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ASIC’S USER-PAYS REGIME INCREASES LICENSEE COSTS.

ASIC’S USER-PAYS REGIME INCREASES LICENSEE COSTS.

Since 1 July 2017, most businesses who are regulated by ASIC must pay a levy to fund ASIC’s work, a cost that was previously borne by taxpayers.

Who must pay

The ASIC Supervisory Cost Recovery Levy Act 2017 imposes the levy on financial services, credit service and, market infrastructure businesses, liquidators, and companies and company-like entities, unless they are specifically exempted by the regulations.

How it works

The levy applies to businesses that were regulated by ASIC for any part of the financial year. It will change annually, and may be:

  • a flat rate;
  • a graduated or variable, rate; or
  • a combination of both (a flat amount and an additional variable amount).

How the levy is calculated depends on which sub-sector your business operates in. Businesses whose products or services fall within several sub-sectors, must pay the levy for each sub-sector.

Draft regulations explain how costs will be calculated for each sub-sector. For example, licensed credit intermediaries must pay:

  • A flat $1,000 levy; plus
  • A variable component, depending on the number of credit representatives.

A few key examples include:

Sub-sector  Payment Method  Calculation 
INSURANCE      
Insurance product providers  Both 
  • A flat fee of $20,000; plus
  • If total revenue from insurance products is > $5 million, a share of ASIC’s costs of regulating this sub-sector, calculated based on the entity’s proportion of total industry insurance product revenue above $5 million.
Insurance product distributors, e.g. brokers  Flat  ASIC’s costs of regulating this sub-sector divided by the number of distributors in the sub-sector.
Risk management product providers  Flat  ASIC’s costs of regulating this sub-sector divided by the number of risk management product providers in the sub-sector.
FINANCIAL ADVICE      
Licensees who provide personal advice to retail clients (other than on basic banking, general insurance or consumer credit insurance products)  Both 
  • A flat fee of $1,500; plus
  • A variable component that depends on how many financial planners the licensee authorises to provide advice.
Licensees who only provide personal advice to retail clients on basic banking, general insurance or consumer credit insurance products
Flat  ASIC’s costs of regulating this sub-sector divided by the number of licensees in the sub-sector. 
Licensees that provide general advice only to retail or wholesale clients  Flat ASIC’s costs of regulating this sub-sector divided by the number of licensees in the sub-sector. 
Licensees that provide personal advice only to wholesale clients  Flat  ASIC’s costs of regulating this sub-sector divided by the number of licensees in the sub-sector. 
Managed discretionary account providers  Flat  ASIC’s costs of regulating this sub-sector divided by the number of providers in this sub-sector. 
DEPOSIT-TAKING AND CREDIT SECTOR     
Credit providers  Both 
  • A flat fee of $2,000; plus
  • If the sub-sector provides credit of >$100 million - a share of ASIC’s costs of regulating this sub-sector calculated on the credit providers’ proportion of total credit over the $100 million threshold. 
Credit intermediaries, e.g. mortgage and finance brokers  Both 
  • A flat fee of $1,000; plus
  • A variable component based on the number of credit representatives authorised by the intermediary. 
Small amount credit providers  Both
  • A flat fee of $2,000; plus
  • A variable component calculated on the credit provider’s share of the total credit provided in this sub-sector; plus
  • If the sub-sector provides credit of >$100 million - a share of ASIC’s costs of regulating this sub-sector calculated on the credit providers’ proportion of total credit over the $100 million threshold. 
Margin lenders  Flat ASIC’s costs of regulating this sub-sector divided by the number of lenders in the sub-sector.
CORPORATE SECTOR    
Large proprietary companies Flat ASIC’s costs of regulating this sub-sector divided by the number of companies in the sub-sector.
Public companies (unlisted) Flat ASIC’s costs of regulating this sub-sector divided by the number of companies in the sub-sector.

Pay or face the penalties

ASIC will notify entities what they have to pay. Businesses will have 30 days to pay once they receive the notice.

A 20% penalty payment will apply to businesses who fail to pay the levy on time. Administrative action and/or criminal charges may be taken against businesses who do not pay within 12 months.

Where the levy is calculated on the basis of information that businesses provide to ASIC, e.g. the number of authorised representatives, businesses who make a false or misleading statement to ASIC may be required to pay double the shortfall.

Managing the additional cost

Businesses who can’t afford multiple levies may need to consider reducing the services they offer.

Although the levies add a new barrier to entry to the market, those who can afford to pay multiple levies can have a presence in several markets and potentially expand their services.

Contact us if you need advice about the impact of these levies for your business.

Author: Lydia Carstensen

August 2017

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