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Government agrees to 365-day net offset payment

frydo frydo
Annie Kane 6 minute read

The government will move to a 365-day cap when determining the maximum drawdown amount for commissions, instead of the previously announced 90-day cap, Treasurer Josh Frydenberg has confirmed.

Speaking at the AFG Next 2019 conference in Melbourne on Monday (28 October), the federal Treasurer revealed that the Morrison government had been taking into account industry responses to its recent consultation on the upcoming best interests duty for brokers, and will move away from its previously announced 90-day cap when determining the maximum drawdown amount on which commissions can be paid on home loans.

According to Mr Frydenberg, stakeholder responses argued that the three-month calculation period for the net of offset payments as part of the broking reforms proposed in its National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 “was too short”. As a result, this cap will be extended to a full 365 days.

This will “allow brokers to be more fairly remunerated for the funds that they arrange,” he told the 900-strong audience at the AFG Next conference.


The Treasurer also revealed that some stakeholders argued for more clarity around how to comply with the best interests duty. He added that it was his view that “a principle-based approach is fundamental to improving consumer outcomes, and it is the interest of mortgage brokers as well”.

Speaking at the AFG Next 2019 conference, Mr Frydenberg said: “Of course, the industry should work with ASIC to have a position that complies with this duty and take appropriate feedback, but now is the time for industry to take the lead on how brokers will continue to demonstrate that they act in the best interests of consumers.

“Now is the time for leadership, and I strongly encourage organisations such as the AFG to be working closely with brokers to develop guidance on how they satisfy that duty.”

The Treasurer said that the government would also continue to focus on the “better alignment of the interests of consumers and brokers”.

Mr Frydenberg said: “Like any other financial service, mortgage broking relies on consumers being prepared to place their trust in [brokers].


Our collective goal should be to ensure that the introduction of a best interests duty serves as an important signal to consumers that gives them even more confidence to engage with your sector to seek out a mortgage broker to assist them with their borrowing or refinancing needs. 

“It is, of course, important that we get the duty right. It should not impose an unreasonable compliance burden nor lead to a simple tick-a-box approach. The duty will need to be applied in the context of responsible lending obligations without further restricting the availability of credit.”

He concluded: “Overall, the submissions confirmed that stakeholders generally approved of the policy intent within the draft legislation. However, a number of issues were raised relating to technicalities around the functioning of specific provisions.

The government has listened carefully and is now taking on board that feedback.”

Legislation will be introduced in Parliament later this year and the reforms will come into force from mid-next year.

Mr Frydenberg continued: “[As such], this work should be happening now. We do know that many brokers continue to put their customers first and are already acting in the best interests of their customer, so this should not be seen as a compliance burden for mortgage brokers but, instead, an opportunity to make explicit what best practice for mortgage brokers already is.”

[Related: Net of offset confusion ‘wasting brokers’ time’]

Government agrees to 365-day net offset payment
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.



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