Deposits and Wholesale Funding Guarantee Scheme - Announcement of Fee Waiver
On 12 October 2008, the Australian Government announced guarantee arrangements for deposits in authorised deposit-taking institutions (ADIs). The arrangements were designed to improve confidence in the Australian financial system.
While initially the Guarantee applied to all deposits of any size, the Australian Government announced that from 28 November 2008, the Deposit and Wholesale Funding Guarantee Scheme would only apply to deposits over $1 million if a Deposit Guarantee Charge, calculated as a percentage of the total deposit amounts above $1 million was paid.
The government has advised that from 1 April 2009 solicitors general trust and prescribed accounts will be exempt from paying the Deposit Guarantee Charge. All funds held in solicitors general trust and prescribed accounts are covered by the government guarantee, at no cost.
This is a great result for the QLS as it was our Business Law Section which proposed the exemption of solicitors trust accounts as the only workable solution. We contributed significantly to the LCA submissions and also actively campaigned our Attorney-General. In this instance the combined advocacy of the Law Council at the national level and the law societies at the state level created sufficient leverage for the Commonwealth to agree to our proposals.
We estimate the dollar value of this success is in excess of $1.5 million per year to Queensland firms alone.
Trust money held in investment accounts and controlled money accounts (where the interest accrues to the client) is not covered by the government's guarantee if the amount deposited is $1 million, or more, unless the law practice opts in to Guarantee coverage. It is suggested that if an amount of $1 million, or more, is held in an investment or controlled money account for a client, the client's instructions should be sought as to whether the client wants the money to be covered by the Guarantee and agrees to pay the Guarantee charge.