Mr BROUGH (Minister for Revenue and Assistant Treasurer) (5:44 PM) —The Superannuation Supervisory Levy Imposition Amendment Bill 2004 and related bills implement the legislative elements of the government’s response to The review of financial sector levies. In undertaking certain consumer protection and market integrity functions relating to prudential regulatory entities, the Australian Prudential Regulatory Authority, as the prudential supervisor, the Australian Securities and Investments Commission and the Australian Taxation Office perform vital tasks in Australia’s financial system. The government is committed to ensuring that the three regulators are properly resourced to undertake these tasks effectively and efficiently. It is therefore important that the financial sector levies, which fund the regulatory activities, are able to meet the evolving needs of prudential supervision and raise the funds from financial institutions in an equitable manner.

The existing levy determination arrangements were established following the 1997 financial systems inquiry, and acceptance of the general principles of the cost of financial regulation should be borne by those who benefit from it. The arrangements are evaluated regularly, every few years, to ensure that they remain appropriate. A requirement of the most recent review was that it balance accountability, efficiency, transparency and equity with simplicity of administration and collection to ensure that the recommended options have the capacity to provide stable and effective funding for the regulators on a sustainable basis. Fundamentally, the review’s task was to consider how the burden of funding the relevant regulatory activities might best be distributed amongst the prudential regulated industries and institutions. The government has accepted the review’s recommendations subject to their not causing increases in levies paid by the smallest financial sector entities.

While some key features of the current levy determination framework remain appropriate and are being retained, a number of important adjustments to the framework are being introduced through this package of bills. The amendments generally allow for increased flexibility in the way the levies are determined for 2005-06 and subsequent years. The intent is to ensure that the levies meet the objectives set for the review. The legislative package restructures the levies into two components. The first component reflects the cost of supervising an institution and retains the structure of the existing levy arrangements: a flat proportion of assets subject to minimum and maximum levy amounts for individual institutions. The second new component reflects system impact and vertical equity considerations and is calculated as a proportion of assets. There is an overall cap on the amount that may be raised through this component by no minimum or maximum amount applying to individual institutions. The statutory upper limit on the maximum amount of the first levy component is being increased to $1.5 million for the 2005-06 year, with an increased indexation factor applying in later years. This overcomes an inequity that has prevented the largest banks from being levied significantly more than smaller and less complex banks.

Small APRA funds are being recognised as a separate class of superannuation fund, with the intention that the SAFs be levied at a lower rate than other funds. This recognises that a single approved trust commonly manages a large number of SAFs and that the primary focus of the prudential attention is on the trustee rather than on each of the individual funds. In addition, authorised non-operating holding companies in the general insurance sector are also being made subject to the levies for the first time. This brings them into line with the arrangements for the authorised deposit-taking institutions sector. I thank the member for Mitchell and the member for Hunter for their contributions and for supporting the bill. I commend the bill to the House.

Question agreed to.

Bill read a second time.