(1) Despite subsection 1013C(2) of the Act, the indirect cost of a MySuper product, an investment option offered within a superannuation product other than a MySuper product, a collective investment product or an investment option offered by a managed investment scheme, means any amount that:
(a) either:
(i) a responsible person knows, or reasonably ought to know or, where this is not the case, may reasonably estimate has reduced or will reduce (as applicable) whether directly or indirectly the return on the product or option that is paid from or reduces the amount or value of:
(A) the income of or the property attributable to the product or option; or
(B) the income of or the property attributable to an interposed vehicle in or through which the property attributable to the product or option is invested; or
(ii) satisfies both the following:
(A) the amount is paid or payable by or on behalf of a person who may make payments that form part of the return on, or the value of, the product or option whether directly or through an interposed vehicle;
(B) payment of the amount is a benefit that increases the returns or value of the product or option or provides a benefit to the issuer in relation to the product or option that is retained by the issuer; and
(b) for a MySuper product or an investment option offered within a superannuation product other than a MySuper product—is not charged to a member as a fee; and
(c) for a MySuper product or an investment option offered within a superannuation product other than a MySuper product—is not any of the following:
(i) an activity fee, an advice fee, a buy-sell spread, an insurance fee or a switching fee; or
(ii) administration fees and costs, investment fees and costs or transaction costs, to the extent it has been paid as a cost out of the superannuation entity to which the product or option relates; and
(d) subject to subclause (3), has been paid as a cost out of an interposed vehicle which:
(i) if the amount had been paid as a cost out of the superannuation entity to which the product or option relates—would be:
(A) a cost within the definition of administration fees and costs disregarding paragraphs (a), (b) and (c) of that definition; or
(B) a cost within the definition of investment fees and costs disregarding paragraphs (b) and (c) of that definition; or
(C) a cost within the meaning of transaction costs disregarding paragraphs (g) and (ga) of that definition;
(ii) if the amount had been paid as a cost out of scheme property of the registered scheme or the assets of the notified foreign passport fund to which the product or option relates—would be a cost within the definition of management fees and costs disregarding paragraph (1)(h).
(2) For the purposes of subclause (1):
(a) property is invested in or through an interposed vehicle even if:
(i) the property is in turn invested in or through one or more other interposed vehicles; or
(ii) the property was invested in the first mentioned interposed vehicle through or by another interposed vehicle; and
(b) property is not invested in or through an interposed vehicle if the property is invested in the vehicle by a body, trust or partnership that:
(i) is not an interposed vehicle; and
(ii) is not the trustee or responsible entity.
(3) Without limiting subclause (1), the indirect costs of a product or investment option referred to in subclause (1) include:
(a) the following amounts where the responsible person knows, or reasonably ought to know or, where this is not the case, may reasonably estimate those amounts:
(i) in relation to a derivative financial product that is not an option to acquire or dispose of a financial product—the amount that is the difference between the underlying return and the actual return for the derivative financial product, where the actual return on the product or option is less than the underlying return on the derivative financial product over the relevant financial year; or
(ii) in relation to a derivative financial product that is an option to acquire or dispose of a financial product—any amount by which the cost incurred to acquire the derivative financial product exceeds the amount that would be obtained on its disposal at that time; or
(b) where the responsible person does not know, does not believe they reasonably ought to know, and is not able to reasonably estimate without taking steps that the responsible person considers unreasonable, the amount in paragraph (a) (as applicable) in relation to a derivative financial product—the following amounts in relation to the derivative financial product:
(i) in relation to a derivative financial product that is not an option to acquire or dispose of a financial product—the greater of:
(A) the amount calculated using the following formula:
relevant percentage x value x (n/365)
where:
n means the number of days that the derivative financial product was held by the responsible person or interposed vehicle during the relevant financial year;
relevant percentage means 0.1%; and
value, in relation to a derivative financial product, means the value of the ultimate reference assets, in each case taking into account any leverage, offsets or similar adjustments applied to or between the ultimate reference assets under the terms of the derivative financial product; and
(B) the minimum amount that the responsible person believes or has reasonable grounds to believe would apply under paragraph (a);
(ii) in relation to a derivative financial product that is an option to acquire or dispose of a financial product—the lesser of:
(A) the amount that would apply under subparagraph (i) if the exclusion from that subparagraph (i) of options did not apply; and
(B) the premium paid by the responsible person or interposed vehicle for the option,
where the amount referred to in paragraph (a) or (b) is attributable to:
(c) the product or investment option; or
(d) an interposed vehicle through which the property attributable to the product or investment option is invested.
(3A) In subclause (3) and (4):
actual return means the return that has been or would be received (as applicable), or loss that would be payable, by the responsible entity, operator of a notified foreign passport fund, trustee or interposed vehicle in relation to the derivative financial product over the relevant financial year if the derivative financial product was:
(a) acquired at the time the derivative financial product was acquired, or, if the derivative financial product was not acquired during the relevant financial year, acquired at the commencement of the relevant financial year for the same price at which it would have been disposed at the end of the preceding financial year; and
(b) disposed of at the time the derivative financial product was disposed of, or, if the derivative financial product was not disposed of during the relevant financial year, disposed of at the end of the relevant financial year for the price at which it would have been disposed of at that time.
derivative financial product means a financial product that:
(a) is:
(i) a derivative; or
(ii) either:
(A) a security other than a share in a body or a debenture of a body; or
(B) a collective investment product or financial product referred to in paragraph 764A(1)(ba) of the Act other than an interest in a managed investment scheme,
under which:
(C) financial products (delivery products) will be delivered or an amount paid at a specified time (maturity) in the future; and
(D) the value of the delivery products to be delivered at maturity or the amount to be paid is ultimately determined, derived from or varies by reference to the value or amount of one or more of the following (each, a reference asset):
(I) financial products other than the delivery products;
(II) an asset other than a financial product;
(III) a rate (including an interest rate or exchange rate);
(IV) an index;
provided that the reference asset is not related to the value of:
(V) a share in a body or debenture of a body to which the delivery products relate; or
(VI) the assets of the managed investment scheme to which the delivery products relate; or
(VII) the assets attributable to a class of interests in the managed investment scheme to which the delivery products relate; and
(b) is not able to be traded on a financial market at the time it is acquired.
reference asset:
(a) in relation to a derivative financial product that is a derivative—means the something else that the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from, or varies by reference to and, if the something else is a rate of interest or inflation, the amount on which that rate is applied under the derivative financial product in determining the amount to be paid or received; and
(b) in relation to a derivative financial product that is a security, collective investment product or financial product referred to in paragraph 764A(1)(ba) of the Act other than an interest in a managed investment scheme—has the meaning given by subparagraph (3A)(a)(ii)(D).
relevant financial year means the financial year for which responsible person is calculating indirect costs.
ultimate reference asset, in relation to a derivative financial product and each reference asset for the derivative financial product, means:
(a) to the extent that the reference asset is:
(i) a derivative financial product; or
(ii) rights in an entity that would be an interposed vehicle if it were held by the superannuation entity or scheme; or
(iii) an index that includes a derivative financial product referred to in sub-paragraph (i) or rights in an entity referred to in sub-paragraph (ii),
the asset or assets from which the returns from the derivative financial product or rights in the entity are determined, or any asset or assets that are held in or through any other derivative financial products or entities that would be an interposed vehicle if they were held as part of the superannuation entity or scheme; and
(b) to the extent that the reference asset is not covered by any of the subparagraphs in paragraph (a)—the reference asset.
underlying return, in relation to a derivative financial product, means the return that has been or would be received (as applicable), or loss that would be payable, because of the change in the value of the ultimate reference assets taking into account any leverage, offsets or similar adjustments applied to or between the ultimate reference assets under the terms of each relevant derivative financial product or interest in an interposed vehicle over the relevant financial year for which the derivative financial product was held.
(4) Despite subclause (1) and (3), indirect costs of a collective investment product or an investment option of a managed investment scheme do not include amounts referred to in subclause (3):
(a) where the derivative financial product referred to in subclause (3) is acquired or disposed of for the primary purpose of avoiding or limiting the financial consequences of fluctuations in, or in the value of, receipts or costs of the managed investment scheme whether or not the receipts or costs arise in or through an interposed vehicle; and
(b) where the indirect costs were calculated under subparagraph (3)(a)(ii), to the extent that the difference would result from the incurring of transaction costs in relation to the ultimate reference assets.
Section 101A - ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070 - Indirect costs | Zoe