Bills Digest No. 102, 2019–20
PDF version [587KB]
Paula Pyburne
Law and Bills Digest Section
10
June 2020
Contents
Purpose of the package of Bills
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Date introduced: 13
May 2020
House: House of
Representatives
Portfolio: Treasury
Commencement: Each
of the Bills commences on the day after Royal Assent.
Links: The links to the
Bills, their Explanatory Memoranda and the second reading speeches can be
found on the Bills’ home pages for the Australian
Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020;
the Authorised
Deposit-taking Institutions Supervisory Levy Imposition Amendment Bill 2020;
the Authorised
Non-operating Holding Companies Supervisory Levy Imposition Amendment Bill
2020; the General
Insurance Supervisory Levy Imposition Amendment Bill 2020; the Life
Insurance Supervisory Levy Imposition Amendment Bill 2020; the Retirement
Savings Account Providers Supervisory Levy Imposition Amendment Bill 2020;
and the Superannuation
Supervisory Levy Imposition Amendment Bill 2020, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at June 2020.
Purpose of
the package of Bills
This Bills Digest relates to a package of Bills being:
The purpose of the APRA Industry Funding Bill is to amend
the Australian
Prudential Regulation Authority Act 1998 (APRA Act) in order to expand
the range of activities that are funded by the Commonwealth and recoverable
through the financial institution supervisory levy framework.
The purpose of the Levy Imposition Bills is to amend the
following statutes:
The amendments to each of those Acts are intended to increase
the statutory upper limit on the amount of levies the Australian Prudential
Regulation Authority (APRA) can collect from the entities that it prudentially
regulates.
The Government has not previously announced the measures
in the package of Bills.[1]
Background
About APRA
The APRA is an independent statutory authority that
supervises institutions across banking, insurance and superannuation, and is
accountable to the Australian Parliament.[2]
It oversees banks, credit unions, building
societies, general insurance and reinsurance companies, life insurance,
friendly societies, and most members of the superannuation industry.
The main purposes for which APRA exists are:
- regulating
bodies in the financial sector in accordance with other laws of the
Commonwealth that provide for prudential regulation or for retirement income
standards
- administering
the financial claims schemes provided for in the Banking Act 1959
and the Insurance
Act 1973 and
- developing
the administrative practices and procedures to be applied in performing that
regulatory role and administration.[3]
APRA and
supervisory levies
From its inception, APRA has been empowered to impose
levies on the institutions which it regulates.[4]
In 1998, the Government introduced levy setting
arrangements to recover the majority of the operational costs of APRA and other
specific costs incurred by certain Commonwealth agencies and departments. The Financial
Institutions Supervisory Levies Collection Act 1998 provides that
certain financial institutions are liable to pay a financial levy[5]
and when the levy is due for payment.[6]
The levies are paid to APRA on behalf of the Commonwealth.[7]
Levies
methodology
The current levies methodology is based on the time APRA
estimates that it spends on supervising each industry sector. The levy has two
components:
- a
restricted levy component, reflecting the cost of supervision for an
industry. This is structured as a percentage rate on assets, subject to minimum
and maximum amounts. Activities covered by this component include costs
associated with APRA’s onsite and offsite analysis, supervision and risk
assessment of individual institutions and its legal and enforcement activities
and
- an unrestricted levy component, which covers costs relating to
‘systemic’ regulation, rather than costs that can be allocated to an individual
institution or industry. While this is also structured as a percentage rate on
assets, the key difference is that there are no minimum or maximum amounts.
This aims to ensure that the larger institutions pay more according to their
size. Activities covered by this component include costs associated with the
development of APRA’s prudential framework for the industries it supervises, as
well as its statistical data collection and publications.[8]
Under the APRA Act, the responsible Minister makes annual
determinations specifying the levy to be paid to the Commonwealth to cover
the cost of activities.[9]
Prior to the release of the determinations, a consultation paper on the
application of the levies is released in order to seek industry views on the
relevant financial year’s levies.[10]
Adjustments to the minimum and maximum parameters for the restricted
levy component are made annually by the Treasurer following industry
consultation so that there is an equitable sharing of the levy burden within
each industry sector.[11]
The unrestricted levy component is directed towards ‘ensuring that the
larger institutions are levied proportionately more in accordance with their
size, compared to smaller ones’.[12]
Role of the
Levy Imposition Acts
A suite of Levy Imposition Acts impose levies on institutions
operating in the APRA-regulated financial services sector.[13]
These Acts largely set a consumer price indexed (CPI) statutory upper limit
and provide for the Minister to make a determination about matters such as the
levy percentages for the restricted and unrestricted
levy components, the minimum and maximum levy
amounts applicable to the restricted levy component, and the date at which a
regulated institution’s levy base is to be calculated.[14]
Problem to
be addressed
According to the Explanatory Memorandum to the package of
Bills:
Since the introduction of the industry funding model, the
scope of the activities being industry funded has expanded. With this
expansion, the yearly levy on one sector has already hit the statutory upper
limit while yearly levies on other sectors continue to increase.[15]
On 16 August 2019, the Treasury circulated a discussion paper
seeking feedback from stakeholders about changes to the statutory limit. The discussion
paper explains the problem to be addressed as follows:
For ADIs, the maximum for the restricted levy
component is now set at the statutory cap ... [F]ollowing an increase in APRA’s
funding, it was necessary to defer $3.1 million in supervisory levies payable
by these largest institutions to ensure they continued to pay their share of
APRA’s supervisory effort.
Reflecting its role, APRA’s regulatory intensity of the
largest institutions has significantly increased over recent years (and
therefore its level of funding). To avoid further deferrals of levies payable
by these institutions, it is appropriate to reconsider the statutory cap
provided for in the legislation.[16]
[emphasis added]
According to Assistant Treasurer, Michael Sukkar:
These Bills will ensure there are no regulatory barriers to
all institutions paying their appropriate share and to bearing the costs of
regulatory activities undertaken by the Commonwealth agencies in relation to
APRA regulated entities, which aim to promote consumer outcomes.
... [they] will ensure the framework of the APRA levies keeps
pace with the evolving regulatory environment and the size of the industry.[17]
Committee consideration
Senate
Standing Committee for Selection of Bills
At its meeting of 13 May 2020, the Senate Standing
Committee for the Selection of Bills deferred consideration of the package of
Bills.[18]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing this Bills Digest the Senate
Committee for the Scrutiny of Bills had not made any comments about any of the
Bills in the package of Bills.
Policy
position of non-government parties/independents
At the time of writing this Bills Digest no comments had
been made about the package of Bills by non-government parties or independent
Members and Senators.
Position of
major interest groups
At the time of writing this Bills Digest stakeholders had
not commented on the package of Bills as introduced into the Parliament.
Importantly, although Treasury issued a discussion paper about the proposed
financial institutions supervisory levies for 2019–20, no submissions by
stakeholders have been published.
Financial
implications
According to the Explanatory Memorandum which relates to the
package of Bills, they will have nil financial impact.[19]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’
compatibility with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of that Act. The Government
considers that the Bills are compatible.[20]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights made no
comment on the APRA package of Bills on the basis that they do not ‘engage, or
only marginally engages, human rights; promotes human rights; and/or
permissibly limits human rights’.[21]
Key issues
and provisions
Amending the
APRA Act
Under subsection 50(1) of the APRA Act, APRA is
authorised to collect revenue to offset expenses incurred by certain other
Commonwealth entities, including the Australian Securities and Investments
Commission (ASIC), the Australian Taxation Office (ATO), the Australian
Competition and Consumer Commission (ACCC), the Gateway Network Governance Body
Ltd (GNGB) and, in 2019–20 only, the Treasury.[22]
These expenses relate to:
- certain
market integrity and consumer protection functions undertaken by ASIC, ACCC and
the ATO
- claims
for the early release of superannuation benefits on compassionate grounds
undertaken by the ATO
- funding
for the Superannuation Complaints Tribunal (ASIC) which will cease to operate
from 1 July 2023
- establishment
of a dedicated analysis and advisory function—the Financial Services
Competition Branch (FSCB)—to investigate foreign exchange and specific
competition issues in Australia’s financial system (ACCC)
- governing
and maintaining the superannuation transaction network (GNGB) and
- in
2019–20 only, a recovery of costs incurred by the Treasury in conducting a
Capability Review of APRA in 2018–19.[23]
Table 1 below sets out the amount of supervisory levies by
agency over a seven year period.
Table 1: Financial Institutions Supervisory levies funding by agency ($’million)
Agency |
FY 13/14 |
FY 14/15 |
FY 15/16 |
FY 16/17 |
FY 17/18 |
FY 18/19 |
FY 19/20 |
APRA |
115.6 |
116.9 |
117.5 |
122.1 |
136.1 |
141.6 |
186.1 |
ASIC |
32.2 |
28.5 |
28.2 |
70.4 |
49.6 |
35.5 |
8.4 |
ATO |
7.3 |
7.1 |
17.9 |
17.8 |
17.8 |
31.0 |
36.3 |
DHS |
4.4 |
4.5 |
4.7 |
4.8 |
5.1 |
- |
- |
ACCC |
- |
- |
- |
- |
3.0 |
3.2 |
3.5 |
SuperStream |
99.5 |
71.7 |
61.8 |
35.5 |
35.5 |
- |
- |
GNGB |
- |
- |
- |
- |
- |
0.6 |
0.7 |
Treasury |
- |
- |
- |
- |
- |
- |
1.0 |
Non-APRA prior year under-collection recouped |
- |
- |
- |
- |
0.9 |
1.5 |
- |
Total |
259.0 |
228.7 |
230.0 |
250.7 |
248.0 |
213.4 |
236.0 |
Source: The Treasury, Financial
Institutions Supervisory Levies methodology, Discussion paper, Treasury,
Canberra, August 2019, p. 2.
Item 2 of the APRA Industry Funding Bill inserts the
definition of leviable body into subsection 50(6) of the APRA
Act so that it has the same meaning as in the Financial Institutions
Supervisory Levies Collection Act, where it is defined as any of the
following types of bodies:
- an
Authorised Deposit-taking Institution (ADI)
- an
authorised Non-operating holding company (NOHC)
- a
life insurance company
- a
general insurance company
- a
private health insurer
- a
Retirement Savings Account (RSA) provider
- a
superannuation entity.[24]
Determining
the amount of levy money
Item 1 of the APRA Industry Funding Bill repeals
and replaces subsection 50(1) of the APRA Act which allows the Minister
to determine certain Commonwealth costs. Under proposed paragraph 50(1)(a)
the Minister is empowered to make written determinations (which are legislative
instruments) for each financial year specifying the amount of the levy
money[25]
payable to the Commonwealth, in respect of that financial year, to cover the
following costs to the Commonwealth:
- costs incurred in connection with supporting the integrity and
efficiency of markets in which leviable bodies operate
- costs incurred in connection with promoting the interests of consumers
in markets in which leviable bodies operate
- the cost of administering the function of making determinations about
the release on compassionate grounds of benefits that are in a superannuation
entity or retirement savings account
-
the cost of governing and maintaining the superannuation transactions
network and
- costs relating directly or indirectly to the regulation of leviable
bodies.
The costs set out in proposed subparagraph 50(1)(a)(i)
expand on those which are expressed in existing subparagraph 50(1)(a)(i) of the
APRA Act so that the costs associated with supporting the integrity of
financial markets are linked to costs for supporting the efficiency of those
markets. This can include ‘activities such as inquiries or market studies into
competition issues in financial markets’.[26]
The costs set out in proposed subparagraph 50(1)(a)(ii)
expand on the existing references to consumer protection in subparagraph
50(1)(a)(i). Under the APRA Industry Funding Bill the reference is broader—to
encompass costs incurred in promoting the interests of consumers in financial
markets. Such costs ‘can include the costs of consumer advocacy activities to
improve consumer outcomes’.[27]
Proposed subparagraphs 50(1)(a)(iii) and (iv) are
in similar terms to existing subparagraphs 50(1)(a)(ii) and (iii) of the APRA
Act.
Proposed subparagraph 50(1)(a)(v) specifies that
those costs relating directly or indirectly to the cost of regulation of
leviable bodies may also be covered by the Ministerial determination. This will
give the government scope to determine levies for the widest range of activities.
Under proposed paragraph 50(1)(b) the Minister is
empowered to make written determinations (which are legislative instruments)
for each financial year in respect of each class of levy, specifying the amount
of the levy money payable to the Commonwealth, in respect of that class of levy
for that financial year, to cover the costs to the Commonwealth of performing
specified prudential regulation functions. Proposed subparagraphs
50(1)(b)(i)–(v) are in equivalent terms to proposed subparagraphs
50(1)(a)(i)–(v) (and so relate to the same functions and costs).
Amending the
Levy Imposition Acts
Changing the
statutory upper limit
Section 5 of the ADI Supervisory Levy Imposition Act defines
the statutory upper limit as:
- in relation to the financial year
commencing on 1 July 2005—$1,500,000 or
- in relation to a later financial
year—the amount calculated by multiplying the statutory upper limit for the
previous financial year by the indexation factor for the later
financial year.
Item 1 of the ADI Levy Imposition Bill repeals and
replaces paragraph (a) of the definition so that the statutory upper
limit for the year commencing on 1 July 2020 is $10,000,000.
Maximum
restricted levy amount
Existing section 7 of the ADI Supervisory Levy Imposition
Act sets out the method by which the levy is to be calculated, including
how to work out the restricted levy component (subsection 7(1A))
and the unrestricted levy component (subsection 7(1B)).
Subsection 7(3) requires the Treasurer to determine, by
legislative instrument the following amounts:
- the maximum restricted levy amount for each financial year
- the minimum restricted levy amount for each financial year
- the restricted levy percentage for each financial year
- the unrestricted levy percentage for each financial year and
- how
an ADI’s levy base is to be worked out.
Item 3 of the ADI Levy Imposition Bill amends
subsection 7(4) so that the maximum restricted levy amount for a financial year
must not exceed the statutory upper limit for that financial year,
rather than the limit that applies at the time the determination is made.
Indexation
factor
As set out above, paragraph (b) of the definition of the
term statutory upper limit makes clear that the amount is subject to
indexation.
Section 8 of the ADI Supervisory Levy Imposition Act
provides the method for calculating the indexation factor. Item 4 of the
ADI Levy Imposition Bill repeals and replaces subsection 8(1) of the Act so
that there is a three step process to be followed when working out the
indexation factor in a financial year:
- Step
1: this step cannot be taken until the Treasurer has made the first of the
required determinations under subsection 7(3) of an amount or a percentage for
a financial year. Once that has been done the starting point is to identify the
index number for the most recent quarter (called for the purposes of this step
the relevant quarter) for which the Australian Statistician has
published an index number—as at the day on which the Treasurer has made his, or
her, first determination. As set out at section 5 of the ADI Supervisory
Levy Imposition Act, the index number for a quarter is the All Groups
Consumer Price Index (CPI) number for that quarter [28]
- Step
2: divide the index number for the relevant quarter by the index number for the
quarter 12 months before the relevant quarter and
- Step
3: add 0.030 to the number worked out in Step 2.
This differs from the current indexation arrangements,
which use the index number of the March quarter immediately preceding the
current financial year (the first March quarter), divided by the index number
for the March quarter that is 12 months before the first March quarter, and
then adding 0.030 to that number.
The arrangements proposed by the Bill will allow the
indexation figure to be calculated using the most recent CPI figure available,
which should better reflect the current economic situation.
The other
Levy Imposition Bills
Each of the Levy Imposition Bills contains amendments
which:
- increase
the statutory upper limit to $10,000,000 from 1 July 2020[29]
- specify
that the levy amount must not exceed the statutory upper limit for a financial
year[30]
and
- insert
the method for working out the indexation factor for a financial year in
equivalent terms to that set out in the ADI Levy Imposition Bill.[31]
[1]. Explanatory
Memorandum, Australian Prudential Regulation Authority Amendment (APRA
Industry Funding) Bill 2020 [and associated Bills], p. 2.
[2]. Australian
Prudential Regulation Authority (APRA), About APRA, APRA website.
[3]. APRA
Act, subsection 8(1).
[4]. L
Jones, Australian
Prudential Regulation Authority Bill 1998, Bills digest, 203, 1997–98,
Department of the Parliamentary Library, Canberra, 1998, p. 8.
[5]. Financial
Institutions Supervisory Levies Collection Act, section 8.
[6]. Financial
Institutions Supervisory Levies Collection Act, section 9.
[7]. Financial
Institutions Supervisory Levies Collection Act, section 11.
[8]. The
Treasury, Financial
Institutions Supervisory Levies methodology, Discussion paper,
Treasury, Canberra, August 2019, p. 4.
[9]. The
Treasury, The
Financial Industry Supervisory Levy Methodology Review, Response paper,
Treasury, Canberra, 16 April 2014, p. 1; section 50 of the APRA
Act.
[10]. See
for example, The Treasury, Proposed Financial
Institutions Supervisory Levies 2019–20, Treasury, Canberra, June 2019.
[11]. The
Treasury, Financial
Institutions Supervisory Levies methodology, op. cit., p. 8.
[12]. Ibid.
[13]. That
is, the Authorised
Deposit-taking Institutions Supervisory Levy Imposition Act 1998; the Authorised
Non-operating Holding Companies Supervisory Levy Imposition Act 1998;
the General
Insurance Supervisory Levy Imposition Act 1998; the Life Insurance
Supervisory Levy Imposition Act 1998; the Retirement Savings
Account Providers Supervisory Levy Imposition Act 1998 and the Superannuation
Supervisory Levy Imposition Act 1998.
[14]. The
Treasury, Financial
Institutions Supervisory Levies methodology, op. cit., p. 1.
[15]. Explanatory
Memorandum, Australian Prudential Regulation Authority Amendment (APRA
Industry Funding) Bill 2020 [and associated Bills], p. 4.
[16]. The
Treasury, Financial
Institutions Supervisory Levies methodology, op. cit., p. 8.
[17]. M
Sukkar, ‘Second
reading speech: Australian Prudential Regulation Authority Amendment (APRA
Industry Funding) Bill 2020’, House of Representatives, Debates, 13
May 2020, p. 3250.
[18]. Senate
Standing Committee for Selection of Bills, Report,
4, 2020, The Senate, Canberra, 14 May 2020.
[19]. Explanatory
Memorandum, Australian Prudential Regulation Authority Amendment (APRA
Industry Funding) Bill 2020 [and associated Bills], p. 2.
[20]. The
Statement of Compatibility with Human Rights can be found at pages 11–12 of the
Explanatory
Memorandum to the Australian Prudential Regulation Authority Amendment
(APRA Industry Funding) Bill 2020 [and associated Bills].
[21]. Parliamentary
Joint Committee on Human Rights (PJCHR), Report,
6, 2020, 20 May 2020, p. 21.
[22]. APRA,
Cost
recovery implementation statement: prudential regulation of financial
institutions, APRA, Sydney, 3 July 2019, p. 7.
[23]. Ibid.,
pp. 7–8.
[24]. Financial
Institutions Supervisory Levies Collection Act 1998, section 7.
[25]. APRA
Act, subsection 50(6) defines levy money: (a) in relation to
levy, means any amount paid or payable to the Commonwealth in respect of levy;
or (b) in relation to a particular class of levy, means any amount paid or
payable to the Commonwealth in respect of that class of levy.
[26]. Explanatory
Memorandum, Australian Prudential Regulation Authority Amendment (APRA
Industry Funding) Bill 2020 [and associated Bills], p. 9.
[27]. Ibid.
[28]. Australian
Bureau of Statistics (ABS), Consumer
Price Index, Australia, March 2020, cat. No. 6401.0, ABS, Canberra, 29 April 2020.
[29]. Authorised
Non-operating Holding Companies Supervisory Levy Imposition Act, proposed
paragraph (a) of the definition of statutory upper limit in
section 5 inserted by item 1 of the NOHC Supervisory Levy Bill; the General
Insurance Supervisory Levy Imposition Act, proposed paragraph (a) of
the definition of statutory upper limit in section 6 inserted by item
2 of the General Insurance Supervisory Levy Bill; the Life Insurance
Supervisory Levy Imposition Act, proposed paragraph (a) of the
definition of statutory upper limit in section 5 inserted by item
1 of the Life Insurance Supervisory Levy Bill; the Retirement Savings
Account Providers Supervisory Levy Imposition Act, proposed paragraph
(a) of the definition of statutory upper limit in section 5
inserted by item 1 of the RSA Providers Supervisory Levy Bill; and
the Superannuation Supervisory Levy Imposition Act, proposed
paragraph (a) of the definition of statutory upper limit in
section 5 inserted by item 1 of the Superannuation Supervisory Levy
Bill.
[30]. Authorised
Non-operating Holding Companies Supervisory Levy Imposition Act, subsection
7(1) amended by item 3 of the NOHC Supervisory Levy Bill; the General
Insurance Supervisory Levy Imposition Act, subsection 8(4) amended by item
4 of the General Insurance Supervisory Levy Bill; the Life Insurance
Supervisory Levy Imposition Act, subsection 7(4) amended by
item 3 of the Life Insurance Supervisory Levy Bill; the Retirement
Savings Account Providers Supervisory Levy Imposition Act, subsection 7(4)
amended by item 3 of the RSA Providers Supervisory Levy Bill; and
the Superannuation Supervisory Levy Imposition Act, subsection 7(4)
amended by item 3 of the Superannuation Supervisory Levy Bill.
[31]. Authorised
Non-operating Holding Companies Supervisory Levy Imposition Act, proposed
subsection 8(1) inserted by item 4 of the NOHC Supervisory Levy
Bill; the General Insurance Supervisory Levy Imposition Act, proposed
subsection 9(1) inserted by item 6 of the General Insurance
Supervisory Levy Bill; the Life Insurance Supervisory Levy Imposition Act, proposed
subsection 8(1) inserted by item 4 of the Life Insurance Supervisory
Levy Bill; the Retirement Savings Account Providers Supervisory Levy
Imposition Act, proposed subsection 8(1) inserted by item 4
of the RSA Providers Supervisory Levy Bill; and the Superannuation
Supervisory Levy Imposition Act, proposed subsection 8(1) inserted
by item 4 of the Superannuation Supervisory Levy Bill.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
![Creative commons logo](/-/media/Images/cc.gif?la=en&hash=6E8356E3BD4744A5FDDE90E61B2B07FF7DDCEDB0)
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.