Bills Digest no. 14 2015–16
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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Tarek Dale
Economics Section
2 September 2015
Contents
Purpose
of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Other provisions
Date introduced: 13
August 2015
House: House of
Representatives
Portfolio: Treasury
Commencement: 31
December 2015.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
The Bill amends the Banking Act 1959
and the Life
Insurance Act 1995 so that inactive bank accounts and unclaimed life
insurance policies are treated as unclaimed (and therefore transferred to the
Commonwealth) after seven years of inactivity, rather than after three years.[1]
The Bill also makes a number of other amendments. Foreign
currency and children’s accounts will be added to the list of accounts which
are exempt from the unclaimed moneys requirements under the Banking Act.
Details of account holders with unclaimed money will no longer be published,
and will be exempt from the requirements of the Freedom of Information
Act 1982.[2]
Under the Banking Act and the Life Insurance Act,
‘unclaimed money’ is transferred to the Commonwealth. Unclaimed moneys include
bank accounts that are inactive (no deposits or withdrawals) for a specified
period, or life insurance policies that are unclaimed after the policy matures.[3]
Individuals whose money is transferred to the Commonwealth
can reclaim it, and from July 2013 interest is paid at the rate of change in the
consumer price index.[4]
The details of unclaimed moneys are publicly available, including through the
Australian Securities and Investments Commission (ASIC) Moneysmart website,
and publication in the ASIC Gazette.[5]
The earlier change in the
threshold: from seven to three years
The period of inactivity required before money is treated as
unclaimed is currently three years. The threshold was seven years, prior to the
commencement of Treasury
Legislation Amendment (Unclaimed Money and Other Measures) Act 2012.[6]
That legislation also established a right to interest on unclaimed moneys from
July 2013, among other changes.[7]
A joint press release by the former Treasurer Wayne Swan
and Parliamentary Secretary to the Treasurer Bernie Ripoll stated that ‘Australians
who have lost track of superannuation or old bank accounts will now have their
money returned faster and interest paid to preserve its real value’.[8]
In its submission to a Senate inquiry on those changes, consumer organisation
CHOICE commented:
The proposed amendment contains several important benefits
for consumers. With unclaimed monies being transferred four years earlier to
the Commonwealth, the Australian Securities and Investments Commission, or the
Commissioner of Taxation, the erosion of balances through fees, commission and
adverse market movements is substantially reduced.[9]
Reviews and consultation
Discussion paper
In May 2014 the Government released a discussion paper on
potential changes to the unclaimed moneys regime, including requests for
comments on three options to:
- retain
the status-quo of three years
- increase
the period of inactivity required to five years or
- increase
it to seven years.[10]
That discussion paper also included discussion on related
issues, including:
- whether
foreign currency accounts should be captured
- balancing
privacy requirements with the requirement to publish information on unclaimed moneys
and
- other
administrative issues.[11]
Financial System Inquiry
In November 2014 the Financial System Inquiry discussed
unclaimed moneys in an appendix to its final report. The report stated:
At present, bank accounts and life insurance policies are
deemed to be unclaimed moneys and transferred to Government if they are
inactive for three years. The present position was changed in 2012, from a
longstanding arrangement that required an inactive period of seven years.
The Australian Bankers’ Association estimates that reverting
to seven years would halve the number of claims. The Inquiry believes
Government should act to ensure bank accounts and life insurance policies are
deemed unclaimed after seven years of inactivity and that these moneys should
be held in a separate trust account.[12]
The final report recommended that the Government should:
Define bank accounts and life insurance policies as unclaimed
moneys only if they are inactive for seven years.[13]
Exposure draft legislation
The Government (Treasury) subsequently released an Exposure
Draft of legislation proposing amendments to the unclaimed moneys regime,
including changes to increase the period of inactivity back to seven years.[14]
The Bill as tabled is identical to the Exposure Draft.
At the time of writing the Bill had not been referred to a
committee for inquiry and report.[15]
The Senate Standing Committee for the Scrutiny of Bills had no comment on the
Bill.[16]
At the time of writing, debate in the House of
Representatives had not proceeded beyond the Minister’s second reading speech.[17]
The earlier change from seven to three years was a measure
introduced by the previous Labor Government in the Treasury Legislation
Amendment (Unclaimed Money and Other Measures) Bill 2012.[18]
The Australian Greens and Senator Xenophon voted in support of that Bill, while
Senator Madigan voted against it.[19]
The Treasury has not released the submissions on the
exposure draft of the Bill.[20]
Some of the submissions made to the earlier discussion paper in 2014 are
summarised below.
Australian Bankers’ Association
The Australian Bankers’ Association (ABA) supported
increasing the period of inactivity before money is treated as lost from three
years to seven years.[21]
The ABA also recommended exemptions for a number of accounts, including children’s
accounts and foreign currency accounts,[22]
and tightening the provisions on handling the personal information of account
holders.[23]
Customer Owned Banking Association
The Customer Owned Banking Association (COBA) is the
‘industry body for credit unions, mutual building societies and mutual banks’.[24]
Its submission noted:
We do not see any compelling argument which would suggest
that moving from a three year period to a five of [sic] seven year period would
reduce the number of accounts transferred unnecessarily.[25]
The submission also noted the potential for regulatory
costs in requiring authorised deposit-taking institutions (ADIs) to undertake
further changes to the existing system.[26]
Financial Rights Legal Centre
The Financial Rights Legal Centre supported the option of a five
year threshold.[27]
It also argued for a requirement to notify consumers in writing before accounts
are treated as unclaimed (this is not currently a requirement), and noted
concerns about the publication of personal information.[28]
National Seniors Australia
National Seniors Australia supported extending the period of
inactivity to seven years, and amending the current legislation to ensure the
protection of personal information.[29]
Privacy Commissioner
The Privacy Commissioner, Timothy Pilgrim, provided a
detailed submission to the Treasury discussion paper. This included a
recommendation for Treasury to consider removing the requirement for
publication of the details of unclaimed moneys.[30]
The measures included in the Bill were announced in the
2015–16 Budget, with a fiscal cost of $158 million over the four years, as set
out in Table 1 below. The Budget papers and the Explanatory Memorandum also
note that the measure will have a negative cash impact of $285.1 million over
four years from 2015–16, but do not comment on the difference between the cash
and fiscal measures; this presumably reflects timing differences.[31]
Table 1: Financial impact of measures in the Bill
|
|
2015–16
|
2016–17
|
2017–18
|
2018–19
|
|
Reduced expenses (a)
|
78.9
|
83.0
|
86.1
|
89.2
|
|
Reduced revenue (b)
|
-119.2
|
-122.2
|
-125.3
|
-128.4
|
|
Net impact
|
|
|
|
|
Sources and Notes: Australian Government, Budget
measures: budget paper no. 2: 2015–16, p. 177; Explanatory
Memorandum, Banking Laws Amendment (Unclaimed Money) Bill 2015, p.3, accessed
13 August 2015, (a) The reduced expenses reflect the lower claims as fewer
amounts are reclaimed. (b) The reduced revenue reflects the reduction in
unclaimed moneys transferred to the Commonwealth.
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
(Cth), the Government has assessed the Bill’s compatibility with the human
rights and freedoms recognised or declared in the international instruments
listed in section 3 of that Act.
The Explanatory Memorandum notes that the Bill engages
three human rights:
the right of the child to have their best interests be a
primary consideration under Article 3(1) of the Convention on the Rights of the
Child
the right to the protection from arbitrary or unlawful
interference with privacy under Article 17 of the International Covenant on
Civil and Political Rights (ICCPR) and
the right to seek information under Article 19(2) of the
ICCPR.[32]
The Government considers that the Bill is compatible. The
Parliamentary Joint Committee on Human Rights had no comment on the Bill.[33]
The Bill includes three substantive changes:
- increasing
from three years to seven years the period of inactivity before money is
‘unclaimed’ (and therefore transferred to the Commonwealth)
- exempting
foreign currency and children’s accounts from becoming unclaimed and
- changes
to the handling of personal information.
Changing the period of inactivity
from three years to seven years
Item 1 of the Bill amends the Banking Act to
increase the period of inactivity required before money becomes ‘unclaimed
money’ from three years to seven years. Item 8 makes a matching change
to the Life Insurance Act.
The Explanatory Memorandum notes that currently around 50
per cent of bank accounts and life insurance funds transferred to the
Commonwealth are reclaimed within two years, suggesting that they are
‘effectively active’.[34]
Regulatory impacts
The Explanatory Memorandum includes a detailed Regulation
Impact Statement (RIS), examining the impact of the change. The RIS estimates
that a change to a seven year period of inactivity will result in:
- a
$28 million one-off cost to industry in updating ‘IT infrastructure and
processes’
- a
$36 million ongoing saving for industry associated with extending the threshold
and
- a
$1.7 million ongoing benefit for account holders associated with extending the
threshold.[35]
While the cost component for small ADIs is expected to be
$7 million, the RIS does not estimate that they will receive an ongoing benefit
from the change, which is expected to flow to large ADIs and life insurance
companies.
Exemptions for foreign currency and
children’s accounts
Currently, subsection 69(1A) of the Banking Act
specifies that farm management deposits are not subject to the unclaimed moneys
regime. Item 2 of the Bill repeals and replaces subsection 69(1A),
to specify three categories as exempt from being unclaimed moneys:
- money
denominated in a foreign currency
- money
in a children’s account and
- farm
management deposits (matching the exemption in the current legislation).
Item 5 inserts a new definition into the Banking
Act of a ‘children’s account’. This definition matches the one currently in the
Banking Regulations
1966 (which specifies that children’s accounts are exempt from the three
year requirement, and instead only become unclaimed moneys after seven years of
inactivity).[36]
Foreign currency accounts
The Treasury discussion paper noted some of the
complications that occur where foreign currency accounts are held at Australian
ADIs. The paper noted that:
Foreign Currency Accounts (FCAs) are bank accounts held in a
denomination other than Australian Dollars (AUD). When they are declared
unclaimed they are converted to AUD before being transferred to ASIC, and when
claimed are also returned to the account holder in AUD. As a result account
holders are exposed to the risk that the exchange rate will appreciate or
depreciate over the relevant period ...
The ... option ... to exempt FCAs from the unclaimed moneys
provisions entirely ... would likely deliver a reduction in the compliance burden
for ADIs and account holders, but if the accounts are genuinely unclaimed they
will never be captured and therefore could have their value eroded by fees and
charges.[37]
The Australian Bankers Association has previously
criticised the current application of the system to foreign currency accounts. Its
submission to the discussion paper supported removing foreign currency accounts
from the unclaimed moneys regime entirely:
The ABA believes that all foreign currency accounts should be
exempt entirely from the unclaimed moneys regime to streamline the operation of
the provisions ...
It should be noted that customers with foreign currency
accounts are typically sophisticated users of financial services and include
commercial entities and high-net worth customers residing in Australia or
overseas. Previous changes to the provisions elicited a large number of
complaints and significant dissatisfaction from these customers due to their moneys
being reported/transferred to ASIC and consequent changes in the amount due to
changes in foreign exchange rates between the period of the transfer and return
of the moneys from ASIC. In some cases, banks have covered the adverse movement
in foreign exchange rates to maintain good customer relations. We do not
believe this is a satisfactory situation.[38]
Changes to handling of personal
information
There are two changes in the Bill that affect how personal
information is dealt with. Under the current legislation, information on the
unclaimed moneys transferred to the Commonwealth is published in a Gazette,
both electronically and in print.[39]
In addition, information on unclaimed moneys is also available under the
Commonwealth Freedom of Information Act 1982 (FOI Act).[40]
Item 4 replaces subsection 69(9) of the Banking
Act so that the Treasurer can determine how the information on unclaimed
moneys is published, without explicitly listing publication in a Gazette as an
option. This broadly matches a recommendation made by the Australian Privacy
Commissioner, who wrote in a submission to the Treasury:
... the OAIC [Office of the Australian Information
Commissioner] suggests that the personal information is made publicly
available, and searchable, through the MoneySmart database alone. This would
enable the information to be permanently removed once the money is returned to
the account or policy holder.[41]
Item 6 of the Bill inserts proposed section 69A into
the Banking Act, which specifies that information relating to unclaimed
moneys must not be disclosed to ‘to a person other than the payee or an agent
of the payee’. Item 9 makes a similar change to the Life Insurance
Act by inserting proposed section 216A. In both cases there is an
exemption to allow disclosure of the details where authorised through the
unclaimed moneys regime.
Item 10 inserts references to these sections into the
FOI Act, with the effect that information in relation to unclaimed
moneys is no longer available through the FOI process, except to the ‘person to
whom the information relates (or their agent)’.[42]
Currently, ADIs are required to notify the Treasurer within three
months, of all the unclaimed money they hold at the end of a calendar year.[43]
If a deposit or credit is made in relation to an account between 31 December
and when the statement is provided to the Treasurer, then the account is not
included in the statement.
Under the current legislation, where an account holder
notifies the ADI that they do not wish the account to be treated as active, but
does not make a deposit or withdrawal, then the unclaimed moneys are still
transferred to the Commonwealth. Item 3 inserts proposed subsection
69(3) into the Banking Act to specify that where an account holder
or agent notifies the ADI, before the day the statement is delivered to the
Treasurer, that they want the account to be treated as active, then the account
is not treated as unclaimed moneys.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Banking Act 1959
(Cth) and Life
Insurance Act 1995 (Cth), both accessed 26 August 2015.
[2]. Freedom of Information
Act 1982 (Cth), accessed 26 August 2015.
[3]. Australian
Securities and Investments Commission (ASIC), ‘Unclaimed money: How
to find your lost money’, ASIC website, accessed 24 August 2015;
ASIC, ‘Claim
money from life insurance policies’, Moneysmart website, 6 July 2015,
accessed 24 August 2015. Subsection 69(1) of the Banking Act
provides that unclaimed money is ‘moneys to the credit of an account that has
not been operated on either by deposit or withdrawal’ for the time-frame
specified (currently three years). Subsection 216(15) of the Life Insurance
Act contains the definition in relation to life insurance policies.
[4]. ASIC,
‘Interest
paid on unclaimed money’, Moneysmart website, 18 June 2015, accessed
24 August 2015.
[5]. ASIC,
‘Find
unclaimed money: Find your lost money’, Moneysmart website, 18 June 2015,
accessed 24 August 2015; ASIC, ‘ASIC
gazette: unclaimed monies’, ASIC website, 11 August 2015, accessed 24
August 2015.
[6]. Treasury Legislation
Amendment (Unclaimed Money and Other Measures) Act 2012 (Cth), accessed
24 August 2015.
[7]. K
Swoboda, Treasury
Legislation Amendment (Unclaimed Money and Other Measures) Bill 2012,
Bills digest, 50, 2012–13, Parliamentary Library, Canberra, 2012, p. 3,
accessed 26 August 2015. These changes were announced in the 2012–13 Mid-Year
Economic and Fiscal Outlook (W Swan (Treasurer) and P Wong (Minister for
Finance and Deregulation), Mid-year
economic and fiscal outlook 2012–13, p. 277, accessed 24 August 2015).
[8]. W
Swan (Treasurer) and B Ripoll (Parliamentary Secretary to the Treasurer), Unclaimed
money and lost super now properly protected, media release, 29 November
2012, accessed 26 August 2015.
[9]. CHOICE,
Submission
to Senate Economics Legislation Committee, Inquiry into the Treasury
Legislation Amendment (Unclaimed Money and Other Measures) Bill 2012, 9
November 2012, accessed 25 August 2015, p. 1.
[10]. Treasury,
Options
for improving the unclaimed bank account and life insurance money provisions,
Discussion paper, 30 May 2014, p. 6, accessed 24 August 2015.
[11]. Ibid.
[12]. Financial
System Inquiry (FSI), Final
Report, Treasury, Parkes, November 2014, p. 272, accessed 26 August
2015.
[13]. Ibid.,
p. 272.
[14]. Treasury,
Banking Laws Amendment (Unclaimed Money) Bill 2015—Exposure
Draft, [28 May 2015], accessed 27 August 2015.
[15]. The
House of Representatives Selection Committee had not yet considered the Bill.
The Senate Selection of Bills Committee had deferred consideration of the Bill:
Senate Selection of Bills Committee, Report,
10, 2015, The Senate, Canberra, 20 August 2015, pp. 3-4, accessed 25 August
2015.
[16]. Senate
Standing Committee for the Scrutiny of Bills, Alert
digest, 8, 2015, Senate, Canberra, 19 August 2015, p. 4.
[17]. J
Frydenberg, ‘Second
reading speech: Banking Laws Amendment (Unclaimed Money) Bill 2015’, House
of Representatives, Debates, 13 August 2015, pp. 3-4.
[18]. B
Ripoll, ‘Second
reading speech: Treasury Legislation Amendment (Unclaimed Money and Other
Measures) Bill 2012’, House of Representatives, Debates, 13 August
2015, pp. 12575-12576.
[19]. Australia,
House of Representatives, ‘Treasury
Legislation Amendment (Unclaimed Money and Other Measures) Bill 2012’, Votes
and Proceedings, 144, 27 November 2012; Australia, Senate, ‘Treasury
Legislation Amendment (Unclaimed Money and Other Measures) Bill 2012’, Votes
and Proceedings, 129, 29 November 2012.
[20]. Treasury,
Banking Laws Amendment (Unclaimed Money) Bill 2015—Exposure
Draft, op. cit.
[21]. Australian
Bankers’ Association (ABA), Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, 11 July 2014, p. 1, accessed
24 August 2015.
[22]. Ibid.,
pp. 4-5.
[23]. Ibid.,
pp. 5-6.
[24]. Customer
Owned Banking Association, Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, 11 July 2014, p. 1, accessed
24 August 2015.
[25]. Ibid.,
p. 3.
[26]. Ibid.,
p. 4.
[27]. Financial
Rights Legal Centre, Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, July 2014, p. 1, accessed 24
August 2015.
[28]. Ibid.,
pp. 1-2.
[29]. National
Seniors Australia, Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, July 2014, p. 1, accessed 24
August 2015.
[30]. T
Pilgrim (Privacy Commissioner), Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, 18 July 2014, p. 1, accessed
24 August 2015.
[31]. Australian
Government, Budget
measures: budget paper no. 2: 2015–16, p. 177; Explanatory
Memorandum, Banking Laws Amendment (Unclaimed Money) Bill 2015, p.3,
accessed 13 August 2015.
[32]. The
Statement of Compatibility with Human Rights can be found at page 55 of the Explanatory
Memorandum to the Bill.
[33]. Parliamentary
Joint Committee on Human Rights, Twenty-sixth
report of the 44th Parliament, 18 August 2015, p. 1.
[34]. Explanatory
Memorandum, Banking Laws Amendment (Unclaimed Money) Bill 2015, pp. 5, 11.
[35]. Ibid.,
pp. 27-30.
[36]. Subregulation
20(10), Banking
Regulations 1966 (Cth), accessed 24 August 2015.
[37]. Treasury,
Options
for improving the unclaimed bank account and life insurance money provisions,
op. cit., p. 9.
[38]. ABA,
Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, op. cit., p. 5.
[39]. T
Pilgrim (Privacy Commissioner), Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, op. cit., p. 4.
[40]. Explanatory
Memorandum, Banking Laws Amendment (Unclaimed Money) Bill 2015, p. 6,
accessed 24 August 2015.
[41]. T
Pilgrim (Privacy Commissioner), Submission
to Treasury, Options for improving the unclaimed bank account and life
insurance money provisions—Discussion paper, op. cit., p. 5.
[42]. Explanatory
Memorandum, Banking Laws Amendment (Unclaimed Money) Bill 2015, p. 13,
accessed 13 August 2015.
[43]. Subsection
69(3) of the Banking Act.
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