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Legislative Assembly for the ACT: 1999 Week 3 Hansard (25 March) . . Page.. 821 ..

MR HUMPHRIES (continuing):

Until a few years ago the trustee legislation in each Australian State and Territory had a similar list. However, the unsatisfactory nature of the lists has led to a new approach being adopted in most States and the Northern Territory. If the Assembly passes this legislation, only Queensland will still have a list system, and I understand that the new approach is under active consideration in that State also. The most significant defect of the list in the Act is that the listed investments are generally accepted as being unsuitable for many trusts.

Trusts that are likely to have a life in excess of 20 years are not uncommon. It is generally considered that for the interests of beneficiaries to be protected, such a trust, and in many cases a trust with a much shorter duration, should include investments in all asset classes. Significantly, the listed investments do not include investments in residential or commercial real estate or in shares in listed companies. Members will be aware that such investments are not without risk, but, Mr Speaker, this Bill does not suggest the Government thinks otherwise. However, I am informed that investments in these assets will often be in the interests of beneficiaries.

In addition, members will be aware that over the last five or so years the level of government debt in Australia has contracted quite markedly. This has had the effect that the pool of investments that are available, and that are listed, has contracted. In theory these defects could be overcome by amending the list. However, given the changes that are occurring in investment markets, it would not be long before that list was again out of date and in need of further amendment. In any event, constantly amending the list raises the major difficulty with any such list. It can be looked on as a recommendation from the Government that investments should be made in the listed assets and that these investments are safe and suitable for all trusts. The list was never intended as a recommendation from the Government, but this perception is unavoidable while there is a list.

To overcome these difficulties, the Bill amends the Act to allow a trustee to invest in any form of investment. However, it goes on to require the trustee to exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons. If the trustee is a professional trustee or a professional money manager, a higher standard is imposed.

The Bill, Mr Speaker, goes on to direct a trustee's attention to a number of matters that should be taken into account when investment decisions are made. These include the needs of beneficiaries, the value of the trust and the likelihood of a gain or loss being incurred. The trustee is also required to review the investments that have been made at least once a year. These amendments are in line with those that have been made interstate.

The Bill also makes amendments to the Public Trustee Act 1985 to allow the Public Trustee to accommodate the responsibilities that will be cast on it by the amendments. In addition a minor consequential amendment is made to the Financial Management Act 1996.

Debate (on motion by Mr Stanhope ) adjourned.

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