Prepared by Julia Winzar
It’s that time of year again and surprise…… innovation in the financial services sector is again a key item on the agenda in the 2017 Federal Budget. The Budget makes some key announcements aimed at encouraging innovation, improving competition and delivering fairer outcomes for consumers and businesses in the financial services sector. Some of these are a rehash of existing frameworks which didn’t go quite far enough to assist those small innovative businesses that were initially targeted. But, at least it is a step in the right direction.
The key announcements for financial services industry participants include:
Extension of the licensing sandbox
The Government proposes to extend the existing regulatory sandbox to allow businesses to test a wider range of new financial products and services without an AFSL or credit licence. The existing regulatory sandbox was implemented in December last year and provided licensing exemptions for a limited range of financial products and services.
The amended sandbox will apply to a greater range of products and services including consumer credit, short-term deposit or payment products, and the operation of a CSEF intermediary. In addition, the amended sandbox will give businesses 24 months to test their financial products and services, instead of the original 12-month timeframe.
A new dispute resolution body, the Australian Financial Complaints Authority, will be established to hear all financial disputes, including superannuation. The body will replace the Financial Ombudsman Service, Credit and Investments Ombudsman and Superannuation Complaints Tribunal. To provide consumers and small businesses with greater access to dispute resolution, the body will be able to hear disputes of a higher value than under current caps.
It is proposed that the new dispute resolution body will commence operations from 1 July 2018.
Extending crowd sourced equity funding
Draft legislation has been released to extend crowd-sourced equity funding (CSEF) to proprietary
companies. The existing CSEF framework, which is set to commence in September this year, applies only to public companies. Under the draft legislation, proprietary companies will be able to rely on the CSEF framework but will have additional obligations, including requirements to have a minimum of two directors, financial reporting and audit requirements and restrictions on related party transactions.
Review of competition
The Productivity Commission will commence a review on competition in the financial system on 1 July 2017. The focus of the review will be to improve consumer outcomes, support innovation and improve productivity and competitiveness of the financial system. The review is expected to be completed within a 12-month timeframe.
Removing the double taxation of digital currency
In an effort to encourage innovation in the digital currency space, from 1 July 2017, purchases of digital currency will no longer be subject to the GST. Under current arrangements, digital currency is subject to GST at the time of purchase and again when it is exchanged for other goods or services that are subject to GST.
Comprehensive credit reporting
The Government proposes to make the existing comprehensive credit reporting regime mandatory if at least 40% of data held by credit providers is not being reported by the end of 2017.
It looks like it will be a very busy 6 to 12 months.