Corporate regulation—ASIC, APRA, ACCC, ATO, and AUSTRAC funding and governance changes

Budget Review 2014–15 Index

Kali Sanyal

The Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA) and the Australian Competition and Consumer Commission (ACCC) are the principal regulatory agencies that implement government policy on corporate regulation.  The Australian Taxation Office (ATO) is the principal organisation for revenue collection and is entrusted with the role of ensuring the integrity of the tax system.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is responsible for regulating anti-money laundering and counter terrorism financing (AML/CTF) under the Attorney General’s Department.

The 2014–15 Budget announced savings measures by reducing funding on departmental operations of ASIC and ATO, and extended regulatory programs under ACCC. These institutions are engaged in dealing with corporate insider trading, breach of consumer rights and anti-competitive conduct, and tax evasion as part of their major enforcement obligations.

ASIC and the 2014–15 Budget

ASIC’s regulatory responsibilities include ensuring market integrity in the financial services sector; supervising investment management; capital markets, corporations and their auditors and liquidators; and overseeing market operators. These duties form part of its broader mandate to supervise, facilitate and improve the performance of the financial system, and administer Commonwealth laws regarding corporations and businesses.

In the 2014–15 Budget, the Government announced that funding for ASIC’s operations will be reduced by $120.1 million over five years in order to match the policy priorities of the new government.[1] 

Cash appropriations for operational expenses were $363.8 million in 2012–13 and $373.2 million in 2013–14. [2] The 2014–15 Budget allocates $325.1 million in 2014–15, down by 13 per cent from 2013–14. In the forward estimates period ASIC will receive cash appropriations for operating expenses, on average, of $305.2 million each year, down by 18 per cent from 2013–14.[3]

The Government has yet to detail the rationale for reducing operational funding other than the need to repair the budget. [4] Meanwhile media reports quoted the Hon Steven Ciobo, the Parliamentary Secretary to the Treasurer as saying there is ‘scope for the financial services industry … to self-regulate more’.[5]

Of late, community attention has focussed on ASIC’s role and balancing act between regulatory and enforcement issues. One aspect of that attention is how ASIC deals with corporate fraud, and insider trading which is ‘among the most complicated types of offence under our corporations law’ and ‘very difficult to prosecute’.[6] The second issue is how ASIC has been dealing with the changes under the Future of Financial Advice (FOFA) Reform package.

Following some financial collapses in recent years and, in particular, instances of deceptive conduct in financial advice services, the Australian Parliament initiated an inquiry in June 2013 to scrutinise ASIC’s performance. The Senate Economics References Committee has already conducted five public hearings in 2014 to receive community feedback on the issue and is expected to release its recommendations at the end of May 2014.[7] 

Implications of the ASIC funding cut

According to one journalist, ASIC has some of the broadest responsibilities of any corporate regulator in the world.  That includes big investigations, like the probe that led to the recent arrest of a former Bureau of Statistics employee and an ex-NAB trader over alleged insider trading.[8]

This reduction may force ASIC to be more selective in terms of the matters that they choose to investigate and then ultimately prosecute. Its decisions could, in the long term, have an impact on people’s confidence in capital markets. One commentator has noted:

…that would be most regrettable because we do need to have a corporate regulator that enforces our corporate laws very strongly in order to give people confidence in our capital markets.[9]

ACCC and the 2014–15 Budget

The ACCC (including Australia’s Energy Regulator – AER) is mandated to enforce the Competition and Consumer Act 2010, and is the national regulator of the energy sector in Australia. The ACCC’s focus in 2014–15 will be to ensure consumer protection, handling emerging consumer issues in the online marketplace, and in the supermarket and fuel sectors.

The 2014–15 Budget appropriated cash of $167.5 million to ACCC for operational expenses. In the forward estimates period, ACCC will continue to receive, on average, $163.3 million each year.[10]

In addition, the Government earmarked an additional $17.7 million in 2017–18 as part of a package of $68.5 million over four years from 2014–15 that was included in the Mid-Year Economic and Fiscal Outlook 2013–14. The fund is to extend ACCC ‘s role to monitor prices and protect consumer interests following repeal of the carbon tax.[11]

There is also $1.4 million over four years for the ACCC to administer a reform of unfair contract relief to small business under the Australian Consumer Law, similar to the relief provisions available currently to consumers in general. In order to make the relationship with big businesses fairer to the small business sector, the Government announced that legislative changes would be introduced.[12]

In addition, the Government also announced that the transfer of the National Competition Council (NCC) Secretariat to the ACCC, and thus saving $3.6 million over the forward estimate period.[13]

Funding to the Australian Taxation Office (ATO)

The taxation and superannuation systems are part of Australia's social and economic infrastructure. As the principal revenue collection agency of the Australian Government, the role of the Australian Taxation Office also includes aspects of administering the superannuation system, acting as custodian of the Australian Business Register and managing business operations of the Australian Valuation Office.

The Budget 2014–15 announced savings of $142.8 million over three years from 2015–16 by reducing the ATO’s resourcing.[14]

On 6 November 2013, the Treasurer, announced that the Government would act on changes to a number of announced but not legislated tax measures.

Of the 92 unlegislated and unresolved tax and superannuation changes, the Government will proceed with 18 initiatives. A further three initiatives will be significantly amended. The Government will not proceed with seven initiatives.[15]

There was no announcement regarding the other initiatives. It is believed that those measures are on hold and the Government may revisit them after consultation with the stakeholders.

Among the measures the Government will not proceed with are:

  • Self-Education Expenses Cap (announced as part of the 2013–14 Budget, and delayed for one year in the 2013 Economic Statement)
  • $1.8 billion Fringe Benefits Tax on the car industry. (announced the measure on 16 July 2013 and documented it in the 2013 Economic Statement)
  • Tax on Superannuation Pensions – tax on earnings on super assets supporting retirement income streams (announced in April 2013 and documented in the 2013–14 Budget)

According to the Mid-Year Economic and Fiscal Outlook 2013–14 released on 1 December 2013, these changes would reduce ATO’s operational expenses by $9.1 million in 2013–14, and $10.6 million in 2014–15. There will be further savings of $33.2 million in the following two years.[16] 

The 2014–15 Budget savings measures include these previous announcements. The ATO will also be subject to an efficiency dividend by bringing forward staff reductions that had been already planned in response to efficiency dividends and decisions of the previous government. The Government now plans to bring forward the reduction of staffing numbers that were due to occur in 2015–16 (1,600). A total reduction of 4,700 staff is planned between 2013–14 and 2017–18.[17]

Australian Prudential Regulatory Authority (APRA)

In the 2014–15 Budget, the Government announced that the prudential regulation of health funds functions of the Private Health Insurance Administration Council (PHIAC) will be merged into APRA. The rest of the function of the PHIAC will merge into the Australian Competition and Consumer Commission (ACCC). The winding up of the council will start from 2014–15 as part of the measures of the government initiative to reduce the number of agencies.[18] There is no revenue implication announced in the 2014–15 Budget.

Small Business and Family Enterprise Ombudsman – a new government initiative

There will be a further $8 million available to the Treasury to establish the Small Business and Family Enterprise Ombudsman, as an integral entity for small business operators to seek government services and assistance. [19] 

Australian Transaction Reports and Analysis Centre—industry contribution

The 2014–15 Budget announced that there would be an increase of revenue by $79.1 million over four years, through a phased increase in the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) industry levy under the Attorney General’s Department.[20]

Currently they agency recovers around 53 per cent of its total expenses from industry. Under this measure, industry contributions to AUSTRAC’s total expenses will increase to 70 per cent in 2014–15, 90 per cent in 2015–16 and 2016–17, and 100 per cent in 2017–18.[21]

The Government also announced that the current $300 base component fee for AUSTRAC’s 3,638 smallest regulated entities would be removed. Under the new arrangements, only about 1,029 reporting large entities will be required to contribute towards AUSTRAC’s expenses.[22]

[1].       The budget figures in this article have been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2014–15, 2014, p. 214, accessed 16 May 2014.

[2].           Australian Government, Portfolio budget statements 2013–14: budget related paper no. 1.18: Treasury Portfolio, 2013, p. 167, accessed 16 May 2014; Australian Government, Portfolio budget statements 2014–15: budget related paper no. 1.16: Treasury Portfolio, 2014, p. 168, accessed 16 May 2014.

[3].           Ibid.

[4].        L Metherell, ‘ASIC's funding cut in move away from financial sector oversight’, ABC News website, Budget 2014,15 May 2014, accessed 15 May 2014.

[5].        Ibid.

[6].           E Knight, ‘Regulator bags a bigger catch’, the Sydney Morning Herald, 1 August 2012, p. 1, accessed 19 May 2014.

[7].           Senate Economics References Committee, Inquiry into the Performance of the Australian Securities and Investments Commission, Senate Economics References Committee website, accessed 16 May 2014.

[8].           T Nolan, Government cuts ASIC funding, hints at more corporate self-regulation, ABC News, The World Today, 15 May 2014, accessed 19 May 2014.

[9].           Ibid.

[10].         Portfolio budget statements 2014–15: budget related paper no. 1.16: Treasury Portfolio, op. cit., p. 100, accessed.

[11].         Budget Measures: budget paper no. 2: 2014–15, 2014, op. cit., p. 213.

[12].         Ibid.

[13].         Budget Measures: budget paper no. 2: 2014–15, 2014, op. cit., p. 217.

[14].         Ibid, p. 214.

[15].         J Hockey (Treasurer), Restoring Integrity In the Australian Tax System, media release, 6 November 2013, accessed 19 May 2014.

[16].         Australian Government, Mid-Year Economic and Fiscal Outlook 2013–14, Expense Measures, Appendix A: Policy decisions taken since the 2013–14 Budget, p.111, 1 December 2013, accessed 19 May 2014.

[17].         Australian Government, Budget measures: budget paper no. 2: 2014–15, 2014, op. cit., p. 214.

[18].         M Cormann (Finance Minister), Delivering A Smaller, More Rational Government, media release, 13 May 2014, accessed 20 May 2014.

[19].         B Billson (Minister for Small Business), Access to the Commonwealth made easier for small business, media release, 13  May 2014, accessed 15 May 2014.

[20].         Budget measures: budget paper no. 2: 2014–15, op. cit., p. 9.

[21].         Ibid.

[22].         Ibid.


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