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		Current Issues

Promoting an effective regulatory framework for the industry   [top]
Trustee corporations are licensed and regulated under individual State or Territory legislation to carry out their traditional business, including acting as executor or administrator of deceased estates, administering personal trusts, and operating as guardian or attorney.

They are also subject to certain Commonwealth legislation in respect of some of their other activities, ie:

• the Superannuation Industry (Supervision) Act 1993 (SIS), when they act as an "Approved Trustee" for superannuation funds, or
• the Managed Investments Act 1998 (MIA), when they operate managed funds as a "Responsible Entity".

The Standing Committee of Attorneys General (SCAG) is currently looking at harmonising State and Territory legislation to ensure uniform licensing and prudential supervision regimes for trustee corporations. These arrangements will continue to ensure that only entities able to meet the highest standards of fiduciary care and professionalism can obtain the status of government endorsed statutory trustee corporations.

Following representations to the Federal Treasury and the Australian Securities and Investments Commission (ASIC) about the practical difficulties of applying the Financial Services Reform Act 2001 (FSRA) to some activities of trustee corporations, regulations have been prepared which provide certain exemptions from the Act's licensing requirements, including where:

• a trustee is appointed by a Court to hold financial products on behalf of beneficiaries who do not have legal capacity (eg minors), or
• the "client" is a beneficiary of a trust who cannot be identified in advance.

Seeking the ability to charge realistic fees for trustee services   [top]
Trustee corporations are subject to legislative fee caps in respect of some of their services. The Association has submitted to government that, consistent with the principles of national competition policy, there should be deregulation of fees.

It should be noted that there is no lack of competition in the products and services offered by trustee corporations - this comes both from within the industry and from other financial service providers, such as accountants, solicitors, financial planners and banks, which provide some of the same products or services.

We believe that adequate protection for beneficiaries/clients is provided by:

• competition,
• the requirement that trustee corporations advertise their fees, and
• general regulatory oversight.

One particular area where trustee corporations provide valuable expertise and carry unique fiduciary responsibilities is in undertaking the administration of long term charitable trusts and foundations. This role involves the application of a high level of professional skill, care, and attention across a range of areas including legal, taxation, accounting and asset management.

A longstanding issue in NSW is that the legislated maximum annual fees applicable to long-term charitable trusts, regardless of the complexities involved in their management, are set below those for other long-term trusts.

The inability to recover the costs of operating charitable trusts diminishes the incentive to promote this valuable area of philanthropic endeavour. This, in turn, diminishes the services provided to those who otherwise would benefit from charitable trusts.

The TCA has been seeking the agreement of the NSW Government to bring the maximum fees for charitable trusts into conformity with those for other long term trusts. Philanthropy Australia Ltd is supportive of this proposal, on the basis that the TCA has developed appropriate industry dispute resolution procedures in respect of fee increases.

Promoting equitable taxation of trusts   [top]
There is common misconception that trusts are primarily used for tax avoidance

In fact, the vast majority of trusts are created for legitimate reasons, including protecting the interests of minors and the disabled, and for charitable purposes. Those arrangements generally are merely conduits through which assets can be invested and maintained during the beneficiaries' lives or for the benefit of future generations.

The TCA seeks to ensure that any Government proposals for reform of the taxation system do not have unintended, adverse consequences for the legitimate use of trusts or for their beneficiaries.

Seeking equitable APRA levies on superannuation funds   [top]
Several TCA members act as Approved Trustees for many Small APRA Funds (SAFs). These are superannuation funds with less than 5 members, who do not themselves wish to take on the responsibilities of also being trustees of those funds.

We believe that the system for calculating APRA's supervisory levies which, for 2005/06 includes a flat fee of $500 pa per SAF, results in SAFs incurring a disproportionate share of the cost of APRA's supervision of the superannuation industry, given that APRA’s focus in supervising SAFs is very much on the capabilities of the Approved Trustees that manage the several thousand funds involved and is less intensive than for other regulated superannuation funds. The Government has acknowledged that supervisory costs per fund are lower the greater the number of funds under the same trustee – in this regard, it is relevant to note that while there are about 40 Approved Trustees that manage SAFs, the great bulk of that business is handled by 3 TCA members.

Our understanding is that APRA's focus in supervising the SAFs segment of the superannuation industry is very much on the capabilities and performance of the respective Approved Trustees that manage the several thousand individual funds involved.

We believe that consideration should be given to adopting a levy formula that has regard to the number of SAFs, and aggregate assets of those particular funds, being managed by each Approved Trustee. This would acknowledge the apparent economies of scale enjoyed by APRA in its supervision of those funds.

Promoting effective protective arrangements for the elderly   [top]
The TCA believes that much of the potential trauma associated with the personal finances of elderly persons, particularly those with conditions such as dementia, can be addressed by giving early attention to effective protective arrangements. This includes:

• preparing a valid and up-to-date will that clearly expresses a person's wishes in respect of their estate, and
• creating an enduring power of attorney, whereby a third party is appointed to make financial (and possibly other) decisions on behalf of a person if that person becomes unable to manage their own affairs.

We have submitted to the Government that:

• the relevant legislation should be unified across Australia, to overcome the difficulties that frequently arise with wills and powers of attorney outside the region in which they are drawn,
• a register of powers of attorney should not be established ahead of very careful consideration as to whether the benefits (such as enhancing accountability and facilitating better protection against abuse) offset the costs (including reduced privacy and increased expense), and
• in situations where elderly people are unable to look after themselves and a Court appoints a financial manager and/or a personal carer, the body charged with reviewing their performance should be independent of those parties.

Promoting effective investor protection arrangements for the superannuation and managed investments sectors   [top]
The Association believes that, in order to strengthen investor protection, three key changes should be made to the current regulatory regimes for superannuation funds and managed investment schemes:

• expand the independent compliance function - this would represent a preventative measure to improve governance and reduce the probability of serious problems arising in the operation of funds/schemes,
• widen access to the compliance role - to promote competition in the provision of this service, and
• ensure adequate financial underpinnings for fund/scheme operations - to provide greater means of non-Government compensation to investors in the event of losses due to negligence or fraud.

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