Bills Digest No. 207 1997-98
Superannuation Supervisory Levy Imposition Bill 1998
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details
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
Portfolio: Treasury
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 regulatory agencies should collect from the financial entities which
they regulate enough revenue to fund themselves, but not more. As far
as practicable, the regulatory agencies should charge each financial entity
for direct services provided, and levy sectors of industry to meet the
general costs of their regulation.(2)
The government has stated its aim to be:
To establish an administratively simple and uniform scheme based on the
principle of full cost recover from the institutional categories that
are regulated.(3)
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:
- The Treasurer must determine, for each financial year, the amount
of levy money received during the financial year that is to be available
to cover the costs to the Commonwealth of providing market integrity
and consumer protection functions for prudentially regulated institutions.
That amount is retained in the Consolidated Revenue Fund;
- The balance of the levy money (after 'taking out' the amount referred
to above) is to be paid to APRA (clause 50 of the Australian Prudential
Regulation Authority Bill 1998).
It is necessary to understand the meaning of the following
two terms so as to understand the levy regime:
- An 'authorised deposit taking institution' is a body corporate which
is authorised, to carry on banking business in Australia under the Banking
Act 1959. It will cover banks, building societies, credit unions
etc.
- An 'authorised non-operating holding company' is a new type of financial
entity designed to allow the formation of financial conglomerates which
are to be allowed to hold more than one deposit-taking licence.
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).
Amount of the levy - deposit-taking institutions,
insurance companies, superannuation entities and retirement savings account
providers
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.
- Financial System Inquiry, Financial System Inquiry Final Report,
(Mr Stan Wallis, Inquiry Chairman), Canberra, March 1997.
- Ibid., 532.
- Australia, House of Representatives, Treasurer, Second Reading speech
in respect of the Company Law Review Bill 1997, Parliamentary
Debates, 26 March 1998, 1160.
Lee Jones
14 May 1998
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1998
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Published by the Department of the Parliamentary Library, 1998.
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