Financial Services in Focus – Issue 100

ASIC demands answers from private credit as it beefs up surveillance

On 21 March, the Australian Financial Review reported that ASIC had sent a 20-page questionnaire to multiple private credit funds demanding details in relation to governance, valuation modelling, conflict of interests and investor protection measures by 14 April. This comes at a time when ASIC has increased its surveillance of the rapidly growing private credit funds sector, which has seen a series of defaults and collapses. This latest round follows the notices sent by ASIC in November 2024 (for further information on these notices, you can read our alert here). In this context, we refer you to Issue 99 of our Financial Services in Focus publication, where we discussed ASIC’s recent discussion paper, Australia’s evolving capital markets:  A discussion paper on the dynamics between public and private markets, which seeks engagement from participants to better understand the market dynamics and provide actionable ideas on regulation to enhance the operation of capital markets, including in the funds space.  

Feedback on the discussion paper closes 5.00 pm on 28 April. 

APRA makes minor changes to reporting standards 

On 19 March, APRA announced minor changes to reporting standard SRS 101.0 Definitions for Superannuation Data Collections, reporting standard SRS 553.0 Investment Exposure Concentrations and Valuations and reporting standard SRS 606.0 RSE Profile to align with the APRA Connect taxonomy and clarify reporting requirements.

These new reporting standards apply to RSE licensees and are intended to enhance current reporting on the business model and structure of the RSE licensee board and board committees, to gain a comprehensive understanding of the governance practices and effectiveness of superannuation trustees. The new reporting standards will also address a key gap in APRA’s current collections to inform assessments of the governance of, and exposures to, liquidity and valuation risk; and to rationalise Australian Bureau of Statistics (ABS) reporting standards on investments to meet the needs of both APRA and ABS.

Read the new reporting standards. 

Government announces consultation on payday super draft legislation 

On 14 March, Treasury announced its consultation on draft legislation and regulations for payday super. These amendments:

• require employers to pay their employees’ super at the same time as their salary and wages; and
• update penalties and charges for late or missed super payments.

The updates will make the consequences for employers targeted and proportionate.

The consultation pack comprises exposure draft bills, explanatory materials, exposure draft regulations and an explanatory statement, all of which are available at the above link.

The last day to submit responses to this consultation is 11 April 2025.

APRA publishes updates to FAQs on Superannuation Data Transformation 

On 12 March 2025, APRA announced 10 new and two revised frequently asked questions (FAQs) on its Superannuation Data Transformation project. APRA also added two new worked examples on the project.  The FAQs are designed to provide guidance on commonly asked questions on reporting obligations raised by RSE licensees. 

The new FAQs and worked examples can be found here. 

APRA confirms consultation on changes to capital requirements for annuity products

On 27 February, APRA confirmed it will proceed with a public consultation on capital settings for annuity products. 

The key change proposed is the approach to calculating the ‘illiquidity premium’ in LPS 112 Capital Adequacy: Measurement of Capital. This would lower life insurer capital requirements for annuity products provided certain risk controls are in place. This proposal will be released in the second quarter of 2025 – stay tuned! 

ASX proposes amendments to the Clear Operating Rules and Procedures and AMO Contractual Terms 

On 3 March, ASX released a consultation paper Consultation on Release 1 (Clearing Services) – Amendments to Rules and Procedures. To facilitate the implementation of Release 1 (Clearing Services) of the CHESS replacement system, ASX is required to amend the:

• ASX Clear Operating Rules (ASX COR);
• ASX Clear Operating Rules Procedures; and
• ASX Operating Rules Procedures, 

(collectively referred to as the Rules and Procedures).

These amendments reflect the solutions design for new or changed functionality and are being made to:

• reflect the implementation of a new Financial Information eXchange (FIX) Gateway and FIX messaging for Approved Market Operators (AMOs), including minor amendments to the contents of certain messages and the terminology used to refer to the new FIX message types; and
• decommission a limited subset of the existing CHESS functionality, including the ability for Clearing Participants to remove trades from novation and set-off, and exclude trades from set-off, in certain circumstances. 

On the same date, ASX also released a separate consultation paper Consultation on Release 1 (Clearing Services) – Amendments to AMO Contractual Terms. The contractual terms proposed for amendments include the:

• Trade Acceptance Service Legal Terms;
• Product Services Legal Terms; and
• Operational and Technical Standards.

Responses to both consultation papers are requested by 14 April 2025.

Government responds to inquiry into the CHESS replacement project

On 3 March, Treasury published the Government’s response to the recommendations from a report published by the Parliamentary Joint Committee on Corporations and Financial Services, Competition in clearing and settlement and the ASX CHESS Replacement Project: The CHESS Replacement Project is too important to fail in April 2024 (Report).

The Report made 12 recommendations seeking to strengthen the oversight and regulation of Australia’s financial market infrastructure.

Some of the recommendations include:

• the Minister proceed as quickly as practical to implement the ministerial determinations to empower ASIC to make rules to facilitate competition or fair provision of monopoly clearing and settlement services;
• the government progress the Financial Market Infrastructure reforms as soon as practical;
• the new competition in clearing and settlement legislation and subsequent actions by the Minister, Treasury and regulators be independently reviewed in the second half of 2026; and
• the Council of Financial Regulators amends the 2017 regulatory expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia.

Of the 12 recommendations, the Government actioned two, supported one, supported three in principle, and noted the remaining six.

New ‘tipping off’ offence comes into effect

From 31 March, the new ‘tipping off’ offence came into effect, which means reporting entities are now prohibited from disclosing information to another person (other than an AUSTRAC entrusted person), if the disclosure would or could reasonably be expected to prejudice an investigation. 

Prior to the tipping off reforms, reporting entities were prohibited from disclosing that they had given, or were required to give, a suspicious matter report under s41(2) of the AML/CTF Act, or any information from which it could reasonably be inferred they had given or were required to give a report.

We recommend all reporting entities review the reforms and plan ahead to make the required amendments to their AML/CTF programs and practices when the new laws are sufficiently certain, which is expected to be around the end of July.

Further information about the new ‘tipping off’ offence can be found on the AUSTRAC website. 

ASIC updates guidance to clarify treatment of student loan commitments by banks and lenders

On 6 March, ASIC released updated regulatory guidance to clarify how the Higher Education Loan Program (HELP), and other student loan commitments, may be considered by banks and lenders assessing whether a consumer can afford to take on new credit. 

The key update to Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) includes the addition of two paragraphs, RG 209.68 and RG 209.69: 

• RG 209.68 acknowledges that HELP debts are different from other forms of debt because the amount required to be repaid depends on a person’s level of income.
• While RG 209.69 states lenders may consider it appropriate not to factor in an applicant’s HELP debt when calculating a consumer’s outgoings when assessing a proposed loan, the updates do not change broader lending policies or responsible lending obligations. 

Treasury clarifies tax arrangements for managed investment trusts (MITs)

On 13 March, Assistant Treasurer Stephen Jones announced the Government will amend the income tax laws to ensure legitimate investors can continue to access concessional withholding tax rates in Australia while strengthening guidelines to prevent misuse.

This targeted policy change reaffirms that genuine, foreign-based widely held investors, such as pension funds, can still access concessional withholding tax rates on eligible distributions to members through MITs.

The amendments will maintain current industry practice and understanding of the operation of the MIT pooling requirements under Division 275 of the Income Tax Assessment Act 1997 and remove ambiguity around the use of MITs.

ATO shifts non-compliant small businesses to monthly GST

On 5 March, the ATO announced that from 1 April it will move around 3500 small businesses with a history of non-payment, late or non-lodgement, or incorrect reporting, from quarterly to monthly GST reporting to improve their compliance.

The ATO stated that moving to a monthly reporting and payment cycle can help small businesses to keep on top of their obligations and remain viable and small businesses that report monthly will be better able to address their past unmet tax obligations in a structured way, rather than falling further behind.

ACCC consults on assessment guidelines for new merger regime 

On 20 March, the ACCC released draft merger assessment guidelines for consultation. These guidelines outline the analytical framework the ACCC will apply when assessing notified acquisitions under the new regime, reflecting best practice for competition assessments. 

The guidelines are intended to help merger parties and their advisors to assess how the ACCC will assess notified acquisitions under the new regime, which will become compulsory on 1 January 2026. 

The ACCC has said there will be greater transparency regarding decision making which, alongside the guidelines, will provide ‘greater predictability regarding the ACCC’s analysis and decision making’.

The consultation process will run until 17 April. The merger assessment guidelines will be updated following this consultation process and released ahead of voluntary notifications commencing on 1 July.

ATO releases new small business benchmarks for 100 industries

On 17 March, the ATO released a new set of updated financial benchmarks to help small business owners take the pulse of their business.

Updated annually, the ATO’s benchmarks act as a health check allowing small business owners to compare their performance, including average expenses, against other businesses in the same industry.

Treasury updates guidance material following changes to the foreign investment framework

On 14 March, Treasury updated the following guidance material following changes to the foreign investment framework:

• Key Concepts Guidance Note;
• Residential Land Guidance Note;
• Exemption Certificates Guidance Note;
• Fees Guidance Note;
• Tax Conditions Guidance Note;
• Residential Compliance Guidance Note; and
• Proposal Checklist Appendix – Tax Checklist.

The updated guidance material now includes information about the following topics: 

• the ban on foreign purchases of established dwellings announced by the Treasurer and Minister for Housing on 16 February 2025;
• foreign investment in new and established Build to Rent developments;
• partial refunds of application fees for unsuccessful proposals in competitive bid processes; and
• tax arrangements that will attract greater scrutiny in the foreign investment assessment process.

Council of Financial Regulators releases quarterly statement

On 13 March, the Council of Financial Regulators released its quarterly statement, following its regular quarterly meeting where it discussed potential sources of systemic risk and key vulnerabilities facing the Australian financial system, in the context of a highly uncertain international outlook.

Members agreed that a high level of vigilance among banks and other financial institutions was appropriate in the circumstances, alongside robust contingency plans.

The Council agreed to continue its important shared program to strengthen cyber and operational resilience in the financial system, with a particular focus on better understanding service provider concentration risks, testing crisis management and cyber defence plans, and building back-up payments capabilities.

The Council reviewed its approach to planning and coordinating crisis simulation exercises in various key risk areas to ensure there were regular fire drills of inter-agency crisis management arrangements. The Council agreed to continue to strengthen crisis preparedness arrangements, including through targeted testing of coordination protocols.

The Council was provided with an update on the Review into small and medium-sized banks, conducted with the Australian Competition and Consumer Commission (ACCC). The Council noted there had been a wide range of feedback that covered proposals for adjustments to the regulatory and legislative frameworks to enhance proportionality and transparency, including in relation to reporting requirements. 

The Council plans to provide a final report to the Government by 1 July, with recommendations for consideration by the Government and relevant agencies.

ASIC warns payday lenders may be breaching consumer protection laws

On 13 March, after conducting a review, ASIC released Report 805 Falling Short: Compliance with the small amount credit contract obligations highlighting that some lenders who provide small amount credit contracts may be attempting to move vulnerable consumers into contracts with fewer protections. ASIC is concerned these lenders may be falling short of their obligations by:

• entering into unsuitable contracts with consumers, or
• failing to identify an appropriate target market and distribute their products accordingly.

Lenders who have changed their product offerings or business models following the Financial Service Reform Act 2022 (which changed the laws in relation to small amount credit contracts) will need to consider their obligation to take into account a consumer’s requirements and objectives before entering into a credit contract. Lenders should also set appropriate review triggers in their target market determinations to adequately monitor the risk of distributing products outside of their target market.

APRA proposes changes to strengthen and streamline governance and fit and proper requirements 

On 6 March, APRA released eight proposals to strengthen its prudential governance framework for banks, insurers and superannuation trustees. According to APRA chair John Lonsdale, “almost 80 per cent of entities subject to heightened risk-based APRA supervision have underlying governance problems”. 

APRA’s proposed changes include: 

• lifting requirements for boards to ensure they have the right mix of skills and experience to deliver the entity’s strategy;
• raising minimum standards around the fitness and propriety of responsible persons, and requiring significant financial institutions to engage with APRA on succession planning and potential appointments;
• extending existing requirements for superannuation trustees in relation to managing conflicts of interest to banking and insurance;
• strengthening board independence, especially in relation to entities that are part of a group;
• clarifying APRA’s expectations around the roles of boards, the chair and senior management; and
• introducing a lifetime tenure limit of 10 years for non-executive directors at an APRA-regulated entity. 

APRA intends to release updated prudential standards and guidance for formal consultation in the first half of 2026. It aims to publish the updated framework by the beginning of 2027 ahead of it commencing by 2028.

AFCA welcomes changes to its authorisation conditions

On 11 March, AFCA welcomed the decision by Assistant Treasurer and Minister for Financial Services Stephen Jones to approve a change to the conditions of AFCA’s authorisation as ombudsman service for the financial sector. The change, which will come into effect in 12 months’ time, expands AFCA’s jurisdiction to investigate and consider the actions of ‘receiving banks’ in scam complaints. ‘Receiving bank’ refers to the bank where the proceeds of a scam are transferred to. This authorisation condition change means the actions of receiving banks can be considered as part of the full chain of events in a scam.

RBA proposes decommissioning the Bulk Electronic Clearing System 

On 11 March, the RBA released its risk assessment into the payment industry’s proposed decommissioning of the Bulk Electronic Clearing System (BECS), which is currently Australia’s primary system for account-to-account payments. The risk assessment concludes that the industry is yet to arrive at a ‘shared vision of the desired features of account-account payments in Australia’. There has been insufficient industry coordination, planning and certainty regarding this transition. However, given that a disruption to BECS payments has the potential to cause economic harm, the RBA expects any transition of these payments to an alternative will be orderly, safe and reliable. 

Recommendations made by the RBA include:

• to define a vision for the target future state and strategic objectives for account-to-account payments in Australia, in collaboration with the Government and the RBA and with due recognition of public interest considerations;
• comprehensively consider alternative options for achieving that target future state; and
• once a target future state has been agreed, establish a transition plan that includes appropriate mechanisms for coordination and stakeholder engagement.

The RBA will provide ongoing oversight of transition activities, including by conducting assessments of industry’s implementation of these recommendations. It will also actively support the modernisation of account-to-account payments by ensuring public interest considerations are reflected in industry deliberations over the strategic objectives for the account-to-account payments system.

ACCC releases guidance on merger reform transition

On 4 March, the ACCC released guidance on transitional arrangements to assist businesses and their advisers considering a merger in 2025, ahead of a new merger regime coming into effect in 2026. Under the new regime, all acquisitions that meet a prescribed threshold will have to be notified to the ACCC from 1 January 2026. 

The guidance intends to provide businesses and other stakeholders with key dates and processes and also indicates how the ACCC will assist business during the transition period. 

Business will have the option to start using the new regime on a voluntary basis from 1 July. 

Treasury launches new portal for foreign investors

On 24 February, Treasury launched the compliance functionality of its new Foreign Investment Portal.

All investors and agents can now use the Foreign Investment Portal to:

• create an account;
• submit a compliance report; and
• communicate with the Treasury on their compliance reporting. 

Further fact sheets on the use of the new portal can be found on the Foreign Investment Review Board’s website.