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Governance Review Implementation (Treasury Portfolio Agencies) Bill 2007

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2004-2005-2006-2007

the parliament of the commonwealth of australia

house of representatives

Governance review implementation (treasury portfolio agencies) bill 2007

explanatory memorandum

( Circulated by the authority of the Treasurer,

The Hon Peter Costello, MP)





Table of Contents

 

Glossary........................................................................................................... 1

Outline.............................................................................................................. 2

Financial Impact Statement....................................................................... 3

Introduction.................................................................................................... 4

Schedule 1 Amendments............................................................................... 5

Schedule 2 Application and transitional provisions......................... 25

Schedule 3 Technical amendments relating to legislative instruments       31

 

 





 

1  

Glossary

1.1               The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

APRA Act

Australian Prudential Regulation Authority Act 1998

ASC Act

Australian Securities Commission Act 1989

ASIC Act

Australian Securities and Investments Commission Act 2001

Bill

Governance Review Implementation (Treasury Portfolio Agencies) Bill 2007

CAC Act

Commonwealth Authorities and Companies Act 1997

CRF

Consolidated Revenue Fund

Corporations Act

Corporations Act 2001

FMA Act

Financial Management and Accountability Act 1997

FMA Regulations

Financial Management and Accountability Regulations 1997

Public Service Act

Public Service Act 1999

Uhrig Review

Review of the Corporate Governance of Statutory Authorities and Office Holders , June 2003

 



 

2  

Outline

2.1               The Governance Review Implementation (Treasury Portfolio Agencies) Bill 2007 (the Bill) seeks to improve the corporate governance of three statutory authorities in the Treasury portfolio — the Australian Securities and Investments Commission (ASIC), the Corporations and Markets Advisory Committee (CAMAC) and the Australian Prudential Regulation Authority (APRA).  The Bill is one part of a broader exercise within the Australian Government to improve transparency and consistency in relation to governance arrangements for statutory authorities and office holders.

2.2               In August 2004, the Australian Government announced its response to the June 2003 Review of the Corporate Governance of Statutory Authorities and Office Holders (the Uhrig Review).  As part of the response, the Australian Government agreed that the Financial Management and Accountability Act 1997 (the FMA Act), should be applied to statutory authorities where it is appropriate they be legally and financially part of the Commonwealth and they do not need to own assets.

2.3               The Bill implements this decision in relation to ASIC, CAMAC and APRA, transferring them from the Commonwealth Authorities and Companies Act 1997 (the CAC Act) to the FMA Act.

2.4               Under the new regime, the three agencies will hold money and property on behalf of the Commonwealth, rather than in their own right.  This reflects their status as agencies that are largely budget-funded, in contrast to agencies that raise funds from commercial activities.

2.5               Similarly, the agencies will have the power to enter into contracts on behalf of the Commonwealth.  ASIC and APRA will retain the power to enter into contracts on their own behalf, however the intention is that this power will only be used for regulatory purposes (for example, regulatory agreements).

2.6               As a consequence of the above changes, a number of technical amendments are required.

2.7               First, a number of provisions in the Corporations Act 2001 (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (ASIC Act) will be amended to reflect that ASIC will now be acting as a trustee on behalf of the Commonwealth in relation to moneys and properties held on trust.

2.8               Second, the statutory regime for unclaimed moneys under Part 9.7 of the Corporations Act will be managed through a statutory special account, the Companies and Unclaimed Moneys Special Account, to be established in the ASIC Act.

2.9               Third, the Australian Prudential Regulation Authority Special Account will be established in the Australian Prudential Regulation Authority Act 1998 (APRA Act) for funding the operations of APRA.  APRA’s current funding sources will be received on behalf of the Commonwealth and credited to the Account.

2.10           The Bill will also define the reporting requirements of ASIC, CAMAC and APRA under the FMA Act and the responsibilities of the Chief Executives of the agencies.

2.11           It is important to note that the above changes will not adversely affect the operational capabilities or independence of the statutory bodies. As noted in the Uhrig Review, it is the authority’s legislative framework (and not its financial framework) that establishes the level of operational independence required to exercise its statutory responsibilities effectively.

Financial Impact Statement

2.12           There is no financial impact.



 

3  

Introduction

Clause 1:  Short title

3.1               This Act may be cited as the Governance Review Implementation (Treasury Portfolio Agencies) Act 2007 .

Clause 2:  Commencement

3.2               The short title and commencement provisions of the Act commence on the day on which this Act receives the Royal Assent.

Clause 3:  Schedules

3.3               Schedules 1 and 2 will commence on 1 July 2007 .  Schedule 3 will commence on the day on which this Act receives the Royal Assent.  

 



 

4  

Schedule 1 Amendments

4.1               Schedule 1 amends the ASIC Act, the Corporations Act and the APRA Act in order for ASIC, CAMAC and APRA to conform to the requirements of the FMA Act.  Minor consequential amendments are also made to the Financial Institutions Supervisory Levies Collection Act 1998 .

Part 1 — ASIC

Division 1 — Main amendments

Definitions

Notes on items

4.2               Item 1 will repeal the definition of ‘trust money’ in subsection 5(1) of the ASIC Act.  Instead, the definition of trust money found in section 16 of the FMA Act will apply.

4.3               Item 13 inserts the definition of the new Companies and Unclaimed Monies Special Account into section 9 of the Corporations Act.  Item 14 repeals the definition of ‘unclaimed money account’ in section 9 of the Corporations Act. 

4.4               Item 15 replaces the existing definition of ‘unclaimed property’ with a new definition that refers to the new special account.

Body corporate status

Background

4.5               ASIC is a statutory authority established by Commonwealth legislation for a public purpose (section 8 of the Australian Securities and Investments Commission Act 2001 (ASIC Act)).   

4.6               Maintaining ASIC’s status as a separate body corporate is necessary to preserve its operational independence, perceived and real. 

4.7               The FMA Act framework and the CAC Act Framework are two Acts that are part of the broader financial framework.

4.8               The CAC Act and the FMA Act are structured differently and impose different requirements on officers operating under them.  The Uhrig Review recommended that the FMA Act should be applied to statutory authorities where it is appropriate they be legally and financially part of the Commonwealth and do not need to own assets.  It was noted that this would typically include Budget-funded authorities (in contrast to those primarily funded through commercial operations). 

4.9               ASIC is currently a CAC Act body, but is prescribed as an FMA Act agency for the purposes of the public money that it holds. Part 2 of Schedule 1 to the Financial Management and Accountability Regulations 1997 (FMA Regulations) describes ASIC as a prescribed agency that handles money other than public money and an FMA agency only in regard to the public money it holds.

4.10           The proposed transfer of ASIC to the FMA Act is consistent with the recommendations of the Uhrig Review.  The FMA Act better reflects the role of ASIC as a regulator, rather than a body with a commercial focus.  This transfer is one part of a broader exercise intended to improve consistency and transparency in governance arrangements.  The proposed transfer will also address a source of complexity and uncertainty, by bringing ASIC under the FMA framework. 

4.11           To effect the transfer, the ASIC Act will be amended to state that ASIC holds property on behalf of the Commonwealth.  ASIC will be provided with the power to enter into contracts on behalf of the Commonwealth.  ASIC will also retain the right to enter into contracts in its own name, but it is expected that the use of this right will be restricted to regulatory matters (such as enforceable undertakings).

4.12           ASIC will also be granted power to act as trustee on behalf of the Commonwealth.  References in the Corporations Act and ASIC Act to ASIC holding property on trust will be amended to refer to ASIC holding property on trust on behalf of the Commonwealth. 

4.13           Under the FMA Act, money held on trust (special public money) is public money and therefore requires an appropriation.  This appropriation may be provided by a special account that is set up by a determination of the Finance Minister under section 20 FMA Act.  It is intended that special accounts will be established to deal with the range of trust money that ASIC currently holds.

Key changes

4.14        ASIC will be subject only to the FMA Act and will no longer be a CAC Act body.  It will retain its status as a body corporate, but will hold money and property on behalf of the Commonwealth.  ASIC will hold trust money and property on behalf of the Commonwealth.  ASIC will retain its common seal and may sue and be sued in its corporate name.

Notes on items

4.15           Items 2 through to and including item 7 make the necessary amendments to bring ASIC under the FMA Act, while retaining its separate body corporate status and its ability to enter into contracts in its own right. 

4.16           Items 3 and 7 amend section 8 to provide that ASIC may not hold property or money on trust.  Any real or personal property or money that ASIC would otherwise hold on trust is held by the Commonwealth on trust.  ASIC would perform all the duties and exercise all of the powers of the Commonwealth as trustee. 

4.17           Items 4 and 7 clarify that ASIC has the power to enter into contracts in its own right.  ASIC may also enter into contracts on behalf of the Commonwealth.  It is intended that ASIC would use its power to enter into contracts in its own right only for regulatory purposes, as distinct from, for example, corporate contracts. 

4.18           Item 7 states that any real or personal property held by ASIC is held for and on behalf of the Commonwealth.  This property includes security deposits, such as security deposits under section 1284 of the Corporations Act.  Any money that ASIC receives is received for and on behalf of the Commonwealth.  

4.19           Item 7 also clarifies that a right to sue is taken not to be personal property for the purposes of subsection 8(3).  This means that any costs order that resulted from any action would be payable to ASIC in its own name and on its own behalf.  However, on receiving any money in respect of the debt, the money would be held by ASIC for and on behalf of the Commonwealth. 

Financial liabilities

Background

4.20           ASIC is funded by the Commonwealth.  As a CAC Act body, ASIC holds the funds provided by the Commonwealth as its own in its own bank account.  Whilst ASIC collects fees and charges (public money), this money is returned to the consolidated revenue fund.  Section 134 of the ASIC Act states that ASIC’s money also includes any other money paid to ASIC (including money paid by a State or Territory), but in practice ASIC does not receive any other substantial funding for its operational expenses other than that from the Commonwealth.  ASIC is responsible under the ASIC Act for discharging any expenses, charges, obligations or liabilities that ASIC incurs with its own money.

Key changes

4.21           Under the FMA Act, ASIC will hold public money and public property for and on behalf of the Commonwealth and will not hold money or property in its own name. The Commonwealth will be responsible for meeting ASIC’s financial liabilities.  Public money and public property are defined in section 5 of the FMA Act.

4.22           When ASIC is prescribed under the FMA Act, all money it holds will be public money and will be subject to the requirements of the FMA Act.  All references to ‘ASIC’s money’ will be removed from the ASIC Act. 

Notes on items

4.23           Item 8 inserts new section 8A in the ASIC Act, which provides that ASIC’s financial liabilities will become the Commonwealth’s liabilities.  Item 12 replaces Part 8 of the ASIC Act, removing references to ASIC’s money.

Chief Executive’s duties

Key changes

4.24           Under the FMA Act the Chairperson of ASIC, as ASIC’s Chief Executive, will be personally responsible and accountable for managing the agency in a way which promotes the efficient, ethical and effective use of Commonwealth resources.  ASIC (as a whole) remains responsible for the proper exercise of the functions and powers that are conferred on it.

Notes on items

4.25           Item 9 inserts new section 10A in the ASIC Act.  It provides that the Chairperson of ASIC is not subject to direction by ASIC in relation to the Chairperson’s performance of functions or exercise of powers under the FMA Act or the Public Service Act 1999 in relation to ASIC.  This is a standard provision that ensures that the Chairperson’s personal obligations under the FMA Act and Public Service Act are kept separate from the collegiate decision-making processes which otherwise characterise ASIC.

4.26           Item 10 amends section 94 of the ASIC Act to include a reference to the new section 10A as well as the current section 12 of the ASIC Act.

4.27           Item 11 repeals subsection 124(7) of the ASIC Act, as the CAC Act will no longer apply to ASIC members.

Finance and reporting requirements

Division 1 — Companies and Unclaimed Moneys Special Account

Background

4.28           Under Part 9.7 of the Corporations Act 2001 (Corporations Act), ASIC holds unclaimed property on trust.  If property becomes unclaimed property, ASIC must, in the case of money pay it into an unclaimed money account, or in the case of property, sell or dispose of the property and pay the proceeds into an unclaimed money account.  The Minister has a discretion to apply income earned from investing unclaimed moneys. 

4.29           Under the FMA Act, money held on trust is an example of ‘special public money’, which is public money that is not held on account of the Commonwealth or for the benefit of the Commonwealth.  This type of money is generally paid into a special account. 

4.30           Currently, ASIC is allowed to invest unclaimed money.  FMA bodies are generally not allowed to invest money under the FMA Act unless approved as part of the Special Account Policy, or authorised by legislation.

Key changes

4.31           Section 133 will establish a special account for the treatment of unclaimed moneys under Part 9.7 of the Corporations Act, titled the Companies and Unclaimed Moneys Special Account.  This is dealt with in more detail below.

4.32           The special account is a ledger account recording a right to draw money from the consolidated revenue fund.  The Account aims to replicate as far as possible the existing arrangements under Part 9.7 of the Corporations Act for the treatment of unclaimed moneys.  The Minister will retain a discretion to apply the proceeds of investment of the moneys.

Notes on items

4.33           The new section 134 sets out the types of money that must be credited to the Account.  This will include property that becomes unclaimed property and repayments of principal and interest on investments of unclaimed property. 

4.34           The purposes of the Account are set out in the new section 135 of the ASIC Act.  The account can be debited for payment of amounts to persons who are entitled to money paid into the account or for payment of amounts to the Commonwealth after six years.  In addition, interest received by ASIC from the investment of unclaimed property may be applied at the Minister’s discretion for certain purposes.  (ASIC’s power to invest unclaimed property will be derived from section 39 of the FMA Act.)  ASIC will also be able to debit the account to meet the expenses of administering the account.

4.35           Items 35 through to and including item 39 amend Part 9.7 of the Corporations Act to refer to the new Account.

4.36           Item 36 provides that the Commonwealth (as well as ASIC) is not liable to pay calls on shares or to discharge other obligations arising from the shares where unclaimed property is or includes shares in a body corporate.

4.37           Item 37 provides that if any money is not debited within six years after it was originally credited to the Account, then that money must be debited from the account.  This money still forms part of the Consolidated Revenue Fund (CRF), but it can no longer be spent in accordance with the terms of the Account.  ASIC requires a valid appropriation to spend this money once it forms part of the broader CRF.  Section 28 of the FMA Act is the relevant appropriation for ASIC to use in this instance.

4.38           ASIC must pay a person entitled to money credited to the Account.  If the money is still in the Account (that is, it has been there for less than six years), then the special account provides the appropriation mechanism for ASIC to pay out the money.  If the money has been there over six years and has been debited from the Account (but is still part of the CRF), then section 28 of the FMA Act is the relevant appropriation to use.

4.39           Item 38 provides that the Commonwealth (as well as ASIC) cannot be liable for the recovery of money paid out of the Account where a person claims to be entitled to money that has been paid to another person.  

4.40           Item 39 repeals subsection 1341(5), since all moneys in the special account remain part of the CRF and money will no longer be appropriated by the Parliament for the purpose of paying moneys to persons who claim to be entitled.  Instead, the CRF will be appropriated by ASIC using the appropriation mechanisms described above.

Division 2 — Reporting requirements

Key changes

4.41           Under the FMA Act the Chairperson of ASIC, as ASIC’s Chief Executive, will be personally responsible and accountable for managing the agency in a way which promotes the efficient, ethical and effective use of Commonwealth resources.

Notes on items

4.42           Item 12 inserts new section 136 in the ASIC Act which sets out the reporting requirements that ASIC will be required to fulfil in accordance with its obligations under the FMA Act.  In particular, the Chairperson is personally responsible for providing to the Minister an annual report on ASIC’s operations during the financial year.

Division 3 — Liability to taxation

Notes on items

4.43           ASIC’s general immunity to taxation will be retained.  New section 137 of the ASIC Act states that ASIC is not subject to taxation under either Commonwealth or State and Territory laws.  However, the regulations may provide that this does not apply in relation to taxation under a specified law.  This is consistent with previous provisions in the ASIC Act and the former ASC Act.

Part 5A.1 — Deregistered companies

Background

4.44           Part 5A.1 of the Corporations Act deals with the circumstances where a company is deregistered.  Currently, under subsection 601AD(2), a company’s property on deregistration vests in ASIC. ASIC may deal with the property in accordance with section 601AE, subject to existing liabilities attaching to the property, as set out in subsection 601AE(3) and section 601AF.  A company may be reinstated either by ASIC or by a Court order (section 601AH).

Key changes

4.45           Under the FMA Act, ASIC will no longer hold property on trust in its own name, but on behalf of the Commonwealth.  Sections 601AD through to and including 601AH will be amended to reflect this disctinction:  1) non-trust property will vest in ASIC; and 2) trust property will vest in the Commonwealth.  In practice these amendments will maintain the status quo in relation to this area of the law, as ASIC will perform all the duties and exercise all the powers of the Commonwealth as trustee in relation to property held on trust by the Commonwealth. 

Notes on items

4.46           Item 19 inserts new subsection 601AD(1A), that provides that on deregistration, all property that a company held on trust before deregistration vests in the Commonwealth.  Trust property includes property held by the company on trust as well as company property vested in a liquidator on trust.

4.47           Item 20 repeals subsection 601AD(2) and provides that all other non-trust company property vests in ASIC. The new subsection provides that all other company property, barring trust property, vests in ASIC on deregistration. 

4.48           Items 21 and 22 amend subsection 601AD(3) to include the Commonwealth as well as ASIC as taking only the same property rights that the company itself held on deregistration.

4.49           Item 23 inserts new subsection 601AD(3A), that provides that the Commonwealth’s powers as an owner over property vested in it upon deregistration are subject to its obligations as trustee of the trust.

4.50           Item 24 inserts new subsections 601AE(1) and (1A). When trust property vests in the Commonwealth under 601AD(1A), the Commonwealth will be granted a discretion to continue to act as trustee or to apply to a court for the appointment of a new trustee.  In practice, ASIC acting on behalf of the Commonwealth will choose how to exercise this discretion. 

4.51           Where the terms of the trust and general trust law provide no guidance on how the Commonwealth should deal with the trust moneys, and if the Commonwealth chooses to continue to act as trustee, then subsection 601AE(1A) provides that the Commonwealth must credit the money to a special account, or otherwise sell or dispose of the property as it thinks fit and credit the amount of the proceeds to a special account.  It is intended that a section 20 FMA special account will be established to deal with these trust moneys.

4.52           Item 25 amends subsection 601AE(2) to allow ASIC to deal with non-trust property vesting in it under subsection 601AD(2).

4.53           Item 26 inserts new subsection 601AE(2A). It provides that the Commonwealth is liable for any liabilities imposed under a law of the Commonwealth on property which vests in the Commonwealth under subsection 601AD(1A).  Liabilities in this section refer to Commonwealth taxes. The Commonwealth will be liable to make notional payments to discharge the liability.

4.54           Items 27 and 28 amend subsection 601AE(3) to include the Commonwealth as well as ASIC for being responsible for dealing with the obligations arising from property vested under subsections 601AD(1A) or (2).  These liabilities include state taxes.

4.55           Item 29 amends subsection 601AE(4) to include the Commonwealth as well as ASIC for being responsible for dealing with the obligations under subsections 601AE(2A) and (3). 

4.56           Item 30 amends subsection 601AE(5) to provide that the Commonwealth and ASIC must keep records in accordance with this subsection.

4.57           Items 31 and 32 amend section 601AF, and insert a new note stating that the Commonwealth as well as ASIC can fulfil outstanding obligations of deregistered companies.

4.58           Item 33 repeals the note in section 601AF, and substitutes a new note to cover property that is vested in the Commonwealth as well as property that is vested in ASIC.

4.59           Item 34 amends subsection 601AH(5) to include property vested in the Commonwealth as well as property that is vested in ASIC.  Where a company is reinstated under section 601AH, a person would be able to argue that they were entitled to the money (as mentioned in subsection 1341(2)) and have it transferred back again under subsection 601AH(5).

Part 5.7 Corporations Act — Winding up bodies other than companies

Background

4.60           Section 588 of the Corporations Act deals with the outstanding property remaining after the dissolution or deregistration of a registrable body.  Currently, the outstanding property of a defunct registrable body vests in either the person entitled to the property under the law of the body’s place of origin, or otherwise ASIC. 

Key changes

4.61           Items 16, 17 and 18 amend Part 5.7 of the Corporations Act so that trust property vests in the Commonwealth.  ASIC will have the power to exercise all powers and duties of a trustee on behalf of the Commonwealth in relation to the property held on trust.

Notes on items

4.62           Item 16 amends paragraph 588(2)(b) of the Corporations Act to state that if the outstanding property was held by the body or liquidator on trust, then the property will vest in the Commonwealth.

4.63           Item 17 amends subsection 588(3) to insert ‘the Commonwealth’ as a party (as well as ASIC), that may exercise the liquidator’s claims without approval of the Court.  In practice, ASIC on behalf of the Commonwealth will exercise this power.

4.64           Item 18 repeals subsection 588(4) and substitutes new subsection 588(4) to take account of the amendments to section 601AD, with the effect that trust property will vest in the Commonwealth and that ASIC will hold trust property on behalf of the Commonwealth, and that other property will vest in ASIC.

Part 2 — CAMAC

Body corporate status

Background

4.65           CAMAC is a statutory authority established by Commonwealth legislation for a public purpose (section 146 of the Australian Securities and Investments Commission Act 2001 (ASIC Act)).  

Key changes

4.66           CAMAC will be subject only to the FMA Act and will no longer be a CAC Act body.  It will retain its status as a body corporate, but will hold money and property on behalf of the Commonwealth.  CAMAC will retain its common seal and may sue and be sued in its corporate name.

Notes on items

4.67           Items 40, 41 and 42 make the necessary amendments to bring CAMAC under the FMA Act, while retaining its separate body corporate status.

4.68           Item 41 repeals note 2 and substitutes a new note which provides that CAMAC may enter into contracts for and on behalf of the Commonwealth in respect of public money and public property, in accordance with section 44 of the FMA Act.

4.69           Item 42 inserts paragraph 146(3) to provide that any real or personal property held by CAMAC is held for and on behalf of the Commonwealth.  Any money that CAMAC receives is received for and on behalf of the Commonwealth.   

4.70           Item 42 also clarifies that a right to sue is taken not to be personal property for the purposes of subsection 146(2).  This means that any costs order that resulted from any action would be payable to CAMAC in its own name and on its own behalf.  However, on receiving any money in respect of the debt, the money would be held by CAMAC for and on behalf of the Commonwealth.

Financial liabilities

Background

4.71           CAMAC is funded by the Commonwealth.  As a CAC Act body, CAMAC holds the funds provided by the Commonwealth as its own in its own bank account.  Section 160 of the ASIC Act states that CAMAC’s money also includes any other money paid to CAMAC, but in practice CAMAC does not receive any other substantial funding for its operational expenses other than that from the Commonwealth.  CAMAC is responsible under the ASIC Act for discharging any expenses, charges, obligations or liabilities that CAMAC incurs with its own money.

Key changes

4.72           Under the FMA Act, CAMAC will hold public money and public property for and on behalf of the Commonwealth and will not hold money or property in its own name.  The Commonwealth will be responsible for meeting CAMAC’s financial liabilities.  Public money and public property are defined in section 5 of the FMA Act.

4.73           When CAMAC is prescribed under the FMA Act, all money it holds will be public money and will be subject to the requirements of the FMA Act. All references to ‘CAMAC’s money’ will be removed from the ASIC Act. 

Notes on items

4.74           Item 43 inserts new section 146A, which provides that CAMAC’s financial liabilities will become the Commonwealth’s liabilities.

Chief Executive’s duties

Key changes

4.75           Under the FMA Act, the the Convenor of CAMAC, as CAMAC’s Chief Executive, will be personally responsible and accountable for managing the agency in a way which promotes the efficient, ethical and effective use of Commonwealth resources.  CAMAC (as a whole) remains responsible for the proper exercise of the functions and powers that are conferred on it.

Notes on items

4.76           Item 44 inserts new section 147A in the ASIC Act.  It provides that the Convenor of CAMAC is not subject to direction by CAMAC in relation to the Convenor’s performance of functions or exercise of powers under the FMA Act or the Public Service Act 1999 in relation to CAMAC. This is a standard provision that ensures that the Convenor’s personal obligations under the FMA Act and Public Service Act are kept separate from the collegiate decision-making processes which otherwise govern CAMAC.

Finance and reporting requirements

Division 2 — Staff

Notes on items

4.77           Item 45 repeals the heading of Division 2 of Part 9 of the ASIC Act and changes it to ‘Staff.’ 

Division 3 — Liability to taxation

Notes on items

4.78           Item 46 repeals sections 159 to 168.  CAMAC’s general immunity to taxation will be retained.  New section 159 of the ASIC Act states that CAMAC is not subject to taxation under either Commonwealth or State and Territory laws.  However, the regulations may provide that this does not apply in relation to taxation under a specified law.  This is consistent with provisions in the old ASIC Act and the former ASC Act.

Division 4 — Reporting requirements

Notes on items

4.79           Item 46 inserts new section 162 in the ASIC Act which sets out the reporting requirements that CAMAC will be required to fulfil in accordance with its obligations under the FMA Act.  In particular, the Convenor is personally responsible for providing to the Minister an annual report on CAMAC’s operations during the financial year.

Part 3 — APRA

Body corporate status

Background

4.80           APRA is currently a body corporate and, as a Commonwealth authority under the CAC Act, is considered to be legally and financially separate to the Commonwealth.  It is a body corporate established by Commonwealth legislation for a public purpose (section 8 of the Australian Prudential Regulation Authority Act 1998 (APRA Act)). 

4.81           Currently, APRA is a CAC Act body and holds money in its own name.

4.82           Generally, agencies under the FMA Act are considered to be legally and financially a part of the Commonwealth, even though they are separately accountable for the money and property in their custody or control, and do not generally hold money on their own account.  

Key changes

4.83           APRA will be subject to the FMA Act and will no longer be a CAC Act body.  It will retain its status as a body corporate but will hold money and property on behalf of the Commonwealth.  This will provide certainty as APRA is no longer a CAC body.  Item 49 achieves this by amending section 11 of the APRA Act which sets out APRA’s powers.  APRA will retain its common seal and may sue and be sued in its corporate name.  The privileges and immunities of the Crown will no longer be expressly withheld from APRA.

Notes on items

4.84           Item 49 alters the contracting powers of APRA.  APRA retains its contracting power in paragraph 11(2)(b) of the APRA Act and may now enter into contracts for and on behalf of the Commonwealth in respect of public money and public property, in accordance with section 44 of the FMA Act.  The new subsection 11(3) in the APRA Act provides that APRA may enter into contracts in its own right.  It is intended that APRA will use this power for regulatory agreements, rather than for operational administrative purposes.

4.85           Item 49 adds new subsections 11(4) and 11(5) to the APRA Act so that any real or personal property held by APRA is held for and on behalf of the Commonwealth.  Any money that APRA receives is received for and on behalf of the Commonwealth.  

4.86           Item 49 adds new subsection 11(6) to the APRA Act which clarifies that a right to sue is taken not to be personal property for the purposes of subsection 11(4).  This confirms that subsection 11(4) does not alter APRA’s ability to sue and be sued as set out in paragraph 13(1)(c) of the APRA Act.  As with other moneys received by APRA, amounts paid to APRA arising from Court decisions are held for and on behalf of the Commonwealth.   

4.87           The CAC Act will no longer apply to APRA and therefore references to CAC Act requirements or ‘APRA’s money’ are no longer required and are repealed from a number of sections of the APRA Act.  Item 48 repeals the note in section 7 of the APRA Act.  Item 59 repeals section 48C of the APRA Act.  Item 63 repeals section 54 of the APRA Act.

4.88           Item 52 repeals section 14 of the APRA Act so that the privileges and immunities of the Crown are no longer expressly withdrawn from APRA.  APRA will be subject to the general principles of the law on immunity applying to Government agencies.  This is consistent with the treatment of similar FMA Act agencies.

Financial liabilities

Background

4.89           APRA is funded primarily by the Commonwealth which provides APRA with its share of financial sector levy money collected from industry for this purpose.  As a CAC Act body, APRA holds all funds, including funds provided by the Commonwealth, as its own in its own bank account.  Section 49 of the APRA Act states that APRA’s money also consists of any other amounts paid to APRA.  These sources can include for example: charges and penalties; contractual agreements; and agreements to provide prudential regulation and advice services.  APRA is currently responsible under the APRA Act for discharging any expenses, charges, obligations or liabilities that APRA incurs with its own money.

Key changes

4.90           Under the FMA Act, APRA will hold public money and public property for and on behalf of the Commonwealth and will not hold money or property in its own name. The Commonwealth will be responsible for meeting APRA’s financial liabilities.  Public money and public property are defined in section 5 of the FMA Act.

4.91           Once APRA is prescribed under the FMA Act all money it holds will be public money and will be subject to the requirements of the FMA Act.  All references to ‘APRA’s money’ will be removed from the APRA Act. 

Notes on items

4.92           Item 50 inserts new section 11A in the APRA Act, which provides that APRA’s financial liabilities will become the Commonwealth’s liabilities.

Finance and reporting requirements

Background

4.93           Part 5 of the APRA Act sets out the financial framework that APRA operates under the CAC Act. 

4.94           Under the FMA Act, all money under the custody or control of APRA will need an appropriation before it can be spent by APRA. 

Key changes

4.95           Items 62 to 65 make a number of changes to the financial and taxation arrangements in Part 5 of the APRA Act.  A key change is the establishment of a Special Account for APRA.  All of APRA’s sources of funding are now received for and on behalf of the Commonwealth; these amounts are credited to the Account, with the balance of the Account providing APRA with the appropriation authority to spend these amounts.  Other key changes include: repealing requirements relating to the CAC Act and ‘APRA’s money’; defining levy amounts to be credited to the Account; and updating taxation arrangements.  Item 66 sets out APRA’s reporting requirements in section 59 of the APRA Act.

Notes on items

4.96           Item 62 repeals section 49 of the APRA Act as APRA no longer holds money in its own name.  Item 63 repeals sections 52 to 53 which likewise are no longer required given APRA does not hold money of its own.  These provisions are replaced by arrangements for administering Commonwealth money.

4.97           Item 63 establishes the Australian Prudential Regulation Authority Special Account (the Account) in sections 52 to 54 of the APRA Act.

4.98           The new section 52 establishes the Account in the APRA Act for the funding of APRA.  The special account is a ledger account recording a right to draw money from the Consolidated Revenue Fund. 

4.99           The new section 53 sets out the amounts that must be credited to the Account.  This covers all of the sources that fund APRA’s operations including: APRA’s share of levy money; amounts received under a contract, for example from AusAID for providing technical assistance; fees, charges or penalties; and any amount appropriated by Parliament for the purpose of the Account.  The amounts credited to the account under paragraph 53(a) should include a component for notional interest earned on the Account. 

4.100       The purposes of the Account are set out in the new section 54 of the APRA Act.  The Account can be debited for the purposes meeting the costs associated with the performance of APRA’s functions or the exercise of its powers; for payment of remuneration to APRA staff; and for making other payments that APRA is authorised to make under any law of the Commonwealth. 

4.101       Item 47 inserts the definition of the Australian Prudential Regulation Authority Special Account (the Account) into subsection 3(1) of the APRA Act.

4.102       Item 62 makes a number of amendments to section 50 of the APRA Act.  The main purpose of section 50 is to provide for APRA’s share of levy amounts to be credited to the Account.  Previously section 50 provided for paying APRA’s share of levy money from the Commonwealth to APRA.  All money is now held for and on behalf of the Commonwealth and forms part of the Consolidated Revenue Fund.  The crediting of amounts to the Account provides APRA with the appropriation authority to expend money from the Account.  Amounts determined under paragraphs 50(1)(a) or (b) for the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions are not credited to the Account.  The word paid is used in subsection 50(3) to reflect that the amount appropriated (the amount standing to the credit of the Account) is increased when levy money is received. 

4.103       The appropriation of money to the Account under section 50(3) deals with the legal authority to spend amounts standing to the credit of the Account.  The note to section 50(3) highlights the requirement to report revenue on an accrual basis in accordance with section 49 of the FMA Act, under which, annual financial statements must be prepared in accordance with the Finance Minister’s Orders (FMOs).   The FMOs are based on accrual principles in accordance with external reporting standards.

4.104       The use of the word paid rather than payable in section 50(3) should not be taken to imply that APRA’s revenue should be reported on a cash basis where they would otherwise be required to be reported on an accruals basis. However, it should also be noted that the acquittal of the appropriation provided by a Special Account is reported on a cash basis.

4.105       Items 68 to 70 repeal subsections 11(2) and 13(3) of the Financial Institutions Supervisory Levies Collection Act 1998 consistent with APRA no longer holding money in its own name.  All money (including all levy money) is received for and on behalf of the Commonwealth.

4.106       Items 64 and 65 update out of date references to sales tax in section 55 of the APRA Act.  APRA’s general immunity to taxation is retained.

4.107       Item 66 amends section 59 of the APRA Act to set out the reporting requirements that APRA will be required to fulfil in accordance with its obligations under the FMA Act.  The section previously supplemented CAC Act reporting obligations.  In particular, the Chair is now personally responsible for providing to the Minister an annual report on APRA’s operations during the financial year.  The Minister is responsible for tabling the report in each House of Parliament within 15 days of receiving that report.

Chief Executive’s duties

Background

4.108       Under part 7 of the FMA Act, the Chief Executive is personally responsible for managing the affairs of the Agency in a way that promotes the proper use of the Commonwealth resources for which the Chief Executive is responsible. 

Key changes

4.109       The Chief Executive of APRA is its Chair.  A new section confirms for the avoidance of doubt that the Chair is not subject to direction from APRA on matters relating to fulfilling the Chair’s statutory responsibilities as a Chief Executive under the FMA Act.

Notes on items

4.110       Item 51 inserts new section 12A in the APRA Act.  It provides that the Chair of APRA is not subject to direction by APRA in relation to the Chair’s performance of functions or exercise of powers under the FMA Act or part 4 or 4A of the APRA Act (employment powers) in relation to APRA.  This is a standard provision that ensures that the Chair’s personal obligations under the FMA Act and part 4 or 4A of the APRA Act are kept separate from the collegiate decision-making processes which otherwise govern APRA.

Employment powers

Background

4.111       Part 4 of the APRA Act sets out powers relating to APRA staff members.  Currently powers to employ staff and engage consultants rest with APRA.

4.112       This retains the current situation which permits a high degree of flexibility in some employment practices in order to assist APRA to attract and maintain highly skilled staff in the highly competitive financial services employment market.  APRA employment arrangements will not be subject to the Public Service Act.

Key changes

4.113       Items 53 to 58, 60, 61 and 67 deal with changes to employment practices.  While APRA staff will continue to be employed under part 4 of the APRA Act, these employment powers are transferred from APRA to the Chair.  This is because the Chair as Chief Executive of the FMA Act agency will be personally responsible for managing the affairs of the Agency in a way that promotes the proper use of the Commonwealth resources.

4.114        The new express requirements for the Chair to determine APRA Values and an APRA Code of Conduct are also included in part 4 of the APRA Act.  This provides conformity with other Government agencies not otherwise subject to the general Australian Public Service (APS) Values and Code of Conduct requirements of the Public Service Act.  There is no requirement for the APRA Values and Code of Conduct to be the same as the APS Values and Code of Conduct.

Notes on items

4.115       Items 53 and 54 amend subsections 45(1) and 45(2) of the APRA Act so that the Chair may, on behalf of APRA, appoint staff under terms and conditions determined by the Chair.

4.116       Items 55 and 56 similarly amend subsections 47(1) and 47(2) of the APRA Act so that the Chair may, on behalf of APRA, engage consultants under terms and conditions determined by the Chair. 

4.117       Items 60 and 61 similarly replaces APRA with the Chair for the purpose of section 48D in part 4A of the APRA Act.   

4.118       Item 57 consequentially replaces references in paragraphs 48(a) and 48(c) of the APRA Act to persons appointed or engaged by APRA with references to the Chair.  Item 67 similarly amends a reference in paragraph 102(2)(d) of the ASIC Act to staff appointments by APRA to instead refer to the Chair of APRA.

4.119       Item 58 adds section 48AA to the APRA Act, which allows the Chair to delegate the employment functions and powers in part 4 or part 4A of the APRA Act to another APRA Member or to an APRA staff member.

4.120       Item 58 also adds sections 48AB and 48AC to the APRA Act, which include requirements for the Chair to determine, in writing, APRA Values and an APRA Code of Conduct.  Under section 48AB the Chair must uphold and promote the APRA Values.  Other APRA Members and staff engaged under section 45 of the APRA Act must also uphold the APRA Values.  Under section 48AC the APRA Code of Conduct applies to APRA Members and APRA staff engaged under section 45 of the APRA Act.  These requirements do not apply to consultants.



 

5  

Schedule 2 Application and transitional provisions

5.1               The transitional provisions are designed to ensure a smooth transition for ASIC, CAMAC and APRA to the FMA Act.  In particular, the provisions ensure that property, and especially trust property, is transferred over in a manner which will minimise any impact on the daily operations of ASIC, CAMAC and APRA. Arrangements for the transfer of money also ensure that the agencies receive an appropriation for amounts held prior to commencement time.

Part 1 — Definitions

Item 1:  Definitions

5.2               Several terms are defined in item 1.

Part 2 — Application and transitional provisions for ASIC and CAMAC

Division 1 — Application provision for ASIC and CAMAC

Item 2:  Pre-existing property, money and financial liabilities

5.3               This item provides that any real or personal property or money that is held by ASIC or CAMAC immediately before the commencement time is taken, immediately after that time, to be held by ASIC or CAMAC for and on behalf of the Commonwealth.  This item is subject to items 3, 4 and 5 in this Schedule which deal with property held on trust.

5.4               Item 2 also provides that any financial liabilities of ASIC or CAMAC that exist immediately before the commencement time are taken, immediately after that time, to be liabilities of the Commonwealth.

5.5               Money that was held by ASIC or CAMAC immediately before the commencement of this Act (the original amount), will be held by ASIC or CAMAC for and on behalf of the Commonwealth after the commencement time. An amount equal to the original amount may be paid out of the Consolidated Revenue Fund, which is appropriated accordingly, for the purposes of ASIC or CAMAC.

Division 2 — Transitional provisions for ASIC

Item 3:  Trust property held under Part 9.7 of the Corporations Act

5.6               Previously, ASIC held unclaimed property on trust under Part 9.7 of the Corporations Act.  Any unclaimed property held before the commencement time will be taken, immediately after commencement, to be held by ASIC on behalf of the Commonwealth, to be dealt with in accordance with the amended Part 9.7 of the Corporations Act.

Item 4:  Vesting of other assets held on trust by ASIC

5.7               At the commencement time, any other assets held on trust by ASIC (those not dealt with under Part 9.7 of the Corporations Act), will cease to be assets held on trust by ASIC, and will become assets held on trust by the Commonwealth. The item will take effect without any conveyance, transfer or assignment. The Commonwealth will become the successor in law in relation to these assets.  ASIC may, for and on behalf of the Commonwealth, perform all the duties and exercise all the powers of the Commonwealth as trustee in relation to assets held on trust by the Commonwealth.

Item 5:  Vesting of liabilities relating to assets held on trust

5.8               At the commencement time, any liabilities attaching to the assets mentioned in item 4 of this Schedule, will transfer from ASIC to the Commonwealth. The item will take effect without any conveyance, transfer or assignment.  The Commonwealth will become the successor in law in relation to these liabilities.

Item 6:  Certificates relating to vesting of land

5.9               If land vests in the Commonwealth under this Schedule, and a certificate is lodged with the land registration official that meets certain conditions set out in paragraph 6(1)(b), then the land registration official may register the matter and deal with, and give effect to, the certificate.

Item 7:  Certificates relating to vesting of assets other than land

5.10           If assets other than land vest in the Commonwealth under this Schedule, and a certificate is lodged with the assets official that meets certain conditions set out in paragraph 7(1)(b), then the assets official may deal with, and give effect to, the certificate and make entries in the register as are necessary.

Item 8:  Substitution of Commonwealth as a party to pending proceedings

5.11           If there any court or tribunal proceedings pending immediately before commencement time that relate to property held on trust, to which ASIC was a party, then at the commencement time, the Commonwealth will be substituted for ASIC as a party to the proceedings.

Item 9:  Certificates taken to be authentic

5.12           Any document that appears to be a certificate made or issued under a provision of this Schedule is taken to be authentic, and to have been properly given, unless the contrary is established.

Division 3 — Transitional provision for CAMAC

Item 10:  Access to records

5.13           In certain circumstances, directors of a Commonwealth authority have, under subsection 27L(2) of the CAC Act, the ability to access the Authority’s books for up to seven years after ceasing to be a director.  Directors will continue to have access to the books for the period remaining after CAMAC transfers to the FMA Act. Subsection 27L(4) of the CAC Act provides that a Commonwealth authority must allow a person to exercise his or her rights to inspect or take copies of the books under this section.  In relation to the books of CAMAC, the reference to a Commonwealth authority is to be read, after the commencement time, as a reference to the Convenor of CAMAC. 

Part 3 — Application and transitional provisions for APRA

Item 11:  Pre-existing property, money and financial liabilities

5.14           This item provides that any real or personal property or money that is held by APRA immediately before the commencement time is taken, immediately after that time, to be held by APRA for and on behalf of the Commonwealth.

5.15           Item 11 also provides that any financial liabilities of APRA that exist immediately before the commencement time are taken, immediately after that time, to be liabilities of the Commonwealth.

5.16           Money held by APRA immediately before commencement (including any reserves built up by APRA) will be held on behalf of the Commonwealth and form part of the Consolidated Revenue Fund.  On commencement an amount equal to this will be credited to the APRA Special Account, ensuring that APRA has the appropriation authority to spend such amounts on the purpose of the Account.

Item 12:  Appointment and engagement of staff and consultants

5.17           Amendments to sections 45 and 47 of the APRA Act in items 53 to 56 of schedule 1, provide that staff and consultants are to be engaged by the Chair following commencement.  This provision provides that staff appointed by APRA or consultants engaged by APRA prior to the commencement date will be taken to have been appointed by the Chair, on behalf of APRA, immediately following commencement.  Instruments entered into by APRA under these sections have effect from commencement time so far as the context permits as if the reference to APRA were a reference to the Chair of APRA.

5.18           The provision also confirms, for the avoidance of doubt, that the amendments in items 53 to 56 of schedule 1 do not constitute a transmission of business for the purposes of the Workplace Relations Act 1996 , hence employment agreements entered into prior to commencement will not have to be renegotiated.

Item 13:  Access to records

5.19           As discussed above at paragraph 2.130. In relation to the books of APRA, the reference to a Commonwealth authority is to be read, after the commencement time, as a reference to the Chair of APRA.

Part 4 — Transitional provisions for ASIC, CAMAC and APRA

Item 14:  Financial statements and other reporting requirements

5.20           On commencement, many reporting requirements will change.  This transitional provision ensures that, following commencement, the agencies continue to have an obligation to complete their pre-commencement reporting obligations for pre-commencement time parts of reporting periods.  If the Agency head is required to provide a similar report under new reporting arrangements for the remainder of a period following commencement time, the Agency head may meet the requirements in a single report. 

5.21           The Agency head must provide the report as required by law for a period that ended before the commencement time, if the report has not been provided by the commencement time.  This provision is intended to capture any offence provisions that may apply for failure to provide a report.

Item 15:  New annual report requirements to apply from 2007-2008 and later financial years

5.22           This item provides that new annual report requirements apply to the 2007-08 financial year and later financial years.  See 2.138 for earlier financial years.

Item 16:  Continuing obligation to keep records

5.23           If immediately before this item commences, the Agency has kept accounting records under subsection 20(1) of the CAC Act, then subsection 20 of the CAC Act will continue to apply to those records after this item commences.

Item 17:  Constitutional safety net — acquisition of property

5.24           If property is acquired under this Schedule otherwise than on just terms, the Commonwealth will be liable to pay a reasonable amount of compensation to the person.  If agreement cannot be reached, proceedings can be instituted in a court to determine a reasonable amount of compensation.

Item 18:  Exemption from stamp duty and other State or Territory taxes

5.25           If an asset or liability under this Schedule is transferred, then no stamp duty or any other tax is payable under a law of a State or Territory in respect of it, nor in relation to the operation of this Schedule in any other respect.

Item 19:  Delegation by Minister

5.26           This item provides that the Minister may, by writing, delegate all or any of his or her powers and functions under this Schedule, in relation to an Agency, to the Agency head.  The delegate must comply with any directions of the Minister when exercising or performing powers or functions under a delegation.

Item 20:  Regulations

5.27           Regulations may be made by the Governor-General prescribing matters required or permitted by this Schedule to be prescribed, or necessary or convenient to be prescribed to give effect to this Schedule.  In particular, regulations may be made prescribing matters of a transitional nature relating to the amendments or repeals made by Schedule 1 to the Act.



 

6  

Schedule 3 Technical amendments relating to legislative instruments

6.1               Items 1 to 5 amend obsolete references in sections 51 and 57 of the APRA Act to determinations being a disallowable instrument under the (now former) section 46A of the Acts Interpretation Act 1901 .  These references have been replaced with references to making determinations by legislative instrument.