Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2019-2020
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY AMENDMENT
(APRA INDUSTRY FUNDING) BILL 2020
AUTHORISED DEPOSIT-TAKING INSTITUTIONS SUPERVISORY LEVY
IMPOSITION AMENDMENT BILL 2020
AUTHORISED NON-OPERATING HOLDING COMPANIES SUPERVISORY
LEVY IMPOSITION AMENDMENT BILL 2020
GENERAL INSURANCE SUPERVISORY LEVY IMPOSITION AMENDMENT
BILL 2020
LIFE INSURANCE SUPERVISORY LEVY IMPOSITION AMENDMENT BILL
2020
RETIREMENT SAVINGS ACCOUNT PROVIDERS SUPERVISORY LEVY
IMPOSITION AMENDMENT BILL 2020
SUPERANNUATION SUPERVISORY LEVY IMPOSITION AMENDMENT BILL
2020
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Josh Frydenberg MP)
Table of contents
Glossary................................................................................................. 1
General outline and financial impact ...................................................... 2
Chapter 1 Financial Institution Supervisory Levy
amendments ................................................................ 3
Chapter 2 Statement of Compatibility with Human Rights .......... 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
APRA Australian Prudential Regulation Authority
APRA Industry Funding Bill the Australian Prudential Regulation
Authority Amendment (APRA Industry
Funding) Bill 2020
CPI Consumer Price Index
Levy Imposition Acts • 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.
Levy Imposition Amendment • the Authorised Deposit-taking Institutions
Bills 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.
1
General outline and financial impact
Financial Institution Supervisory Levy amendments
This Explanatory Memorandum accompanies the Levy Imposition
Amendment Bills, which make amendments to their respective Levy
Imposition Acts to increase the statutory upper limit on the amount of
levies APRA can collect from the entities it prudentially regulates,
ensuring that APRA remains industry funded. The Levy Imposition
Amendment Bills also make amendments to how the indexation factor
used to index the statutory upper limit is calculated.
This Explanatory Memorandum also accompanies the APRA Industry
Funding Bill, which makes amendments to the Australian Prudential
Regulation Authority Act 1998 to ensure that the Commonwealth can
recover the costs of a wider range of activities that are funded by the
Commonwealth and recoverable through the financial institution
supervisory levy framework.
Date of effect: The APRA Industry Funding Bill and the Levy Imposition
Amendment Bills commence on the day after the Bills receive Royal
Assent.
Proposal announced: The proposals have not been previously
announced.
Financial impact: Nil.
Human rights implications: The APRA Industry Funding Bill and Levy
Imposition Amendment Bills do not raise any human rights issue. See
Statement of Compatibility with Human Rights -- Chapter 2.
Compliance cost impact: This measure is estimated to have no more than
minor regulatory impacts.
2
Chapter 1
Financial Institution Supervisory Levy
amendments
Outline of chapter
1.1 This Explanatory Memorandum accompanies the
following Bills:
• 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.
1.2 Those Bills make amendments to the following Acts,
respectively:
• 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.
1.3 The Levy Imposition Amendment Bills make
amendments to increase the statutory upper limit on the amount of
levies APRA can collect from the entities it prudentially regulates,
3
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
and associated Bills
ensuring that APRA remains industry funded. The Levy Imposition
Amendment Bills also make amendments to how the indexation
factor used to index the statutory upper limit is calculated.
1.4 This Explanatory Memorandum also accompanies the
APRA Industry Funding Bill. The APRA Industry Funding Bill
makes amendments to the Australian Prudential Regulation
Authority Act 1998 to ensure that in the dynamic regulatory
environment, the Commonwealth can recover the costs of a wider
range of activities that are funded by the Commonwealth and
recoverable through the financial institution supervisory levy
framework.
Context of amendments
1.5 In 1998, the Government introduced an industry funding
model to recover the operational costs of APRA, and other specific
costs incurred by certain Commonwealth agencies and departments.
1.6 The legislative framework is made up of the Financial
Institutions Supervisory Levies Collection Act 1998, which
prescribes the timing of payment and the collection of the levies.
1.7 The Levy Imposition Acts impose the levies in
prudentially regulated sectors. The Levy Imposition Acts allow the
Treasurer to determine levy amounts and set a limit that is indexed
to CPI on the amount of certain levies that can be determined.
1.8 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.
1.9 On 16 August 2019, the Treasury released a
consultation paper seeking feedback from stakeholders on
changes to the statutory limit. The consultation period ended on
13 September 2019. Taking into consideration feedback from
stakeholders, the Government has decided to make changes to the
financial institution supervisory levy framework to ensure it can
continue to operate as intended and remain fit for purpose.
Summary of new law
1.10 The Levy Imposition Amendment Bills make
amendments to raise the statutory upper limit on certain levy
4
Financial Institution Supervisory Levy amendments
amounts that can be determined under their respective Levy
Imposition Acts to an amount of $10 million for the financial year
commencing 1 July 2020.
1.11 The Levy Imposition Amendment Bills also make
amendments to allow the indexation factor used in calculating the
statutory upper limit to use the most recently published CPI figures
available.
1.12 The APRA Industry Funding Bill makes amendments to
subsection 50(1) of the Australian Prudential Regulation Authority
Act 1998 to ensure that the Commonwealth can recover the costs of
a wider range of activities that are funded by the Commonwealth
and recoverable through the financial institution supervisory levy
framework.
Comparison of key features of new law and current law
New law Current law
The statutory upper limit is an The statutory upper limit is an
amount of $10 million for the amount of $1.5 million for the
financial year commencing 1 July financial year commencing 1 July
2020 and increased by an 2005 and increased by an
indexation factor for later indexation factor for later
financial years. financial years.
The indexation factor for a given The indexation factor for a given
financial year is calculated by financial year is calculated by
dividing the published CPI figure dividing the CPI figure from the
for the most recent quarter by the most recently published March
published CPI figure from the quarter immediately preceding
quarter 12 months before, and the financial year by the CPI
adding 0.03 to it. figure from the previous March
quarter, and adding 0.03 to it.
The Minister is required to make The Minister is required to make
a legislative instrument to a legislative instrument to
determine the amount of levy determine the amount of levy
money payable to the money payable to the
Commonwealth in respect of levy Commonwealth in respect of levy
or each class of levy to cover the or each class of levy to cover the
following costs to the costs to the Commonwealth of:
Commonwealth:
• costs incurred in connection • providing market integrity and
5
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
and associated Bills
New law Current law
with supporting the integrity consumer protection functions
and efficiency of markets in for prudentially regulated
which leviable bodies operate; institutions;
• costs incurred in connection • administering the function of
with promoting the interests making determinations about
of consumers in markets in the release on compassionate
which leviable bodies operate; grounds of benefits that are in
• the cost of administering the a superannuation entity or
function of making retirement savings account;
determinations about the and
release on compassionate • governing and maintaining the
grounds of benefits that are in superannuation transactions
a superannuation entity or network.
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.
Detailed explanation of new law
Statutory upper limit
1.13 The Levy Imposition Amendment Bills increase the
statutory upper limit for the financial year commencing on
1 July 2020 to $10 million. [Schedule 1 of the Authorised Deposit-taking
Institutions Supervisory Levy Imposition Amendment Bill 2020, item 1, the
definition of "statutory upper limit" in section 5 of the Authorised Deposit-
taking Institutions Supervisory Levy Imposition Act 1998; Schedule 1 of the
Authorised Non-operating Holding Companies Supervisory Levy Imposition
Amendment Bill 2020, item 1, the definition of "statutory upper limit" in
section 5 of the Authorised Non-operating Holding Companies Supervisory Levy
Imposition Act 1998; Schedule 1 of the General Insurance Supervisory Levy
Imposition Amendment Bill 2020, item 2, the definition of "statutory upper
limit" in section 6 of the General Insurance Supervisory Levy Imposition
Act 1998; Schedule 1 of the Life Insurance Supervisory Levy Imposition
Amendment Bill 2020, item 1, the definition of "statutory upper limit" in
section 5 of the Life Insurance Supervisory Levy Imposition Act 1998;Schedule
1 of the Retirement Savings Account Providers Supervisory Levy Imposition
Amendment Bill 2020, item 1, the definition of "statutory upper limit" in
section 5 of the Retirement Savings Account Providers Supervisory Levy
Imposition Act 1998; Schedule 1 of the Superannuation Supervisory Levy
6
Financial Institution Supervisory Levy amendments
Imposition Amendment Bill 2020, item 1, the definition of "statutory upper
limit" in section 5 of the Superannuation Supervisory Levy Imposition Act 1998]
1.14 Minor amendments have also been made to the definitions
of statutory upper limit and the provisions that provide that certain
determined levy amounts cannot exceed the statutory limit, to
clarify the operation of the provisions. [Schedule 1 of the Authorised
Deposit-taking Institutions Supervisory Levy Imposition Amendment Bill 2020,
items 2 and 3, the definition of "statutory upper limit" in section 5, and section 7
of the Authorised Deposit-taking Institutions Supervisory Levy Imposition
Act 1998; Schedule 1 of the Authorised Non-operating Holding Companies
Supervisory Levy Imposition Amendment Bill 2020, items 2 and 3, the definition
of "statutory upper limit" in section 5, and section 7 of the Authorised Non-
operating Holding Companies Supervisory Levy Imposition Act 1998;
Schedule 1 of the General Insurance Supervisory Levy Imposition Amendment
Bill 2020, items 1, 3, 4 and 5, the definition of "statutory upper limit" in
section 6, and section 8 of the General Insurance Supervisory Levy Imposition
Act 1998; Schedule 1 of the Life Insurance Supervisory Levy Imposition
Amendment Bill 2020, items 2 and 3, the definition of "statutory upper limit" in
section 5, and section 7 of the Life Insurance Supervisory Levy Imposition
Act 1998; Schedule 1 of the Retirement Savings Account Providers Supervisory
Levy Imposition Amendment Bill 2020, items 2 and 3 , the definition of
"statutory upper limit" in section 5, and section 7 of the Retirement Savings
Account Providers Supervisory Levy Imposition Act 1998; Schedule 1 of the
Superannuation Supervisory Levy Imposition Amendment Bill 2020, items 2 and
3, the definition of "statutory upper limit" in section 5, and section 7 of the
Superannuation Supervisory Levy Imposition Act 1998]
1.15 The statutory upper limit operates to provide a limit on
certain levy amounts that the Treasurer determines each financial
year, and that are payable by leviable bodies and collected by
APRA.
1.16 The amendments will allow APRA to continue to collect a
sufficient amount of levies from all leviable bodies to cover its
costs, ensuring it remains fully industry funded and that all sectors
continue to pay their fair share of the levies.
1.17 The statutory upper limit continues to be indexed, which
ensures that its value does not diminish through inflation.
Indexation factor
1.18 The Levy Imposition Amendment Bills make changes to
the calculation of the indexation factor used to establish the
statutory upper limits applying in later years to allow the indexation
factor to be calculated using the latest published CPI figures. The
Levy Imposition Amendment Bills also make consequential
amendments to the Levy Imposition Acts to ensure that only the
index numbers that are published by the Australian Statistician are
used in the calculation of the indexation factor. [Schedule 1 of the
Authorised Deposit-taking Institutions Supervisory Levy Imposition Amendment
Bill 2020, items 4 and 5, section 8 of the Authorised Deposit-taking Institutions
7
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
and associated Bills
Supervisory Levy Imposition Act 1998; Schedule 1 of the Authorised Non-
operating Holding Companies Supervisory Levy Imposition Amendment Bill
2020, items 4 and 5, in section 8 of the Authorised Non-operating Holding
Companies Supervisory Levy Imposition Act 1998; Schedule 1 of the General
Insurance Supervisory Levy Imposition Amendment Bill 2020, items 6 and 7, in
section 9 of the General Insurance Supervisory Levy Imposition Act 1998;
Schedule 1 of the Life Insurance Supervisory Levy Imposition Amendment Bill
2020, items 4 and 5, in section 8 of the Life Insurance Supervisory Levy
Imposition Act 1998; Schedule 1 of the Retirement Savings Account Providers
Supervisory Levy Imposition Amendment Bill 2020, items 4 and 5, in section 8 of
the Retirement Savings Account Providers Supervisory Levy Imposition Act
1998; Schedule 1 of the Superannuation Supervisory Levy Imposition
Amendment Bill 2020, items 4 and 5, in section 8 of the Superannuation
Supervisory Levy Imposition Act 1998]
1.19 Currently, the indexation factor calculation requires the
use of the published index numbers for the March quarter
immediately preceding the relevant financial year and the previous
March quarter.
1.20 The amendments allow the indexation factor to be the
number worked out by:
• using the index number for the most recent quarter at the
start of the day on which the first determination is made;
and
• dividing that index number by the index number from the
same quarter in the previous year; and
• adding 0.030 to the number worked out from the previous
steps.
1.21 The changes allow the calculation of the indexation factor
used to index the statutory upper limit to use the latest published
CPI figure available. This removes the limitation of having to use
the March quarter published figures and provides flexibility around
the process of calculating the statutory upper limit for the relevant
financial year.
Commonwealth costs
1.22 The APRA Industry Funding Bill makes changes to the
sorts of activities in relation to leviable bodies that the
Commonwealth can recover costs for.
1.23 A new definition of leviable body has been inserted,
which has the same meaning as in the Financial Institutions
Supervisory Levies Collection Act 1998. [Schedule 1 of the APRA
Industry Funding Bill, item 2, the definition of "leviable body" subsection 50(6)
of the Australian Prudential Regulation Authority Act 1998]
8
Financial Institution Supervisory Levy amendments
1.24 The Commonwealth's costs of the following remain
recoverable:
• administering the function of making determinations
about the release on compassionate grounds of benefits
that are in a superannuation entity or retirement savings
account; and
• governing and maintaining the superannuation
transactions network.
1.25 The amendments allow a determination to be made by the
Minister to recover the following additional costs:
• 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;
and
• costs relating directly or indirectly to the regulation of
leviable bodies.
[Schedule 1 of the APRA Industry Funding Bill, item 1, subsection 50(1) of the
Australian Prudential Regulation Authority Act 1998]
1.26 Costs incurred in connection with supporting the integrity
and efficiency of markets can include activities such as inquiries or
market studies into competition issues in financial markets.
1.27 Costs incurred in connection with promoting the interests
of consumers can include the costs of consumer advocacy activities
to improve consumer outcomes.
1.28 It is intended that costs relating directly or indirectly to
the regulation of leviable bodies would capture the costs of a wide
range of regulatory activities, and provide flexibility to support the
financial institution supervisory levy framework in the future.
1.29 These amendments ensure that the Commonwealth can
recover its costs for a wider range activities that are to be industry
funded in the future.
Commencement provisions
1.30 The Levy Imposition Amendment Bills commence on the
day after Royal Assent. [Clause 2 of the Levy Imposition Amendment Bills]
1.31 The APRA Industry Funding Bill commences on the day
after Royal Assent. [Clause 2 of the APRA Industry Funding Bill]
9
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
and associated Bills
Application provisions
1.32 The amendments made by the Levy Imposition Bills
apply in relation to determinations that are made under the
respective Levy Imposition Acts on or after the commencement of
the Levy Imposition Amendment Bills. [Schedule 1 of the Authorised
Deposit-taking Institutions Supervisory Levy Imposition Amendment Bill 2020,
item 6; Schedule 1 of the Authorised Non-operating Holding Companies
Supervisory Levy Imposition Amendment Bill 2020, item 6; Schedule 1 of the
General Insurance Supervisory Levy Imposition Amendment Bill 2020, item 8;
Schedule 1 of the Life Insurance Supervisory Levy Imposition Amendment Bill
2020, item 6; Schedule 1 of the Retirement Savings Account Providers
Supervisory Levy Imposition Amendment Bill 2020, item 6; Schedule 1 of the
Superannuation Supervisory Levy Imposition Amendment Bill 2020, item 6]
1.33 The amendments made by the APRA Industry Funding
Bill apply in relation to a determination under subsection 50(1) of
the Australian Prudential Regulation Authority Act 1998 that is
made on or after the commencement of the APRA Industry Funding
Bill. [Schedule 1 of the APRA Industry Funding Bill, item 3]
10
Chapter 2
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Australian Prudential Regulation Authority Amendment (APRA Industry
Funding) Bill 2020
Authorised Deposit-taking Institutions Supervisory Levy Imposition
Amendment Bill 2020
Authorised Non-operating Holding Companies Supervisory Levy
Imposition Amendment Bill 2020
General Insurance Supervisory Levy Imposition Amendment Bill 2020
Life Insurance Supervisory Levy Imposition Amendment Bill 2020
Retirement Savings Account Providers Supervisory Levy Imposition
Amendment Bill 2020
Superannuation Supervisory Levy Imposition Amendment Bill 2020
2.1 These Bills are compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
2.2 The APRA Industry Funding Bill makes amendments to the
Australian Prudential Regulation Authority Act 1998 to ensure that the
Commonwealth can recover the costs of a wider range of activities that
are funded by the Commonwealth and recoverable through the financial
institution supervisory levy framework.
2.3 The Levy Imposition Amendment Bills make amendments to
raise the statutory upper limit on certain levy amounts that can be
determined under their respective Levy Imposition Acts to an amount of
$10 million for the financial year commencing 1 July 2020.
11
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020
and associated Bills
2.4 The Levy Imposition Amendment Bills also make amendments
to allow the indexation factor used in calculating the statutory upper limit
to use the most recently published CPI figures available.
Human rights implications
2.5 The Bills do not engage any of the applicable rights or freedoms.
Conclusion
2.6 The Bills are compatible with human rights as they do not raise
any human rights issues.
12