Minister for Financial Services & Superannuation
14 September 2010 - 1 July 2013
Address to the Institute of Chartered Accountants lunch
17 February 2013
-- CHECK AGAINST DELIVERY --
As many would know Parramatta is where the salt water of Sydney Harbour meets the fresh water from the hills.
Governor Phillip chose Parramatta as the best place for a productive farm as it was the furthest navigable point inland from the poor soil along the coast on the Parramatta River and also the point at which the saltwater ended and the river became freshwater and therefore useful for farming.
So this is a growing place - a place of productivity – so it's good to meet here.
Respect for your profession
When one speaks to accountants, I truly believe one speaks to a trusted confidant of so many Australian families.
I've been accused of being a numbers man myself in the past, and while that sentiment may be misguided, it's certainly good to be here among the real numbers men and women today.
To chat with you is to become more aware of the lives of others.
For you are the keepers of the great domestic secrets of how life is lived.
You are the consigliore of suburban prosperity; of kitchen table budgets; of holidays foregone and school fees paid; of the nursing home chosen and the beach house not bought; of the margins by which a small business prevails; or goes under.
Yours is a profession of high ethical standards and can I say upfront that I believe, and our Government believes, that you did a very good job during the Global Financial Crisis – and we thank you.
Chartered Accountants are in essence the profession that holds the tax system and corporate reporting together.
It might be said that accountants are akin to the motor mechanics of the tax regime.
Nearly every family owns and drives a car – but few would know how to maintain or improve the performance of their vehicles.
And every family interacts with the tax system on a daily basis - yet few would even have the accounting-equivalent ability to change a tyre should their tax arrangements need repair.
And so Australian families and businesses turn to your profession when their financial vehicles break down, or when they want to rev up their tax affairs.
In Australia there are by now, I am advised, around 200,000 professional accountants (Chartered Accountants as well as CPAs), advising almost 9 million households and over 2 million businesses.
So a Minister of the Crown does consider in his pondering moments how many of that 170,000, at this very moment are reaching out their hands, and giving their careful advice:
- to countless mum-and-dad operations;
- to family farms, corner stores, country pubs; and
- to marinas, repair shops, small service providers.
And also how big is the reach, by two or three or four degrees of separation, into the heartland that he, as a Minister must serve, he is overwhelmed by the intricate enormity of what you do.
Of what shows you keep on the road, what outworn machinery you keep lurching into action and what faltering decisions you steady on their way, indeed what anxious spirits you soothe in their difficult moments.
Yours is a profession to be much valued and thought about by purveyors of public policy – so I am very glad to be here.
The role of traditional accountant has of course evolved significantly over time.
You have gone from being the simple end-of-the-year financial service provider, to a year-round adviser, trusted in the hours that matter - like Lionel Logue in The King's Speech - on tax, on investment, on retirement options, on the big business plan, and the small but crucial adjustment to the next financial year.
Aside from being good financial and business advisers to households and businesses, I know professional accountants play a key role in helping to support countless community groups, sporting clubs and charities through serving as honorary treasurers for boards, and helping with the audit of financial statements for those organisations.
The accounting profession contributes a significant time commitment to pro-bono work of this type, but the profession is not as well versed in capturing the true 'value' of that pro-bono work in the same way that the legal profession does – this is something that the Institute of Chartered Accountants is putting some work into now, with the objective being that we are better able to capture the value of that pro-bono work in the future (this is especially important in times of natural disaster when businesses are disrupted).
I'd also like to acknowledge the work that the Institute does in contributing to a strong public policy debate on some of the big challenges confronting our nation into the future.
I do believe the Institute always looks to keep the public interest front and centre in its policy, and this really is vitally important because that's what sets a professional body apart from an industry body that serves as more of a paid 'lobby group'.
In saying that there are some special reforms we've put in place that I know you have welcomed, as a profession.
As you would be aware, the Government has put in place a number of Future of Financial Advice (FOFA) reforms that remove conflicts of interest that threatened the quality of financial advice that has been provided to Australian investors, and the misrepresenting of financial products that culminated in high profile corporate collapses such as Storm Financial, Opes Prime and Westpoint.
We announced in April 2010 that we would remove the 'accountants' exemption' as part of the FOFA reforms.
This reflected concerns that nature of the existing exemption was resulting in some clients only receiving very narrow financial advice.
It would be desirable for both accountants and their clients if the law could be changed to facilitate accountants being able to have broader discussions on financial issues.
The existing accountants' exemption enables accountants who are members of the Institute of Chartered Accountants in Australia, CPA Australia or the Institute of Public Accountants to advise on the set-up and winding up of self-managed superannuation funds without a license.
After a lot of consultation, including with professional accounting bodies such as the Institute, the Government released draft Regulations for public consultation in November of last year.
Feedback from submissions was generally positive.
The Institute provided a joint submission with CPA Australia on the draft Regulations and I know Government officials have met and listened to issues raised by the Institute and by the CPA.
So I would like to formally thank the Institute and CPA for their involvement in the consultation process on the accountants' exemption issue and the other important FOFA reforms.
We will be looking to finalise amendments to the draft Regulations shortly.
The Regulation effectively replaces the current accountants' licensing exemption with a limited Australian financial services licence (AFSL) from 1 July 2013 and will enable accountants to provide a greater range of advice to clients than the current exemption.
The greater range of advice accountants will be able to provide includes advice in relation to establishing, and investment strategies of an SMSF; superannuation products more broadly as a product class (but not particular products); general insurance products broadly (but not particular products); and basic deposit products broadly (but not particular products).
In order to facilitate the transition of accountants into the new regime, the regulations provide for 'recognised accountants', that is someone who is an ICAA, CPA or IPA member with a streamlined licence application process between 1 July 2013 and 1 July 2016 and a lower level of licence application requirements.
'Recognised accountants' will not have to demonstrate they have experience providing financial services to receive the limited licence.
Licensees who receive an AFSL under this streamlined process must complete a knowledge update review within three years of the date on which the license is granted to maintain their licence.
After 1 July 2016, accountants seeking to obtain an AFSL will be required to satisfy the same experience requirements as anyone else.
Limited AFSL holders will be subject to all of the regulatory requirements that apply the provision of personal advice (for example the best interests duty) due to being a holder of an AFSL – resulting in more consumer protection and greater holistic advice to clients.
The new licensing regime removes the existing obligation of an annual external audit of financial statements and compliance arrangements and replaces it with an obligation to provide an annual compliance certificate where the limited AFSL holders do not handle a client's money in connection with the provision of the advice they give.
Standard Business Reporting
I know Standard Business Reporting has also been a significant move for your profession.
In mid-2010, our Government introduced Standard Business Reporting (SBR) to reduce the business to government reporting burden through the provision of standardised electronic reporting.
Under SBR, accountants and other businesses are now able to use SBR-enabled software to lodge a wide range of financial reporting forms to the ATO, ASIC, APRA and the state and territory revenue offices.
These reports include PAYG forms, Activity Statements, tax file number declarations, trust and partnership tax returns, state payroll tax returns and financial reports to ASIC.
Using SBR, accountants are able to meet their clients' needs in a more efficient and timely manner.
SBR-enabled software harmonises reporting information across forms and government agencies and allows accountants to report, through a single online channel, directly to government from their accounting systems.
The benefits of SBR will grow over time, freeing accountants up for higher level analysis and advising, and streamlining the movement of financial information along the reporting chain.
Red tape reduction for business continues to be a Government priority and is a key reform area under the agenda of the Council of Australian Governments (COAG).
COAG has noted the significantly increased use of SBR by business over the past year and has encouraged all governments to make greater use of its capabilities.
COAG has also noted that the Government is undertaking a number of initiatives to further expand the use of SBR, including that the ATO has announced that it will be adopting SBR technology to rationalise its online reporting channels by 2015.
Our support for the financial services sector
The list of policies and reforms we have implemented is substantial, so I hope you will contemplate these when advising your clients and indeed talking to friends and family:
- lifting compulsory superannuation from 9 to 12 percent
- scrapping the super tax paid by low income earners (below $37,000) which affects 3.6 million workers (and the tax will be reintroduced by the conservatives)
- The Investor Management Regime
- Consumer friendly insurance reforms (standard definition, key facts one pager)
- Jobs growth -- employment in the financial services and insurance sector has grown by over 16,000 over the past 5 years – and we expect jobs in financial services to grow by and 18,500 in the five years to 2016/17
- Indeed if you're interested in where we see the occupations of the future are growing the fastest
Projected Employment Growth by Occupational Group – five years to 2016-17 ('000s)
As an economy, we are in transition.
As a society, we are in transition.
As a nation, we are in transition.
We are benefiting from high commodities prices.
We are seeing the re-emergence of great opportunity in Asia – it's been called the advantage of adjacency.
We are building for the potential of the digital economy.
And we are faced with the challenge of an unprecedented ageing of our population.
And of course there is the ever present challenge of climate change and carbon pollution.
The hard truth is that economic, generational and environmental change is coming our way … whether we like it or not.
Now, there are two kinds of change:
- The kind of change you make happen,
- And the kind if change that happens to you.
As a progressive Labor Government we believe in making change happen.
That's why we led the world with our pro-active response to the Global Financial Crisis.
It's why we are taking action to on carbon.
Or why we're building the National Broadband Network.
Or building up our retirement savings system, to make it stronger and more sustainable.
And that's why we're committed to delivering an economically productive National Disability Insurance Scheme.
… because leadership in Government is all about making change happen for the better.
Thanks for having me here today – I always appreciate our conversations.