2021-22 Federal Budget measure: Relief for Foreign Financial Service Providers

The Australian Federal Government has announced in its Budget Papers that it will

'consult on options to restore previously well-established regulatory relief for Foreign Financial Service Providers (FFSPs) who are licensed and regulated in jurisdictions with comparable financial service rules and obligations, or have limited connection to Australia, from holding an Australian Financial Service License, in order to reduce duplicate regulatory requirements. The relief is limited to FFSPs that deal with wholesale clients and professional investors.

The Government will also consult on options to create a fast-track licensing process for FFSPs who wish to establish more permanent operations in Australia. Fast-tracking is intended to shorten application timeframes and reduce barriers to entering the Australian market.'

This is part of the Government’s strategy:

'To encourage global businesses to invest in, and relocate to Australia, the Government will establish a fast track process to provide investors with certainty around the tax implications of large investments, finalise the implementation of the Corporate Collective Investment Vehicle regime, and establish a more efficient licensing regime for foreign financial service providers. Measures will also be implemented to modernise the individual tax residency rules to provide greater certainty and reduce compliance costs for globally mobile individuals and their employers.' (emphasis added)

So far, we do not have any further detail of the timing implications of this announcement for the introduction of the foreign licensing regime. It seems likely that it will not commence as planned or in its current form. The reference to fast-track licensing suggests that some form of foreign licensing will continue to be an option.

It is also worth noting that the Government appears intent on restoring the limited connection regime which enabled foreign providers to provide financial services from outside Australia to wholesale clients in Australia.

We welcome the Government’s announcement. While there will be some short-term uncertainty for the market, we believe it will more than compensated by longer-term benefits for the competitiveness and dynamism of the Australian financial sector.

We will provide further details when they come to hand.

[Sources: Budget Paper No. 2 Budget Measures, page 190; Statement 1: Budget Overview, page 20]