New regulations have been made to amend the Corporations Regulations 2001 to further clarify the provisions relating to the form and content of the First Home Saver Account (FHSA) product disclosure statement (PDS). They also provide that the right to return a FHSA product during the cooling-off period and certain other defined situations is restricted to reflect the payment restrictions applying to FHSAs. Other amendments facilitate the transfer of funds from an inactive FHSA to a default superannuation fund, and clarify the circumstances under which the FHSA PDS must be the first document given or sent to a client.
Background
The First Home Saver Accounts Act 2008 and related legislation to implement and regulate First Home Saver Accounts introduced by the Australian Government to assist first home buyers to save for their first home, received Royal Assent on 25 June 2008. The legislation came into force from 26 June 2008. However, to enable providers to develop products and systems, it will not be possible for a customer to open an FHSA until 1 October 2008. An FHSA is a financial product for the purposes of the Corporations Act 2001 (Cth).
The Government initiative is aimed at enabling super funds and banks to offer a superannuation style investment account that helps maximize savings through tax breaks and Government contributions.
Corporations Amendment Regulations 2008 (No. 4)
On 17 July 2008, the Corporations Amendments Regulations 2008 (No. 4) (First FHSA Amendment Regulations No.4) were made, prescribing in detail among other things the form and content of the PDS for FHSAs.
After the First FHSA Amendment Regulations were made, further analysis and submissions received from stakeholders revealed that there are a small number of technical problems and potentially misleading statements that need to be addressed in order to ensure that the policy intent of the Government with respect to the form and content of the FHSA PDS is fully achieved.
Corporations Amendment Regulations 2008 (No. 5)
The new Corporations Amendments Regulations 2008 (No. 5) (Second FHSA Amendment Regulations) deal with the identified problems and potentially misleading statements. Issues covered by them include:
- The right to return the FHSA product in certain situations is restricted to reflect the payment restrictions applying to FHSAs
- Funds from an inactive FHSA account can be transferred to a default superannuation fund without the need for an application form to be completed
- The requirement for the FHSA PDS to be the first document given or sent to the client only applies to those documents directly related to the FHSA
- Certain statements in the prescribed text are amended to provide for clarity and consistency
- The fee disclosure provisions are amended to clearly define what indirect costs and management costs are and how they are to be disclosed.
The Second FHSA Amendment Regulations and the relevant Explanatory Statement can be accessed at www.comlaw.gov.au/.
The Explanatory Statement for the Second FHSA Amendment Regulations contained two prototype examples of FHSA PDSs. These have been amended to account for the changes, and also to correct a number of inconsistencies and errors in the original versions.
How do the new amendments affect you?
If you are an FHSA provider that is making FHSA products available by 1 October 2008, you will need to take into consideration the new requirements set out in the Second Amendment Regulations to make further amendments to the PDS of your FHSA and your processes for FHSA. Deacons can assist in making the appropriate amendments
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.