Update On Tranche 1 Of The DBFO
The DBFO Act, which received royal assent on 9 July 2024, represents the Government’s response to QAR final report recommendations 7, 8, 10, 13.1–13.5 and 13.7–13.9. It is the first tranche (‘Tranche 1’) of Government legislation as part of the DBFO package.
Overview of the DBFO Act
Clarifies the legal basis in the Superannuation Industry (Supervision) Act 1993 for superannuation trustees to charge individual members for financial advice from their superannuation account, and clarifies associated tax consequences under the Income Tax Assessment Act 1997.
Streamlines ongoing fee renewal and consent requirements in the Corporations Act 2001 (Corporations Act), including removing the requirement to provide a fee disclosure statement
Amends the Corporations Act to provide more flexibility in how Financial Services Guide (FSG) requirements can be met,
Simplifies and clarifies the provisions governing conflicted remuneration in the Corporations Act and introduces new standardised consent requirements for life risk insurance, general insurance and consumer credit insurance commissions.
Transitional periods
The DBFO Act has transitional periods before some amendments commence:
| Legislation | Summary | Commencement |
|---|---|---|
| Advice fee deductions from | Clarifies the legal basis for super trustees charging a member’s advice fees to their super and associated tax consequences. Amends the mandatory content for non-ongoing fee consents and replaces ASIC’s ability to prescribe this content with Ministerial ability. | 6 months after the day after royal assent for new fee arrangements. Transitional arrangements of up to 12 months apply to existing non-ongoing fee arrangements at this time. |
| Ongoing fee arrangements (OFAs) | Removes the requirement to provide a fee disclosure statement, introduces flexibility in anniversary date timing for OFAs, amends the mandatory content for ongoing fee consents and replaces ASIC ability to prescribe this content with Ministerial ability. | 6 months after the day after royal assent for new OFAs. (the ‘start day’) Transitional arrangements apply to existing OFAs at the start day so that current requirements may apply for up to 150 days after the ‘transition day’, which is the anniversary of the day the OFA was entered into that occurs after the start day. |
| FSGs | Permits financial product advice providers to either continue to give an FSG or instead make the FSG information publicly available on their website | The day after royal assent. |
| Conflicted remuneration | Amends the ban on conflicted remuneration to: Explicitly provide that benefits given by a retail client to an AFS licensee or representatives are not conflicted remuneration. Provide an exception that permits super trustees to pay an AFS licensee or representative a fee for personal advice that relates to a member’s interest in the fund from that member’s interest. Remove exceptions for benefits given by clients for the issue, sale or dealing in financial products. Remove exceptions for the issue of financial products where advice has not been provided in the previous 12 months. |
The day after royal assent. Transitional arrangements apply for remuneration paid under arrangements existing at this time until the giving of benefits under the arrangement is varied (including by the end of the arrangement). |
| Consent for insurance commissions | Requires a person who provides personal advice to a retail client about a general insurance, certain life risk insurance or consumer credit insurance products and receives a commission in connection with the issue or sale of that product to obtain the client’s informed consent before accepting the commission or it will be conflicted remuneration. There are exemptions that apply: where a licensee or representative has purchased an advice business and the original recipient of the commission had already met the consent requirements. |
12 months after royal assent. |
ASIC response
By November 2024, ASIC intends to issue new guidance on ongoing fee arrangements and consents to deduct fees or costs under non-ongoing fee arrangements to reflect the changes as a result of the DBFO Act.
ASIC also intends to issue a new Information Sheet on FSGs and the new website disclosure information. This Sheet will replace the guidance on FSGs in Section C of Regulatory Guide 175 Licensing: Financial product advisers–Conduct and disclosure.
As a licensee, we will be waiting for ASIC to issue further guidance in November before implementing any changes to policies and procedures.
With the exception of FSG’s, given the transitional periods will not apply until after ASIC issues further guidance, we will await the Information Sheets before announcing changes.
You are welcome to make your FSG available on your website, if you have not already done so