Issue 790, 5 January 2021
In this issue:
- Capital gains tax rollovers: Board of Taxation review
- Critical infrastructure review
- APRA data collection tool: APRA Connect
- Financial services regulation: review of the legislative framework
- APRA and ASIC engagement
Capital gains tax rollovers: Board of Taxation review
The Board of Taxation has released a consultation paper proposing significant reform to the existing capital gains tax (CGT) roll-over rules.
As reported in ASFA Action issue 731, the Board commenced its review of CGT roll-overs in December 2019. The Board released an initial ‘consultation guide’ last February and was originally due to report back to the Government by 30 November. The consultation period was subsequently extended due to the COVID-19 pandemic and a revised reporting deadline has not yet been announced.
On 23 December, the Board issued a second consultation paper. This sets out the Board’s first-stage proposal for rationalising (and replacing) seven of the key CGT roll-overs that deal with the most common business restructuring transactions, including mergers, demergers, and internal reorganisations.
These proposals have potential implications for superannuation funds. For example, if adopted by the Government, the proposed ‘general business restructure roll-over’ could potentially replace the specific roll-over relief for merging superannuation funds and provide greater scope for a trustee to rationalise a fund’s investment structure following a merger.
If you have any feedback that you would like ASFA to consider in relation to the consultation paper, please forward it to Julia Stannard by close of business Monday 25 January.
Critical infrastructure review
A Parliamentary committee is conducting a review of existing legislation and a Bill currently before Parliament that relates to Australia’s critical infrastructure.
In mid-December, the Government introduced the Security Legislation Amendment (Critical Infrastructure) Bill 2020 (the Bill) into Parliament. This followed consultations in August and November (see ASFA Action issues 771 and 783) on amendments building on the existing regulatory regime created by the Security of Critical Infrastructure Act 2018 (the Act) to enhance security and resilience of critical infrastructure assets and systems of national significance. Expansion of the concepts to include systems of national significance is intended to widen the regime to address threats such as natural disasters and cyber-attacks.
The Bill seeks to achieve this expansion by amending the Act to:
- identify critical infrastructure assets across 11 industry sectors (increased from the current 4 sectors) – including introduction of a concept of a ‘critical superannuation asset’
- establish positive security obligations for critical infrastructure assets, including to adopt and maintain a critical infrastructure risk management program (to be delivered through sector-specific requirements) and mandatory cyber incident reporting
- introduce enhanced cyber security obligations to ensure Government and industry can work collaboratively to strengthen the cyber preparedness and resilience of entities that operate assets of the highest criticality to Australia’s national interests (defined as systems of national significance)
- provide Government with the necessary and proportionate powers to be exercised as a last resort in circumstances where a cyber security incident has, is, or is likely to impact a critical infrastructure asset and Australia’s national interest.
Separate to the introduction of the Bill, there is an existing requirement that the Parliamentary Joint Committee on Intelligence and Security commence a review into the operation, effectiveness and implications of the reforms introduced in the Act by 11 April 2021.
As the Bill amends the regime established by the Act, the Committee will be commencing its statutory review of the Act in conjunction with its review of the amendments proposed in the Bill. The statutory review will analyse the operation, effectiveness and implications of the Act. In particular, it will:
- consider whether it would be appropriate to have a unified scheme that covers all infrastructure assets (including telecommunication assets) that are critical to:
- the social or economic stability of Australia or its people
- the defence of Australia
- national security
- review the circumstances relating to any declarations of assets by the Minister.
If you have any feedback you would like ASFA to consider in relation to the review of the Bill or the statutory review of the Act please forward it to Byron Addison by close of business Friday 5 February 2021.
APRA data collection tool: APRA Connect
APRA has advised it is planning to launch its new data collection solution, APRA Connect, at the end of September 2021.
In late March, APRA suspended its program to implement APRA Connect as a replacement to the current Direct to APRA (D2A) system, due to the COVID-19 pandemic.
In late December, APRA indicated that the project has resumed and provided the following outline:
- APRA Connect will go live at the end of September 2021 with a progressive cutover of regulatory data reporting to the new solution over the coming years
- all entities will be responsible for maintaining entity information, such as contact details, responsible persons and related parties on APRA Connect
- the timing of regulatory data reporting commencing in APRA Connect will vary for each industry. APRA will progressively start new collections in APRA Connect in line with industry consultations. The Superannuation Data Transformation collections will be among the first regulatory data collections to be introduced in APRA Connect at the September 2021 go live date
- D2A will continue to be used for most existing collections – dual reporting systems will be in place for the medium term and any resubmissions for D2A-submitted returns must be made through D2A. Returns will be exclusively available on one system or the other and no new collections will be introduced to D2A. Once all data reporting has moved to APRA Connect, D2A will be retired
- to assist entities in their transition to APRA Connect, APRA will make a test environment available from the end of June 2021 as a permanent feature and will also conduct a pilot in the external test environment for a small number of superannuation entities. The pilot is expected to take place in April/May 2021.
More information will be made available via the dedicated webpage Getting ready for APRA Connect. APRA is encouraging entities to consider what the introduction of APRA Connect and the revised implementation approach means for their transition to APRA Connect.
Financial services regulation: review of the legislative framework
As reported in ASFA Action issue 775, the Government has asked the Australian Law Reform Commission (ALRC) to conduct a review of the legislative framework for corporations and financial services regulation. The Terms of Reference (ToR) for the review set out three sub-topics:
- the use of definitions
- regulatory design and hierarchy of laws
- the framing or structuring of Chapter 7 of the Corporations Act 2001.
Separate interim reports are to be produced for each sub-topic, by 30 November 2021, 30 September 2022 and 25 August 2023 respectively, with a final report due by 30 November 2023.
In late December, the ALRC updated its website to set out the approach it will take in relation to this multi-year review. In particular, this notes as follows:
The ALRC’s proposed approach is to treat the ToR as one overarching inquiry, rather than as three sub-inquiries on discrete topics. This will have the benefit that the consolidated final report will be able to make a set of recommendations that inter-relate and make sense as a coherent whole. In any event, the sub-topics set out in the ToR will inevitably overlap and each will have implications for the others.
One way of achieving coherence across the topics to be covered in the Interim Reports is to maintain a level of consistency in scope throughout the Inquiry. Consequently, the ALRC proposes that Chapter 7 of the Corporations Act be a focus point for each of the topics. However, issues and themes arising in other parts of corporations and financial services law will also be identified and captured. That is, the ALRC will analyse other parts of the Corporations Act, other legislation relevant to corporations and financial services, and other Commonwealth statutes, in developing its recommendations. The ALRC’s recommendations will have implications for legislative design well beyond Chapter 7 of the Corporations Act.
APRA and ASIC engagement
APRA and ASIC have published their first annual update on engagement between the two regulators.
The update highlights areas where APRA and ASIC have “demonstrated strengthened collaboration” over the last 12 months, including in relation to addressing issues arising from the COVID-19 pandemic. In relation to superannuation specifically, the update notes that “APRA and ASIC have worked together to ensure guidance to trustees was integrated, including jointly informing all licensees on 1 April 2020 of current and new obligations prompted by the crisis. The agencies have also collaborated on developing and implementing a single pandemic data collection”.
The update notes that:
- APRA and ASIC’s cooperation will this year be reinforced by the implementation of Royal Commission Recommendation 6.9 via a statutory obligation to cooperate, share information and notify each other of suspected entity breaches of laws administered by the other
- key regulatory priorities of 2021—including implementation of the latest consumer credit and superannuation reforms, preparation for the Financial Accountability Regime (FAR), and improving performance assessment frameworks—emphasise the continued importance of collaborating and working effectively and efficiently together
- APRA and ASIC will continue to work together on supporting the financial system, businesses and consumers as they enter the next stage of recovery from the pandemic.
The publication of the update fulfils the agencies’ obligation under their 2019 Memorandum of Understanding to report annually on their engagement activities.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
