FBAA chief, who was in Canberra for the Budget's unveiling, explains what it means for your business
There are many components to this year’s Budget but I will focus on those that will impact Finance & Mortgage Brokers.
The government has reinforced this is a Budget about making right choices to secure better days ahead. So we hope this is the outcome, time will tell.
Firstly the FBAA has been saying since last year that our two ombudsman services (FOS and CIO) would become one and in this Budget the government has supported and accepted all 11 recommendations of the Ramsey Review which basically means that FOS, the CIO and the Superannuation Complaints Tribunal will all become one.
Therefore the government will look to legislate and implement by 1 July 2018 (so within 12 months) the Australian Financial Complaints Authority (AFCA) and will then be our sole industry Ombudsman, and as per the current services structures, it will be funded by industry.
The AFCA will have jurisdiction of consumer and small business will have access to free, fast (we hope so), and binding dispute resolution. Not unexpected as predicted by the FBAA and hopefully will bring better and fair outcomes for those in a financial dispute.
Banks and regulators
Next, the banks will be held to a far greater account with the government bringing forward a comprehensive package of reforms to strengthen accountability and competition. The government will look to legislate a new Banking Executive Accountability Regime, taking action to increase competition in the financial system and with more competition improve consumer choices and the resulting wish-list is to drive down costs.
Given Government is also looking to introduce a new levy on the top 5 banks (hmmm who is number 5 … Macquarie/ING/Suncorp/Bendigo-Adelaide ?) from 1 July 2017 which will be calculated quarterly as 0.015% of an ADI’s licensed entity liabilities. This is an endeavour to create a more level playing field for funding costs for smaller banks and non-banks as well as asking the ACCC to undertake a residential mortgage pricing inquiry until 30 June 2018.
‘All well and good’ but I dare say the banks won't simply absorb this levy and pass it on to borrowers by way of a further out-of-cycle interest rate cut which if is the case this will be a bad outcome for home loan and business borrowers.
There is more funding to APRA and ASIC to strengthen and broaden their governances.
Next, the FBAA has been speaking about issues with credit cards since 2011 and now in this Budget the government has advised that credit card reforms are coming in an endeavour to assist borrowers not get caught in a debt cycle with these facilities.
This will mean:
- Proven ability to repay the limit within a reasonable time
- Prohibit unsolicited limit increase
- Simplify how interest is calculated
- Online options to cancel cards or reduce limits
The FBAA has been saying this will come shortly and it's squarely on the agenda!
There are many other areas of the budget in relation to small business with the extension of the $20,000 immediate tax asset write-off for small business up to $10m turnover, tax rate for small business now 27.5% as of today and more to come aiming for 15% tax rate ahead, targeting the ‘black economy’ so that everyone pays their fair share of tax they are meant to, etc.
Reducing pressure on housing affordability and the ability to contribute extra into super at lower tax rates and then withdraw it to assist partially with a deposit for your first home, tougher rules for foreign investors in the residential housing sector (resulting in more housing for people who live here), more incentives to developers to build low-cost housing, stronger job growth and investment into infrastructure creating a lot more jobs etc.
Peter White is the executive director of the FBAA and was invited by the Treasury to be present at the unveiling of this year's Federal Budget in Canberra. He has worked extensively with government and regulators and has a background in finance spanning almost four decades.