The Australian Securities and Investments Commission (ASIC) has begun a targeted review that may help bolster investment in property by Australian superannuation funds.
The review will examine potential changes to how stamp duty repayments are disclosed under Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements (RG 97).
According to ASIC, concerns have been flagged that the disclosure affects performance test results and discourages property investment by super funds.
ASIC chair Joe Longo said the regulator is responding to consultation during an investor roundtable recently held by the Treasurer.
“This is exactly the sort of actionable idea to address regulatory issues ASIC is open to testing,” Longo said.
“If the review finds appropriate changes will deliver benefits without undermining disclosures, then ASIC will act. We want to ensure red tape isn’t unnecessarily holding back investments.”
“A significant portion of Australia’s $4 trillion superannuation system already invests in property assets, but we have heard there is appetite for more,” Longo added. “This review will allow us to look at the way our regulations govern the calculation of fee-adjusted returns and encourage transparency and investment in our economy.”
Longo further stated that the review will consider whether class order relief should be granted to bring consistency to how internally and externally managed private credit arrangements are disclosed.
“A change like that could encourage internal management, meaning lower costs for superannuation members as well as continuing to support safe credit growth for business borrowers.”
The review will be led by ASIC with participation from industry representatives and Treasury and will report by 30 November. The review panel will seek direct submissions from experts and key stakeholders.
RG 97 currently requires the disclosure of transactional and operational costs including brokerage, buy-sell spread, settlement costs (including custody costs), clearing costs, and stamp duty on an investment transaction.
According to ASIC, the guide governs which fees and costs must be disclosed in the Australian Prudential and Regulation Authority’s superannuation fund performance test.
If the investment is in an unlisted property such as a new apartment, the stamp duty fee is disclosed as a transaction cost. For investments in listed property such as a real estate trust, stamp duty is rolled into the investment fees disclosure.
Not every fee and cost is included due to their difficulty to itemise. For example, borrowing costs, property operating costs, and – unless the costs are indirect costs covered by cl 101A(3)(a)(ii) – implicit transaction costs or market impact costs.
Responding to ASIC’s announcement, the Association of Superannuation Funds of Australia’s CEO, Mary Delahunty, remarked that this is “exactly the kind of targeted reform” needed to unlock the super sector’s ability to “supercharge national productivity”.
“The superannuation sector has raised concerns about RG 97’s treatment of stamp duty since ASIC started developing the regime.
“Stamp duty is fundamentally different to other transaction costs covered by RG 97. It’s an unavoidable tax that cannot be reduced through efficient portfolio management or changing investment strategies.”
She added that treating stamp duty as an equivalency to management fees creates misleading cost comparisons, while making residential property investments appear less competitive.
“The current RG 97 unfairly penalises funds that invest directly in Australian residential property, as opposed to foreign residential property or indirectly through REITs,” Delahunty said. “We expect a swift resolution, as potential solutions have been well-canvassed in previous consultations with ASIC.”
“This is a small regulatory tweak about where stamp duty disclosure sits – the duty will still be still paid, but it won’t distort investment comparisons.”
According to Delahunty, this will allow a larger portion of the $40 billion in capital the superannuation sector deploys quarterly to flow towards residential property investments, while improving overall economic productivity.
Echoing Delahunty’s sentiment, Navleen Prasad, CEO of the Australian Investment Council, welcomed the move by ASIC, calling it “great news for more reasons than one”.
“Anything that generates more affordable housing is positive,” she said. “But it also shows the potential that can be unlocked across all sorts of asset classes, including high-growth and innovation businesses, when barriers to investment are removed.”
According to Prasad, there is significant potential in addressing major challenges like energy transition, AI, sustainable care and sovereign capability, and that overcoming RG97 constraints can help unlock solutions across these areas.
“Super funds have the potential to increase investment in high-growth and innovation businesses without the handbrake of RG97 and a greater focus on net returns, which is ultimately what will drive better outcomes in retirement for workers,” she added.
“Today’s announcement by ASIC is a great action, we hope it paves the way for a broader review of RG97 and its effect on investment in areas of national priority.”
