Coalition Senators' Dissenting Report

Introduction

1.1The Coalition’s concerns with the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 are centered around Schedule 1 and 3 of the Bill.

1.2Schedules 2, 4, 5, 6 and 7 of the Bill are largely administrative or uncontroversial in nature and are supported by the Coalition.

1.3Stakeholders cautioned that Schedule 1 of the Bill risks an excessive and partially unnecessary compliance burden. Coalition Senators share these concerns.

1.4It is of serious concern that the Government is seeking to drastically water down a key recommendation of the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Schedule 3 of the Bill.

1.5Coalition Senators strongly support the principle of Schedules 6 and 7 of the Bill, which seek to extend the former Coalition Government’s policy positions.

Changes to beneficial ownership disclosure laws (Schedule 1)

1.6Schedule 1 of the Bill seeks to make changes to the transparency regime for beneficial ownership of listed entities.

1.7The goal of Schedule 1 is to improve transparency and discourage the use of complex structures to obscure beneficial ownership or facilitate financial crime, which on the face of it is worthy. However, this schedule extends well beyond that.

1.8Coalition Senators note the pivot from the original objective of tackling international tax avoidance toward focusing primarily on preventing hostile takeovers, a priority for which there appears to be no pressing need.

1.9There are several concerns in relation to the amendments in Schedule 1, including a disproportionate compliance burden on institutional investors and the timing of implementation. This measure effectively goes after the 1% of investors doing something wrong by imposing a compliance burden on the other 99%.

1.10The Financial Services Council’s (FSC) submission argued that the complexity of the proposed compliance measures appears to be inconsistent with the Australian Securities and Investments Commission’s (ASIC) regulatory simplification and modernisation initiatives (REP 813).

1.11Within Schedule 1, there are overly complex new definitions and there are concerns about the threshold for entities to disclose changes.

1.12Specifically, the threshold for requiring entities to disclose changes in their derivative-based holding percentage has been deemed too low by the FSC. According to the FSC, this low threshold could result in "large volumes of technical filings that could reflect internal portfolio rebalancing rather than meaningful changes in ownership or control" and would place a significant compliance burden on investors.

1.13Furthermore, the Bill sets an unrealistic timeframe for the implementation of these complex and burdensome compliance changes. This provision is set to commence just 12 months after Royal Assent to allow for a transition period for fund managers, custodians and administrators to fully implement the changes.

1.14However, the operational details for these changes, such as the calculation methodologies for derivative exposures and substantial holding notice formats, are not set out in the Bill. They are to be determined later via ASIC instruments.

1.15It is unacceptable for these details to be decided later through ASIC instruments. This creates uncertainty for industry as they design new systems in order to comply.

1.16It is the view of Coalition Senators that the commencement period should be extended to 24 months following Royal Assent, to allow time for these changes to be properly understood and for ASIC to consult and publish derivative calculation methodologies and reporting instruments well before commencement.

Reducing transparency for ASIC and APRA (Schedule 3)

1.17Schedule 3 of the Bill seeks to weaken independent oversight of ASIC and the Australian Prudential Regulation Authority (APRA) by reducing the frequency of reviews undertaken by the Financial Regulator Assessment Authority (FRAA), from every two years to every five years.

1.18The Coalition is deeply concerned about Labor’s decision to dilute the accountability framework established in response to the recommendations of the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

1.19The Royal Commission found that ASIC and APRA required more frequent and more robust scrutiny to ensure they fulfilled their obligations to the public and exercised their powers in line with the law and community expectations.

1.20Specifically, recommendation 6.13 of the Royal Commission outlined the need for reviews into the regulator to be handed to the relevant minister biennially:

Recommendation 6.14: A new oversight authority

A new oversight authority for APRA and ASIC, independent of Government, should be established by legislation to assess the effectiveness of each regulator in discharging its functions and meeting its statutory objects…it should be required to report to the Minister in respect of each regulator biennially.

1.21Reducing the review cycle directly contradicts the purpose of the FRAA, which was established to strengthen independent oversight and improve regulator performance. Instead, the Bill weakens the regime at a time when regulatory performance is under serious question.

1.22It is unacceptable that this proposal has been put forward at a moment when serious regulatory failures have occurred, including the First Guardian and Shield matters, which have resulted in more than 12,000 Australians losing over $1 billion in retirement savings while the regulator's response has been called into question.

1.23The human consequences have been severe. Families have lost life savings and older Australians approaching retirement have seen decades of contributions evaporate. Trust in the superannuation system has fractured.

1.24In this environment, reducing oversight of ASIC and APRA is both irresponsible and insensitive to the experiences of Australians affected by regulatory failure.

1.25These events have highlighted the importance of strong and proactive oversight, not a five-yearly retrospective review that will provide fewer opportunities to identify underperformance and implement necessary reforms.

A weakening of accountability at the wrong time

1.26ASIC and APRA are entrusted with significant responsibilities across financial markets, superannuation, banking, insurance and financial stability. When these regulators fail to act promptly or decisively, Australians pay the price.

1.27In recent years, ASIC and APRA have faced ongoing criticism for delays in enforcement action, a lack of transparency and significant governance challenges.

1.28Despite these concerns, the Bill reduces scrutiny rather than strengthens it. A five-year review cycle risks embedding underperformance for half a decade before Parliament or the public are alerted to issues.

A breach of trust in the Royal Commission legacy

1.29The Royal Commission demonstrated that regulator complacency and inadequate oversight had contributed to concerns throughout the financial system.

1.30The FRAA was created to prevent those failings from reemerging by ensuring regular, independent scrutiny. Extending the review period to five years undermines this purpose.

1.31At a time when confidence in regulators is fracturing, reducing scrutiny risks further eroding trust in the integrity of oversight and governance arrangements within the financial system.

1.32The Bill is inconsistent with the Government’s stated commitment to consumer protection and financial system stability. Labor has repeatedly spoken about the need to restore trust in institutions yet is simultaneously weakening a key accountability mechanism.

Serious risks from delaying reviews

1.33Longer review cycles means potentially delaying the identification of regulatory drift and a reduced ability to respond to emerging market risks in a timely manner.

1.34With changes in financial markets accelerating, including both technology and predatory activity, regulators require more oversight, not less, to ensure they remain effective and responsive.

1.35Coalition Senators believe that an independent review every two years provides a necessary safeguard to ensure ASIC and APRA remain focused on their mandates, maintain appropriate governance processes and respond to issues.

1.36The proposal to shift to a five-year review cycle is a step backwards and sends the wrong signal.

Labor’s argument to water down transparency is weak and lacks integrity

1.37The argument put forward by Government Senators that “[t]he extended review timeframe will also allow more time for ASIC and APRA to implement changes suggested by previous FRAA reviews and for these changes to filter through to the industries they regulate” doesn’t stack up.

1.38Coalition Senators are strongly of the view that pressure should be placed on ASIC and APRA to implement advice as a priority. Removing pressure from the regulators at this time would risk key recommendations and advice being ignored for half a decade under the new reporting regime which could have disastrous impacts for the financial system and for Australians.

Findings

1.39The proposed changes in Schedule 1 create a disproportionate and complex compliance burden, especially with low derivative disclosure thresholds, on the majority of investors in an attempt to police the minority.

1.40Coalition Senators are of the view that the 12-month commencement timeframe is unrealistic because essential operational details will not be available from ASIC until much later.

1.41In light of the number of complexities and concerns with this Schedule, the Coalition believes the commencement timeframe should be extended to 24 months.

1.42Regarding Schedule 3, the Coalition believes that at this time accountability mechanisms for regulators must be strengthened, not weakened. Financial regulators must be held to the highest standards of performance, transparency and responsiveness.

1.43The Coalition supports the maintenance of the FRAA’s existing two-year review cycle, consistent with the intent of the Royal Commission and the expectations of the Australian public.

1.44For these reasons, the Coalition does not support the passage of Schedule 3 of the Bill and recommends it be removed to enable the swift passage of the Bill.

1.45That the commencement for Schedule 1 be extended to 24 months beginning on the day this Bill receives Royal Assent.

1.46That Schedule 3 of the bill be removed.