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Wednesday, 9 February 2005
Page: 120

Senator COONAN (Minister for Communications, Information Technology and the Arts) (5:19 PM) —I thank Senator Sherry and Senator Murray for their comments and note that the Superannuation Supervisory Levy Imposition Amendment Bill 2004 and related bills are supported, so I will sum up very briefly just so that the government’s position is clear. This package of bills implements the legislative elements of the government’s response to the review of financial sector levies. The Australian Prudential Regulation Authority, APRA—as the prudential supervisor—the Australian Securities and Investments Commission, ASIC, and the Australian Taxation Office, the ATO, in undertaking certain consumer protection and market integrity functions, which I am sure we all support, relating to prudentially regulated entities, perform vital tasks within the Australian financial system. The government is committed to ensuring that the three regulators are properly resourced to undertake these tasks both effectively and efficiently. It is therefore important that the financial sector levies which fund the regulatory activities can 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 system inquiry and the acceptance of the general principle that 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. In performing its evaluation, the most recent review was required to balance accountability, efficiency, transparency and equity with simplicity of administration and collection, and to ensure that the recommended options had the capacity to provide stable and effective funding for the regulators on a sustainable basis going forward. Fundamentally, the review’s task was to consider how the burden of funding the relevant regulatory activities might best be distributed amongst the prudentially regulated industries and institutions. The government has therefore accepted the review’s recommendations, subject to them not causing increases in levies paid by the smallest financial sector entities.

I might just pause there to emphasise, basically in response to a comment by Senator Sherry, that these bills are not actually introducing new taxes; they are simply changing the way of calculating existing levies to fund APRA, part of ASIC and the ATO. The levies only charge the amount considered necessary to cover the cost of the regulators—no more and no less. 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 the package of bills to achieve equity. The amendments generally allow for increased flexibility in the way the levies are determined for 2005-06 and subsequent years. It is intended 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 of flat proportionate assets, subject to minimum and maximum levy amounts for individual institutions. The second component, and this is a 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 2005-06 with an increased indexed factor applying in later years. This overcomes an inequity that has prevented, for example, the largest banks being levied significantly more than much smaller and far less complex banks. Small APRA funds, for instance, are being recognised as a separate class of superannuation fund with the intent that the small superannuation funds will be levied at a lower rate than other funds. This simply recognises that a single approved trustee commonly manages a large number of small APRA funds and that the primary focus of prudential attention is on the trustee rather than 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 institution sector. I should also thank Senator Watson for his remarks. I am sorry to have left Senator Watson out. I thank him for his usual erudite comments on these matters. As he mentioned, the fact that we have got seven bills and perhaps not a more simplified way of presenting this is because of the constitutional requirements for a separate bill for each levy, which relates of course to each industry sector. I do hope that these remarks have placed the government’s response to the review in context. I think it has taken into account the varying circumstances of how to appropriately regulate different sized institutions. Once again, I thank colleagues for their comments. I commend the bills to the Senate.

Question agreed to.

Bills read a second time.