If you have been regulated by Australian Securities and Investments Commission (ASIC) during the 2017-18 financial year, you will be liable for ASIC’s regulatory costs for this financial year in the form of an annual levy.  You will receive your levy invoice in the next financial year (2018-19). This means it is time to start budgeting for the cost in the next year’s cash flow projections.

We know many of you have been anxiously waiting for the release of the indicative levies of ASIC’s regulatory cost recovery scheme since the introduction of the Industry Funding Model on 1 July 2017. ASIC published the 2017-18 indicative levies in late March 2018 and expects to recover $234 million for the financial year 2017-18. We have summarised the indicative levies for subsectors that are most relevant below:

Corporate SubsectorsBudget Cost Recovery Amount ($ in Millions)Number of EntitiesIndicative Minimum Levy/Flat Levy ($)Levy Metric
Description
AUSTRALIAN FINANCIAL SERVICES LICENSES (AFSLs)
Retail OTC Derivatives Issuers2.79110127,855Number of days AFS licensee was authorised to provide financial service in the leviable financial year
Payment Product Providers1.4856482,354Flat Levy
Risk Management Product Providers0.297595,168Flat Levy
Margin Lenders0.2972214,278Flat Levy
Financial Advice Providers
AFS licensees authorised to
provide financial product advice
on relevant products to retail clients
26.1252,9351,500Adjusted number of advisers on ASIC’s Financial Adviser Register
Financial Advice Providers
AFS licensees authorised to
provide financial product advice
to retail clients, only on products
that are not relevant products
0.462660719Number of days AFS licensee was authorised to provide financial service in the leviable financial year
Financial Advice Providers
AFS licensees authorised to
provide general financial
product advice only
2.0239832,058Flat Levy
Financial Advice Providers
AFS licensees authorised to provide financial product advice,
only to wholesale clients
0.8741,466596Flat Levy
AUSTRALIAN CREDIT LICENSES (ACLs)
Credit Providers17.8611.1862,000Credit provided in the leviable financial year
Credit Assistant Providers9.0085242 entities with 36,710 credit representatives1,000Authorised representatives
* The indicative levies published today are based on ASIC’s budgeted regulatory costs outlined in ASIC’s draft Cost Recovery Implementation Statement (CRIS).
* Indicative levies are estimates of ASIC cost recovery levies, based on its budgeted allocation of regulatory costs for each financial year and estimates of the population and business activity metrics for each of the 48 subsectors to which levies apply.

As you can see, some regulated entities will pay a flat levy with the regulatory costs shared equally among their counterparts operating in the same subsector, while others will pay a graduated levy which is subject to the size or level of business activity of each regulated entity in its respective subsector.

What can you expect this year?

How are the Levies Calculated?

The actual levies will be calculated on the following basis:

  • the actual cost of ASIC’s regulation of each subsector in 2017–18;
  • the number of regulated entities during 2017–18; and
  • data from business activity metrics submitted by regulated entities.

ASIC will issue a legislative instrument setting out the regulatory costs for the previous financial year and the allocation of the costs among all the subsectors in November each year.

If you are not an Australian Financial Services Licensee or Australian Credit Licensee operating in one of the 48 subsectors, the above levies will not apply to you, however, as a small proprietary company you will receive a $4 increase in your annual company statement (currently $254 per year) from 1 July 2018 onwards.

ASIC currently obtains its funding from levying the public, with the majority of the funding coming from the fees and charges ASIC already imposes on companies as well as fees paid by individuals to obtain company information. Under the new regulatory cost recovery scheme, ASIC will substantially increase its takings from these further levies.

Background

The Industry Funding Model (Model) introduced by the ASIC and backed by legislation was introduced on 1 July 2017, considered a regulatory milestone for ASIC. The Supervisory Cost Recovery Levy Regulations 2017 was introduced in June 2017.

The background to the Model and the notion behind the Model were previously discussed in our articles “Industry Funding Model for ASIC Moving Closer” and “The Beginning of a New Era in ASIC’s Regulatory Regime” last year.

For further information on indicative levies, please refer to http://asic.gov.au/about-asic/what-we-do/how-we-operate/asic-industry-funding/indicative-levies/.

For information on the relevant legislation, please see the below links:

ASIC Supervisory Cost Recovery Levy Regulations 2017

Cost Recovery Implementation Statement: Levies or ASIC industry funding (2017-18)

Report 535 – ASIC cost recovery arrangements: 2017-18

If you have any further questions about ASIC’s industry funding model and what these changes mean for your business, please contact Sophie Grace directly.