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Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007

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2004-2005-2006-2007

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments Moved on Behalf of the Government

 

 

(Circulated by authority of the

Minister for Revenue and Assistant Treasurer, the Hon Peter Dutton MP)

 



T able of contents

General outline and financial impact............................................................ 1

Chapter 1           Amendments 1 to 14 to Schedule 1.................................. 3

 



G eneral outline and financial impact

Amendments 1 to 14 to Schedule 1 — Streamlining Prudential Regulation

Amendments 1 to 14 correct drafting errors to ensure that the reforms being introduced by the Bill operate as intended.

Date of effect :  Amendments 1 to 9 apply from the date of Royal Assent; amendments 10 to 13 apply from 1 January 2008; and amendment 14 applies from 1 July 2011.

Proposals announced :  These amendments give effect to proposals announced in the paper Streamlining prudential regulation: response to ‘Rethinking Regulation’ , released on 4 December 2006 by the Minister for Revenue and Assistant Treasurer.

Financial impact :  Nil

Compliance cost impact :   Nil

 



C hapter 1     

Amendments 1 to 14 to Schedule 1 — Streamlining Prudential Regulation

Outline of chapter

1.1                   Schedule 1 to this Bill amends the Banking Act 1959 , Insurance Act 1973 (Insurance Act), Life Insurance Act 1995 (Life Act) , Superannuation Industry (Supervision) Act 1993 (SIS Act) (collectively, the prudential Acts) and other related legislation, to implement Government commitments relating to prudential regulation in response to Rethinking Regulation : The Report of the Taskforce on Reducing Regulatory Burdens on Business (Regulation Taskforce).

1.2                   It also includes additional measures to streamline and simplify the prudential Acts in a manner that is consistent with the Regulation Taskforce’s findings.

1.3                   The following amendments make changes to Schedule 1 of the Bill to correct drafting errors.

Explanation of amendments

Amendment 1

1.4                   Amendment 1 amends item 53 of Schedule 1 so that paragraph 7(1)(a) of the Insurance Act excludes Division 3A of Part III of the Insurance Act.

1.5                   Item 53 of Schedule 1 inserts a new paragraph 7(1)(a) of Insurance Act, which gives APRA the power to make determinations exempting a person or a class of persons from the provisions of Part III of the Insurance Act.  Consistent with the proposals announced in Streamlining Prudential Regulation , this reference should not include Division 3A of Part III.

Amendment 2

1.6                   Amendment 2 inserts item 65A into Schedule 1.  Item 65A repeals section 49D of Insurance Act dealing with self-incrimination.

1.7                   The general self-incrimination provisions, contained in new section 38F of Insurance Act, inserted by item 62 already provide protection from self-incrimination.  Therefore, section 49D is repealed to ensure that the protection from self-incrimination is not duplicated.

Amendments 3 and 14

1.8                   Amendment 3 inserts new item 71A into Schedule 1 so that subsection 16C(4) of the Life Act includes a reference to prudential standards, commencing on date of Royal Assent.

1.9                   Item 260 of the Bill incorrectly repeals subsection 16C(4) of the Life Act on 1 July 2011.  Amendment 14 amends item 260 so that subsection 16C(4) of the Life Act is not repealed on 1 July 2011 and amends subsection 16C(4) to remove the reference to prudential rules commencing on 1 July 2011.

1.10               Collectively, Amendment 3 and amendment 14 give effect to the phasing out of prudential rules by 30 June 2011.

Amendments 4, 7, 8 and 9

1.11               Amendment 4 omits item 149 which repeals section 130B of the SIS Act.  Section 130B provides that individuals giving information to the Regulator under sections 129 and 130 of SIS Act enjoys use immunity in relation to the information.  Use immunity provided under section 130B should be retained.

1.12               Amendment 7 amends item 154 of Schedule 1 so that section 336F dealing with self-incrimination does not apply to sections 129 or 130 under the SIS Act.  This is because self-incrimination in respect of sections 129 and 130 is dealt with by section 130B.

1.13               Amendment 8 inserts a note into item 154 of Schedule 1 to clarify that section 130B dealing with self-incrimination applies to sections 129 and 130.  Amendment 9 renumbers the note that already exists in item 154 as a result of amendment 8 .

Amendments 5 and 6

1.14               Item 150 of the Bill includes as a modifiable provision section 113 of SIS Act.  However section 113 is repealed by Item 9 of Schedule 3 and replaced by new section 35C in Item 8 of Schedule 3 as a result of the Government’s reforms to consolidate and rationalise the prudential reporting requirements in the SIS Act.  New section 35C is a modifiable provision.

1.15               Amendment 5 amends item 150 by inserting new paragraph 327(aa) into section 327 of SIS Act referring to new section 35C of SIS Act.  Amendment 6 amends item 150 by omitting paragraph 327(f) of the SIS Act referring to section 113 of the SIS Act.

Amendment 10

1.16               Amendment 10 amends paragraph 121AO(2)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) to omit references to the Life Insurance Actuarial Standards Board (LIASB) and a capital adequacy standard applicable to the company and replaces them with a reference to a prudential standard in relation to a capital adequacy standard applied to the company.

1.17               At the time the LIASB was created, it was considered that the Australian Prudential Regulation Authority (APRA) did not have adequate actuarial capacity to develop actuarial standards for life companies. Since that time, APRA has provided full secretariat support to the LIASB and has developed its own capacity to determine standards dealing with actuarial matters.  Therefore, Schedule 1 of the Bill abolishes the LIASB and removes the concept of actuarial standards from the Life Act from 1 January 2008.  A consequential amendment to ITAA 1936 is required a result of these changes.

Amendments 11 and 12

1.18               Amendments 11 and 12 insert new items 207A and 212A into Schedule 1 to omit from paragraphs 87(1)(c) and 95(1)(d) of the Life Act references to regulations and to insert in their place references to prudential standards.

1.19               Sections 87 and 95 of the Life Act respectively require a life company to notify APRA when it appoints an auditor and actuary for the company.  Currently, additional matters to be included in the notice may be prescribed under the Life Regulations 1995 .  The amendments ensure that these matters can be dealt with in prudential standards.  This approach is consistent with the principles based approach adopted in the Bill which provides that specific requirements relating to auditors and actuaries be set out in prudential standards.

Amendment 13

1.20               Amendment 13 omits item 238 of Schedule 1 of the Bill.  Item 238 amends the definition of ‘the Act’ for the purposes of the Life Act to replace a reference to ‘the instruments made under that Act referred to in paragraph (a)’ with a reference to ‘prudential standards made under that Act’.  This has the effect of excluding regulations and prudential rules made under the Life Act from being considered part of the Act.  Omitting item 238 from the Bill corrects this situation.

1.21               Prudential rules are being phased out by 1 July 2011 as a result of other amendments introduced by the Bill.  Consequently, from that date, prudential rules will not be considered instruments under the Life Act.