Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 - Commentary on Ministerial Responses [2022] AUSStaCSBSD 49 (30 March 2022)

• Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021
• Significant matters in delegated legislation1
• Henry VIII clause—modification of primary legislation by delegated legislation12

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Chapter 2

Commentary on ministerial responses

This chapter considers the responses of ministers to matters previously raised by the committee.

Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021

Purpose	Schedules 1 to 4 to the bill amend corporate and financial services law to establish a Corporate Collective Investment Vehicles as a new type of a company limited by shares that is used for funds management. Schedule 5 to the bill amends the taxation law to specify the tax treatment for the Corporate Collective Investment Vehicles. Schedule 6 to the bill amends the income tax law to extend the loss carry back rules by 12 months, allowing eligible corporate tax entities to claim a loss carry back tax offset in the 2022-23 income year. Schedule 7 to the bill seek to amend the Income Tax Assessment Act 1997. Schedule 8 to the bill makes a number of miscellaneous and technical amendments to various laws in the Treasury portfolio. Schedule 9 to the bill amends the Superannuation Industry (Supervision) Act 1993 to insert a new covenant that requires trustees of Registrable superannuation entities to develop a retirement income strategy for beneficiaries who are retired or are approaching retirement. Schedule 10 to the bill amends the Income Tax Assessment Act 1997 to remove cessation of employment as a taxing point for Employee share scheme interests which are subject to deferred taxation.
Portfolio	Treasury
Introduced	House of Representatives on 25 November 2021
Bill status	Received the Royal Assent on 22 February 2022

Significant matters in delegated legislation^[1]

2.1 In Scrutiny Digest 1 of 2022 the committee requested the Assistant Treasurer's more detailed advice regarding:

• why it is considered necessary and appropriate to leave the following matters to delegated legislation:

- providing additional circumstances where a person is, or is not, a protected member of a CCIV;^[2]

- the requirements for the issue of shares by a CCIV;^[3]

- the requirements or restrictions for cross-investment;^[4]

- the requirements for the reduction of share capital;^[5]

- the matters to be considered in determining the extent to which money or property of a CCIV forms part of the assets of a sub-fund of the CCIV;^[6]

- the matters to be considered in determining the extent to which a liability of a CCIV forms part of the liabilities of a sub-fund of the CCIV;^[7]

- how the money or property of a CCIV may be held, including exempting classes of assets from these requirements;^[8] and

- exempt conduct engaged in by the CCIV from being also engaged in by its corporate director;^[9] and

• whether the bill could be amended to provide at least high-level guidance regarding these matters on the face of the primary legislation.^[10]

Assistant Treasurer's response^[11]

2.2 The Assistant Treasurer advised:

The Corporate Collective Investment Vehicle (CCIV) framework creates a new type of company for funds management in Australia, designed to be an alternative to the commonly used trust-based managed investment scheme.
The regulation-making powers included in this Bill were carefully crafted to provide for appropriate regulatory accompaniment to the CCIV framework to ensure its workability and consistency with the intended objective of the Bill.
While I note that the Committee has generally not considered a desire for administrative flexibility or consistency with existing legislation to be sufficient justification for the inclusion of regulation-making powers, it remains my view that, in the circumstances outlined in the explanatory memorandum, this flexibility is critical to ensuing that the CCIV framework operates as intended. In particular, this is the case for the operation of CCIV s and sub-funds, such as the rules governing the liabilities of a sub-fund, and rules regarding the holding of the assets of a sub-fund. The ability to respond in a timely manner to gaps, ambiguities, or unintended consequences resulting from the application of such rules is essential to the workability of the CCIV framework.

Committee comment

2.3 The committee thanks the Assistant Treasurer for this response. The committee notes the Assistant Treasurer's advice that the regulation-making powers included in the bill were carefully crafted to provide for appropriate regulatory accompaniment to the Corporate Collective Investment Vehicle (CCIV) framework to ensure its workability and consistency with the intended objective of the bill.

2.4 The committee also notes the Assistant Treasurer's advice that this flexibility is critical to ensuing that the CCIV framework operates as intended. The Assistant Treasurer advised that this is particularly the case for the operation of CCIVs and sub‑funds, such as the rules governing the liabilities of a sub-fund, and rules regarding the holding of the assets of a sub-fund. The Assistant Treasurer further advised that the ability to respond in a timely manner to gaps, ambiguities, or unintended consequences resulting from the application of such rules is essential to the workability of the CCIV framework.

2.5 The committee notes that the Assistant Treasurer has not provided a justification beyond a general desire for administrative flexibility in relation to the provisions raised by the committee in its initial comment. Further, no specific details regarding why administrative flexibility would be required for any specific provision has been provided. It therefore remains unclear to the committee why at least high‑level guidance regarding some of these matters could not be included on the face of the primary legislation. The committee does not consider that the Assistant Treasurer's response has adequately addressed the committee's scrutiny concerns.

2.6 The committee draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.

2.7 In light of the fact that this bill has already passed both Houses of the Parliament the committee makes no further comment on this matter.

Henry VIII clause—modification of primary legislation by delegated legislation^[12]

2.8 In Scrutiny Digest 1 of 2022 the committee requested the Assistant Treasurer's more detailed advice regarding:

• why it is considered necessary and appropriate to allow regulations made under proposed subsection 1243A(1) to modify any provision of proposed Chapter 8B or the Corporations Act 2001 more generally; and

• whether the bill can be amended to provide at least high-level guidance constraining the scope of this broad modification power, for example, by providing that before the Governor-General makes regulations for the purposes of proposed subsection 1243A(1), the minister must be satisfied that the modifications would be consistent with the objects set out in the bill.^[13]

Assistant Treasurer's response^[14]

2.9 The Assistant Treasurer advised:

I note the Committee's concern regarding the inclusion of subsection 1243A(1) of the Bill. However, my view is that this provision, which would allow for regulations to modify the proposed Chapter 8B of the Corporations Act 2001, is essential for quickly addressing unforeseen or changing circumstances. Failing to address these circumstances in a timely manner would lead to inappropriate or anomalous outcomes inconsistent with the policy intention of the CCIV framework, or could indeed render make framework unworkable.
The Government has developed the new regulatory framework for CCIVs in close consultation with relevant experts among industry stakeholders, but it remains a new and as yet untested framework. There remains therefore the possibility that the operation of the Bill in practice may produce unintended or unforeseen results. Including this regulation-making power is critical to ensuring timely and targeted adjustments can be implemented if required.
I note that any regulations made under the provisions identified by the Committee will be subject to Parliamentary scrutiny and disallowance procedures.
Regarding the Committee's request that the Bill be amended to provide high-level guidance regarding the matters identified, it is my view that the regulation-making powers as currently set out have been designed appropriately to ensure the CCIV framework operates in accordance with the objects of the Bill. As the Committee will be aware, the Bill has passed both Houses of Parliament as of 10 February 2022 and received the Royal Assent on 22 February 2022.

Committee comment

2.10 The committee thanks the Assistant Treasurer for this response. The committee notes the Assistant Treasurer's advice that proposed section 1243A is essential for quickly addressing unforeseen or changing circumstances. The Assistant Treasurer also advised that failing to address these circumstances in a timely manner would lead to inappropriate or anomalous outcomes inconsistent with the policy intention of the CCIV framework, or could render the framework unworkable.

2.11 The committee also notes the Assistant Treasurer's advice that the government has developed the new regulatory framework for CCIVs in close consultation with relevant experts among industry stakeholders, but that it nevertheless remains a new and as yet untested framework. The Assistant Treasurer advised that there remains the possibility that the operation of the bill in practice may produce unintended or unforeseen results and that including the regulation-making power is critical to ensuring timely and targeted adjustments can be implemented if required.

2.12 The committee reiterates its view that there are significant scrutiny concerns with enabling delegated legislation to override the operation of legislation which has been passed by the Parliament as such clauses impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the executive. While the committee notes that the bill establishes a new scheme and acknowledges that changes may be required as the scheme is put into practice, the committee does not consider that this is a sufficient justification for allowing regulations to modify the operation of primary legislation in circumstances where there is limited guidance regarding this broad modification power on the face of the primary legislation.

2.13 The committee reiterates that delegated legislation, made by the executive, is not subject to the same level of parliamentary scrutiny inherent in bringing proposed changes in the form of an amending bill.

2.14 The committee draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.

2.15 In light of the fact that this bill has already passed both Houses of the Parliament the committee makes no further comment on this matter.

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[1] Schedule 1, item 4 proposed sections and subsections 1222K(5), 1230(5), 1230R, 1231A(4), 1233H(5) 1233L(4) 1234G, 1234J(4), 1234K and 1241A(6) and schedule 3, item 14, proposed subsection 243F(6). The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).

[2] Proposed subsection 1222K(5).

[3] Proposed subsection 1230(5).

[4] Proposed section 1230R.

[5] Proposed subsection 1231A(4).

[6] Proposed subsection 1233H(5).

[7] Proposed subsection 1233L(4).

[8] Proposed section 1234G, subsection 1234J(4) and section 1234K.

[9] Proposed subsection 1241A(6) and proposed subsection 243F(6).

[10] Senate Scrutiny of Bills Committee, Scrutiny Digest 1 of 2022, pp. 4-6.

[11] The Assistant Treasurer responded to the committee's comments in a letter dated 10 March 2022. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 2 of 2022 available at: www.aph.gov.au/senate_scrutiny_digest.

[12] Schedule 1, item 4, proposed section 1243A. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv).

[13] Senate Scrutiny of Bills Committee, Scrutiny Digest 1 of 2022, pp. 6-7.

[14] The Assistant treasurer responded to the committee's comments in a letter dated 10 March 2022. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 2 of 2022 available at: www.aph.gov.au/senate_scrutiny_digest.