IN THIS ISSUE

• ACSA – year in review in the lead up to our AGM
• ACSA @ ASI Conference – a positive session on Digital Assets
• Dual access funds – expanded stakeholders and next steps
• In Focus – the Chair and Deputy of the very active Tax Working Group take us on their career journeys, and explain how external engagement is key to positive change

ACSA YEAR IN REVIEW

The financial year end triggers the need to attend to statutory obligations, but also an opportunity to reflect on the achievements of the Association over the prior 12 months. 

Highlights include:

• Maintaining focus on the “new normal” as pandemic disruption continues to affect local and overseas markets.
• Delivering on our core mission through advocacy.  In the 12 months to June 2021 ACSA made 19 formal submissions across key advocacy areas of regulation, market infrastructure, standards and common market practice.

• More than 180 individuals met in working groups, taskforces and sub-committees to review, discuss and action positive change.
• Major engagement with APRA on the introduction of Superannuation Data Transformation regulations, industry impact and practical data classification issues.
• ACSA continued dialogue with the ASX and other stakeholders to educate the market on the down-stream impact to investors and their service providers of late notice deferred dividends.
• Our sub-committee delivered the Tax Fund Data Standard, and continues promotion through the service chain in the interests of lower risk and improved efficiency.
• ACSA lead cross-industry dialogue and joint submissions in key areas of tax policy review including third party data and important clarifications on the treatment of Swiss withholding tax, and treatment of entitlements to a Foreign Income Tax Offset on foreign gains (Burton’s case).
• In April, we welcomed Sally Surgeon and Jennifer Saunders as Chair and Deputy to our Board, as long-standing Chair David Knights stepped down from the role but remains on the Board.
• Continued advocacy for a Proxy Voting true record date, with direct engagement through Treasury.
• Remained in tune with the voice of member’s through the Executive Member Survey and one-on-one interviews.

ACSA @ ASI VIRTUAL CONFERENCE

ACSA spoke at the AIST Superannuation Investment (ASI) Virtual Conference on the topic of Digital Assets on 2 September 2021.

As outlined in the last issue of our Industry Wrap, this capped off a busy quarter for ACSA in the crypto asset and distributed ledger technology space, including: 

• A detailed submission to ASIC Consultation Paper 343 - Crypto-assets as underlying assets for ETPs and other investment products.
• Feedback to the Senate Select Committee on Australia as a Technology and Financial Centre specifically on the topic of custody for crypto assets.
• Review of the International Securities Services Association’s recent article on DLT Voice of Customer Survey.

 Given the growth in client and regulatory interest, ACSA is reviewing the merits of establishing a local taskforce. 

A key message from ACSA to ASI delegates was that custodians have done their homework on digital assets and stand ready to support clients as the asset class matures. 

The results of live audience polls were valuable.  While generally aligned to global institutional views (gained from the same questions posed in the ISSA Voice of the Client Survey), there were some differences. 

Digital Assets are here to stay … and the majority expect efficiency and diversification benefits. 

The potential for investment diversification rated highly with the local audience, and this contrasted slightly to the efficiency focus of the ISSA respondents.

The importance of clear policy from regulators remains a global issue for institutions. 

The local audience shows even greater concern in the ability to access trusted investment decision making information. 

DUAL ACCESS MANAGED FUNDS

Dual access funds are managed funds that trade on regulated markets (ASX, Chi-X) and settle on CHESS, but that are also available via bilateral orders for applications and redemptions to the issuer’s registry (like a traditional unlisted managed fund). 

As outlined in prior editions of ACSA’s Industry Wrap, although the same underlying fund, each access method entails different custody and settlement market practice.  Rising market interest has driven the need for discussion in the interests of efficiency and common practice. 

The industry group that first met in Q2 this year has expanded with participation from additional registries, market participants, custodians and administrators. 

This cross-industry group met on 2 September 2021 to further understand the opportunities for positive change.  Key points from this meeting are summarised in the table below. 

IN FOCUS

Duncan Lyon

Duncan Lyon is Tax Product Manager, Securities Services, Australian and New Zealand at J.P. Morgan and Chair of the ACSA Tax Working Group. Douglas McMeekin is Associate Director, Tax Policy and Services with NAB Asset Servicing, and Deputy Chair.

The Tax Working group has had a full agenda this year, including close liaison with the Australian Taxation Office, Treasury, the Financial Services Council, Australian Superannuation Funds Association and the Australian Financial Markets Association in developing and reviewing proposals for positive change.

For this In Focus feature, ACSA CEO Robert Brown speaks with Duncan and Doug to understand a bit about their career journey and also what it takes to encourage industry teamwork within the complex area of taxation policy and practice.

Your career stories, can you share how you got to where you are today?

Duncan: I started my career with PwC, before becoming a Partner in Deloitte in 2000. I enjoyed solving a number of different technology challenges in the tax reporting and training space before applying my industry experience to J.P. Morgan in 2011. I had my grounding in audit before specialising in tax, which evolved into a focus on streamlining tax reporting using technology and process improvements.

Doug: I started my career in the Melbourne tax division of KPMG Peat Marwick at it was then called. Initially my clients were in the manufacturing industry, with a particular focus on automotive manufacturing. Things have changed a lot in Melbourne since then! KPMG Melbourne was a great place to start your career because you got to rub shoulders with a number of experienced tax professionals and really learn the craft. After 6 years at KPMG I headed to the UK, based in London, where I worked mainly in financial services.

Upon my return to Melbourne I picked up a tax manager role with AXA Australia’s wrap platform. From there I moved into the corporate side of things. AXA was acquired by AMP, and I stayed with the combined group for several years. I really enjoyed my time at AXA and AMP. I worked with some highly professional individuals and learnt a lot, including what to expect from a custodian. In 2018 an opportunity came up to join the NAB Asset Servicing business, managing the tax policy and services team, and I took it. 

Can you tell us about the work you do with ACSA and why you choose to volunteer?

Doug: We take a collegial approach on the ACSA tax working group. We discuss issues as they arise and gain the benefit of each other’s experience. We leverage this expertise and experience in our interactions with other industry bodies and regulators. Ultimately, due to the advocacy work that we do as part of ACSA, tax related change can be implemented for our clients as efficiently and painlessly as possible. Advocacy and achieving results for our clients is the reason I have volunteered.

Duncan: I volunteered to become Chair of the Tax Working Group last year. I enjoy working with a talented group of like-minded tax professionals across the industry to identify and resolve common issues that we face. Our goal is to enhance the services we provide to our clients and reduce compliance costs. We also have good collaborative relationships with the ATO and Treasury and other peak industry bodies, including the FSC and ASFA, which allows us to make meaningful progress in achieving this outcome.

What do you believe are the short term priorities for our industry and how can ACSA help us get there?

Duncan: In recent years, the ATO has increased focus on tax risk management and governance over the tax data provided by custodians to support the tax return information lodged by our clients. This followed assurance reviews across the industry. This has sparked a healthy debate on how to provide assurance over the controls that custodians have in place to ensure delivery of high-quality tax information, in the most efficient and costeffective way. Our working group is working collaboratively with the ATO, ASFA and the FSC in response to the ATO’s consultation paper.

There are also a number of technical matters that increase cost and complexity for custodians providing tax services. ACSA is proactively working with Treasury and the ATO to determine practical solutions to challenges such as how to apply the law and incoming tax measures that require further consultation. Examples include practical application of the Burton’s decision, which can limit tax relief for foreign CGT payments, and the Affordable Housing Incentive which risks a low take-up of the intended policy outcomes.

Doug: With tax there are always changes on the horizon. As Duncan mentioned, we are currently dealing with the implications arising from the Burton’s case decision, tax controls and governance. Commencement of the Corporate Collective Investment Vehicle regime is also material, changes to tax rules concerning hedging arrangements, and potential changes to the way capital gains flow through trusts. All these initiatives will potentially impact our clients, so the knowledge and experience of those that sit on the ACSA tax working group will come in very useful as we navigate through these changes.

To be effective in achieving positive change, we not only need to form an ACSA consensus, but also influence other industry bodies and regulators. What do you see as the keys to success?

Doug: Recognition that positive change is a two-way street. Other industry bodies and regulators have their own job to do. They will have their own motivators and goals. It is about finding common ground, and having an open mind. In this way approaches can be agreed upon and ultimately success can be achieved.

Duncan: Our industry is fundamental in sustaining the economic well-being of the country while reducing the administration and compliance costs of investors. The key to our success is working collaboratively and openly to achieve the best outcomes that benefit all.