Amidst the maelstrom of cyclones, electioneering and tariffs that dominated most of March, you may have missed Treasury’s long-awaited release of draft legislation for Tranche 2 of the Delivering Better Financial Outcomes reforms. The Treasury Laws Amendment Bill 2025, currently in the exposure draft phase, marks the next step in the slow, incremental reforms to the financial advice landscape in Australia.
In what was his final act as Financial Services Minister, there is no doubt that Minister Jones, who will retire from politics after the election on 3 May, had good intentions. However, Tranche 2 appears to be a missed opportunity for significant reform. Tranche 2 leaves out key reforms that were promised to be included in this tranche, and the reforms that made the cut are unlikely to make a material difference to the thousands of Australians who need financial advice.
Need to know:
- ‘Client Advice Records’ will replace ’Statements of Advice’.
- Super funds will be empowered to provide free (charged to the fund) financial advice to members about superannuation and retirement planning.
- Super funds will be permitted to provide targeted prompts to members to drive greater engagement at key life stages.
Changes introduced by the Bill
1. Collective charging for retirement advice
The Bill will amend the Superannuation Industry (Supervision) Act 1993 (SIS Act) to clarify the scope of advice that can be collectively charged to the super fund, as opposed to the individual member who receives the advice (‘intra-fund advice’). The amendments aim to provide superannuation trustees with greater flexibility to provide cost-effective retirement advice to members.
Key features:
- The Bill introduces a framework to help super trustees determine when advice relates to a financial product that is a beneficial interest in the superannuation fund. The costs of such advice can be charged to the super fund, rather than the member.
- Section 99F of the SIS Act, the best interest duty and the sole purpose test continue to apply.
- The consultation document accompanying the Bill explains that regulations will confirm an ‘allowed topics list’ and a ‘disallowed topics list’ for intra-fund advice.
- The proposed allowed topics list includes contributions, investment options, insurance in super and retirement income.
- The proposed disallowed topics list includes: buying or selling financial products outside super; holistic financial planning; estate planning; and tax planning.
- Section 99F will continue to prohibit intra-fund advice on new members joining the fund, and consolidation of super accounts.
Issues:
- The Bill attempts to clarify the scope of advice that can be collectively charged, but the regulations are not exhaustive. Super trustees are expected to exercise their judgement, which could lead to inconsistencies and disputes.
- In practice, we don’t believe the reforms will expand the list of topics on which super trustees provide intra-fund advice.
- The Bill purports to provide clarity on the matters that can be taken into account when providing intra-fund advice. For example, a spouse’s income, assets held outside super, debts of the household, and eligibility for age pension. However, this is arguably already permitted – probably required – pursuant to the best interests duty.
2. Targeted prompts to superannuation members
The Bill introduces a framework for trustees to send targeted prompts to members, encouraging member engagement at key life stages. The prompts are permitted to contain ‘superannuation-related advice’. The amendments aim to provide comfort and certainty to super trustees that such prompts will not be treated as personal advice, even where personal and financial information about the member has been used by the super trustee.
Key features:
- The amendment will allow super trustees to give more specific recommendations to members than are currently permitted.
- Complying prompts will be deemed to be general advice, not personal advice.
- Trustees must prepare an assessment framework before sending a prompt, to ensure the advice is appropriate for the targeted class of members.
- The framework includes requirements for statements and warnings in prompts, record-keeping obligations, and monitoring the effects of prompts on member behaviour.
- Members can opt-out of receiving prompts for a specified period, up to five years.
Issues:
- The inclusion of statements and warnings in prompts may not be sufficient to prevent members from perceiving the advice as personal advice. After all, their super fund holds a great deal of personal and financial information about them.
3. Client advice records
The Bill proposes to replace Statements of Advice (SOAs) with a new advice document called a Client Advice Record (CAR).
Key features:
- The CAR is intended to be clear, concise and fit-for-purpose, helping clients make informed decisions without the burden of lengthy and legalistic documents.
- The CAR can be provided in various formats, including by audio recording or email for simple or single-issue advice.
- Providers must maintain records to demonstrate compliance with legislative requirements (separate from the CARs themselves).
- No change to the rules on when an SOA/CAR must be prepared.
- Records of advice will continue to be permitted for further advice and no-change advice.
Issues:
- Unlike the targeted prompts and intra-fund advice changes, both of which commence the day after Royal Assent, the client advice record changes commence 12 months after Royal Assent and only apply to advice provided after this date. The policy objective for this remains unclear.
- In our view, the amendments are unlikely to result in CARs being significantly shorter than SOAs.
- While the amendments aim to simplify the advice process, the record-keeping requirements remain extensive.
- As if we didn’t have enough acronyms in the financial advice profession already, Minister Jones has delivered a new one. Going forward we will have CARs (Corporate Authorised Representatives), CARs (Client Advice Records) and cars (those things we drive around in).
What didn’t make the cut?
Frustratingly, the draft Bill left out two significant reforms that were originally scheduled to be included in Tranche 2. First, the proposed changes to the best interests duty, including removing the safe harbour provisions. Second, the establishment of a new class of ‘adviser’. These advisers will be subject to lower education requirements, will be limited to advising on simple topics, and will not be permitted to charge a fee or receive commission.
Apparently, work on the supplementary legislation is underway, but not ready for consultation. It may be that these issues were placed in the too-hard basket in the run up to the election. Regardless, once finalised, the legislation will be combined with the Bill and introduced to the parliament as a single package. Expect a second round of consultation later in the year, depending on who wins the election on 3 May.
Don’t hold your breath for Royal Assent.
Looking ahead
The burning question remains: Will these reforms deliver against the promise of reducing red tape and making advice more accessible?
The Treasury Laws Amendment Bill 2025 represents a step in the right direction, but also a missed opportunity. Some would argue it is a case of ‘two steps forward, one step back’.
The Bill’s narrow scope, potential for misinterpretation, and administrative burden present challenges that need to be addressed and clarified.
As the Bill progresses through the consultation and legislative process, it is crucial for stakeholders to advocate for refinements to ensure the Bill achieves its objectives without unintended consequences.
For financial planning businesses, staying informed and engaged is essential. Proactive adaptation will be key to navigating this evolving regulatory environment. We can help you with this.
If you have any questions or need advice, please contact Simon Carrodus at simon.carrodus@hamiltonlocke.com.au or 0402 905 252.
