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Policy and Research Update | June 2020

Welcome to the Australian Investment Council’s second Policy and Research update for 2020.

Regulatory change and risks have increased significantly over recent months with governments at all levels looking to respond quickly to the health and economic pressures of COVID-19. As the private capital industry touches almost every sectors of the economy, many of these changes impact on our industry.

In response to the unprecedented volume of legal and regulatory change, the Australian Investment Council has:

- Developed a content hub, tracking key government initiatives and developments;

- Engaged closely with private capital investment firms and key advisors;

- Written to and held discussions with various ministers and government agencies;

- Conducted member surveys; and

- Continued our various streams of business-as-usual research and policy work.

There has been a lot of activity over the previous few months. Some of the main items include:

- Representing the industry regarding changes to the foreign investment policy framework;

- Engaging with the Government on the JobKeeper Program;

- Publishing the Preqin & Australian Investment Council Yearbook 2020; and

- Initiating call for a policy summit to develop the nation’s roadmap to recovery.

For more detail, including upcoming activities, please find below a list of our main submissions, engagements and research from February 2020 through to May 2020.

If you have any policy or research questions or issues you would like to discuss, please contact us.


Submissions, hearings and government meetings

 

February

Retirement Income Review

Following recommendations in the Productivity Commission's report into the Efficiency and Competitiveness of Superannuation, the government commissioned an independent Retirement Income Review. The Council made a submission to the Treasury consultation, highlighting the importance of having a world class superannuation system, including:

- The lost opportunity of focussing on fees and cost rather than fund performance; and,

- The role of alternative assets is superannuation funds’ asset allocation and performance.

Business Innovation and Investment Program: Getting a better deal for Australia

The Australian Investment Council lodged a submission to the Department of Home Affairs on the Business Innovation and Investment Program to see how the benefits of the Significant Investor Visa can be maximised for Australian Businesses. The Council’s submission recommended no change to the SIV investment threshold. However, if the SIV threshold is increased, we recommended a moderate increase to $6 million, with a 2 to 3-year transition period.

March

Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019

The Australian Investment Council made a submission to the Senate Standing Committee on Economics in relation to the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019.

This is the latest consultation on this issue, with consultations dates back over a number of years. Our submission reinforced our previous submissions in that measures should only be implemented that support Australia’s R&D ecosystem – something which is particularly important given the current economic conditions.

RG97 - ASIC Roundtable

The Australian Investment Council recently attended an ASIC industry roundtable on the requirements of updated Regulatory Guide 97. The presentation from the roundtable are available from ASIC’s website.

Consultation regarding RG97 have been ongoing for many years. From the private capital industry’s point of view, the final regulatory guide is much more favourable than the initial proposals. However, the guidance continues to have a greater focus on fees rather than net returns. The focus on fees, particularly for MySuper, has been strongly supported by parts of government and a number of regulatory agencies.

Wherever possible, the Council continues to highlight the shortfalls of myopically focusing on fees and argues for a balanced approach which, we feel, would ultimately lead to better retirement outcomes for Australians.

April

Initial public offers: Relief for voluntary escrow arrangements and pre-prospectus communications

The Council made a submission to ASIC’s Consultation Paper 328 – Initial public offers: Relief for voluntary escrow arrangements and pre-prospectus communications . Our submission made nine recommendations where we highlighted the implications of the proposals on the private capital industry, calling on a range of international examples

Changes to Australia’s Foreign Policy Investment Framework

In response to changes implemented by the Federal Government, the Australian Investment Council undertook a range lobbying activities, including writing to the Federal Treasurer, to ensure our industry’s concerns were heard. For a summary of the implications of these changes and our actions, please see the write up on our website or our short policy update video.

May

Private capital access to the JobKeeper program

The Australian Investment Council undertook a range lobbying activities in response to some private capital-backed Australian businesses being ineligible for the Federal Government’s JobKeeper program. For a summary of this issue and our actions, please see the write up on our website or our short policy update video.

Calls for a national economic and social policy summit

The Australian Investment Council has led the call to government to establish a national policy summit to develop the nation’s roadmap to recovery. We have promoted this initiative on various platforms, including in writing directly to the Federal Government. The Council’s initiative has been picked up by a number of media outlets with other associations and commentators now also calling for a summit.

Negative Control

Over the previous months, the Council has continued its direct engagement with the ATO. While the ATO has highlighted that it has shifted its resources towards the numerous COVID-19 related government initiatives and deadlines may shift, its work regarding ‘negative control’ continues.

The Legal and Tax Advisory Committee approved an engagement strategy and established a Negative Control Working Group. This group has been focusing on the more technical aspects of engaging with the ATO on this long-standing issue and includes representatives from many of the industry legal and tax advisory firms.

For more detail on our work in this areas, please contact us.

Future events

A number of regulators, such as APRA, ASIC and the ATO have delayed a wide range of projects and consultations. As economic conditions improve and government resources focusing on COVID-19 related policy development and/or implementation are reduced, we expect work on these delayed projects to increase.

Coupled with a new raft of new government initiatives to support our economic recovery and the winding back of existing initiatives, we expect an ongoing environment of elevated regulatory and legal risks facing the industry in the second half of 2020.


Research

 

February

PE and VC Benchmark Report – Q3, 2019

In association with Cambridge Associates, we released the Q3 2019 Australian Private Equity and Venture Capital index and benchmark statistics. The overview report is available to all members while access to the PE and VC specific benchmarks is restricted. If you currently do not have but would like access to these reports please contact us.

April

Preqin & Australian Investment Council Yearbook 2020

Amongst the many insights in the report, analysis confirms that Australia continues to be a stand-out destination for private capital investment over the past year – displaying one of the most attractive risk/return profiles in the world, and delivering stable long-term returns for investors. The private equity and venture capital segments followed the global pace with a significant increase in assets under management in 2019, rising to a new record high of $33 billion, up 16% on 2018 levels. The report is available on our website. For an overview, please see an short presentation of the key insights available here.

Political Insight Series: COVID-19 - fuelling the rise of China and Fortress Australia

Steve Lewis, Senior Adviser at Newgate Australia, shares his thought-provoking look inside how China could use COVID-19 to change its geopolitical goals and its relationship with Australia, in our latest instalment in our Political Insight Series. Lewis also looks into the rise of the ‘Fortress Australia’ argument, and how this may change domestic industry for the next decade and beyond.

Member only interactive webinar with NAB’s Global Head of Research

In conjunction with AIC corporate partner firm NAB, the Council hosted a members-only interactive webinar with NAB's Global Head of Research, Markets, Ivan Colhoun. Ivan shared his expert views on the global and Australian economic and financial outlook, including NAB’s prediction that unemployment could reach a record-high 12% in the period ahead. The presentation slides from that webinar are available on our website (members only).

Future events

Benchmark Report – Q4, 2019

The Q4 2019 benchmark reports are expected to be released in June 2020.

Industry Factsheet

The Australian Investment Council is updating its industry factsheets which will be available on our website.