As part of the federal budget handed down this evening, the government and Australian Prudential Regulation Authority (APRA) announced there will be a reduction in barriers for new banks and a focus on increasing competition to drive lower prices and a better service for consumers.
The government will look to relax the legislative 15 per cent ownership cap for innovative new entrants, and will also lift the prohibition on the use of the term ‘bank’ by Authorised Deposit-taking Institutions (ADIs) with less than $50 million in capital.
This will allow smaller ADIs to benefit from the reputational advantages of being called a ‘bank’. Over time, these changes are expected to improve competition by encouraging new entrants, the government said.
As well as committing to increasing competition in the fintech sector, the government has released draft legislation that will make it easier for start-ups and innovative small businesses to raise capital.
The draft legislation looks to extend crowd-sourced equity funding (CSEF) to proprietary companies. This will open up crowd-sourced equity funding for a wider range of businesses and provide additional sources of capital, the government said.
Proprietary companies using CSEF will be able to have an unlimited number of CSEF shareholders.
The government will also be introducing a “world-leading” legislative financial services regulatory sandbox, according to the budget.
This will enable more businesses to test a wider range of new financial products and services without a licence, which will reduce regulatory hurdles that have traditionally suffocated new businesses trying to develop new financial solutions and caused Australian talent go offshore, the government said.
Robust consumer protections and disclosure requirements will be in place to protect customers, however.
Further, the government is removing the double taxation of digital currency to make it easier for new innovative digital currency businesses to operate in Australia.
From 1 July 2017, purchases of digital currency will no longer be subject to the GST.
This will allow digital currencies to be treated just like money for GST purposes. Currently, consumers who use digital currencies can effectively bear GST twice: once on the purchase of the digital currency and once again on its use in exchange for other goods and services subject to the GST.
The government has also commissioned Innovation and Science Australia to develop a 2030 Strategic Plan for Australia’s Innovation, Science and Research (ISR) System. The plan will outline what the nation’s ISR system should look like into the future and ensure that Australia is positioned as a world leader in innovation, the government said.
FinTech Australia chief executive Danielle Szetho warmly welcomed the measures, describing the budget as a "boost" for the emerging sector.
“We welcome these initiatives – they’re a huge step forward when it comes to growing a globally competitive Australian fintech industry, that will also deliver greater choice and improved financial outcomes for consumers,” Ms Szetho said.
“We’re also proud that many of these initiatives have come about through the strong and detailed advocacy work undertaken by FinTech Australia and its members.”
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