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Passage History
Purpose
Background
Main Provisions
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Authorised Deposit-Taking Institutions Supervisory Levy Imposition Bill 1998
Authorised Non-Operating Holding Companies Supervisory Levy Imposition Bill 1998
Superannuation Supervisory Levy Imposition Bill 1998
Retirement Savings Account Providers Supervisory Levy Imposition Bill 1998
Life Insurance Supervisory Levy Imposition Bill 1998
General Insurance Supervisory Levy Imposition Bill 1998
Date Introduced: 26 March 1998
House: House of Representatives
Commencement: Each of the Bills with the exception of the Authorised Deposit-taking Institutions Supervisory Levy Bill 1998, commence on the day that the Australian Prudential Regulation Authority Act 1998 commences.
The Authorised Deposit-taking Institutions Supervisory Levy Bill 1998 commences on the earlier of a date to be fixed by proclamation and two years after the Act receives the Royal Assent.
If the day of commencement of any of the Acts is other than 1 July of any year, the Acts have effect subject to modification provided in the regulations.
To impose levies on those industries that will be prudentially regulated by the Australian Prudential Regulation Authority (APRA).
The Financial System Inquiry Final Report (FSI Report - sometimes referred to as the 'Wallis Inquiry report') recommended that a single Commonwealth prudential regulator should be established for the deposit taking (including banks, building societies and credit unions), insurance (general and life) and superannuation industries (including retirement savings accounts).(1) The Government has resolved to implement that recommendation by the creation of APRA. The creation of APRA will result in the abolition of the Insurance and Superannuation Commission and eventually the state-based structure for regulation of building societies and credit unions.
At present, the various industries are regulated by different authorities which have separate funding mechanisms. This has created significant disparities between the nature and level of funding of each regulator.
Recommendation 104 of the FSI Report is headed 'Regulatory agencies' charges should reflect their costs' and states:
The government has stated its aim to be:
In broad terms, the proposed charges are similar to those currently imposed on building societies, credit unions and insurance and superannuation entities. The regulatory functions of the Reserve Bank are presently funded by the interest forgone on non-callable deposits held by the Reserve Bank (a requirement which will be abolished by the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998).
The funds received as a result of the imposition of these six levies are to be applied in two ways:
It is necessary to understand the meaning of the following two terms so as to understand the levy regime:
Further information about the Financial Sector Inquiry Final Report can be obtained from Parliamentary Library Research Paper No. 16 of 1996-97, entitled The Wallis Report on the Australian Financial System: Summary and Critique, by Phil Hanratty.
(Clauses and clause numbering in each of the Bills are consistent unless otherwise stated.)
Each of these Bills sets up the mechanism for determining the amount of the levy that each type of institution is liable to pay. Liability for the levy will then be created by the Financial Institutions Supervisory Levies Collection Bill 1998 (clause 6 of each Bill; clause 7 of the General Insurance Supervisory Levy Imposition Bill 1998).
The amount of the levy is determined under clause 7 of each Bill (except the General Insurance Supervisory Levy Imposition Bill 1998 under which clause 8 is the relevant provision).
The levy payable by each type of institution, except authorised non-operating holding companies (see below), is a percentage (levy percentage) of the particular entity's asset value. The levy percentage is determined by the Treasurer for each financial year. If the amount calculated is more than the maximum levy amount or less than the minimum levy amount, the levy imposed is limited to the maximum levy amount or increased to the minimum levy amount, as the case may be. The maximum and minimum levy amounts are determined by the Treasurer each financial year.
The Bills provide that the Treasurer cannot set the maximum levy amount at more than $500 000 for superannuation entities, retirement savings account providers and life and general insurance companies and $1 000 000 for authorised deposit-taking institutions. Those amount are indexed in accordance with the consumer price index.
The Treasurer must also determine how an entity's asset value is to be calculated.
Amount of the levy - non-operating holding companies
The levy payable by authorised non-operating holding companies (authorised NOHCs) is determined each financial year by the Treasurer. There is no requirement that the levy bear any relationship to the entity's asset value. However, the levy cannot exceed $500 000 (clause 7 of the Authorised Non-operating Holding Companies supervisory Levy Imposition Bill 1998).
The Explanatory Memorandum to the Bills provides that the amount levied on authorised NOHCs will be a flat amount because the entities are not expected to hold significant assets but may require intensive supervision.
Lee Jones
14 May 1998
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.
ISSN 1328-8091
© Commonwealth of Australia 1998
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Published by the Department of the Parliamentary Library, 1998.