Bills Digest No. 209 1997-98
Life Insurance 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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