First Home Saver Accounts - Consultation Paper
This chapter identifies the providers able to offer First Home Saver Accounts and outlines the arrangements for the portability of accounts.
Public-Offer Licensees, life insurers, banks, building societies, and credit unions will be able to offer First Home Saver Accounts. All of these entities are subject to high levels of prudential regulation by APRA, including in particular minimum capital or approved guarantee requirements.
2.1.1 Public-Offer Licensees
Public-Offer Licensees will be able to offer the accounts. Public-Offer Licensees must be constitutional corporations (trading or financial corporations formed within the Commonwealth) and comply with specific capital and other requirements under legislation and as stipulated by APRA.
Public-Offer Licensees are subject to higher levels of prudential regulation than non-public-offer RSE licensees (including minimum capital requirements). These higher standards of prudential regulation are closer to the standards imposed on all authorised deposit-taking institutions (ADIs) and life insurers and ensure that trustees will be well placed to deal with the operational risk associated with the shorter term nature of the accounts.
First Home Saver Accounts offered by a Public-Offer Licensee must be offered through a trust arrangement which is separate from the licensee’s superannuation trust. The trust deed will need to specify the appointment of a trustee and how that trustee will administer the accounts. The trust will be subject to prudential regulation by APRA similar to existing regulation under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Self-managed superannuation funds
Self-managed superannuation funds will not be able to offer the accounts as these funds are not subject to prudential regulation by APRA.
2.1.2 Life insurers, banks, building societies, and credit unions
Life insurers, banks, building societies, and credit unions will be able to offer the accounts.
Life insurers are registered with APRA to carry on life insurance business in Australia under the Life Insurance Act 1995, and are regulated under prudential standards under this legislation. For example, they are required to comply with minimum capital, solvency, risk management and governance standards. Banks, building societies and credit unions are authorised by APRA to carry on banking business in Australia under the Banking Act 1959 and are regulated by APRA according to prudential standards made under the Act. For example, they are required to adhere to strict capital adequacy, liquidity and governance standards.
First Home Saver Accounts offered by a life insurer would be offered as a life insurance policy (which may be investment-linked). An account offered by a bank, building society or credit union would be offered as a deposit account.
All account providers must be a bank, building society or credit union, an authorised life insurer or a Public-Offer Licensee. Public-Offer Licensees must seek authorisation from APRA to offer these accounts through a designated trust. Banks, building societies, credit unions and life insurers (including friendly societies) will be able to offer the accounts under their existing APRA authorisation.
The specific prudential and legislative requirements for account providers will vary depending on the type of provider offering the account and on whether it is offered as a deposit account, as a life policy or under a trust. The proposed prudential requirements are outlined in Chapter 6.
Portability arrangements will apply to accounts. Account providers will need to transfer an account balance to another provider within 30 days of a request from the account holder. Account providers will need to notify the new provider of account details including (but not limited to) the amount of contributions received for the year, account earnings over the life of the account and the number of years in which contributions of at least $1,000 have been made. They will also be required to notify the Australian Taxation Office (ATO) that the account has been transferred at the end of the year.
Account providers will be required to disclose the account holder’s tax file number (TFN) to the new provider when the account balance is transferred.
A standard form will be introduced to facilitate the transfer of account balances between providers.
Where an individual wishes to open a new account and transfer the balance of their existing account to a new account provider, the new provider will be permitted to open an account. The requirements for opening a new account when transferring balances are discussed in Chapter 3.
These portability processes will apply in the case of a provider ceasing to offer a product. The provider will need to inform the account holder, who can choose another First Home Saver Account provider or contribute the balance of their account to superannuation. In some cases, the new account will be a different account type, for example with a bank rather than a life insurer.
If the account holder cannot be contacted, the provider will transfer the balance into a default First Home Saver Account. This will avoid the creation of legacy products.
The prudential framework will provide for the bulk transfer of assets from an account provider where it ceases to provide products and the account holder has not chosen another provider. For banks, building societies, credit unions and life insurers, arrangements under existing legislation will apply. For Public-Offer Licensees, arrangements will be similar to those applying to superannuation funds under the SIS Act.