House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 2 Costs of implementing SuperStream measures

Outline of chapter

2.1 Schedule 2 to this Bill amends section 50 of the Australian Prudential Authority Act 1998 (APRA Act).

2.2 The amendments enable costs associated with the implementation of the SuperStream measures to be included in the Minister's determination specifying the amount of the levy that is payable to the Commonwealth.

2.3 The amendments also enable the Minister to make a determination that specifies the proportion of levy money paid to Australian Prudential Regulation Authority (APRA) that is to be credited to the APRA Special Account.

Context of amendments

2.4 As part of the Stronger Super reform package, the Government announced that expenditure associated with the introduction of SuperStream would be financed by a temporary levy on industry.

2.5 Government costs associated with the implementation of SuperStream will be recovered through the Superannuation Supervisory levy that applies to APRA-regulated funds.

2.6 Costs associated with the implementation of SuperStream will be collected through the existing collection mechanism that exists for the Superannuation Supervisory levy.

2.7 APRA is primarily funded through industry levies known as the Financial Sector Levies. The total funding requirement is determined by the annual Portfolio Budget Statement submitted to, and approved by, the Government.

2.8 Under subsection 50(1) of the APRA Act, the Minister is to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth, in respect of levy (or each class of levy) for that financial year. The amount specified in the determination is to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions and administering the function of making determinations about the release on compassionate grounds ofbenefits that are in a superannuation entity or retirement savings account.

2.9 The amendments in Part 1 of Schedule 2 provide that the Minister's determination under subsection 50(1) of the APRA Act will include an amount of levy money to also cover the costs to the Commonwealth of implementing SuperStream.

2.10 The APRA Act currently requires APRA to collect and return the proportions collected on behalf of Australian Securities and Investments Commission (ASIC), Department of Human Services (DHS) and the Australian Taxation Office (ATO) to the Commonwealth in the first instance. Once the ATO, DHS and ASIC amounts have been met in consolidated revenue, the APRA Act provides that APRA receives the residual amounts collected through the levyto fund it supervisory activities.

2.11 This disbursement method and the variation in the timing that levies are paid by regulated institutions can cause cash flow difficulties for APRA.

2.12 The amendment in Part 2 of Schedule 2 to this Bill will provide an amendment to the APRA Act to ensure that levies collected by APRA are allocated on a proportionate basis between the Commonwealth and APRA's special account. This revised process will enable a more timely allocation of revenue to support APRA's regulatory functions.

Summary of new law

2.13 Schedule 2 to this Bill amends the APRA Act to enable costs associated with the implementation of the SuperStream measures to be included in the Minister's determination specifying the amount of the levy that is payable to the Commonwealth.

2.14 The amendments enable the Minister to make a determination that specifies the proportion of levy money paid to APRA that is to be credited to the APRA Special Account.

2.15 Schedule 2 also inserts a definition for SuperStream measures.

Comparison of key features of new law and current law

Detailed explanation of new law

Amendments to theAPRA Act

2.16 Subsection 50(1) of the APRA Act enables the Minister to make by legislative instrument, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth in respect of the levy (or each class of levy) for that financial year, to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions and administering the function of making determinations about the release on compassionate grounds ofbenefits that are in a superannuation entity or retirement savings account.

2.17 An amendment will be made to subsection 50(1) that enables the Minister's determination to specify the amount of levy money that is payable to the Commonwealth to cover the costs to the Commonwealth of implementing the SuperStream measures until 30 June 2018. [ Schedule 2, items1and2, subparagraphs 50(1)(a)(iii) and 50(1)(b)(iii) of the APRA Act ]

2.18 The Minister will be able to make a determination for each financial year specifying the proportion of amounts of levy money that is to be credited to the APRA Special Account on an ongoing basis. [ Schedule 2, item 4, section 50(1)(A) of the APRA Act ]

2.19 Currently, subsection 50(2) provides that a levy amount collected to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions and administering the function of making determinations about the release on compassionate grounds is not to be credited to the APRA Special Account. Further, subsection 50(3) provides that if levy amounts collected exceed the costs to the Commonwealth, these amounts can be credited to the APRA Special Account.

2.20 Existing subsections 50(2) and 50(3) will be repealed and replaced by new subsections50(2) and 50(3)(a) and(b) that determine the proportion of amount of levy money paid to APRA on behalf of the Commonwealth and to be credited to the APRA Special Account, and states that levy money paid to APRA, that exceeds the amount included in the Minister's determination to be credited to the APRA Special Account,will also be credited to the APRA Special Account. [ Schedule 2, item 4, subsection 50(2)and paragraphs 50(3)(a) and (b) of the APRA Act ]

2.21 An amendment will be made to subsection 50(6) to insert a definition of the measures covered by SuperStream. [ Schedule 2, item 5, section 50(6) of the APRA Act ]

Application and transitional provisions

2.22 The amendments in this schedule apply from 1 July 2012, and to the 2012-13 financial year.

Consequential amendments

2.23 Nil.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Cost of Implementing SuperStream measures

2.24 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.25 Schedule 2 of this Bill amends the Australian Prudential Regulation Authority Act 1998 to enable costs associated with the implementation of the SuperStream measures to be included in the determination of Commonwealth costs.

2.26 These amendments will enable the determination specifying the amount of levy money payable to the Commonwealth to include costs associated with the implementation of SuperStream and also to determine the proportion of levy money paid to APRA that is to be credited to the APRA Special Account.

Human rights implications

2.27 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

2.28 This Schedule is compatible with human rights as it does not raise any human rights issues.

Minister for Superannuation, the Hon Bill Shorten