aist-proposed levies 2016-17

ProposedFinancialInstitutionsSupervisoryLeviesfor2016-17

2June2016

AISTSubmission


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Copyright©2015AustralianInstituteofSuperannuationTrusteesABN19123284275

AISTAustralianInstituteofSuperannuationTrustees

Groundfloor215SpringStMelbourneVIC3000

P61386773800F61386773801T@[email protected]

AIST TheAustralianInstituteofSuperannuationTrusteesisanationalnot-for-profitorganisationwhosemembershipconsistsofthetrusteedirectorsandstaffofindustry,corporateandpublic-sectorfunds.

Astheprincipaladvocateandpeakrepresentativebodyforthe$600billionnot-for-profitsuperannuationsector,AISTplaysakeyroleinpolicydevelopmentandisaleadingproviderofresearch.

AISTprovidesprofessionaltraining,consultingservicesandsupportfortrusteesandfundstafftohelpthemmeetthechallengesofmanagingsuperannuationfundsandadvancingtheinterestsoftheirfundmembers.Eachyear,AISThoststheConferenceofMajorSuperannuationFunds(CMSF),inadditiontonumerousotherindustryconferencesandevents.

Contact KarenVolpato,SeniorPolicyAdvisor 0419127496RichardWebb,Policy&RegulatoryAnalyst 0386773835TomGarcia,ChiefExecutiveOfficer 0386773800


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1 Executive summary Inbrief:

WhileAISTwelcomesconsultationonproposedfinancialleviesfor2016-2017,AISTisonceagainconcernedthatinsufficientdetailrenderstheproposalasnon-compliantwiththeGovernment’sCostRecoveryGuidelinesandChargingFramework.AISTcallsforproposedleviespaperstoattachCostRecoveryImpactStatementsandtheoutcomesoftheRegulatorPerformanceFrameworkfromallregulators(evenifindraft).Whilenotraisedintheproposal,AISTfirmlybelievesimplementationofanASICuser-paysmodelshouldnotoccurwithoutfurtherconsultation.Weseekinformationastohowtheadditionalapprox.$120millionfundingtoASICwillberaised.

AISTwelcomestheopportunitytorespondtothepaperProposedFinancialInstitutionsSupervisoryLeviesfor2016-17(‘ProposedLeviesPaper’).Ashighlightedinprevioussubmissions,theproposedleviesaredifficulttoassessgiventhatfirstly,aCostRecoveryImpactStatement(CRIS)hasnotyetbeenreleasedandsecondly,theRegulatorPerformanceFramework1cameintoeffectonlyon1July2015.Thismakesitdifficulttoassessthequantumorapplicationofthelevies.

AISTstronglysupportsfocussedandproperlyresourcedregulators.Understandingresourcingsufficiencyneedstransparencyregardingalignmentofresourcesandmeetingtheobjectivessetbygovernment.Tothisend,AISTappreciatesthestrategyunderpinningthesuiteofGovernmentguidelines,including:

• AustralianGovernmentCostRecoveryGuidelines(‘theCRG’)2.• AustralianGovernmentChargingFramework(‘ChargingFramework’)3.• RegulatorPerformanceFramework(‘PerformanceFramework’).

ThissuitereinforcestheneedtohaveaCRISfromAPRA,ASICandtheATOreleasedsimultaneouslywiththeissueofanyproposedleviespapers.TheapplicationofresourcestogovernmentobjectivesunderthePerformanceFrameworkshouldalsobesimultaneouslyreleased.Theseitemscouldeitherbeindraftform.AISTwouldgreatlyappreciategaininganunderstandingastowhetherthiswilloccurgoingforward.Leviesultimatelycomefrommembers’retirementsavings,whichunderpinstheneedforgreater

1AustralianGovernment,(2014).RegulatorPerformanceFramework.[online]AustralianGovernment.Availableat:http://tinyurl.com/ht72fsy[Accessed31May2016].

2AustralianGovernment,DepartmentofFinance,(2014).AustralianGovernmentCostRecoveryGuidelines,July2014-Thirdedition.ResourceManagementGuideNo.304.[online]AustralianGovernment.Availableat:http://tinyurl.com/lplwh2g[Accessed31May2016].

3AustralianGovernment,DepartmentofFinance,(2015).AustralianGovernmentChargingFramework,ResourceManagementGuideno.302.[online]AustralianGovernment.Availableat:http://tinyurl.com/grrwr8q[Accessed31May2016].


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transparency.Wereiterateourconcernsthatcurrently,suchtransparencyislacking.WhileAISTunderstandsthatimplementationofthePerformanceFrameworkisintrain,thelackofdetailsuchasmightbefoundinaCRISfromeachoftheregulatorswhichbenefitfromtheleviesismoredifficulttounderstand.

AISThasthefollowingadditionalconcerns:

• Littledetailregardingtheallocationofcost-recoverableitemstoboththerestricted(supervisory)andunrestricted(systemic)componentofthelevy.ItisdifficulttoassesswhethertheallocationscomewithintheCRG.

• Howsufficientmoniesforsignificantcostsassociatedwithlarge-scalecourtcaseswillbemet.AISTnotesarecentcommentinthemediathatASIC’sEnforcementSpecialAccountwouldbesubjecttocostrecovery(previouslyexcluded)4.ThisunderpinsAIST’spreviouscommentsthatgreatertransparencyaroundwhatisbeingrecoveredandhowitisbeingappliedisneeded.

• WhilewearepleasedtoseetheProposedLeviesPapernotingthatfrom2017-18,ASIC’sregulatorycostswillberecoveredfromallindustrysectorsregulatedbyASIC,weneedgreatertransparencyastohowthiswillbedone.

• Forthesecondyearinarow,theEarlyReleaseofSuperannuationBenefitsprogram,theUnclaimedSuperannuationMoneysprogramandtheLostMemberRegisterhavebeenincludedinthelevies.Theinclusionisnotaccompaniedbydetailaboutcostingmethodologies,orwhethertheprogramsinvolveexpenditureswhichmaynotbecostrecovered.

Inordertoaddresstheseissues,AISTstronglycontendsthatanyproposedleviespapersshouldbeaccompaniedbyCRISsandoutcomesoftheRegulatorPerformanceFramework(evenifindraft).SufficientdetailshouldbeincludedsothatboththeGovernmentandstakeholderscanseehowactivities,resourcesandfundingarealigned.

4Gluyas,R.(2016).ASICtoadopttimerecording.TheAustralian.[online]Availableat:http://tinyurl.com/hvjasfb[Accessed31May2016].


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2 Consultation issues 2.1 Introduction AISTrecognisesthattheraisingoffinancialsectorleviesisneededtoassistGovernmentagenciesprovideoversightorcertainservices.AISTstronglyendorsesthepolicyobjectivescontainedintheCRG,namelyconsistency,transparency,andaccountability,andthepromotionoftheproperuseofresources.Thesepolicyobjectivesareincreasinglyrelevant,givenboththesizeoftheAustralianfinancialsectoraswellasthequantumoflevies.

Paragraph52oftheCRGoutlineswhattypesofdetailshouldbeprovidedinordertomeettherequirementsof‘transparency’and‘accountability’:

Indevelopingahigh-levelcostrecoverymodel,entitystaffshould:

o Provideestimatesofexpensesandrevenuefortheactivityo Discusshowchangesintheunderlyingassumptionswillaffectfinancialestimateso Demonstratethepotentialtoalignexpensesandrevenueo Proposehowtheactivitycouldbebrokendownintodistinctoutputs(e.g.assessmentsof

permitapplications,registrationsofgoodsorcomplianceaudits)thatfacilitatetheachievementofthegovernmentpolicyoutcomes

o Identifyhigh-levelbusinessprocessesfortheoutputsoftheactivityo Identifyappropriatetypesofcostrecoverycharges(fees,leviesorboth)o Produceestimatesofthecostrecoverycharges.

Wearedisappointedthat,onceagain,theProposedLeviesPaperdoesnotfullyaddresstherequirementsoftheCRG.Thereisinsufficientinformationforgroupsbeinglevied(e.g.superannuationfunds)toanalysetheactivity.Indeed,theProposedLeviesPapercoversmuchthesamegroundastheProposedLeviesPaperfor2015-2016,withtheadditionofafewadditionallevies.

2.2 Requirement for a CRIS TheProposedLeviesPapernotesthattheAPRACRISwillnotbemadeavailableuntilJune2016.WealsoneedaCRIS(evenifindraftform)fromtheotherregulatorswhichreceivelevymonies.

Paragraph39oftheCRGnotesthat:

Eachcostrecoveredactivity,regardlessoffinancialvalue,mustbedocumentedinacostrecoveryimplementationstatement(CRIS)beforechargescommence.

Paragraph39oftheCRGgoesontomakeitclearthattheCRISispreparedtoprovidethebasisforengagementwithstakeholders.ItshouldbeclearthatwithouttheCRIS,thebasisisnotthere.


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Wecontinuetolackinformationtoassesswhetherresourcesandoutputsarealigned,andwhetherprogramsstatedintheProposedLeviesPaperareindeedrecoupable.WenotealsothattheAPRACRISthatwascirculatedinarrearslastyearwasconsiderablylowondetail.

Hereisasummaryofsomechangesregardingtheleviesbeingraised–changesaboutwhichwehavelittleornoinformation:

• IncreasedfundingformodernisingAPRAdatacapabilities.• IncreasedfundingforenhancingASIC’sdataanalytics.• IncreasedfundingtoASICforarangeofmatters,includingfinancialliteracy(whichAISTqueries

whetherthisisa‘tax’ora‘levy’).• IncreasedfundingtotheSCT.WhileAISTstronglysupportsadditionalfundingtotheSCT,welack

detailastohowtheseadditionalmonieswillbeprovidedintheformofaCRIS.

Thislackoftransparencymakesitdifficultfortheindustrytoassesstheimpactofwhatiscurrentlyhappening–letaloneconsidernewissuessuchasthatraisedinthemediaregardingcostrecoveryfortheASICEnforcementSpecialAccount.

2.3 ASIC User Pays funding model – and what steps need to be taken before implementation

WhilenotspecificallyraisedwithintheProposedLeviesPaper,AISTnotesrecentcommentsthatASICwillbemovingtoauser-paysmodel:AsrecommendedbytheFSI,theGovernmentwillintroduceanindustryfunding,or‘user-pays’modelforASIC,tocommenceinthesecondhalfof2017.From2017-18,ASIC’scostswillberecoveredfromallindustrysectorsregulatedbyASIC.’5

Inour2015submission6,weprovidedgeneralsupportforthisconcept,butfurthertransparencyaroundhowleviesareraisedandappliedisneededbeforeanynewmodelisintroduced.Weemphasizerecommendationsmadeinthatsubmissionastowhatstepsneedtobetakenbeforetheimplementationofanewfundingmodel:

• ImplementationandpublicreportingofthePerformanceFramework.• ACRIShasbeendrafted.• TheotherconsultationprocessesinChapter5oftheProposedFundingmodelfortheAustralian

SecuritiesandInvestmentsCommissionPaper28August2015.

5TreasureroftheCommonwealthofAustraliaandtheMinisterforSmallBusiness,AssistantTreasurer,(2016).TurnbullGovernmentbolstersASICtoprotectAustralianconsumers.[online]Availableat:http://tinyurl.com/jg5luld[Accessed1Jun.2016].

6AIST,(2015),ProposedIndustryFundingModelfortheAustralianSecuritiesandInvestmentsCommission9October2015.[online]Availableat:http://tinyurl.com/psesn8r[Accessed31May2016].


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2.4 Additional ASIC funding – approx. $120million Theissueoftheadditional$120million(approx.)fundingtoASICisalsonotspecificallyraisedwithintheProposedLeviesPaper.AISTunderstandsfromvariouspublicstatementsthatthesemoniesaretobeappliedtothefollowing(someofthesecategoriesarediscussedintheProposedLeviesPaper):

• $61.1mtoenhancedataanalyticsandsurveillance.• $9.2mtoASICandTreasurytoensuretheycanimplementappropriatelaw.• $57mtosurveillanceofadvice,lending,lifeinsurance,andbreachreporting.• Theappointmentofanadditionalcommissioner–someonewhohashadexperienceinprosecuting

financialservicescrimes.

WhilewearepleasedtoseetheProposedLeviesPapernotingthatfrom2017-18,ASIC’sregulatorycostswillberecoveredfromallindustrysectorsregulatedbyASIC,weneedgreatertransparencyastohowthiswillbedone.

Variousmediacommentarieshavediscussedthatthismoneywilldeliverastrongerfocusonthebankingsector,andthatthefundingforanewcommissionerwillcomefroma‘userpays’system

TheProposedLeviesPaperdoesnotprovidecertaintyregardinghowthesematterswillbehandledeithernoworinthefuture.ThisfurtherunderpinsAIST’scallforaCRISfromallregulatorswhichreceivelevymoneyandimplementationoftheconsultationprocesseswehaveoutlinedinpoint2.3above.

2.5 Querying inclusion of certain programs AISTquestionstheinclusionofotherprogramssuchastheEarlyReleaseofSuperannuationBenefits,theUnclaimedSuperannuationMoneysprogramme,andtheLostMemberRegisterwithouttransparencyofaCRISwhichhasbeenpreparedinlinewiththeCRG.

2.6 Adoption of option 2 – shifting some components from ‘restricted’ to ‘unrestricted’ – needs clarity

AISTnotesthatoption2hasagainbeenappliedwithintheProposedLeviesPaper.ThelackoftransparencymakesitdifficultforstakeholderssuchasAISTtoassessthemethodology.ThisappliesnotonlytoAPRAbutalsoleviesraisedonbehalfoftheotherregulators.

2.7 SCT funding should remain separate WhileAISTispleasedthatadditionalfundingwillbeprovidedtotheSCT,wearestronglyreinforcepreviouscommentsthattheSCTfundingshouldremainseparatefromASIC.


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2.8 Those who gain benefits from system should contribute to levies CostrecoveryofSuperStreamcostsislargeatanestimated$35.5millionfor2016-2017.InformationabouttheraisingofSuperStreamleviesisinsufficient.AISTnotesthatAttachmentAtotheProposedLeviesPaperprovidessparseinformation,andalsodoesnotincludeasignificantblockofthesuperannuationsectorwhichgainsusefromSuperStream–SelfManagedSuperannuationFunds.

2.8.1 SMSFs

AISTnotes–onceagain-thatAttachmentAtotheProposedLeviesPaperprovidessparseinformation,anddoesnotprovidesufficientinformationregardingwhetherallwhogainbenefitsfromthesystemshouldcontributetothelevies,e.g.SelfManagedSuperannuationFunds.

2.8.2 Impact

WenotefromtheProposedLeviesPaperthatforecastcostsforthe2015-16financialyearappeartobebroadlycomparablewithpreviousfigures.Thefollowingcomparisonconsidersthreedifferentfundsandtheeffectofthechangestotheleviesrecoupment:

2016-17(forecast) Largefund Smallfund ERF

FUM(000s) $80,014,466.00 $216,187.00 $516,593.00Numberofmembers 2,120,160 2,065 1,013,184 Components(forecast)

Restricted(000s) $260.00 $7.26 $17.36Unrestricted(000s) $6,835.64 $18.47 $44.13Total(000s) $7,095.64 $25.73 $61.49(2015-16equivalent)(000s) $7,095.64 $25.49 $60.92Costpermember $3.35 $12.46 $0.06(2015-16equivalent) $3.35 $12.35 $0.06

Ascanbeseen,forsmallfundsandERFs,thisappearstorepresentasmallincreaseinfees.

AlthoughAISTwouldpreferareductioninfeesintheinterestsofsuperannuationfundmembers,were-iteratethatthemethodologyneedstoreflectaconsistentandproperprocessofevaluation.Wearenotyetconvincedthatthishastakenplace.

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aist-proposed levies 2016-17

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