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32 HOUSE OF REPRESENTATIVES Thursday, 1 December 2016 Schedule 4 to this bill make amendments to the Income Tax Assessment Acts of 1936 and 1997 to provide ongoing income tax relief to ex gratia disaster assistance payments made to eligible New Zealand special category visa (subclass 444) holders. The Australian government gives eligible individuals adversely affected by a disaster event a helping hand by providing disaster recovery payments or income support allowances. At this difficult time, it is important that these payments are not subject to tax. Exempting disaster recovery payments from tax, or providing a rebate for income support allowances, maximises the value of the payments for people whose lives are affected by a disaster event. It also ensures that the payments are treated in the same way as disaster assistance payments made to Australians. Providing ongoing tax relief will provide recipients with certainty that their payments will be free from tax, or that a rebate is available. This will remove one concern from individuals who have been affected by a disaster event. Schedule 5: client money Honourable members may recall that, in introducing this bill, the government is not only implementing a commitment set out in our response to the financial system inquiry, we are also responding to a view, long held by ASIC, that the current regime provides inadequate protection for retail client moneys. We know that trust and confidence in the sector have been diminished by the actions of some industry participants. Once diminished, one has to work hard to restore them. This government is prepared to work hard. This bill is just one part of our agenda to ensure that Australia's financial services regulatory regime can inspire confidence and trust. And we have consulted extensively on this measure. While views differed on the best approach to protecting client money, most stakeholders agreed that the regime as it currently stands is inadequate. And that is why we are working to foster an environment where consumer protection matches the level of risk as it is understood by the client. Let me explain. Currently, Australia's regulatory arrangements governing the use of client money by OTC derivatives providers put retail clients at risk of losing their money in the event of the licensee's insolvency. If client money relating to a derivative, or a dealing in a derivative, continues to be allowed to be used by financial services licensees to meet various obligations, which they themselves have incurred, confidence in our financial system will continue to be undermined. Once client money has been withdrawn from client accounts by the licensee, it is no longer protected. Instead, clients are exposed to higher levels of risk, particularly counterparty risk, and they might consequently be unable to recover their money if a licensee becomes insolvent. Compared to experienced OTC derivatives traders, retail clients (who are usually mum-and-dad investors or small businesses) often have less experience and may not understand or be able to evaluate the risks associated with their client money being used to meet the licensee's own obligations. Certainly, for the vast majority of financial products and services, the client money regime already prohibits licensees from using client money and client property for their own purposes—in other words, most of the time, client money is held on trust for the client. In those cases, client money is returned to clients if the licensee becomes insolvent, rather than being added to the pool that is distributed among all the licensee's creditors, in accordance with the insolvency laws. By pursuing these reforms, we are closing a loophole, which will ensure that all retail client money is protected, in accordance with the same standards. Honourable members, the reforms I introduce today will better protect client money provided for retail derivatives by ensuring that retail client money must be held on trust for the client. The reforms do not ban licensees from hedging or prevent them from managing their own business risks. Indeed, licensees are required by law to have adequate risk management practices in place. CHAMBER
Thursday, 1 December 2016 HOUSE OF REPRESENTATIVES 33 But licensees' risk management practices need to be self-sustaining—they cannot continue to facilitate their own risk management by placing retail client money at risk. And I appreciate that many licensees already choose both to hedge with their own money and respect clients' expectations that their money will be segregated and held on trust. These reforms also provide ASIC with the power to effectively monitor the limitations on the use of derivative client money by enabling ASIC to make client money reconciliation and reporting rules. The financial system is certainly more resilient than before the global financial crisis. Nevertheless, I agree with the financial system inquiry's conclusions that, while consumers are ultimately responsible for the consequences of their financial decisions, they must be treated fairly and ethically. Furthermore, the regulatory regime should engender confidence and trust in the system—because reduced trust represents a barrier to consumers engaging with the Australian financial system and blocks investment in Australian businesses. That is why the government has already introduced a number of measures to improve consumer protection within the financial system. We have established a register of financial advisers that allows consumers to verify the credentials of financial advisers and be confident that they are appropriately qualified and experienced. We are progressing reforms to lift the professional, educational and ethical standards of financial advisers who provide advice on more complex financial products to retail clients. And, we are progressing reforms to life insurance advice remuneration structures, which are important steps towards addressing concerns that remuneration incentives are affecting the quality of advice provided to consumers and encouraging the unnecessary turnover of policies. Full details of the measures are contained in the explanatory memorandum. In closing, I note that these reforms represent necessary and valuable changes to the current regulatory environment, both for the treatment of client moneys and the disclosure requirements for employee share schemes. Not only will they deliver significant benefits to consumers, start-ups and employees, they will also help maintain trust and confidence in the financial system. I commend this bill to the House. Debate adjourned. Airports Amendment Bill 2016 First Reading Bill and explanatory memorandum presented by Mr Chester. Bill read a first time. Second Reading Mr CHESTER (Gippsland—Minister for Infrastructure and Transport) (11:51): I move: That this bill be now read a second time. We all recognise the 21 Australian federal leased airports are critical infrastructure assets to our nation's productivity and economic growth. Since privatisation, airport lessee companies have invested significant capital, in the order of billions of dollars, and our airports currently directly employ over 120,000 people across Australia. This is a product of sound government policy and robust and strategic long-term planning by airport operators. I am proud of the significant progress our airports have made since privatisation in delivering high-quality, economically beneficial investment decisions that respond positively to the current and future needs of the aviation industry and maximise the benefits to the Australian economy and communities. I am particularly proud of the management of our airports and I recognise their efforts to better integrate and facilitate balanced and coherent planning outcomes with the state, territory and local governments who have responsibilities for planning and infrastructure provision in the areas surrounding our airports. The government regulates planning and development on our airport sites through the Airports Act 1996. Under the Airports Act, all federal leased airports (except Mount Isa and Tenant Creek) are required to prepare a master plan every five years to establish a strategic direction for efficient and economic development at the airport as well as prepare major development plans for specific major on-airport developments. The Airports Act sets out the required content of each plan and prescribes the public consultation process an airport lessee company must undertake prior to the plan being submitted for ministerial consideration. On average, CHAMBER
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