Issue 607, 2 September 2016
In this issue:
- Digital advice: ASIC guidance
- Single touch payroll: bill introduced
- Non-centrally cleared derivatives: APRA prudential standard deferred
Digital advice: ASIC guidance
ASIC has finalised new guidance on the provision of digital advice.
Digital advice (also known as ‘robo-advice’) is the provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser. It can comprise general or personal advice, and ranges from narrow in scope to comprehensive financial product advice.
The new guidance, Regulatory Guide RG 255: Providing digital financial product advice to retail clients brings together some of the issues that digital advice providers need to consider when operating in Australia, from the licensing stage through to the actual provision of advice. RG 255 also includes guidance on some issues that are unique to digital advice, such as:
- how the organisational competence obligation applies to digital advice licensees
- the ways in which digital advice licensees should monitor and test their algorithms.
Announcing the release of RG 255, ASIC’s Deputy Chairman Peter Kell noted that ASIC supports the development of a healthy and robust digital advice market. In an environment where only around 20 per cent of adult Australians seek personal advice, ASIC considers that digital advice has the potential to offer an attractive, convenient and low-cost advice service to retail clients who may not otherwise seek advice. ASIC recognises that digital advice continues to be developing area and digital advice providers are encouraged to contact ASIC if they have questions.
RG 255 is substantially the same as a draft issued for consultation earlier this year as part of Consultation Paper CP 254 (see ASFA Action issue 598), but now includes some enhanced guidance around meeting the best interests duty in a scaled/digital environment and some examples.
ASIC has also published its response to the submissions received on CP 254.
Single touch payroll: bill introduced
The government has introduced into Parliament its proposed single touch payroll (STP) reforms for reporting of payroll and superannuation information to the Australian Taxation Office (ATO).
The STP reforms are contained in Schedule 23 of the Budget Savings (Omnibus) Bill 2016 (Omnibus Bill), introduced into the House of Representatives on 31 August 2016.
STP creates a new reporting framework for ‘substantial’ employers (those with 20 or more employees) to automatically provide payroll and superannuation contribution information to the ATO when payments are made. Entities that report under STP will not have to comply with a number of existing reporting obligations under the taxation laws.
The stated rationale for including superannuation contribution information in STP is that it will enable the ATO to intervene earlier if Superannuation Guarantee (SG) contributions are not being paid. Under the current law, the ATO typically receives information about SG amounts six to twelve months after the employee entitlements have been paid. In contrast, Standard Business Reporting enabled software will allow for this information to be automatically reported to the ATO under STP when the contributions are paid.
The STP reporting framework will be mandatory from 1 July 2018 for substantial employers, with employers able to adopt it earlier on a voluntary basis. The government has not made any decision at this stage to extend the regime on a mandatory basis to smaller employers.
Schedule 23 of the Omnibus Bill also contains a number of amendments to streamline an employer’s payroll and superannuation choice processes.
Currently, the ‘standard choice form’ required for choice of superannuation purposes and the tax file number (TFN) declaration required to be completed for new employment arrangements are predominantly manual (paper based) processes. The STP reforms will allow employers to provide employees with the option to complete these forms through an ATO online service, with the employer then receiving validated information from the ATO directly into their business management software.
The use of the online process for standard choice forms and TFN declarations will be voluntary for employers and employees, and will be available for all employers (not only ‘substantial’ employers). Where the online process is used, employers will still be required to provide employees with a standard choice form within 28 days of them commencing employment, as this will contain information about the employer’s default fund.
The amendments to allow use of the online process for standard choice forms and TFN declarations will apply from 1 January 2017.The ATO is currently working with industry stakeholders, including ASFA, to develop the detail to support the STP framework set out in Schedule 23.
The Omnibus Bill has been referred to the Senate Economics Legislation Committee, with the Committee due to report by 13 September 2016.
Non-centrally cleared derivatives: APRA prudential standard deferred
APRA has recently written to institutions under its regulation, including superannuation entities, advising that a new cross-industry prudential standard on non-centrally cleared derivatives, originally proposed to apply from 1 September 2016, will now be deferred.
Earlier this year, APRA released a discussion paper and a draft new prudential standard, Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives (CPS 226). APRA had originally proposed that CPS 226 would formally commence on 1 September 2016, with the new margining requirements phased-in from September 2016 to September 2020. In light of delays in implementation of the internationally-agreed framework in other major derivative markets, APRA has reconsidered the timeline for Australian implementation, and concluded that it is appropriate to defer the implementation of CPS 226. APRA intends to release the final version of CPS 226 in the near future, but will not set a new commencement date at this stage.
Once finalised, CPS 226 will set out the final form of the margining and risk mitigation requirements to be applied by APRA-regulated institutions with material levels of non-centrally cleared derivatives, taking into account feedback received during the consultation period.
APRA will continue to monitor progress in other jurisdictions and will advise the Australian implementation date, and revised phase-in schedule for the margin requirements, in due course. APRA-regulated entities are encouraged to contact their APRA supervisor with any questions.
