- ASIC estimates significant increases in levies
- Past experience indicates that the actual levies may be higher again
- CA ANZ believes ASIC’s process need to change
The Australian Securities and Investments Commission released the Cost Recovery Implementation Statement (CRIS) for consultation on 23 July and CA ANZ is seeking member views as we will be providing feedback.
Registered company auditors
The estimated levy for FY20-21 is $1127, which represents an increase of 39% from FY19-20 of $811.
The increased levy is above the 33% rise in ASIC’s estimated cost to regulate company auditors. Auditors in regional communities and smaller and medium sized firms face a disproportionate impact as many retain their registration to do vital work for community organisations and not-for-profits for little or no charge.
Financial advice sector
The estimated levy for FY20-21 per adviser is $3138, which is an increase of 29% from FY19-20 of $2426 (for licensees that provide personal advice to retail clients on relevant financial products).
This increase follows the significant increase to the FY19-20 levy of $2426, an increase of 112% from the FY18-19 levy of $1142. While the estimates for FY19-20 indicate that members with a limited AFSL and three advisers need to allow for levies of at least $10,914, as noted by Bronny Speed, Leader – Financial Advice: “These estimates have routinely been between 25-55% less than the final levy amount, making it extremely difficult for businesses to plan for the expense.”
The estimated levy per appointment or notifiable event for FY20-21 is $127, which is an increase of 60% from FY19-20 of $79.16.
We expected the insolvency levy per metric to increase, reflecting the significant reduction in the total number of corporate insolvencies. Therefore, there would be a lower total number of metrics over which to disperse costs. We raised this concern in a number of our submissions to government over the past 12 months. However, we did not anticipate the 23% increase in ASIC’s estimated costs to regulate this same population undertaking significantly less work.
These estimates have routinely been between 25-55 per cent less than the final levy amount, making it extremely difficult for businesses to plan for the expense.
Reasonableness of the estimates
Members will be concerned by not only the value of each levy but whether that value can be relied upon to appropriately budget their cash flows for payment in March 2022. Even though this CRIS has been released after the end of the financial year to which it relates, we are aware from previous years that the budgeted figures can sometimes bear little resemblance to the actual levies. For example, the estimated levy for financial advisers to retail clients in the FY19-20 CRIS was $1571 and the actual levy was $2426 (54% increase).
Timeliness of the CRIS
We are concerned with the increasingly delayed release of the draft CRIS – this year it has come three weeks after the end of the financial year to which it relates. This late release leaves the regulated population seeking to recover these costs from future work, not from work related to the levy period.
ASIC has indicated that the delayed release of the CRIS FY90-21 reflected the additional burden on ASIC due to the business support measures in place to combat the impact of the pandemic. However, we will request an explanation as to the nature of those additional activities and the related cost impact, including how they relate to ASIC’s regulated population.
ASIC’s processes to put into effect the industry funding model need to be far more timely as they currently fall short of expectations – noting one of their KPIs – “to be open and transparent, to communicate in a clear, targeted and effective manner and to not impede the efficient operation of regulated entities.”
We are concerned with the lack of deadlines for ASIC to issue its CRIS and the lack of reconciliation between budget and actuals. Further, the significant annual increases could result in individuals leaving the regulated professions. In turn, this will place more pressure on those that remain as ASIC’s costs are spread across a diminishing population.
At a time when the Australian Government is seeking to support businesses to survive the effects of the pandemic, the massive levy hikes, particularly for regulated populations that have seen significant, well-publicised declines in workloads, seems out of step with being “actively focussed on protecting consumers and supporting business during a challenging time”.
Feedback by email to [email protected] is required by August 11th.
Submission on ASIC’s industry funding model for 2019-20
ASIC’s Cost Recovery Statement outlines how ASIC will implement the industry funding model for the period.Read more