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Committee hands down DBFO bill report
The economics legislation committee has released its findings on the DBFO bill and its controversial section 99FA.
The Senate Economics Legislation Committee has released its report on the first Delivering Better Financial Outcomes (DBFO) bill after requesting an additional day on Thursday to finalise it.
Despite the delay, the committee – as had been expected – affirmed the government’s position on the bill, including the controversial changes to section 99FA of the Superannuation (Industry) Supervision Act, which outlines the requirements trustees must meet to release funds for the payment of advice.
"The committee notes the intent of the government is to ensure that financial advice can be paid from superannuation in accordance with trustees discharging their general obligations that are designed to protect the retirement incomes of members," the report said.
"The committee supports this intent and is reassured by evidence that the status quo can continue, supported by greater legal clarity, and that trustees would not be obliged to check every piece of financial advice as the bill simply codifies current practice into law.
"In particular, the committee draws attention to the supplementary explanatory memorandum which states ‘Consistent with meeting their obligations under the current 99FA, trustees should have in place robust assurance processes to satisfy themselves that advice deductions from members’ superannuation accounts comply with their legal obligations. This may include random or risk-based sampling of advice."
The committee noted industry views that the "primary law should be more prescriptive in outlining steps that trustees must take to meet their obligations".
"However, the committee is convinced by evidence from ASIC and Treasury that a prescriptive approach is likely to be impractical given the diversity within the superannuation industry,” the report said.
Its only recommendation said: "The committee recommends that the bill be passed."
Speaking at an event on Thursday morning, Financial Advice Association Australia (FAAA) general manager of policy, advocacy and standards, Phil Anderson, said he did not expect last week’s Senate economics hearing to impact how the government views the DBFO bill.
While the government recently amended the bill’s explanatory memorandum to clarify that trustees are not expected to rigorously review each statement of advice (SOA), professionals and legal experts argue that these changes to the EM are insufficient and that the legislation itself needs to be amended.
Also on Thursday, shadow treasurer Angus Taylor and shadow financial services minister Luke Howarth addressed a letter to Financial Services Minister Stephen Jones to demand section 99FA be removed from the first DBFO bill.
“As witnesses from ASFA, the Financial Advice Association of Australia, the Law Council of Australia and the Financial Services Council indicated to the committee there is a significant discrepancy between what the government says the intent of this clause is, and what industry say its impacts will be,” the joint letter said.
“In the words of the FAAA, this clause ‘threatens the financial wellbeing of Australians’ and ‘add[s] nothing but confusion, uncertainty and cost.’ In the words of the Financial Services Council, this clause fails ‘to achieve the common policy objective of more affordable and accessible advice’ and will ‘put an unacceptable legal burden on trustees’ and ‘an unacceptable regulatory cost on advice businesses.’
“The Coalition therefore recommends that the Government remove section 99FA in division 1 of Schedule 1 from the Bill. We will support the Bill should this change be made and work with the Government to facilitate its speedy passage through the Senate and the House.”
SMSF Adviser's sister brand, ifa, understands that the Coalition wants to see s99FA re-consulted by the Treasury in anticipation of tranche two of the government’s legislation implementing the Quality of Advice review recommendations.
In the Coalition Senators' dissenting report, they affirmed this view.
"That Part 1 Schedule 1 of the Bill be removed and the provisions re-consulted on by the Treasury in anticipation of Tranche 2 of the Government’s legislation implementing the Quality of Advice review recommendations," it said.
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