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Thursday, 28 October 2021
Page: 10275

Mr TUDGE (Aston—Minister for Education and Youth) (10:01): I move:

That this bill be now read a second time.

The Financial Services Compensation Scheme of Last Resort Levy Bill 2021 is one of two bills which form the levy framework for the financial services Compensation Scheme of Last Resort (CSLR).

The framework imposes a levy on relevant industry entities to fund the CSLR on an ongoing basis.

An annual levy, to be first issued in January 2023, will raise the funds needed to operate the CSLR in advance of the financial year in which claims are to be paid.

The annual levy will be payable by entities who are members of a sub-sector that provides financial services that are within the scope of the CSLR.

The annual levy will cover the costs of administering the CSLR, including compensation amounts payable to applicants, associated Australian Financial Complaints Authority (AFCA) complaint handling fees and ongoing administrative costs for the CSLR operator and the Australian Securities and Investments Commission (ASIC).

The method to determine the exact amount of annual levy payable by relevant industry entities who are members of a sub-sector will be prescribed in regulations and will be proportional to their size and draw on concepts already in place for similar calculations in the ASIC industry funding model.

Amounts to be paid by sub-sectors under the levy framework will be subject to caps. A cap of $10 million will apply for individual subsectors and is designed to provide assurance to relevant financial market sectors about the maximum amount expected to be levied. The overall scheme cap, which is the total amount that can be levied across industry in a single year, is $250 million. This amount is designed to allow the scheme to respond to significant and unforeseen 'black swan' events, such as the failure of a large financial firm, if they arise.

In addition to the annual levy, the levy framework provides for a one-off levy to be imposed in the 2022-23 financial year to fund compensation and costs expected to be payable for complaints lodged with AFCA by the date the bills were introduced into the House of Representatives. The one-off levy will be payable by the ten largest financial sector entities, excluding private health insurers and superannuation trustees.

More broadly, the levy framework provides the minister with flexibility to respond to higher than expected outlays, including 'black swan' events, by issuing special levies to in-scope and out-of-scope firms.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.