption from part 4 of the Competition and Consumer Act, the former Trade Practices Act. It is simply a measure for the regulatory change that has been in place since 2006 and which was implemented under the Howard government. The interlinked nature of our payment system means that often there have to be cooperative arrangements and it is desirable to have cooperative arrangements between participants. They are otherwise solely competitors in the ATM sector. These arrangements have the potential on a black-letter reading to contravene the competition laws we have in place; therefore the ATM industry needs a general exemption from the competition laws in order to carry out regular everyday business. In order to protect consumers and the system, the RBA currently runs and administers ATM regulations through the ATM access regime and of course it is in the best interests of consumers that an efficient and stable payments system exist.

The regulations exempting the sector from the Competition and Consumer Act have to be reviewed every two years. The current regulatory clause expires right now, in March 2011. Given that the structure of our ATM system relies on these relationships, it is unlikely that the renewal of these regulations will become unnecessary. We therefore support a legislative change. The fact that the payments system is incredibly interlinked is a welcome feature. It requires a special form of oversight, currently done through the payment system board of the Reserve Bank of Australia.

The opposition have been supportive of the reforms in the ATM sector. Lastly, this bill has responded to stakeholder concerns outlined by the industry—concerns that have come forward flowing from those original reforms. It is welcome that the government on this rare occasion has listened and I have no hesitation or problem in saying that we supported the reforms in 2009 and we support the refinement to the reforms embodied within this bill. This bill has the opposition’s full support.

Michelle Rowland (Greenway, Australian Labor Party) Share this | Link to 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.

Gai Brodtmann (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

I rise today in support of the Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011, which continues this government’s commitment to ensuring that business in this country operates, as much as possible, under one regulatory regime. This bill amends the trustee company provisions in chapter 5D of the Corporations Act to make them more effective by facilitating the consolidation of the industry through voluntary transfers. There are currently 11 such trustee companies in Australia that provide a range of services, such as estate planning, administering deceased estates, managing the financial affairs of people unable to look after their own interests and managing charitable trusts and foundations.

Chapter 5D took effect in May last year following a decision by COAG to create a national system for the regulation of trustee companies. However, this has created a need to allow organisations with multiple trustee subsidiaries to transfer into one licensed entity. This bill provides for an administrative process to achieve this end. The bill also improves the so-called compulsory transfer regime by specifying the criteria that must be considered when assessing a trustee company application, and it makes it an offence to falsely represent oneself as a licensed trustee company.

As a former small business owner, I have always been surprised that, while we have been a nation for well over a century now, there still exist up to eight systems regulating the conduct of business in Australia. Just one example is that, if you want to register as a business, you have to register in each state. I had my business operating here in the ACT and I registered in the ACT, but, if I had then wanted to operate in New South Wales, I would have had to go and register there too. You have all this overlay for business—it is $100 a time just to register your business and it is also an unnecessarily burdensome process. It is, I think, essentially just a hangover from the early days of interstate rivalry and different rail gauges.

I am in strong support of the Minister for Infrastructure and Transport when he said in an opinion piece in the Canberra Times:

It is 110 years since Federation and Australians now enjoy one of the most prosperous and stable nations on earth. Yet have a look in the statute books of the states and territories and on some issues it’s as if Federation is as elusive as it was for Henry Parkes.

Wise words by the minister. While the minister was speaking about the myriad laws and regulations governing transport, I believe it goes further than that to other industries, particularly business—and I gave you an example of my experience. These differences in regulation and the problems they cause for a seamless national economy are a great burden on business. I believe they cost the economy millions if not billions of dollars in lost productivity and waste in the administration of red tape. There are also the opportunity costs involved when you have your own business, because the time you spend on admin issues and running around paying bills could be spent making some money. It has also led to higher costs for consumers and less competition. It is not an uncommon experience for me to hear concerns from constituents in my electorate about the regulatory burden on individuals and business caused by differences in state regulation. It is of particular importance to the people of Canberra as we are surrounded on all sides by New South Wales. A short trip in any direction and a business person in the ACT will find themselves in another jurisdiction.

I have spoken before in this place on my experiences in India and about seeing what occurs when there is a constant battle between state, territory and national governments. I have seen firsthand the effect of overregulation. I have seen firsthand how economies and innovation can be stifled by too much compliance, red tape and disparity between states and territories. I believe that government and this parliament have a dual role—that is, not only to reduce the regulatory burden on business and the community but also to ensure Australians get the right outcome from its regulations. In 2008, an OECD economic survey of Australia noted:

Although product regulation is competition friendly overall, the functioning of markets could be improved, particularly by reducing their segmentation arising from different regulations across the states.

While the bill before us only deals with a limited aspect of regulation, I was nonetheless pleased when the former minister in this area, Senator Sherry, announced at COAG:

… the end of multiple, often contradictory, state-based regulations totalling about 300 pages and their replacement with one clear, standard, national regime.

This bill is another step in the process following on from the initial agreement by COAG for one national trustee company regime. This bill is a response to representations from industry, and I am further pleased that this government responds to the needs of Australian business. This is a responsive government, committed to listening to the Australian community and doing what needs to be done to ensure the continued prosperity of our economy and our society going forward, particularly through business. I commend the bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

in reply—I thank honourable members for their contribution to the debate on this bill. The purpose of the Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011 is to improve the operation of chapter 5D of the Corporations Act 2001. As mentioned in my second reading speech, the bill provides for voluntary transfers of trustee business between entities. Prior to the commencement of chapter 5D, many corporate groups operated multiple subsidiaries in order to comply with former state and territory regimes. This bill, along with the appropriate state and territory legislation, will provide industry with a process for consolidating the business of these subsidiaries into one Commonwealth licensed entity.

The bill also allows for compulsory transfers of trustee company business from a failing licensed trustee company to a state or territory public trustee. Further, the bill provides for a formal procedure under which the prospective licensee applies to the government to be listed as a licensed trustee corporation, and prohibits an entity from holding itself out as a licensed trustee company unless it holds an AFSL with a trustee company authorisation.

Finally, the bill will also amend the Payment Systems (Regulation) Act 1998 to protect participants in the automatic teller machine system from prosecution under the Competition and Consumer Act 2010 and allow them to continue to comply with the Reserve Bank of Australia’s ATM reform. In summary, this bill is the outcome of ongoing consultation with stakeholders such as the Trustee Corporations Association of Australia and state and territory governments with a view to ensuring that the policy objectives and outcomes are being met, and continuing to review and improve the regulatory regime underlying chapter 5D of the Corporations Act 2001. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.