1 July Compliance Deadlines – Are you ready?

A number of recent changes to taxation, anti-money laundering and financial services laws may have an impact on product disclosure statements, application forms and other disclosure documentation (including information memorandums) for financial products.

  • Financial services providers should review their disclosure documents and application forms to ensure compliance.
  • Taxation changes relating to FATCA and anti-money laundering law changes may require financial services providers to implement additional compliance processes and procedures.

Summary of new legal obligations

FATCA changes

In order to comply with the Foreign Account Tax Compliance Act (FATCA) and the recently implemented Intergovernmental Agreement between Australian and US to cooperate on cross border taxation issues (Intergovernmental Agreement), Australian fund managers will need to obtain sufficient information on any US tax resident investors and submit reports on income derived by its US tax resident investors to the Australian Tax Office on an anual basis. Australian fund managers with US sourced income may also need to register with the Internal Revenue Service (IRS) to avoid FATCA withholding being charged on US sourced income. FATCA changes are effective from 1 July 2014, however a transition until 31 December 2014 is allowed for due diligence on existing investors.

MySuper Fee Template changes

Pursuant to changes made to the Corporations Regulations 2001 (Cth) (Corporations Regulations) by the Superannuation Legislation Amendment (MySuper Measures) Regulations 2013 (MySuper Changes), the Fees and Costs template and other minor changes to the consumer advisory warning and worked example of fees and costs in Product Disclosure Statements for Superannuation Products and Managed Investment Products needs to be updated for any PDSs given from 1 July 2014.

Anti-Money Laundering changes

Recent changes have also been made to the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML Act) and the Anti-Money Laundering and Counter Terrorism Financing Act 2006 Rules (AML Rules) which implement a number of measures including, amongst other things, requirements for reporting entities to take reasonable steps to identify and verify the beneficial owners of customers who are companies, trusts, partnerships, incorporated/unincorporated associations, registered cooperatives and government bodies as well as enhanced due diligence on politically exposed persons. Beneficial holders are generally persons who ultimately have direct or indirect control or ownership over the entity which is the customer for AML purpose. These changes take effect from 1 June 2014. However, AUSTRAC has stated that it will adopt a “supervisory approach” under which civil penalties will not apply until 1 January 2016 provided that certain steps are taken to comply.

How do these obligations apply to disclosure of your financial products?

Types of Changes
Who must comply?
What do you need to do?
FATCA changes
​The FATCA changes apply to operators of registered and unregistered managed investment schemes. Complying Australian Superannuation funds are generally exempt. Disclosure documents for financial products which are effected by the FATCA changes should generally be examined to ensure that adequate disclosure is made about:

  • reporting of US tax resident information to the Australian Taxation Office; and
  • withholding implications of FATCA in the event the Fund has US sourced income and does not register with the IRS.

Financial services providers should review existing disclosure documents and consider:

  • whether additional FATCA disclosure is required; and
  • where FATCA disclosure is required, whether the update on FATCA should be included in a supplementary or replacement PDS or other disclosure document or in a website update.

Under ASIC Class Order 03/237, information required in a PDS which is not materially adverse to investors may be updated via other means than a replacement PDS. However, whether CO 03/237 will depend on a case by case basis.

Financial services providers should also update Application Forms for ensure that information on US tax residency is included and necessary consents are obtained in accordance with the Privacy Act 1988 (Cth).

​By 1 July 2014.
MySuper Fee template changes
​Fees and costs disclosure changes apply to both registered managed investment schemes and superannuation products. Responsible entities and superannuation trustees must ensure that any PDS given after 1 July 2014 complies with the new fees and costs disclosure changes. This means that any PDSs issued prior to 1 July 2014 must be amended to comply with Schedule 10 of the Corporations Regulations from 1 July 2014 otherwise the PDS may be considered to be defective under the Corporations Act. All new PDSs must comply with the Fee Template changes.Superannuation trustees and responsible entities should have procedures in place to update all existing PDSs to ensure that the fees and cost disclosure complies with the MySuper Changes.

The Fees and Costs changes for superannuation products are significant as they link the definitions used in the mandated Fees and Costs templates for PDSs to new fee labels introduced under the MySuper changes to the superannuation legislation.  The Fees and Costs changes for managed funds are mostly incidental and unlikely to result in significant changes in the fees and costs template.

The website update relief under CO 03/237is unlikely to be available for this change.

​1 July 2014

However, we understand that industry bodies are currently seeking an extension of the timing for implementation as well as other changes. So far ASIC has not indicated whether it is prepared to grant an extension.
AML changes
The changes to the AML Act and AML Rules apply to all reporting entities including managers of registered and unregistered managed investment schemes, financial planners, stock brokers, lenders etc. However, certain types of financial services such as the provision of superannuation, pensions, annuities and retirement savings accounts are exempt from AML requirements. ​Additional customer due diligence obligations may require changes to a reporting entity’s AML Program which will also result in changes in information required to be collected in relation to beneficial owners and Politically Exposed Persons in application forms for financial products.

Reporting entities should review their AML Program and make any consequential changes to application forms.  Changes will mainly pertain to collection and verification of information for beneficial holders and politically exposed persons.

​1 June 2014

Non- prosecution period for AUSTRAC until 1 January 2016 if certain requirements are met.

Other considerations

In addition to disclosure changes, the recent changes to financial services laws, anti-money laundering laws and the implementation of FATCA also have other implication for financial services providers.  Financial services providers will need to review and update their systems to ensure compliance at the earliest available opportunity.


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