EXPLANATORY STATEMENT
Select Legislative Instrument 2011 No. 272
Issued by the authority of the Assistant Treasurer and Minister for Financial Services and Superannuation
Corporations Act 2001
Corporations Amendment Regulations 2011 (No. 4)
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.
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) which established First Home Saver Accounts (FHSAs) was enacted in June 2008. A FHSA is a financial product designed as a savings account, earning government subsidies, to assist consumers purchase their first home.
The Regulations amend the Corporations Regulations 2001 (the principal Regulations) to support changes made to the FHSA Act by the Tax Laws Amendment (First Home Saver Account) Act 2001 (FHSA Amendment Act).
Part 7.9 of the Act sets out a disclosure regime for financial products, including a FHSA. Under section 1017D of that Part, issuers of an FHSA must provide regular periodic statements to FHSA holders, setting out relevant details on the status of the holder’s account. Subsection 1017D(5) provides the information that must be included in the periodic statement (as relevant). Paragraph 1017D(5)(g) also provides that the regulations can prescribe other details that also need to be included.
Relevantly, subregulation 7.9.74B(2) of the Principal Regulations requires that a periodic statement for a FHSA product must include the number of financial years after the end of the reporting period for the statement during which the holder of the product must continue to make personal contributions to the account, as required under the FHSA Act. That is, how many years of contributions are still required before the account holder is eligible to access the funds in their account. This is generally a minimum period of four years.
Before these changes, if a dwelling was acquired before the prescribed minimum conditions were met, the funds could only be transferred to a superannuation or retirement savings account. The changes now allow an account holder to acquire a dwelling before satisfying those conditions and also, once those relevant conditions are met, to pay the funds from their FHSA account into their (approved) mortgage. However, once a dwelling has been acquired, no further contributions are allowed to be made into the account.
These changes impact on the information required to be provided to an account holder in a periodic statement.
Under the Regulations where the account holder has acquired a dwelling and therefore contributions can no longer be paid into the account, the periodic statement will report how many years remain before the account holder is eligible to access the funds in their account as though the account holder was still contributing for that period of time.
The Regulations also provide a seven month transitional period for providers of FHSA to implement this change, including the option to implement the change early if they wish to.
Details of the Regulations are set out in the Attachment.
The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.
These Regulations were subject to public consultation for a two week period from 20 September 2011. Two submissions were received, but neither raised major issues about the specific regulations. However, due to comments received, the regulations provide for a transitional period of seven months.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
ATTACHMENT
Details of the Corporations Amendment Regulations 2011 (No. 4)
Regulation 1 – Name of Regulations
Provides that the name of the Regulations is the Corporations Amendment Regulations 2011 (No. 4).
Regulation 2 - Commencement
Provides that the commencement date of the regulations is the day after the regulations are registered.
Regulation 3 –Amendment of Corporations Regulations 2001
Provides that Schedule 1 amends the Corporations Regulations 2001.
Regulation 4 – Transitional
Subregulation (1) gives providers of a FHSA product a seven month period from commencement of the Regulations to apply the requirements set out in Schedule 1.
Subregulation (2) provides that a provider may choose to apply the amended requirements set out in Schedule 1 from commencement of the Regulations, rather than wait to the end of the seven month transitional period. If a provider opts in early, they are not permitted to reverse that decision.
SCHEDULE 1
Item [1] Subregulations 7.9.74B(2) and (3)
Subregulations (2) and (3) replace existing subregulations (2) and (3) and provide that:
(2)(a) Where the holder of an FHSA has not acquired a qualifying interest in a dwelling at the time a periodic statement is issued, the statement must include the number of years remaining after the end of the reporting period for the statement, that the holder must continue to make personal FHSA contributions as required under the First Home Saver Accounts Act 2008 in order to be eligible for payment of their funds out of the account.
(2)(b) Where the holder of an FHSA has not acquired a qualifying interest in a dwelling at the time a periodic statement is issued and the account holder is no longer required to make contributions, the account holder may apply for payment out of the account to acquire a qualifying interest in a dwelling as set out in the First Home Saver Accounts Act 2008.
(3) If an account holder has already acquired a qualifying interest in a dwelling at the time the periodic statement is provided, the statement must record the number of years remaining after the end of the reporting period during which the holder would ‘normally’ have been required to continue to make personal contributions (as required under the First Home Saver Accounts Act 2008) to the account. That is, this figure is ascertained by the number of years remaining until they are eligible to access their funds, as though the account holder still made those contributions.