EXPLANATORY STATEMENT
Select Legislative Instrument 2011 No. 66
Issued by authority of the Assistant Treasurer and Minister for Financial Services and Superannuation
Corporations Act 2001
Corporations Amendment Regulations 2011 (No. 1)
The Corporations Act 2001 (the Act) and the Corporations Regulations 2001 (the Principal Regulations) provide for the regulation of corporations, financial markets, products and services, including in relation to financial product licensing, conduct, advice and disclosure.
Subsection 1364(1) of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations, or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.
Part 7.9 of the Act establishes a general disclosure regime for financial products. Under Part 7.9, financial service providers must provide retail clients with a Product Disclosure Statement (PDS) before the consumer purchases the financial product. The PDS is designed to inform the consumer about important features of the product and to assist the consumer to make a decision whether to purchase the product or not. Section 1020G of the Act provides that the regulations may modify the effect of Part 7.9 of the Act.
The First Home Saver Accounts Act 2008 (the FHSA Act) establishing the First Home Saver Accounts (FHSAs) was enacted in June 2008 together with related legislation. As part of that package, the Government introduced, through amendments to the Principal Regulations, a short-form PDS regime to govern these products.
The Principal Regulations prescribe the form and content of FHSA documents, including: that the PDS must not exceed four A4 pages (or equivalent); the PDS is to be made up of specified sections and sub-sections; and prescribe certain text.
These Regulations support amendments made to the FHSA Act, by the Tax Laws Amendment (2011 Measures No. 1) Act 2011 (the 2011 Act).
The 2011 Act increases the flexibility of the FHSA by allowing money in the account to be paid into a genuine mortgage after the end of a minimum qualifying period, where the account holder purchases a dwelling prior to meeting the minimum release conditions, rather than it having to be transferred to a superannuation or retirement savings account. The new rules apply only to persons who acquire a ‘qualifying interest’ in a dwelling (as defined in section 12 of the FHSA Act).
These Regulations make a number of consequential changes to the content requirements of the short-form PDS required for the issue of a FHSA.
Details of the Regulations are set out in the Attachment.
The Regulations were subject to final public consultation for a two week period from 10 February 2011. No significant comments were made and only one minor technical clarification was made as a result of that process.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the commencement of schedule 3 of the 2011 Act.
ATTACHMENT
Details of the Corporations Amendment Regulations 2011 (No. 1)
Regulation 1 – Name of Regulations
This regulation provides that the name of the Regulations is the Corporations Amendment Regulations 2011 (No. 1).
Regulation 2 – Commencement
This regulation provides for the Regulations to commence on commencement of schedule 3 of the Tax Laws Amendment (2011 Measures No. 1) Act 2011 (the 2011 Act).
Regulation 3 – Amendment of Corporations Regulations 2001
This regulation provides that the Corporations Regulations 2001 (the Principal Regulations) are amended as set out in Schedule 1.
Regulation 4 – Transitional
Subregulation 4(1) introduces transitional arrangements for providers of all FHSAs. They provide that a provider has complied with the new requirements for the first three months after commencement of the Regulations where the provider has placed on their website, maintained by or their behalf, the information set out in Schedule 1, being items [2] to [5]. To comply, the provider is also required to notify FHSA providers that the information is available on the relevant website. If requested, a hard copy has to also be made available.
This provision also allows the provider to comply immediately by providing the required information immediately in the relevant PDS.
Subregulation 4(2) sets out the definitions of various terms for the purposes of this regulation.
At the time the Principal Regulations were amended in 2008, two example PDSs were provided for different types of FHSAs. These examples were also available on the home saver website at www.homesaver.treasury.gov.au. These documents are now out of date, and therefore can no longer be relied upon, and are to be deleted. Providers of FHSA must ensure that any PDS for a FHSA meets the updated requirements of legislation as set out in the Corporations Act and related regulations.
Schedule 1 – Amendments
Item [1] – Subregulation 7.9.10A(2), note
This item inserts in the note under subregulation 7.9.10 A (2) three additional items, being ‘FHSA mortgage payment’, ‘FHSA payment conditions’ and ‘genuine mortgage’. These items are defined by the 2011 Act.
Items [2], [3] and [4] - Schedule 10B, subitem 5 (1)
These items amend the prescribed text requirements of section 2 of the FHSA PDS, titled ‘How the First Home Saver Account Works’, to add an additional purpose to the list for which a holder can withdraw their savings, being, ‘ as money you can pay into a genuine mortgage’.
These items also amend the prescribed text in the last point under the heading ‘How to save with a First Home Saver Account’ to provide an additional item to that list stating that FHSA holders can keep their account open until they are eligible to pay the money into a genuine mortgage.
Item [5] - Schedule 10B, paragraph 8(f)
This item adds an additional paragraph to ensure that providers also include summary information about the effects on the product or the interests of the holder of the product if the holder meets the minimum release conditions by acquiring a dwelling prior to meeting the eligibility requirements.
Item [6] -- Schedule 10B, paragraph 9(1)(a)
This item amends paragraph 9(1)(a) to require the PDS to also include summary information on the actions the holder of the product must take should they acquire a qualifying interest in a dwelling using the money in the FHSA.