Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2022-2023
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (FINANCIAL SERVICES COMPENSATION
SCHEME OF LAST RESORT) BILL 2023
FINANCIAL SERVICES COMPENSATION SCHEME OF LAST RESORT LEVY
BILL 2023
FINANCIAL SERVICES COMPENSATION SCHEME OF LAST RESORT LEVY
(COLLECTION) BILL 2023
EXPLANATORY MEMORANDUM
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services,
the Hon Stephen Jones MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 5
Financial services compensation scheme of last resort7
Financial services compensation scheme of last resort
levy ............................................................................ 37
Statement of Compatibility with Human Rights .......... 73
Glossary
This Explanatory Memorandum uses the following abbreviations and acronyms.
Abbreviation Definition
AFCA Australian Financial Complaints
Authority
ASIC Australian Securities and Investments
Commission
ASIC Act Australian Securities and Investments
Commission Act 2001
ASIC supervisory cost recovery levy The levy framework established by the
framework ASIC Supervisory Cost Recovery Levy
Act 2017
Corporations Act Corporations Act 2001
Credit Act National Consumer Credit Protection
Act 2009
CSLR Compensation Scheme of Last Resort
Financial Services Royal Commission Royal Commission into Misconduct in
the Banking, Superannuation and
Financial Services Industry
Financial Services Royal Commission The Final Report of the Royal
Final Report Commission into Misconduct in the
Banking, Superannuation and Financial
Services Industry
the Guide to Framing Commonwealth The Attorney-General's Department's A
Offences Guide to Framing Commonwealth
Offences, Infringement Notices and
Enforcement Powers, September 2011
edition
ICCPR International Covenant on Civil and
Political Rights
Glossary
Abbreviation Definition
Ramsay Review The Supplementary Final Report of the
Review of the financial system external
dispute resolution and complaints
framework
Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
General outline and financial impact
Financial services compensation scheme of last
resort and levy framework
Outline
Together, the Treasury Laws Amendment (Financial Services Compensation Scheme
of Last Resort) Bill 2023, the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023 and the Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 establish the CSLR.
The CSLR is intended to support confidence in the financial system's external dispute
resolution framework. The scheme provides for compensation to be paid to a consumer
where a determination issued by AFCA remains unpaid and the determination relates
to a financial product or service within the scope of the scheme. The Commonwealth
will fund the establishment of the scheme and part of its initial operation. A levy will
be imposed on parts of the financial services industry to fund the scheme's ongoing
operation.
Date of effect
The establishment of the CSLR and the supporting levy framework commences on the
day these Acts receive the Royal Assent.
The operator of the scheme can begin to make compensation payments to eligible
consumers after the commencement of the first levy period.
Proposal announced
This proposal was announced on 4 February 2019 as part of the former Government's
response to the Financial Services Royal Commission.
Financial impact
The estimated financial costs of the CSLR are indicative and dependent on a number of
key factors including the scheme commencement date and AFCA complaint
consideration processes. All figures in this table represent amounts in $m.
2022-23 2023-24 2024-25 2025-26
-2.7 0.5 -0.1 -1.6
5
General outline and financial impact
Human rights implications
Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort)
Bill 2023 raises human rights issues. See Statement of Compatibility with Human
Rights -- Chapter 3 of this Explanatory Memorandum.
The Financial Services Compensation Scheme of Last Resort Levy Bill 2023 does not
raise any human rights issues. See Statement of Compatibility with Human Rights --
Chapter 3 of this Explanatory Memorandum.
The Financial Services Compensation Scheme of Last Resort Levy (Collection)
Bill 2023 raises human rights issues. See Statement of Compatibility with Human
Rights -- Chapter 3 of this Explanatory Memorandum.
Impact Analysis
The Financial Services Royal Commission Final Report has been certified as being
informed by a process and analysis equivalent to an Impact Analysis for the purposes
of the Government decision to implement this reform. The Financial Services Royal
Commission Final Report can be accessed through the Australian Parliament House
website.1
1
https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22publicatio
ns%2Ftabledpapers%2Fbc83795c-b7fa-4b42-a93b-fa012cffffc2%22.
6
Financial services
compensation scheme of last resort
Table of Contents:
Outline of chapter .................................................................................. 8
Context of amendments ......................................................................... 8
Summary of new law.............................................................................. 9
Detailed explanation of new law ............................................................ 9
Key definitions ................................................................................. 9
Establishment of the CSLR operator ............................................. 10
Compensation payments under the scheme ................................. 13
AFCA Fees.................................................................................... 21
Powers of the CSLR operator ....................................................... 23
Powers of the Minister ................................................................... 26
Regulating the CSLR operator ...................................................... 28
Financial matters ........................................................................... 30
Other Amendments ....................................................................... 32
Commencement, application, and machinery provisions .............. 35
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Financial services compensation scheme of last resort
Outline of chapter
1.1 This Chapter describes the establishment and operation of the CSLR. All
legislative references in this Chapter are to the Corporations Act, unless
otherwise stated.
Context of amendments
1.2 The Australian financial system is central to the Australian economy and plays
an essential role in promoting economic growth and stability. A
well-functioning framework for resolving disputes within the financial system
is necessary to safeguard consumer trust and confidence, and to ensure the
system continues to meet the needs of its users.
1.3 The first comprehensive review of the financial system external dispute
resolution framework was commissioned in April 2016. The Ramsay Review
was undertaken by an expert panel chaired by Professor Ian Ramsay and
recommended a new financial system dispute resolution framework. AFCA
was established in response, and it commenced operations on
1 November 2018.
1.4 AFCA provides independent external dispute resolution and deals with
consumer complaints against relevant entities. AFCA is a one-stop shop for
most complaints concerning insurance, banking, credit and superannuation;
and provides an alternative to going to court. AFCA is empowered by the law
to make binding determinations requiring relevant entities to compensate
consumers.
1.5 In February 2017, the expert panel was asked to make recommendations on the
establishment, merits and possible design of a financial services CSLR. A
Supplementary Final Report was provided on 6 September 2017.
1.6 The Supplementary Final Report to the Ramsay Review observed that existing
arrangements were not adequate to ensure that users of the financial system
were compensated for losses where an external dispute resolution scheme,
tribunal or court makes a finding of misconduct and a subsequent award in
favour of the consumer. This issue is compounded in situations of insolvency
as consumers who are awarded damages by a court, or who are entitled to a
payment following a determination from AFCA, are ranked as unsecured
creditors.
1.7 As such, the Supplementary Final Report to the Ramsay Review recommended
that a CSLR be established in Australia.
1.8 The Financial Services Royal Commission Final Report later recommended
that the three principal recommendations made in the Supplementary Final
Report should be carried into effect.
8
Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
Summary of new law
1.9 The objective of the CSLR is to provide compensation to eligible consumers in
circumstances where an AFCA determination awarding monetary
compensation has been made in their favour, but which the relevant entity has
not paid.
1.10 The Minister may authorise a person to be the operator of the CSLR if the
Minister is satisfied that the person will meet the mandatory requirements. This
includes that the operator is a company limited by guarantee and not operated
for profit.
1.11 A consumer who has not been paid in accordance with a relevant AFCA
determination may apply to the operator of the CSLR for payment. If the
eligibility criteria are met, the operator of the CSLR must compensate the
consumer, up to $150,000.
Detailed explanation of new law
Key definitions
1.12 The Treasury Laws Amendment (Financial Services Compensation Scheme of
Last Resort) Bill 2023 includes the following definitions.
1.13 Note, Table 1.1 does not include terms defined in the Financial Services
Compensation Scheme of Last Resort Levy Bill 2023 or the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023 (see
Table 2.1).
Table 1.1 Key definitions
Term Definition
Accumulation recovery day 8 September 2022
AFCA's accumulated unpaid fees Has the meaning given by
subsection 1058B(4) of the Act
AFCA's unpaid fees Has the meaning given by
subsection 1058B(2) of the Act
CSLR operator (short for financial services The person for whom an authorisation under
compensation scheme of last resort operator) section 1060 of the Act is in force
CSLR staff member Means:
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Financial services compensation scheme of last resort
Term Definition
a) a director, officer or employee of
the CSLR operator; or
b) a person engaged as a consultant to,
or to perform services for, the
CSLR operator for the purposes of
the CSLR
Financial services compensation scheme of The CSLR established under Part 7.10B of
last resort the Act
Relevant AFCA determination Has the meaning given in section 1065 of
the Act
[Item 1, section 9]
Establishment of the CSLR operator
1.14 The CSLR is established by Division 1 of Part 7.10B of the Act.
[Item 3, section 1059]
Minister may authorise the CSLR operator
1.15 The Minister may, by notifiable instrument, authorise a person to operate the
CSLR if the Minister is satisfied that the person will meet the mandatory
requirements. The authorisation must specify the day the authorisation comes
into force and may impose any conditions relating to the authorisation.
[Item 3, section 1060]
1.16 It is appropriate for the Minister to be empowered to authorise the operator of
the CSLR as it enables the Minister to consider the specific needs of the
scheme and authorise an operator that is best placed to administer the scheme
effectively and responsibly.
1.17 Once authorised, the operator of the CSLR is to be known as the CSLR
operator.
[Item 3, section 1060]
1.18 The Minister may also:
• vary or revoke the CSLR operator's authorisation; and
• impose, vary or revoke conditions relating to the authorisation.
[Item 3, section 1060]
1.19 There can only be one CSLR operator at any given time. This means that an
authorisation of a person as the CSLR operator may not take effect while the
authorisation of another person as the CSLR operator is in force.
[Item 3, section 1060]
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Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
1.20 The Minister's power to make a notifiable instrument authorising a person as
the CSLR operator (including the power to vary or revoke that authorisation, or
to impose, vary or revoke conditions on that authorisation) is appropriate as it
is administrative (not legislative) in character and does not alter the operation
of the law. Before the Minister is able to exercise this power to authorise a
person as the CSLR operator, the Minister must be satisfied that the person
will meet the mandatory organisational, operator, operational and compliance
requirements. This requirement also ensures transparency by requiring the
instrument to be publicly available on the Federal Register of Legislation.
Mandatory requirements for the CSLR operator
1.21 The mandatory requirements that apply to the CSLR operator are grouped into
four categories:
• organisational;
• operator;
• operational; and
• compliance.
[Item 3, section 1062]
Organisational requirement
1.22 The organisational requirement is that the CSLR operator must not charge a fee
to a consumer seeking compensation, nor require the consumer to pay a fee or
charge to any other entity in relation to their application. This reflects the intent
that the CSLR is free for consumers.
[Item 3, section 1062]
Operator requirements
1.23 The person authorised to be the CSLR operator must be a company limited by
guarantee and operate on a not-for-profit basis (which must be stated in the
operator's constitution).
[Item 3, section 1062]
1.24 The CSLR operator's constitution must also provide that:
• amounts paid to the operator by the Commonwealth must be
maintained for the purpose of the CSLR;
• the Chair of the operator's board must be an independent person
appointed by the Minister as a member of the board; and
11
Financial services compensation scheme of last resort
• within 6 months after the operator's authorisation a director of AFCA
(or the Chair of the AFCA board) and a Fellow of the Institute of
Actuaries of Australia (who has at least 5 years' experience in actuarial
analysis) must be appointed to the board of the CSLR operator.
[Item 3, section 1062]
1.25 The Minister's appointment of an independent member as the Chair of the
CSLR operator's board must be made by written instrument. Consistent with
the Legislation (Exemptions and Other Matters) Regulation 2015 an instrument
of appointment is not a legislative instrument.
[Item 3, section 1061]
1.26 The requirement for a director or Chair of the AFCA board to be a member of
the CSLR operator's board recognises the importance of a close and effective
working relationship between the CSLR operator and AFCA.
1.27 The requirement for an actuarial expert to be a member of the operator's board
reflects the importance of this discipline to the role of the CSLR operator
noting that the CSLR operator must have regard to actuarial principles in
estimating and working out claims, fees and costs estimates to be payable for
each levy period.
Operational requirements
1.28 The operational requirements provide that the CSLR operator must:
• operate in accordance with its constitution;
• administer the CSLR in accordance with the law (Part 7.10B of the Act
and any regulations made under that Part of the Act);
• manage money in a manner that is efficient, effective and economical;
and
• have appropriate expertise to deal with applications for compensation
and to undertake actuarial analysis and modelling to estimate the value
of claims to be made under the CSLR.
[Item 3, section 1062]
1.29 The requirement for the CSLR operator to manage money in a manner that is
efficient, effective and economical is intended to be interpreted in accordance
with the ordinary meaning of these terms in the context. For example, efficient
operation involves achieving appropriate value for money, effective operation
involves an assessment of the extent to which spending achieves the intended
outcomes, and economical operation generally relates to minimising cost.
Compliance requirements
1.30 If the authorisation of the CSLR operator is subject to any conditions imposed
by the Minister, the operator must comply with these conditions, as well as any
12
Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
other requirements relating to compliance with the mandatory requirements
issued to the operator by ASIC.
[Item 3, sections 1062 and 1069K]
Compensation payments under the scheme
1.31 Division 2 of Part 7.10B of the Act provides for the payment of compensation
under the CSLR, including the requirements for making an application,
eligibility for compensation, and the amount of compensation to be paid.
1.32 The CSLR operator cannot consider the merits or facts of a dispute between a
consumer and an AFCA member underpinning a relevant AFCA
determination. Rather, the CSLR operator must make a compensation payment
to a consumer if:
• a relevant AFCA determination has been made in favour of the
consumer;
• the consumer is eligible for compensation;
• the consumer makes an application for compensation under the CSLR;
and
• the consumer accepts the CSLR operator's offer of compensation.
[Item 3, section 1063]
1.33 If all of the conditions for payment of compensation are satisfied, the CSLR
operator must pay the amount of compensation in a single lump sum payment
(unless the Minister has made a determination requiring the compensation
amount to be paid in instalments over a specified period of time).
[Item 3, section 1063]
1.34 Compensation cannot be paid to a consumer before:
• the start of the first levy period; or
• if a later day is prescribed by regulations - that day.
[Item 3, section 1063]
1.35 The regulation-making power to prescribe the day on which compensation
payments can start to be made is appropriate for the effective operation of the
CSLR. While a default date for making payments is prescribed in the
legislation, the power to prescribe a later day in regulations provides the
flexibility required to safeguard the regime by ensuring it works appropriately.
The regulations would be subject to disallowance and parliamentary scrutiny.
13
Financial services compensation scheme of last resort
Eligibility for compensation payments
1.36 A consumer is eligible for compensation under the CSLR if all of the following
steps are satisfied:
• a relevant AFCA determination has been made in favour of the
consumer, which requires an amount to be paid by a relevant entity;
- A consumer remains eligible for compensation even if the
relevant AFCA determination has been made against an
entity which no longer exists (for example, because it has
been de-registered under section 601AD of the Act).
• the consumer has notified AFCA within 12 months after the day the
relevant AFCA determination was made (or a longer period agreed by
AFCA) that the relevant entity has not paid the amount specified in the
determination;
- The discretion for AFCA to extend this notification period
ensures flexibility in circumstances where the consumer is
unable to meet the deadline (for example, in the case of
relevant AFCA determinations made prior to the
commencement of the CSLR).
• where the relevant entity still exists - AFCA has taken appropriate
steps to require the relevant entity to pay the specified amount and has
notified the entity, in writing, that it has finished taking these steps;
• the amount specified in the relevant AFCA determination has not been
fully paid to the consumer;
• the consumer is not eligible to receive payment under another statutory
compensation scheme for the same matters covered in the
determination for an amount equal to or greater than the amount in the
relevant AFCA determination; and
• the consumer makes an application to the CSLR operator for
compensation for the relevant AFCA determination (which has not
been withdrawn); and
- The consumer may withdraw their application for
compensation at any time before they accept an offer for
compensation. If an application is withdrawn, it may be
re-submitted at a later date.
• the CSLR operator reasonably believes that the consumer is unlikely to
be fully paid the amount specified in the relevant AFCA determination
having regard to the relevant entity's financial position or any other
reason which may be relevant.
[Item 3, section 1064]
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Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
Appropriate steps by AFCA
1.37 Compensation under the CSLR is intended to be a last resort only. To reflect
this, compensation is only payable after AFCA takes appropriate steps to
require the amount specified in the relevant AFCA determination to be paid by
the relevant entity.
1.38 AFCA is only required and able to take appropriate steps in circumstances
where the relevant entity against which the determination was made still exists.
This requirement does not apply if the entity has ceased to exist, for example,
because it has been de-registered.
[Item 3, section 1063]
1.39 In satisfying the requirement to take appropriate steps, AFCA may take one or
more of the following steps, if AFCA considers them appropriate:
• seeking an explanation from the relevant entity on why it has failed to
pay the amount in accordance with the relevant AFCA determination;
• explaining to the relevant entity the consequences of failing to comply
with the determination, which include cancellation of the relevant
entity's Australian financial services licence or Australian credit
licence;
• working with the relevant entity to come up with a reasonable payment
plan or other alternatives; and
• if the relevant entity commences insolvency proceedings - engaging
with an officer of the Chapter 5 body corporate to assess whether the
entity is able to pay the amount to the consumer. For example, if the
relevant entity is to be wound up or enters administration, AFCA may
engage with the liquidator or the administrator of the relevant entity.
[Item 3, section 1064]
1.40 In addition to, or instead of, these steps, AFCA may take any other steps it
considers appropriate and cost-effective to achieve the intended outcome of
ensuring that the relevant entity pays the consumer in accordance with the
determination.
[Item 3, section 1064]
Relevant AFCA determination
1.41 Compensation under the CSLR is only available where a relevant AFCA
determination requiring payment has been made in favour of the consumer.
[Item 3, section 1063]
1.42 For the purposes of the CSLR, a relevant AFCA determination:
15
Financial services compensation scheme of last resort
• relates to a complaint made by a consumer against a relevant entity,
which, at the time the complaint is made, is an AFCA member;
• the complaint is about a particular kind of product or service; and
• the determination requires the entity to pay an amount to the consumer
(whether or not the entity still exists) and the determination is accepted
by the consumer.
[Items 1 and 3, sections 9 and 1065]
1.43 To be a relevant AFCA determination, the determination must relate to one or
more of the following kinds of products or services:
• engaging in credit activity as a credit provider or otherwise;
- 'Credit activity' (including when a person engages in a
credit activity) and 'credit provider' are defined in the
Credit Act.
• providing financial product advice that is personal advice to a retail
client about at one or more relevant financial product; and
- 'Financial product advice', 'personal advice', 'retail
client' and 'relevant financial product' are defined in the
Act.
• dealing in securities for a person as a retail client, other than issuing
securities.
- 'Dealing' and 'security' are defined in the Act.
[Item 3, section 1065]
1.44 For the purpose of the CSLR, a relevant AFCA determination may include
determinations made by AFCA before, on, or after the commencement of the
CSLR. Compensation under the CSLR is intended to available for eligible
complaints made to AFCA since AFCA commenced operation on
1 November 2018.
[Item 2, section 1058B]
Applying for compensation payments
1.45 It is not the CSLR operator's role to proactively monitor the status of relevant
AFCA determinations, to determine whether or not compensation is available.
Instead, a compensation payment is only available if the consumer makes an
application for compensation to the CSLR operator.
1.46 A consumer seeking compensation for a relevant AFCA determination may
make an application, in the approved form, to the CSLR operator.
[Item 3, section 1066]
1.47 The CSLR operator may approve a form for this purpose.
[Item 3, section 1066]
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Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
1.48 An application for compensation is considered to be in the approved form if:
• it is in the form approved by the CSLR operator;
• it includes any information (including any declarations) required by the
approved form; and
• it is given in the manner required by the CSLR operator.
[Item 3, section 1066]
1.49 As part of the application process, the consumer may be required to declare
any payments they have received from the relevant entity in accordance with
the relevant AFCA determination, for example, this could include a partial
payment from the relevant entity or an amount paid to the consumer as an
unsecured creditor in an insolvency process.
1.50 Once an application for compensation has been lodged with the CSLR
operator, the consumer may:
• amend their application at any time before the CSLR operator makes
an offer of compensation; and
• withdraw their application at any time before they accept the CSLR
operator's offer of compensation.
[Item 3, section 1066]
Amount of compensation payments
1.51 The maximum amount of compensation that the CSLR may offer (and pay) to
a consumer is capped at $150,000.
[Item 3, section 1067]
1.52 On the other hand, the maximum compensation that may be payable under a
relevant AFCA determination is $542,500. Where the relevant AFCA
determination is for an amount greater than the CSLR compensation cap (that
is, more than $150,000), the excess is not compensable under the CSLR.
Instead, this excess remains a debt owed by the relevant entity to the consumer,
which the consumer can pursue via other means outside of the CSLR.
1.53 The amount of compensation payable to a consumer for a relevant AFCA
determination, is an amount equal to the lower of the following amounts:
• $150,000; or
• the relevant AFCA determination, less any of the following which
apply:
- any amount paid by the relevant entity in accordance with
the relevant AFCA determination, such as a partial
17
Financial services compensation scheme of last resort
payment or a payment made to the consumer as an
unsecured creditor in an insolvency process;
- any compensation the consumer is eligible for under
another statutory compensation scheme for the matters
covered by the determination; and
- any other payments made to the consumer of a kind
prescribed as under regulations (if any).
[Item 3, section 1067]
1.54 The regulation-making power to prescribe any other kinds of payments which
the CSLR operator must take into account is necessary and appropriate as it is
not possible or practical to prescribe all of the kinds of payments that should be
taken into account when determining the amount of compensation payable to
the consumer in primary law. Rather, given the dynamic nature of the financial
system, it is essential that the regulations can prescribe additional criteria to
allow the CSLR to adapt to changing circumstances. The regulations are
subject to disallowance and parliamentary scrutiny.
1.55 These criteria are the only matters to which the CSLR operator may have
regard in determining the amount of compensation to offer. The CSLR
operator may not exercise discretion by including any additional amounts not
specified in the relevant AFCA determination, such as interest payments.
Similarly, the CSLR operator also does not have discretion to remove an
amount for any reasons other than those prescribed by law.
[Item 3, section 1067]
Offer, acceptance, notification and payment
1.56 If a consumer is found eligible for compensation for a relevant AFCA
determination, the CSLR operator must make a written offer of compensation
to the consumer.
[Item 3, section 1068]
1.57 The offer must include the amount of compensation offered and explain the
effect of the CSLR operator's right of subrogation if compensation is paid.
[Item 3, section 1068]
1.58 After an offer of compensation is made, the consumer has 90 calendar days
after the day the offer is made to accept the offer. The consumer must notify
the CSLR operator in writing that they accept the offer.
[Item 3, section 1069]
1.59 If the consumer fails to accept the offer within this timeframe, they are taken to
have withdrawn their application for compensation. However, if required, the
consumer may make another application for compensation.
[Item 3, section 1069]
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Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
1.60 If the consumer accepts the offer of compensation within this timeframe, the
CSLR operator must pay the amount of compensation in a single lump sum
(unless the Minister has made a determination requiring the compensation
payment to be made in specified instalments over a specified period of time).
[Item 3, sections 1063 and 1069H]
1.61 At any time before the consumer accepts the offer, the CSLR operator may
vary or revoke the offer, if the operator reasonably believes that:
• there is an error relating to the offer;
• there is fraud relating to the offer;
• there is a change in circumstances affecting either:
- the consumer's eligibility for the amount of compensation
in the offer; or
- the amount of compensation in the offer; or
• other exceptional circumstances exist that justify the variation or
revocation.
[Item 3, section 1068]
1.62 For example, an offer of compensation may be varied where, after the offer is
made (but before it is accepted), the consumer receives a partial payment in
accordance with the relevant AFCA determination as an unsecured creditor to
an insolvency process. In this circumstance, the consumer may no longer be
eligible for the full amount offered.
1.63 An example of exceptional circumstances that may warrant an offer of
compensation being varied or revoked is where the CSLR operator receives
additional information relating to the legality of arrangements. For example,
where the CSLR operator finds that an Enduring Power of Attorney
arrangement does not give an appointed attorney the necessary authority to
seek the compensation on behalf of the consumer.
1.64 The CSLR operator's discretion to vary or revoke an offer of compensation is
limited and cannot be exercised for reasons other than those prescribed in the
law.
1.65 Merits review is not available in relation to the CSLR operator's decision to
vary or revoke an offer. However, while the decision to vary or revoke an offer
involves the exercise of limited discretion on the part of the CSLR operator,
this discretion is necessarily restricted to situations that relate to the integrity
and proper administration of the scheme.
1.66 If the consumer is unsatisfied with the CSLR operator's original or varied offer
of compensation, they can choose not to accept the offer. At this point, the
consumer can pursue other options for obtaining payment in accordance with
the relevant AFCA determination (for example, by becoming an unsecured
19
Financial services compensation scheme of last resort
creditor in the liquidation of the relevant entity) or make another application
for compensation to the CSLR operator.
1.67 If a consumer has submitted an application for compensation but is found not
to be eligible, the CSLR operator must notify that consumer, in writing, as
soon as reasonably practicable, that they are not eligible for compensation and
the reasons why they are not eligible.
[Item 3, section 1068]
Subrogation of rights
1.68 The CSLR operator may, in certain circumstances, have the right to recover
some or all of the compensation paid to the consumer for a relevant AFCA
determination from the relevant entity against which the determination was
made.
1.69 If the CSLR operator pays compensation for a relevant AFCA determination
and the relevant entity (against which the determination was made) is (or was
at the time the complaint was made) an AFCA member that is, or becomes, a
Chapter 5 body corporate, the CSLR operator is subrogated the rights or
remedies that the consumer would otherwise have had against the relevant
entity.
[Item 3, section 1069A]
1.70 Section 9 of the Act defines a 'Chapter 5 body corporate' as a body corporate
(company) that:
• is being wound up;
• is a CCIV of which one or more sub-funds is being wound up;
• in respect of property of which a receiver, or a receiver and manager,
has been appointed (whether or not by a court) and is acting;
• is under administration;
• has executed a deed of company arrangement that has not yet
terminated;
• is under restructuring;
• has made a restructuring plan that has not yet terminated; or
• has entered into a compromise or arrangement with another person the
administration of which has not been concluded.
1.71 Subrogation of rights provides that the CSLR has any rights or remedies
against the relevant entity to the extent of the compensation amount paid as
recognised by an officer of the Chapter 5 body corporate (for example, an
external administrator or liquidator).
[Item 3, section 1069A]
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1.72 The CSLR operator is not subrogated these rights where the relevant entity
against which the determination is made is not a Chapter 5 body corporate (for
example, because the relevant entity is not a body corporate).
1.73 In practice, this means:
• the consumer no longer has any rights or remedies against the relevant
entity for the amount of compensation they are paid by the CSLR
operator for the relevant AFCA determination;
• the consumer's rights and remedies against the relevant entity (for the
amount of compensation paid) are transferred to the CSLR operator,
which means that the CSLR operator may be able to recover some or
all of the compensation paid under the CSLR from the relevant entity
(for example, as an unsecured creditor in insolvency proceedings); and
• if the relevant AFCA determination exceeds the amount of
compensation paid under the CSLR, the consumer retains their rights
and remedies against the relevant entity for the excess.
1.74 The purpose of this provision is to enable the CSLR operator, in certain
circumstances, to recover some or all of the compensation paid on behalf of the
relevant entity. It is also intended to prevent situations where the consumer is
paid more than the amount specified in the relevant AFCA determination by
receiving a compensation payment under the CSLR and a payment as a
creditor to an insolvency process.
AFCA Fees
1.75 AFCA incurs costs in assessing complaints (whether or not it makes a
determination for compensation). Generally, these costs are required to be paid
by the relevant entity against which a complaint has been made. These fees and
charges are central to AFCA's ongoing operation and sustainability.
1.76 However, there are instances where a relevant entity does not, or is unable to,
pay AFCA's fees. For example, this could occur if the relevant entity becomes
insolvent.
1.77 Where AFCA's fees are not paid by the relevant entity (for whatever reason),
the CSLR operator is required to pay to AFCA an amount equal to AFCA's
unpaid fees (calculated on a monthly basis). This applies in relation to all
unpaid fees and charges for complaints within the scope of the CSLR,
regardless of whether the complaint is determined in favour of the consumer or
the relevant entity.
[Item 3, sections 1069B and 1069C]
1.78 The CSLR operator's payment of AFCA's unpaid fees is funded by an industry
levy.
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Financial services compensation scheme of last resort
1.79 'AFCA's unpaid fees' for a month are the fees (however these fees are
described):
• that relate to one or more complaints that have been finalised by
AFCA, each of which is made against a relevant entity which, at the
time the complaint was made, was an AFCA member and is a
complaint about a particular kind of product or service;
• AFCA has charged to the (current or former) AFCA member - or
would have done so if the relevant entity still existed;
• that have not been paid; and
• AFCA has finished taking appropriate steps to recover the fees from
the relevant entity (see paragraphs 1.37 to 1.40).
[Item 3, section 1058B]
1.80 'AFCA's accumulated unpaid fees' are the same as 'AFCA's unpaid fees',
except that they only relate to fees that became due and payable between
1 November 2018 and 7 September 2022 (the day before the accumulation
recovery day). AFCA fees become due and payable after AFCA has finished
taking appropriate steps to recover these fees from the relevant entity.
[Item 3, section 1058B]
1.81 'AFCA unpaid fees' and 'AFCA accumulated unpaid fees' are intended to
include all AFCA's fees and charges (however these fees or charges are
described) the relate to the assessment of one or more eligible complaints. This
includes complaint fees, the user charge, and any other fees that may apply.
1.82 For 'AFCA's unpaid fees', AFCA must notify the CSLR operator, in writing,
of the fee amount as soon as practicable after the end of each month on or after
the accumulation recovery day (8 September 2022). The CSLR operator must
pay AFCA's unpaid fees as soon as reasonably practicable after being notified
of this amount by AFCA. However, payment cannot begin before the start of
the first levy period (or a later day prescribed by regulations).
[Items 2 and 3, sections 1058B and 1069B]
1.83 Similarly, for 'AFCA's accumulated unpaid fees', AFCA must notify the
CSLR operator, in writing, of the fee amount as soon as reasonably practicable
after the accumulation recovery day (8 September 2022). The CSLR operator
must pay AFCA's accumulated unpaid fees as soon as reasonably practicable
after being notified of this amount by AFCA. However, payment cannot begin
before the start of the first levy period (or a later day prescribed by
regulations).
[Items 2 and 3, sections 1058B and 1069C]
1.84 The regulation-making powers to prescribe the day on which payments can
begin to be made to AFCA is necessary for the effective operation of the
CSLR. While a default day for making payments is prescribed in the
legislation, the power to prescribe a later day in regulations provides the
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flexibility required to safeguard the regime by ensuring it works appropriately.
The regulations are subject to disallowance and parliamentary scrutiny.
Powers of the CSLR operator
Information gathering
1.85 The CSLR operator may obtain information and documents relevant to an
application for compensation.
1.86 If the CSLR operator has a reasonable belief that a person is capable of giving
information or producing documents that are relevant to an application for
compensation, the operator may give that person a written notice requiring
them to give this information (in writing) or produce those documents within
the period specified in the notice.
[Item 3, section 1069D]
1.87 The notice given by the CSLR operator must state what information is required
to be given, or documents are required to be produced, and when that
information or those documents, are required to be provided. The day specified
in the notice must be at least 14 days after the day the notice is given.
[Item 3, section 1069D]
1.88 If documents are required to be produced, the CSLR operator may:
• take possession of the documents and make copies or take extracts
from the documents;
• keep the documents for as long as necessary to deal with the
application for compensation; and
• permit a person (who is entitled to do so) to inspect the document at all
reasonable times.
[Item 3, section 1069D]
1.89 This power for the CSLR operator to require a person to give information or
produce documents does not apply to ASIC (that is, the CSLR operator cannot
compel ASIC to give information or produce documents).
[Item 3, section 1069D]
1.90 Unless the person has a reasonable excuse, a person who fails to comply with a
notice issued by the CSLR operator to give information or produce documents
commits an offence of strict liability. The maximum penalty for this offence is
30 penalty units.
[Item 3, section 1069D]
1.91 A failure to provide this information could affect the CSLR operator's ability
to efficiently and effectively to determine the consumer's eligibility for
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Financial services compensation scheme of last resort
compensation and the value of that compensation (if applicable). Having strict
liability apply to this offence is intended to deter non-compliance by ensuring
that regulators can efficiently and expeditiously deal with low-level offending.
This, in turn, bolsters the integrity of the CSLR and maintains public
confidence in the regime.
1.92 This strict liability offence is consistent with the Guide to Framing
Commonwealth Offences, which states that the maximum penalty for a strict
liability offence should not exceed 60 penalty units for an individual and
300 penalty units for a body corporate. Furthermore, the use of strict liability
(rather than absolute liability) preserves the defence of honest and reasonable
mistake of fact to be proved by the accused on the balance of probabilities.
This defence maintains adequate checks and balances for persons who may be
accused of such offences.
1.93 The defence of 'reasonable excuse' is available to a person who has not
complied with a notice issued by the CSLR operator to give information or
produce documents. Under subsection 13.3(3) of the Criminal Code, a
defendant bears an evidential burden to prove that they have a reasonable
excuse. Whether the person has a reasonable excuse for not complying with
this notice is a matter peculiarly within the knowledge of the defendant. It
would be significantly more difficult and time-consuming for the prosecutor to
disprove the existence of these defences, than it would be for the defence to
establish the matter.
1.94 In accordance with subsection 13.3(3) of the Criminal Code Act 1995, a
defendant who wishes to rely on this defence bears an evidential burden in
relation to that matter. If the defendant discharges this evidential burden, the
prosecution must prove those matters beyond a reasonable doubt.
1.95 If the person who fails to comply with the CSLR operator's notice is, or was, a
member of AFCA, the operator must notify AFCA and ASIC of the person's
failure to comply with the notice.
[Item 3, section 1069D]
Information Sharing
1.96 A CSLR staff member may use or disclose information or documents obtained
by a CSLR staff member if:
• the use or disclosure is for the purpose of:
- Part 7.10A or Part 7.10B of the Act;
- the Financial Services Compensation Scheme of Last
Resort Levy Act 2023; or
- Financial Services Compensation Scheme of Last Resort
Levy (Collection) Act 2023; or
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• the use or disclosure is to any of the following persons or entities for
the purposes of assisting that person or entity to perform its functions
or exercise its powers:
- ASIC;
- AFCA;
- the Information Commissioner; or
- the Commissioner of Taxation.
[Item 3, section 1069E]
1.97 An AFCA staff member may use or disclose information or documents
obtained by an AFCA staff member under, or for the purposes of, Part 7.10A
of the Act if:
• the use or disclosure is for the purposes of Part 7.10A or 7.10B of the
Act, the Financial Services Compensation Scheme of Last Resort Levy
Act 2023, or the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Act 2023; or
• the disclosure is to the CSLR operator for the purpose of assisting the
operator to perform its functions or exercise its powers.
[Item 2, section 1058A]
1.98 Use or disclosure of information by an AFCA staff member includes, making a
record of the information, disclosing the information, producing the relevant
document or permitting access to the document.
[Item 2, sections 1058A]
1.99 ASIC may use or disclose information for the purpose of assisting the CSLR
operator perform its functions or exercise its powers.
[Item 5, section 127 of the ASIC Act]
Reporting of compensation paid by CSLR operator
1.100 If the CSLR operator makes a compensation payment for a relevant AFCA
determination (where the determination has been made against an entity that is
or was an AFCA member), the operator must notify ASIC of the details of the
AFCA member and of its failure to comply with the relevant AFCA
determination.
[Item 3, section 1069F]
1.101 Also, if the CSLR operator pays compensation for a relevant AFCA
determination (where the determination is made against an entity that is or was
an AFCA member), and becomes aware that the entity is a Chapter 5 body
corporate, the operator must notify an officer of the Chapter 5 body corporate
(for example, a liquidator or an administrator) in writing of the amount of
25
Financial services compensation scheme of last resort
compensation paid.
[Item 3, section 1069F]
1.102 This notification is intended to ensure that the officer of the Chapter 5 body
corporate is aware of the debt paid on behalf of the company, the CSLR
operator's subrogated right to remedies to the extent of the compensation paid,
and the remaining debt (if any) owed to the consumer.
1.103 The CSLR operator must, as soon as reasonably practicable after the end of
each levy period, prepare a report for that levy period. The CSLR operator's
report must contain the information prescribed by regulations and be published
on the operator's website.
[Item 3, section 1069G]
1.104 The regulation-making power to prescribe the content of the CSLR operator's
report is necessary and appropriate to ensure that the contents of reports are
flexible and relevant in the context of the operating environment. The content
of these reports may need to be adjusted over time to better reflect the
operation of the CSLR regime. The regulations are subject to disallowance and
parliamentary scrutiny.
Powers of the Minister
1.105 The CSLR is intended to be funded by an industry levy to be imposed on parts
of financial services industry.
1.106 To ensure the sustainability of the CSLR and the industry, the law sets the
following caps on the levy amount payable for a levy period:
• scheme levy cap - the total amount of levy that may be imposed for
any levy period across all persons across all sub-sectors; and
• sub-sector levy cap - the total amount of levy that may be imposed for
the second levy period (or a later levy period), across all members of a
particular sub-sector.
1.107 For a levy period, the CSLR operator may make:
• an initial claims, fees and costs estimate for a levy period and a sub-
sector - this sets out the levy amount payable for a levy period and a
sub-sector; and
• a revised claims, fees and costs estimate for a levy period and a sub-
sector - this estimate (if required) may result in the imposition of a
further levy being imposed for the levy period and the sub-sector.
1.108 If the CSLR operator works out that a revised estimate for the levy period for a
sub-sector could cause the sub-sector levy cap for the levy period and the sub-
sector to be exceeded, the CSLR operator must notify the Minister of this as
soon as reasonably practicable. This notification must include any information
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prescribed by the regulations.
Item 3, section 1069F]
1.109 The regulation-making power is appropriate because the information that
should be included in a notice to the Minister needs to be flexible to take into
the account any relevant circumstances. The types of information that may be
prescribed by regulations for the purpose of this notification may include
information about the affected sub-sector, the number and size of expected
complaints, the possible impact of the revised estimate on the financial system,
and any other information required to assist the Minister in making the
determination. The regulations are subject to disallowance and parliamentary
scrutiny.
1.110 If the Minister receives a notification from the CSLR operator about a revised
estimate, the Minister may make a determination (by legislative instrument) for
the levy period and the sub-sector (or one or more specified sub-sectors).
[Item 3, section 1069H]
1.111 The determination may:
• provide that compensation payments made to consumers in a specified
class must be paid in specified instalments over a specified period of
time (rather than in a single lump sum);
• provide for the imposition of a special levy for the levy period across
all members of the primary sub-sector (the sub-sector for which the
revised claims, fees and costs estimate was made). The determination
must state the amount of special levy payable for the levy period; and
- The amount of special levy payable must not be more than
the difference between the revised estimate and the total
levy amount already paid for the levy period by the sub-
sector.
• provide for the imposition of a special levy for the levy period that
applies to more than one sub-sector (not just the primary sub-sector) -
the Minister may only do this if he or she is satisfied that it is
necessary to do so due to the number and size of compensation
payments required to be paid in the levy period and that this is the
most effective way of enabling timely payment of compensation to
those consumers.
- The determination must specify the sub-sectors that the
special levy is to be imposed on and the special levy
amount.
- In making this determination, the Minister must have
regard to the impact of the special levy amount on the
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Financial services compensation scheme of last resort
financial sustainability and viability of the specified sub-
sectors and on the financial system more broadly.
- The amount of special levy specified in the determination
must not be more than the difference between the revised
estimate for the levy period and the primary sub-sector
and the total amount of levy already paid.
[Item 3, section 1069H]
1.112 These guiding principles are intended to ensure that the Minister's power to
impose a special levy for the levy period on one or more specified sub-sectors
is only exercised where there is a genuine need to do so, and takes into account
any adverse impacts the levy may have on the sustainability and viability of the
specified sub-sectors and the Australian financial system more broadly. In this
way, the Minister's power to impose a special levy is a necessary intervention
to deal with circumstances where the annual levy is insufficient (or likely to be
insufficient) to meet the demand for compensation payments in a particular
levy period.
1.113 The Minister's determination must be made by legislative instrument, which is
subject to disallowance and parliamentary scrutiny.
[Item 3, section 1069H]
1.114 The purpose of the determination is to enable the Minister to select an
appropriate mechanism for dealing with higher than expected costs for a levy
period. However, the Minister's power to intervene is limited to the three
mechanisms prescribed in the primary law.
1.115 This ensures that the CSLR is able to operate with sufficient safeguards in an
evolving and dynamic financial system, while being responsive to unforeseen
events. It is not possible to provide such safeguards in primary law given the
need for timely action in response to these events, as they unfold.
1.116 Further, the Minister's power to make a determination is constrained with
reference to the principles outlined in the Ramsay Review, which ensures the
scheme is designed to limit reliance on ad-hoc funding through a carefully
calibrated levy calculation methodology, and by specifying the circumstances
in which a Ministerial determination may be made.
Regulating the CSLR operator
1.117 A person authorised to operate the CSLR scheme must ensure that they comply
with the mandatory organisational, operator, operational and compliance
requirements.
[Item 3, section 1069J]
1.118 ASIC may make a legislative instrument issuing a direction to the CSLR
operator relating to its compliance with the mandatory requirements.
[Item 3, section 1069K]
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1.119 If ASIC considers that the CSLR operator has not done all things reasonably
practicable to ensure compliance with the mandatory requirements or a
condition of the authorisation imposed by the Minister, ASIC may give the
operator a written notice of its intention to give the CSLR operator a formal
direction.
[Item 3, section 1069L]
1.120 A notice of ASIC's intention to give a formal direction (the first notice) must
set out the specific measures that the formal direction would require the CSLR
operator to take and the reasons for ASIC's intention to give such a direction.
[Item 3, section 1069L]
1.121 If, after the first notice is given to the CSLR operator, the operator has not
taken the specific actions in the notice, and ASIC considers that it is
appropriate to do so, ASIC may give the CSLR operator the formal direction
and a statement for reasons for giving the direction.
[Item 3, section 1069L]
1.122 If ASIC gives the CSLR operator a formal direction, it must specify the
timeframe for compliance with the direction. This timeframe must be
reasonable. What is reasonable depends on the circumstances of the case.
[Item 3, section 1069L]
1.123 A direction given by ASIC is not a legislative instrument. A direction would
not be a legislative instrument within the meaning of section 8 of the
Legislation Act 2003 and is intended as a clarification (not as an exemption) to
that Act. A direction given by ASIC is administrative in character and sets out
the actions the CSLR operator must take to comply with their obligations
under the law.
[Item 3, section 1069L]
1.124 The CSLR operator must comply with a direction given by ASIC. A failure to
comply with a direction is an offence. The maximum penalty for this offence is
100 penalty units for an individual and 1,000 penalty units for a body
corporate. Penalty amounts apply in relation to each day, or part of a day, in
relation to which the offence is committed.
[Items 3 and 18, section 1069L and Schedule 3]
1.125 ASIC may apply to the court for an order requiring the CSLR operator to
comply with the direction, and the court may order the operator to comply with
the direction.
[Item 3, section 1069L]
1.126 A direction given by ASIC has effect until it is revoked by ASIC.
[Item 3, section 1069L]
1.127 ASIC may vary or revoke a direction by giving written notice to the CSLR
operator. ASIC may revoke a direction if, at the time of revocation, ASIC
29
Financial services compensation scheme of last resort
considers that the direction is no longer necessary or appropriate.
[Item 3, section 1069L]
Financial matters
Levy for the first levy period
1.128 The first levy period begins on the day specified in a determination made by
the Minister and ends on 30 June 2024.
1.129 The costs for the first levy period are to be funded by the Commonwealth. For
all subsequent levy periods, the levy amount for the levy period is required to
be paid by parts of the financial services industry.
1.130 For the first levy period, the CSLR operator may, by notifiable instrument,
make an initial estimate of the levy amount for the levy period and a
sub-sector. A single notifiable instrument may be used to determine estimates
for multiple sub-sectors.
[Item 3, section 1069M]
1.131 The CSLR operator's determination for the first levy period must include the
amounts that the CSLR operator reasonably believes (having regard to the
actuarial principles) will be:
• the total amount of compensation payable for the levy period for the
sub-sector (other than for pre-CSLR complaints);
• the sum of AFCA's unpaid fees for each of the months that end on, and
after, 8 September 2022, but before the second levy period (other than
fees relating to pre-CSLR complaints);
• the capital reserve establishment contribution for the first levy period,
which is equal to approximately one-third of the capital reserve for the
CSLR; and
• the CSLR operator's administrative costs for the first levy period.
[Item 3, section 1069M]
1.132 The use of a notifiable instrument for the estimated costs for the first levy
period is considered appropriate given that it applies only to the
Commonwealth. However, the use of a notifiable instrument also ensures
transparency by requiring the instrument to be publicly available on the
Federal Register of Legislation.
1.133 When the instrument estimating the costs for first levy period comes into force,
the Commonwealth must pay this amount to the CSLR operator.
[Item 3, section 1069N]
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1.134 The Commonwealth must pay the CSLR operator the amount specified in the
determination for the first levy period. The payment is to be made for the
following purposes:
• the payment of compensation during the first levy period (other than
for pre-CSLR complaints);
• the payment of AFCA's unpaid fees (other than for pre-CSLR
complaints);
• the establishment of a capital reserve; and
• the administrative costs expected to be incurred by the CSLR operator
for the first levy period.
[Item 3, section 1069N]
1.135 As soon as reasonably practicable after the first levy period, the CSLR operator
may determine the revised costs for the first levy period. This determination
must be made by notifiable instrument and include all of the same matters that
were included in the initial estimate for the first levy period.
[Item 3, section 1069M]
1.136 The CSLR operator's role as the estimator of claims, fees and costs is central
to the design of the CSLR levy framework. If the operator makes a
determination of revised costs for the first levy period, it is appropriate for this
to be made by a notifiable instrument as the information it contains is
administrative (not legislative) in character and does not alter the law or
require the imposition of a levy. The use of a notifiable instrument also ensures
transparency by requiring the instrument to be publicly available on the
Federal Register of Legislation.
Payment to the CSLR operator
1.137 For the second levy period (and each subsequent levy period), persons who are
required to pay the levy must pay the specified levy amount to ASIC. The levy
amounts collected by ASIC are transferred to the Consolidated Revenue Fund
and the Commonwealth is required to pay an amount equal to the total amount
of instalments of levy collected by ASIC, as well as any late payment and
shortfall penalty amounts collected, to the CSLR operator by standing
appropriation from the Consolidated Revenue Fund. The amount appropriated
is equal to the amount levied.
[Item 3, section 1069P]
1.138 A standing appropriation is justified because the timely administration of
payments is central to the operation of any compensation scheme, including the
CSLR. To ensure accountability, the appropriation is constrained to a fund that
consists of levies collected exclusively for the purposes of the CSLR.
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Financial services compensation scheme of last resort
1.139 Another safeguard is that payments made to the CSLR operator may only be
applied for any of the following purposes:
• for the payment of compensation to consumers (when the consumer
accepts the operator's offer of compensation);
• to pay AFCA's unpaid fees and AFCA's accumulated unpaid fees;
• to pay the CSLR operator's administrative costs;
• to reimburse ASIC's administrative costs; and
• to establish and maintain a capital reserve.
[Item 3, section 1069Q]
1.140 The purposes for which money paid to the CSLR operator may be applied is
not intended to prevent investment of money.
[Item 3, section 1069Q]
1.141 However, the CSLR operator is not permitted to invest money paid to the
operator unless:
• the money is not immediately required for the purposes of operating
the CSLR (that is, for any of the prescribed purposes for which the
money may be applied); and
• the money is invested on deposit with an authorised deposit-taking
institution (for example, a bank) or in securities of, or guaranteed by,
the Commonwealth, a state or territory.
[Item 3, section 1069R]
1.142 The limitation on investing money is not intended to prevent the CSLR
operator from purchasing capital assets or expending on capital activities
required to effectively administer the CSLR.
1.143 If the CSLR operator pays an amount of compensation to a consumer which is
more than the amount that was properly payable to that consumer (that is, an
overpayment), the CSLR operator may recover the excess as a debt due to the
CSLR operator by commencing proceedings against the consumer in the
Federal Court or the Federal Circuit and Family Court of Australia (Division 2)
[Item 3, section 1069S]
1.144 As an alternative to court proceedings, the CSLR operator may deduct an
amount equal to the overpayment from any other amount of compensation (if
any) payable to that consumer.
[Item 3, section 1069S]
Other Amendments
1.145 To ensure that ASIC is able to support the establishment and administration of
the CSLR, ASIC has the functions and powers that are conferred on it by the
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Financial Services Compensation Scheme of Last Resort Levy (Collection)
Act 2023.
[Item 4, section 12A of the ASIC Act]
1.146 ASIC is Australia's financial services regulator and is responsible for a range
of functions including issuing levy notices, collecting levies and monitoring
the CSLR operator's compliance with its obligations.
ASIC's power to suspend or cancel licences
1.147 If the CSLR operator pays an amount of compensation to a consumer for a
relevant AFCA determination, the operator must notify ASIC.
[Item 3, section 1069F]
1.148 If ASIC is notified that the CSLR operator has paid an amount of
compensation for a relevant AFCA determination, ASIC must cancel the
Australian financial services licence held by the relevant entity against which
the determination was made, by giving written notice to the individual,
partnership, body corporate, partnership, or trust.
[Items 9, 11, 13 and 15, section 915B]
1.149 Likewise, if the CSLR operator pays an amount of compensation for a relevant
AFCA determination, ASIC must cancel the Australian credit licence held by
the relevant entity against which the determination was made.
[Item 20, section 54 of the Credit Act]
1.150 The cancellation of an Australian financial services licence or an Australian
credit licence is not subject to discretion or merits review.
[Items 17 and 22, section 1317C of the Corporations Act and section 327 of
the Credit Act]
1.151 The unavailability of merits review is justified because the cancellation of a
person's Australian financial services licence or Australian credit licence does
not involve the exercise of discretion on ASIC's part, and may only occur if all
of the following steps have already been taken:
• AFCA has made a determination against the relevant entity (this
involves providing the licensee with an opportunity to be heard in
respect of the complaint before a determination is made);
• the consumer notifies AFCA within 12 months after the day the
determination has been made, that the relevant entity has failed to pay
the amount specified in the determination;
• AFCA takes appropriate steps to ensure that the relevant entity
complies with the determination (which includes notifying the entity of
the consequences of not paying and suggesting alternative payment
options);
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Financial services compensation scheme of last resort
• the consumer makes an application to the CSLR operator for
compensation;
• the CSLR operator finds the consumer eligible for compensation
(which includes forming a reasonable belief that the relevant entity is
unlikely to pay the amount specified in the determination) and pays an
amount of compensation.
1.152 AFCA determinations involve a thorough examination of the relevant issues.
AFCA members are often sophisticated, experienced and well-resourced
participants. In these matters, Australian financial services or credit licence-
holders have the opportunity to articulate their case and provide all relevant
information, regarding the facts of the matter before AFCA.
1.153 ASIC may also suspend or cancel an Australian financial services licence held
by an individual, partnership, body corporate or a trust if the licensee fails to
pay, in full, at least 12 months after the due date for payment any of the
following for which they are liable to pay:
• the instalment of levy;
• a late payment penalty in relation to the instalment of levy;
• a shortfall penalty in relation to the instalment of levy;
[Items 8, 10, 12 and 14 , section 915B]
1.154 Similarly, ASIC may also suspend or cancel a person's Australian credit
licence for failing to pay the instalment of levy (and any late or shortfall
penalties in relation to the instalment of levy) in full at least 12 months after
the due date for payment.
[Item 19, section 54 of the Credit Act]
1.155 The decision to suspend or cancel a person's Australian financial services
licence or Australian credit licence is subject to merits review by the
Administrative Appeals Tribunal.
ASIC's power to make banning orders
1.156 ASIC may, in writing, make a banning order against a person who is an
individual who holds an Australian financial services licence or an Australian
credit licence, a partner in a partnership, a body corporate or a trustee, if all of
the following apply:
• the relevant entity is required to pay an amount in accordance with a
relevant AFCA determination;
• the CSLR operator has paid an amount of compensation for the
relevant AFCA determination;
• at the time the CSLR makes the payment, the relevant entity is the
individual licensee, a partner in the partnership, an officer of the body
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corporate or the trustee of the trust.
[Items 16 and 21, section 920A of the Corporations Act and
section 80 of the Credit Act]
1.157 The power for ASIC to make a banning order is subject to merits review by the
Administrative Appeals Tribunal.
Deregistration and reinstatement of registration
1.158 ASIC may deregister a company if the company fails to pay, in full, at least 12
months after the due date for payment, an instalment of the levy (and any late
payment or shortfall penalties in relation to that instalment of levy).
[Item 6, section 601AB]
1.159 If ASIC deregisters a company for failing to pay an instalment or levy (or
associated penalties), ASIC may re-instate the company's registration if:
• the company makes an application for re-instatement of their
registration; and
• the company has paid the instalments of levy (and any late payment
and shortfall penalties) in full.
[Item 7, section 601AH]
Commencement, application, and machinery
provisions
1.160 The Treasury Laws Amendment (Compensation Scheme of Last Resort)
Act 2023 commences on the day the Act receives the Royal Assent.
1.161 The amendments in Schedule 1 to this Act commence at the same time as the
Financial Services Compensation Scheme of Last Resort Levy Act 2023.
However, if the Levy Act does not commence, the provisions in Schedule 1 to
this Act (Treasury Laws Amendment (Compensation Scheme of Last Resort)
Act 2023) also do not commence.
35
Financial services
compensation scheme of last resort
levy
Table of Contents:
Outline of chapter ................................................................................ 37
Context of amendments ....................................................................... 37
Summary of new law............................................................................ 38
Detailed explanation of new law .......................................................... 39
Key definitions ............................................................................... 39
First levy period ............................................................................. 43
Annual levy .................................................................................... 44
One-off levy ................................................................................... 56
Payment of a levy .......................................................................... 59
Other features of the levy framework ............................................ 66
Commencement, application, and machinery provisions .............. 71
Outline of chapter
2.1 This Chapter provides an overview of the Financial Services Compensation
Scheme of Last Resort Levy Bill 2023 and the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023, which
together create the levy framework that underpins the CSLR funding model.
2.2 All legislative references in this Chapter are to the Corporations Act, unless
otherwise stated.
Context of amendments
2.3 The Supplementary Final Report to the Ramsay Review recommended the
establishment of a CSLR in Australia. The Financial Services Royal
37
Financial services compensation scheme of last resort levy
Commission Final Report later recommended that the three principal
recommendations made in the Supplementary Final Report should be carried
into effect.
2.4 Part of the Government's commitment to the CSLR was that it would be
funded by the financial services industry.
Summary of new law
2.5 The CSLR is funded by a tax (levy) imposed on parts of the financial services
industry.
2.6 Under the CSLR levy framework, an annual levy is payable by persons who
are members of specified sub-sectors (within the meaning of the ASIC
Supervisory Cost Recovery Levy Act 2017). The annual levy is intended to
provide for:
• compensation payments to consumers;
• payment of AFCA's unpaid fees;
• establishment and maintenance of a capital reserve; and
• re-imbursement of the administrative costs incurred by the CSLR
operator and ASIC in administering the scheme.
2.7 The total amount of annual levy payable for a levy period and a sub-sector is
required to be worked out by the CSLR operator in accordance with a method
to be prescribed in the regulations. The method for calculating levy amounts is
intended to draw on concepts already in place for similar calculations as part of
the ASIC supervisor cost recovery levy framework (prescribed under the ASIC
Supervisory Cost Recovery Levy (Collection) Act 2017).
2.8 The total levy amounts to be paid are capped for each levy period. The scheme
levy cap for a levy period is $250 million (this is the total amount that can be
levied in a levy period across all persons across all sub-sectors). A sub-sector
levy cap also applies (this is the amount of levy that may be imposed in any
levy period across all persons in a particular sub-sector).
2.9 Unlike the scheme levy cap which cannot be exceeded under any
circumstances, the sub-sector levy cap for a levy period and a sub-sector may
be exceeded by Ministerial determination.
2.10 If required, the CSLR operator may make a revised claims, fees and costs
estimate for the levy period and a sub-sector. A revised estimate may require
the imposition of a further levy for the levy period and a sub-sector.
2.11 However, if a revised estimate could cause the total levy amount for the levy
period and the sub-sector to exceed the sub-sector levy cap, the Minister may
make a determination that:
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• allows the CSLR operator to make compensation payments to a
specified class of consumers in specified instalments over a specified
period of time, to allow the payment of compensation to be spread over
a longer period of time;
- Without such a determination, the CSLR operator would
be required to make compensation payments in a single
lump sum.
• imposes a special levy for the levy period and the primary sub-sector
(that is, the sub-sector to which the revised estimate relates), which
exceeds the sub-sector levy cap for the levy period and the sub-sector;
or
• imposes a special levy for the levy period on more than one sub-sector
(not just the primary sub-sector) if the Minister considers that:
- it is necessary to do so due to the number and size of
compensation payments that are payable;
- that it is the most efficient way of enabling compensation
to be paid to those persons in a timely manner; and
- having regard to the impact of the special levy amount on
the financial sustainability and viability of the specified
sub-sectors and on the financial system more broadly.
2.12 Australia's ten largest banking and insurance groups (excluding health insurers
and superannuation groups) are also required to pay a one-off levy to fund the
backlog of accumulated unpaid claims (and AFCA's unpaid fees relating to
those claims) relating to complaints made to AFCA between 1 November 2018
and 7 September 2022.
Detailed explanation of new law
Key definitions
2.13 The Financial Services Compensation Scheme of Last Resort Levy Bill 2023
and the Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 include the following definitions.
2.14 Table 2.1 does not include terms already defined in the Treasury Laws
Amendment (Financial Services Compensation Scheme of Last Resort) Bill
2023 (see Table 1.1).
39
Financial services compensation scheme of last resort levy
Table 2.1 Key definitions
Term Definition
AFCA (short for Australian Financial The operator of the AFCA scheme
Complaints Authority)
AFCA scheme The external dispute resolution scheme for
which an authorisation under Part 7.10A of
the Act is in force
Amount Includes a nil amount
Approved form Has the meaning given in section 30 of the
Financial Services Compensation Scheme of
Last Resort Levy (Collection) Act 2023
ASIC Australian Securities and Investments
Commission
Body regulated by APRA Has the meaning given in section 3 of the
Australian Prudential Regulation Authority
Act 1998
Capital reserve An amount equal to $5 million to be applied
by the CSLR operator for the purposes
mentioned in paragraphs 1069Q(1)(a) to (e)
of the Act
Capital reserve establishment contribution An amount equal to approximately one third
of the capital reserve
Claims, fees and costs estimate Means:
a) an initial claims, fees and costs
estimate; or
b) a revised claims, fees and costs
estimate
Commissioner Commissioner of Taxation
First levy period The period that:
a) starts on the day specified in a
determination in force under
subsection 7(2) of the Financial
Services Compensation Scheme of
Last Resort Levy Act 2023; and
b) ends on 30 June 2024
Income year Has the meaning given in the Income Tax
Assessment Act 1997
Initial claims, fees and costs estimate For a levy period and a sub-sector, means an
estimate determined under subsection 9(1)
of the Financial Services Compensation
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Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
Scheme of Last Resort Levy (Collection) Act
2023 for the levy period and the sub-sector
Late payment penalty The penalty payable under section 14 of the
Financial Services Compensation Scheme of
Last Resort Levy (Collection) Act 2023
Levy Levy imposed by Division 1 of Part 2 of the
Financial Services Compensation Scheme of
Last Resort Levy Act 2023
Levy Act The Financial Services Compensation
Scheme of Last Resort Levy Act 2023
Levy Collection Act The Financial Services Compensation
Scheme of Last Resort Levy (Collection) Act
2023
Levy month One of the 12 months of the calendar year
Levy period Means:
a) the first levy period; or
b) a financial year starting after the
end of the first levy period
Offence against this Act Includes an offence against Chapter 7 of the
Criminal Code that relates to the Financial
Services Compensation Scheme of Last
Resort Levy (Collection) Act 2023
Person Has a meaning affected by:
a) section 18 of the Financial Services
Compensation Scheme of Last
Resort Levy Act 2023; and
b) sections 26 to 29 of the Financial
Services Compensation Scheme of
Last Resort Levy (Collection) Act
2023
Pre-CSLR complaint A complaint that:
a) is for AFCA to finalise (including
by making a determination); and
b) is given to AFCA before the
accumulation recovery day; and
c) is a complaint of a kind covered by
paragraph 1065(1)(a) of the Act
Qualifying period For a levy period, means the 12-month
period starting 24 months before the start of
the levy period
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Financial services compensation scheme of last resort levy
Revised claims, fees and costs estimate For a levy period and a sub sector, means a
revised estimate determined under
subsection 10(1) of the Financial Services
Compensation Scheme of Last Resort Levy
(Collection) Act 2023 for the levy period
and the sub sector
Scheme levy cap The cap specified in subsection 17(1) of the
Financial Services Compensation Scheme of
Last Resort Levy Act 2023
Shortfall penalty The penalty payable under section 16 of the
Financial Services Compensation Scheme of
Last Resort Levy (Collection) Act 2023
Sub-sector Has the meaning given in the ASIC
Supervisory Cost Recovery Levy Act 2017
Sub-sector levy cap For a levy period and a sub-sector, means
the cap worked out under subsection 17(2)
of the Financial Services Compensation
Scheme of Last Resort Levy Act 2023 for the
levy period and the sub-sector
[Section 7 of the Financial Services Compensation Scheme of Last Resort Levy Bill
2023; and section 7 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.15 The CSLR levy framework comprises the following funding mechanisms:
• the costs for the first levy period - this is to be funded by the
Commonwealth;
• annual levy for a levy period and a subsector - this could also include:
- where the total levy amount for the levy period and a sub-
sector does not exceed the sub-sector levy cap - one or
more further levies for the levy period and a sub-sector;
- where the total levy amount payable for the levy period
and a sub-sector exceed the sub-sector levy cap - one or
more special levies for the levy period and one or more
sub-sectors, as determined by the Minister; and
• one-off levy - this levy funds the backlog of accumulated unpaid
claims (and AFCA's unpaid fees and AFCA's accumulated unpaid
fees) for complaints made to AFCA between 1 November 2018 and
7 September 2022.
2.16 ASIC, on behalf of the Commonwealth, is responsible for issuing levy notices
and collecting levies imposed under the scheme.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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2.17 The total amount of levies that may be imposed for any levy period across all
persons across all sub-sectors must not exceed $250 million. This is also
known as the 'scheme levy cap'.
[Sections 7 and 17 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
First levy period
2.18 The first levy period is the period that:
• starts on a day specified in a determination made by the Minister; and
• ends on 30 June 2024.
[Section 7 of the Financial Services Compensation Scheme of Last
Resort Bill 2023]
2.19 The Minister may make a notifiable instrument determining the day on which
the first levy period begins.
[Section 7 of the Financial Services Compensation Scheme of Last Resort
Bill 2023]
2.20 The Minister's power to determine the start day for the first levy period, by
notifiable instrument, is appropriate as it is administrative (not legislative) in
character, because although it may affect the interests, obligations or rights of
affected persons, the determination itself does not alter the operation of the
law.
2.21 This determination is necessary to enable the effective and timely operation of
the CSLR levy framework. Given that the commencement of the first levy
period is contingent on a range of other factors, such as the establishment of
the CSLR operator and the enactment of relevant regulations and rules, it is not
possible to prescribe this day in the primary law. The use of a notifiable
instrument also ensures transparency by requiring the instrument to be publicly
available on the Federal Register of Legislation.
2.22 The CSLR operator may make a determination at any time before the start of
the first levy period, which estimates the claims, fees and costs for the first
levy period by sub-sector. The determination for the first levy period includes
the amounts the CSLR operator reasonably believes (having regard to actuarial
principles) will be:
• the total amount of compensation payable for the levy period and a
sub-sector (other than pre-CSLR complaints);
• the sum of AFCA's unpaid fees expected for each of the months
ending on or after the accumulation recovery day, but before the
second levy period (other than fees relating to pre-CSLR complaints);
43
Financial services compensation scheme of last resort levy
• the capital reserve establishment contribution, which is equal to
approximately one-third of the capital reserve for the CSLR; and
• the CSLR operator's expected administrative costs for the first levy
period.
2.23 The costs for the first levy period (other than the one-off levy) are to be paid by
the Commonwealth.
2.24 The requirements that apply to the payment of costs for the first levy period are
set out in the Treasury Laws Amendment (Financial Services Compensation
Scheme of Last Resort) Bill 2023.
Annual levy
Second levy period and each later levy period
2.25 The duration of the second levy period and each later levy period is a financial
year (that is, it starts on 1 July and ends on 30 June of the following year).
[Section 7 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.26 This means that the second levy period commences on 1 July 2024 (after the
end of the first levy period) and ends on 30 June 2025.
Who is required to pay the annual levy?
2.27 The annual levy is imposed on a person in the second levy period (and each
later levy period) if, at any time during the qualifying period for that levy
period:
• the person is a member of a sub-sector of a kind prescribed in the
regulations; and
• the general conditions (if any) prescribed in the regulations are met for
the person and the levy period.
[Section 8 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.28 'Qualifying period' for a levy period, means the 12-month period starting 24
months before the start of the levy period. For example, the qualifying period
for the second levy period is the period between 1 July 2022 to 30 June 2023.
[Section 7 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.29 'Sub-sector' is defined in accordance with the ASIC Supervisory Cost Recovery
Levy Act 2017 and means a group of one of more entities each of which meets
the criteria specified in the ASIC Supervisory Cost Recovery Levy
Regulations 2017. The sub-sectors required to pay the CSLR annual levy
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would be taken from the industry sectors in the ASIC Supervisory Cost
Recovery Levy Regulations 2017 and prescribed in regulations for the
purposes of the CSLR levy framework.
[Section 7 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.30 The regulation-making power to prescribe the sub-sectors that are required to
pay the annual levy is appropriate and necessary for the effective ongoing
operation of the CSLR by ensuring that the application of the scheme remains
up to date with the dynamic financial services sector. Regulations are subject
to disallowance and parliamentary scrutiny and sunset after 10 years.
2.31 The regulation-making power to set general conditions for the annual levy
reduces the complexity of the Act by removing technical matters from the
primary law, which accords with hierarchy of laws principles and increases the
readability of the Act. Also, it is necessary for the government to be able to
make timely amendments to the conditions as required for the effective
operation of the annual levy within the CSLR levy framework. This power
provides a flexible approach to safeguard the regime by ensuring it works
appropriately to target specified persons and sub-sectors. Regulations are
subject to disallowance and parliamentary scrutiny and sunset after 10 years.
2.32 A levy imposed on a person for a levy period is payable by the person.
[Section 11, Financial Services Compensation Scheme of Last Resort Levy
Bill 2023]
2.33 A person may form part of more than one sub-sector, and may be liable to pay
the annual levy for each of those sub-sectors for a levy period.
[Section 7 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
Calculating the annual levy amount
2.34 The amount of annual levy imposed on a person for a levy period and a
sub-sector is the amount worked out in accordance with a method to be
prescribed in the regulations.
[Section 12 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.35 The objectives for working out the total annual levy amount for a levy period
and a sub-sector are that it does not:
• exceed the CSLR operator's initial claims, fees and costs estimate for
the levy period and the sub-sector;
• cause the sub-sector levy cap for the levy period and the sub sector to
be exceeded; and
45
Financial services compensation scheme of last resort levy
• cause the scheme levy cap to be exceeded.
[Section 12 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.36 These objectives set out the expectations for imposition of the annual levy and
is intended to provide leviable entities with a degree of commercial certainty
on the maximum levy amount payable for a levy period and a sub-sector.
2.37 The regulations prescribing the method for working out the annual levy
amount may have regard to the CSLR operator's initial estimate for the levy
period and the sub-sector and any determinations made by ASIC under
regulations for the purposes of section 9 of the ASIC Supervisory Cost
Recovery Levy Act 2017.
[Section 12 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.38 The requirements for working out the annual levy amount for the purposes of
the CSLR are consistent with the existing requirements under section 9 of the
ASIC Supervisory Cost Recovery Levy 2017. This ensures that affected
industry parties are familiar with the method for calculating levies.
2.39 The regulation-making power to prescribe a method for working out the annual
levy amount reduces the complexity of the Act by removing the administrative
and technical matters from the primary law, which accords with hierarchy of
laws principles and increases the readability of the Act. The regulation-making
power is also limited by requiring the Minister to be satisfied that the
regulations are consistent with the primary law objectives for working out the
annual levy amount. Regulations are subject to disallowance and parliamentary
scrutiny and sunset after 10 years.
[Section 12 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
Levy caps
2.40 The CSLR levy framework imposes a scheme levy cap, which is the maximum
amount of levy that may be imposed for any levy period across all persons
across all sub-sectors. The scheme levy cap is set at $250 million per levy
period. This cap may not be exceeded under any circumstances.
[Section 17 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.41 The CSLR levy framework also imposes a sub-sector levy cap. This is the total
amount of the levy that may be imposed for the second levy period (and each
later levy period) across all members of a particular sub-sector. The sub-sector
levy cap is the highest of either:
• $20 million for a levy period and a sub-sector; or
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• the amount prescribed by regulations (or worked out in accordance
with a method prescribed by regulations) for the levy period and the
sub-sector.
[Section 17 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.42 The regulation-making power to prescribe an alternative sub-sector levy cap
amount (or to prescribe a method for working out an alternate sub-sector levy
cap amount) is necessary to ensure that the cap remains appropriate for the
CSLR and the financial services industry. Regulations are subject to
disallowance and parliamentary scrutiny and sunset after 10 years.
2.43 Unlike the scheme levy cap (which is an absolute maximum), it is possible for
the sub-sector levy cap to be exceeded (or further exceeded) by a Ministerial
determination imposing a special levy made under section 1069H of the Act.
[Section 17 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.44 The scheme levy cap and the sub-sector levy cap do not apply to the costs for
the first levy period that are payable by the Commonwealth.
Initial estimate of claims, fees, and costs
2.45 Under the levy framework, the CSLR operator may, by legislative instrument,
determine the initial claims, fees and costs estimate for the upcoming levy
period and a sub-sector. Such a determination must be made within 12 months
before the start of the second levy period (and each later levy period).
[Section 9 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.46 It is appropriate for the CSLR operator to be able to make a legislative
instrument determining the initial claims, fees and costs estimate for a levy
period and a sub-sector, as it balances the need for efficiency and timeliness
with the need for scrutiny of estimates that result in the imposition of a levy.
The legislative instrument is subject to disallowance and parliamentary
scrutiny.
2.47 The CSLR operator's initial claims, fees and costs estimate for the levy period
may include estimates for one or more sub-sectors in a single legislative
instrument.
[Section 9 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.48 The legislative instrument containing the initial claims, fees and costs estimate
must include the amount the CSLR operator reasonably believes (having
regard to actuarial principles) will apply for each of the following matters:
47
Financial services compensation scheme of last resort levy
• the total amount of compensation payable during that levy period for
that sub-sector (other than pre-CSLR complaints) - this would be
informed by AFCA data on the number and size of complaints it has
received and determinations it has made;
• AFCA's unpaid fees for each month during the levy period which is
attributable to the sub-sector - this estimate would be informed by data
provided by AFCA;
• the CSLR operator's expected administration costs for the levy period
- this could include a range of costs, including staffing costs,
equipment, and information technology.
• ASIC's expected administrative costs for the levy period - before the
start of the levy period to which the instrument relates, ASIC may
notify the operator of the administrative costs that ASIC has incurred,
and expects to incur, for the levy period in performing its functions
under the CSLR;
• capital reserve establishment contributions - this is only payable in the
second and third levy periods (at which time the capital reserve is to
have been established); and
- The capital reserve is an amount equal to $5 million.
- In the first three levy periods, a capital reserve
establishment contribution is payable, which is an amount
equal to approximately one third of the capital reserve
amount.
- Any surplus levy amounts that are collected in relation to
pre-CSLR complaints (as part of the one-off levy) may be
used to reduce the capital reserve establishment
contribution payable in the second and third levy periods
(as applicable).
- After the third levy period, the annual levy for a levy
period and a sub-sector may include an amount required
to restore the capital reserve, as required.
• reconciliation from earlier levy periods - this allows amounts to be
added or removed from the estimates where there has been a shortfall
or excess collected in an earlier period. This must take into account:
- any shortfalls or excesses worked out in relation to an
earlier payment of the annual levy - shortfalls or excesses
may be taken into account in the operator's initial
estimate for the third levy period and each later period, as
applicable;
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- any shortfalls or excesses worked out in relation to
pre-CSLR complaints - shortfalls and excesses relating to
pre-CSLR complaints may only be collected in the
second, third and fourth levy periods; and
- any shortfalls or excesses worked out in relation to the
Commonwealth's payment of costs for the first levy
period - shortfalls and excesses may only be collected in
the third levy period.
[Section 9 of the Financial Compensation Scheme of
Last Resort Levy (Collection) Bill 2023]
2.49 Shortfalls may be offset by excesses. To avoid over or under-payment, the
CSLR operator should ensure that shortfalls and excesses from earlier levy
periods are only counted once.
[Section 9 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
2.50 Shortfalls or excesses worked out in relation to pre-CSLR complaints may be
calculated more than once and be collected in the second, third and fourth levy
periods. However, further shortfalls or excesses arising from pre-CSLR
complaints may not be taken into account after the fourth levy period.
[Section 9 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
Revised estimate of the annual levy
2.51 The CSLR operator may, at any time after the start of a levy period (other than
the first levy period) and after re-calculating the initial claims, fees and costs
estimates for the levy period and a sub-sector, make a revised claims, fees and
costs estimate for the levy period and the sub-sector.
[Section 10 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
2.52 The CSLR operator is not under an obligation to make a revised claims, fees
and costs estimate for a levy period and a sub-sector.
2.53 If the CSLR operator makes a revised claims, fees and costs estimate, it must
include re-calculated amounts in relation to each of the matters included in the
initial estimate for the levy period and the sub-sector.
[Section 10 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
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Financial services compensation scheme of last resort levy
2.54 The determination containing the revised claims, fees and costs estimate may
specify whether a further levy needs to be imposed for the levy period and the
sub-sector.
[Section 10 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
2.55 The CSLR operator may make more than one revised claims, fees and costs
estimate for the levy period and a sub-sector - there is no limit on the number
of times the CSLR operator may make such a determination for a levy period.
[Section 10 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
2.56 The form of a revised estimate made by the CSLR operator depends on
whether the determination specifies that a further levy needs to be imposed for
the levy period:
• if the determination requires a further levy to be imposed for the levy
period and a sub-sector - the determination must be in the form of a
legislative instrument; and
• if not - the determination may be in the form of a legislative instrument
or a notifiable instrument.
[Section 10 of the Financial Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.57 If the revised estimate is in the form of a notifiable instrument, any difference
between the revised estimate for the levy period and the sub-sector and the
total levy amount paid for the levy period and the sub-sector may be:
• added to an estimate for a later levy period; or
• required to be paid as a special levy (imposed by a Ministerial
determination) for the levy period and one or more specified
sub-sectors.
2.58 A single legislative instrument may contain revised claims, fees and costs
estimates for one or more sub-sectors.
[Section 10 of the Financial Compensation Scheme of Last Resort Levy
(Collection) Bill 2023]
2.59 The power for the CSLR operator to make a legislative instrument determining
a revised claims, fees and costs estimate is appropriate as it balances the need
for efficiency and timeliness with the need for scrutiny of estimates that result
in the imposition of a levy. The legislative instrument is subject to
disallowance and parliamentary scrutiny.
2.60 On the other hand, it is appropriate that a determination not requiring the
imposition of a further levy is subject to less scrutiny. The use of a notifiable
instrument ensures transparency by requiring the instrument to be publicly
available on the Federal Register of Legislation.
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Further levy for the levy period
2.61 A further levy for the levy period and the sub-sector is imposed if:
• before a revised claims, fees and costs estimate for that levy period and
the sub-sector comes into force, the sub-sector levy cap for that levy
period has not been exceeded; and
• the revised claims, fees and costs estimate for the levy period and the
sub-sector specifies that a further levy needs to be imposed for the levy
period and the sub-sector.
[Section 8 of the Financial Compensation Scheme of Last Resort
Levy Bill 2023]
2.62 If required, more than one further levy can be imposed for the levy period and
the sub-sector.
[Section 8 of the Financial Compensation Scheme of Last Resort Levy
Bill 2023]
2.63 The further levy for the levy period and the sub-sector cannot be imposed if the
amount of the further levy would cause the sub-sector cap for the levy period
to be exceeded (but a further levy can be imposed up to the amount of the
sub-sector levy cap for the levy period and the sub-sector).
[Section 8 of the Financial Compensation Scheme of Last Resort Levy
Bill 2023]
2.64 The amount of a further levy for the levy period and the sub-sector is the
amount worked out in accordance with a method prescribed in the regulations.
[Section 13 of the Financial Compensation Scheme of Last Resort Levy
Bill 2023]
2.65 The objectives for working out the further levy amount are that it does not:
• exceed the difference between the revised estimate and the levy
amount that has already been paid for the levy period and the sub-
sector;
• cause the sub-sector levy cap for the levy period and the sub-sector to
be exceeded; and
• cause the scheme levy cap to be exceeded for the levy period.
[Section 13 of the Financial Compensation Scheme of Last Resort
Levy Bill 2023]
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Financial services compensation scheme of last resort levy
2.66 The regulations prescribing the method for working out a further levy may
have regard to the operator's revised estimate for the levy period and the sub-
sector as well as any determinations made by ASIC under regulations for the
purposes of section 9 of the ASIC Supervisory Cost Recovery Levy Act 2017.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.67 As for the calculation of the annual levy, the regulation-making power to
prescribe a method for working out the further levy amount reduces the
complexity of the Act by removing the administrative and technical matters
from the primary law, which accords with hierarchy of laws principles and
increases the readability of the Act. The regulation-making power is also
limited by requiring the Minister to be satisfied that the regulations are
consistent with the primary law objectives for working out the further levy
amount. Regulations are subject to disallowance and parliamentary scrutiny
and sunset after 10 years.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
Special levy (Ministerial determination)
2.68 A special levy is imposed on a person for the levy period if both of the
following have come into force for the levy period and the sub-sector:
• a revised claims, fees and costs estimate; and
• a determination made by the Minister under section 1069H of the Act
that specifies that a levy needs to be imposed for the levy period and
one or more specified sub-sectors.
[Sections 8 and 9 of the Financial Services Compensation Scheme of
Last Resort Levy Bill 2023]
2.69 The Minister may make a determination to impose a special levy for the levy
period and one or more sub-sectors if:
• the CSLR operator notifies the Minister (under section 1069F of the
Act) that a revised estimate for the levy period and the sub-sector could
cause the sub-sector levy cap for the levy period and the sub-sector to
be exceeded (or further exceeded); and
• the Minister decides to impose a special levy for the levy period and
one or more sub-sectors.
[Section 9 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.70 If the Minister receives a notification from the CSLR operator under
section 1069F of the Act, the Minister may make a determination providing
for:
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• compensation payments made to a specified class of consumers to be
paid in specified instalments over a specified period of time (rather
than in a single lump sum payment);
• the imposition of a special levy for the levy period and the primary
sub-sector (the sub-sector to which the revised claims, fees and costs
estimate relates); or
• the imposition of a special levy for the levy period and more than one
sub-sector (not just the primary sub-sector).
2.71 Given the forward-looking nature of the CSLR levy framework (that is, that
the levy is based on estimates of costs for the upcoming levy period), it is
appropriate and necessary for the Minister to be able to intervene in situations
where the CSLR operator requires additional funding to meet higher than
expected costs for the levy period, such as where a large financial services
provider becomes insolvent, or where a "black swan" event occurs in the
financial services industry. These types of events may lead to a significant
increase in the number and size of compensation payments required to be made
under the CSLR. As these circumstances are often not foreseeable, a
Ministerial determination is necessary to ensure that the CSLR operator has the
funds needed to make compensation payments to consumers as quickly as
possible.
2.72 However, the Minister is not obliged to make a determination in response to a
notification by the CSLR operator. Where the Minister does not make a
determination, the CSLR operator may take alternative steps, such as:
• adding the shortfall to the annual levy estimate for a later levy period;
and/or
• drawing on its capital reserve to meet additional costs for the levy
period (noting that the operator may be able to restore its capital
reserve in the annual levy for a later levy period.
Special levy - primary sub-sector
2.73 If a special levy is imposed for the levy period and the sub-sector, the special
levy amount is required to be worked out in accordance with a method
prescribed by regulations.
[Section 14 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.74 The objectives for working out the special levy amount are that it does not:
• exceed the total amount specified in the Minister's determination made
under section 1069H of the Act; and
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Financial services compensation scheme of last resort levy
• cause the scheme levy cap (of $250 million) to be exceeded for the
levy period.
[Section 14 of the Financial Compensation Scheme of Last Resort
Levy Bill 2023]
2.75 These objectives (and the requirements on the Minister to make a
determination) ensure that the special levy does not constitute a form of
arbitrary taxation.
2.76 The regulations prescribing the method for working out the special levy
amount may have regard to the operator's revised estimate for the levy period
and the sub-sector, the Minister's determination and any determinations made
by ASIC under regulations made for the purposes of section 9 of the ASIC
Supervisory Cost Recovery Levy Act 2017.
[Section 14 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.77 As for the annual levy and the further levy, the regulation-making power to
prescribe a method for working out the special levy amount reduces
complexity by removing the administrative and technical matters from the
primary law, which accords with hierarchy of laws principles and increases the
readability of the Act. The regulation-making power is also limited by
requiring the Minister to be satisfied that the regulations are consistent with the
primary law objectives for working out the special levy amount. Regulations
are subject to disallowance and parliamentary scrutiny and sunset after 10
years.
[Section 14 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
Special levy - not just the primary sub-sector
2.78 If the Minister makes a determination imposing a special levy for the levy
period and one or more sub-sectors (not just the primary sub-sector to which
the operator's revised estimate relates), the levy is imposed on a person if, at
any time during the levy period (or the previous levy period):
• the person is a member of one of the sub-sectors specified in the
Minister's determination; and
• the general conditions (if any) prescribed in the regulations are met for
the person and the levy period.
[Section 9 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.79 As for the annual levy, this regulation-making power to set general conditions
for the special levy reduces complexity by removing technical matters from the
primary law, which accords with hierarchy of laws principles and increases the
readability of the Act. Also, it is necessary to enable the government to make
timely amendments to the conditions as required for the effective operation of
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the special levy within the CSLR levy framework. This power provides a
flexible approach to safeguard the regime by ensuring it works appropriately to
target specified persons and sub-sectors. Regulations are subject to
disallowance and parliamentary scrutiny and sunset after 10 years.
2.80 The Minister may make a determination to impose a special levy for the levy
period and one or more sub-sectors if the Minister is satisfied that this is:
• necessary due to the number and size of compensation payments being
accepted for the levy period; and
• the most effective way of enabling those compensation payments to be
made in a timely manner.
2.81 In making such a determination, the Minister must have regard to the impact of
the special levy on the financial sustainability and viability of the specified
sub-sectors and on the financial system more broadly.
2.82 If the Minister makes a determination imposing a special levy for the levy
period and one or more sub-sectors, the amount of the special levy imposed on
the members of those specified sub-sectors is the amount worked out in
accordance with a method prescribed by regulations.
[Section 15 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.83 The objectives for working out the special levy amount (where it applies to
more than one sub-sector) are that it does not:
• exceed the total amount specified in the Minister's determination; and
• cause the scheme levy cap (of $250 million) to be exceeded for the
levy period.
[Section 15 of the Financial Compensation Scheme of Last Resort
Levy Bill 2023]
2.84 The regulations prescribing the method for working out the special levy may
have regard to the operator's revised estimate for the levy period and the
primary sub-sector, the Minister's determination and any determinations made
by ASIC under regulations made for the purposes of section 9 of the ASIC
Supervisory Cost Recovery Levy Act 2017.
[Section 15 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.85 As for the annual levy, the regulation-making power to prescribe a method for
working out the special levy amount reduces complexity by removing the
administrative and technical matters from the primary law, which accords with
hierarchy of laws principles and increases the readability of the Act. The
regulation-making power is also limited by requiring the Minister to be
satisfied that the regulations are consistent with the primary law objectives for
working out the special levy amount. Regulations are subject to disallowance
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Financial services compensation scheme of last resort levy
and parliamentary scrutiny and sunset after 10 years.
[Section 15 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
One-off levy
2.86 The CSLR levy framework also provides for the imposition of a one-off levy,
which is an estimate of the amount that the CSLR operator reasonably believes
(having regard to actuarial principles) will be:
• the amount of compensation payable for pre-CSLR complaints;
• AFCA's unpaid fees for all of the months that relate to pre-CSLR
complaints; and
• AFCA's accumulated unpaid fees.
[Section 11 of the Financial Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.87 Pre-CSLR complaints are complaints that are:
• for AFCA to finalise (for example, by making a determination);
• made to AFCA before 8 September 2022 (the accumulation recovery
day); and
• made against a relevant entity which, at the time the complaint is
made, is an AFCA member; and
• about one or more of the following kinds of products or services:
- engaging in a credit activity (whether as a credit provider
or not);
- providing personal advice to a retail client about one or
more relevant financial products; or
- dealing in securities for a retail client (other than issuing
securities).
[Section 7 of the Financial Compensation Scheme of
Last Resort Levy (Collection) Bill 2023
2.88 'AFCA's unpaid fees' are the fees that AFCA notifies the CSLR operator
about that are payable for all of the months that relate to pre-CSLR complaints
and for which AFCA has finished taking appropriate steps to recover from the
AFCA member (current or former).
2.89 'AFCA's accumulated unpaid fees' are AFCA's unpaid fees for which AFCA
finished taking appropriate steps to recover from the AFCA member (current
or former) between 1 November 2018 and 7 September 2022.
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2.90 A person who is required to pay the one-off levy must either pay it in two
equal instalments spread over the first and the second levy periods, or pay the
two instalments at the same time in the first levy period.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Who pays the one-off levy?
2.91 The one-off levy is imposed on a person if the person's total income for the
2021-22 income year is one of the 10 highest of all of the persons who satisfy
both of the following criteria:
• at any time during the 12 months before the start of the first levy
period, the person is a body regulated by APRA; and
- This does not include private health insurers within the
meaning of Private Health Insurance (Prudential
Supervision) Act 2015 or the trustee of a superannuation
entity, within the meaning of the Superannuation Industry
(Supervision) Act 1993.
• section 3C of the Taxation Administration Act 1953 applies to the
person for the 2021-22 income year (which requires corporate tax
entities with a total income of $100 million or more to report particular
information to the Commissioner).
[Section 10 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023]
2.92 Unlike the annual levy, which is payable by all of the members of one or more
specified sub-sectors, the one-off levy is only required to be paid by the 10
entities that meet the relevant criteria. These 10 entities may be members of
different sub-sectors.
Initial estimate of the one-off levy
2.93 The CSLR operator may, by legislative instrument, make a determination that
comprises the initial estimate of the one-off levy amount, which includes the
compensation payable for pre-CSLR complaints, AFCA's unpaid fees relating
to pre-CSLR complaints and AFCA's accumulated unpaid fees.
[Section 11 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.94 A determination can be made at any time after this Act (the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Act 2023) commences.
[Section 11 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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Financial services compensation scheme of last resort levy
2.95 As for the annual levy, the power for the CSLR operator to make a legislative
instrument determining the initial estimate of the one-off levy amount is
appropriate as it balances the need for efficiency and timeliness with the need
for scrutiny of estimates that result in the imposition of a levy. The legislative
instrument is subject to disallowance and parliamentary scrutiny.
2.96 The amount of the one-off levy is the amount worked out in accordance with a
method prescribed by regulations.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.97 The objectives for working out the one-off levy amount are that it does not:
• exceed the amount determined in the operator's initial estimate; and
• cause the scheme levy cap (of $250 million) to be exceeded.
[Section 16 of the Financial Compensation Scheme of Last Resort
Levy Bill 2023]
2.98 The regulations prescribing the method for working out the one-off levy may
have regard to the operator's initial estimate of the one-off levy amount.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.99 As for the annual levy, the regulation-making power to prescribe a method for
working out the one-off levy amount reduces complexity by removing the
administrative and technical matters from the primary law, which accords with
hierarchy of laws principles and increases the readability of the Act. The
regulation-making power is also limited by requiring the Minister to be
satisfied that the regulations are consistent with the primary law objectives for
working out the one-off levy. Regulations are subject to disallowance and
parliamentary scrutiny and sunset after 10 years.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
Revised estimate of pre-CSLR complaints claims and fees
2.100 The CSLR operator may, after the start of the first levy period, and after
re-calculating the one-off levy amount make a revised estimate. The revised
estimate would be determined using re-calculated amounts for each of the
following:
• compensation payable for pre-CSLR complaints;
• AFCA's unpaid fees for the months relating to pre-CSLR complaints;
and
• AFCA's accumulated unpaid fees.
[Section 12 of the Financial Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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2.101 The revised estimate must be made by notifiable instrument. It is considered
appropriate than an instrument that does not require the imposition of a levy is
subject to less scrutiny. However, the use of a notifiable instrument ensures
transparency by requiring the instrument to be publicly available on the
Federal Register of Legislation.
2.102 In regard to the revised estimate of the one-off levy amount:
• if the revised estimate is higher than the one-off levy amount paid (that
is, there is a shortfall in the amount of levy collected) - the CSLR
operator may add this shortfall amount to the estimate for the annual
levy for the second, third and fourth levy periods; or
• if the revised estimate is lower than the one-off levy amount paid (that
is, there is a surplus in the amount of levy collected) - the CSLR
operator may remove the excess amount from the estimate for the
annual levy for the second, third or fourth levy periods.
[Section 12 of the Financial Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.103 Shortfalls and excesses arising from pre-CSLR complaints, AFCA's unpaid
fees relating to pre-CSLR complaints and AFCA's accumulated unpaid fees
may only be taken into account in the annual levy estimates for the second,
third or fourth levy periods (but not after this time).
Payment of a levy
2.104 A levy imposed on a person for a levy period is payable by the person.
[Section 11 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023
2.105 Unless ASIC waives payment of an instalment of levy, or grants an extension
for the payment of a levy payable by the person, a failure to pay the levy by the
date specified in the ASIC notice constitutes a late payment. A late payment of
an instalment of levy attracts a late payment penalty.
[Sections 14 and 18 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
Who is liable to pay a levy?
2.106 Under the CSLR levy framework, a 'person' upon whom a levy is imposed is
required to pay the levy.
2.107 Some of the entity types regulated under the CSLR levy framework are not
legal persons. To address this, the CSLR levy framework extends the meaning
of 'person' (for the purpose of the CSLR levy framework only) to allow the
levy to be imposed on all leviable entities as if they were a legal person.
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Financial services compensation scheme of last resort levy
However, the application of the requirements for certain types of entities are
modified to enable effective operation of the CSLR levy framework. This is
achieved by imposing the obligations on each member of the various
collectives that are treated as a legal person (for example, each partner in a
partnership) but allowing the obligations to be discharged by any member of
the collective.
2.108 For the purposes of the CSLR levy framework, a 'person' includes:
• an individual;
• a body corporate;
• a partnership
• an unincorporated association;
• an RSE licensee that is a group of individual trustees; and
• multiple natural person trustees of a trust are to be treated as a single
'notional entity'.
[Section 18 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023 and sections 26 to 29 of the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023]
2.109 The CSLR levy framework treats a partnership as if it were a person. However,
an obligation that would otherwise be imposed on the partnership (as the
person) is imposed on each partner, but may be discharged by any of the
partners. An offence committed by a partnership is taken to have been
committed by each partner in the partnership who:
• did the relevant act or made the relevant omission which constituted
the offence;
• aided, abetted, counselled or procured the relevant act or omission; or
• was knowingly involved in the relevant act or omission.
[Section 18 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2023 and section 26 of the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023]
2.110 The CSLR levy framework applies in the same way to the members of an
incorporated association and trustees of a RSE licensee that is a group of
individual trustees.
[Section 18 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023 and sections 27 and 28 of the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023]
2.111 The treatment of a 'notional entity' is different to the treatment of partners,
unincorporated associations, and RSE licensees, because the notional entity
may only exist for a period of time. Under the Corporations Act and the
Credit Act a reference to a person can include a reference to situations where
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there are multiple trustees of a trust for a period of time. During the period
where there are multiple trustees, the CSLR levy framework treats these
multiple trustees as a 'notional entity' for the purpose of imposing the levy and
imposes the levy on each of those trustees separately. Any of the trustees may
discharge the liability on behalf of the other trustees. However, if at any time
while the trust is treated as a notional entity (or for a part of the period), the
trust has only one trustee, an obligation that would otherwise be imposed on
the notional entity is imposed on that single trustee. This means that where
there ceases to be multiple trustees of the trust, the obligation does not remain
on the persons that cease to be trustees.
[Section 18 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023 and 29 of the Financial Services Compensation Scheme of
Last Resort Levy (Collection) Bill 2023]
2.112 The treatment of 'persons' under the CSLR levy framework is consistent with
their treatment under section 12 of the ASIC Supervisory Cost Recovery Levy
Act 2017.
Payment of annual levy (including further and special levies)
2.113 Annual levies, further levies and special levies for the second levy period (and
each a later levy period) are required to be paid by the person in a single
instalment.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.114 Annual levies, further levies and special levies are payable on a business day
that is specified in the notice given to the person by ASIC. The day specified in
the notice for payment of the levy must not be before the 30th day after the day
on which the notice is given.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.115 If a further levy and/or special levy is imposed for a levy period and a sub-
sector, a separate (additional) notice must be given to the person for payment
of the further levy or the special levy.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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Financial services compensation scheme of last resort levy
2.116 As for the annual levy, the due date for payment of a further levy or a special
levy must be stated in the notice given by ASIC. The day specified for
payment of these levies must not be before the 30th day after the day on which
the notice is given.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.117 A person may nominate another person to receive notices from ASIC. A
nomination must be given to ASIC in writing. If a nomination is in place,
ASIC may issue notices for the payment of the annual levy, further levy and
special levy (as applicable) for the levy period to the nominated person. An
obligation imposed on the person may be discharged by the nomination person.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Payment of one-off levy
2.118 Persons who are required to pay the one-off levy have the option to pay this
levy amount in one of two ways:
• in a single instalment to be paid in the first levy period - payment is
due on a business day specified in the notice given by ASIC - the day
specified in the notice for payment cannot be before the 30th day after
the day the notice is given; or
• in two equal instalments (the first instalment in the first levy period,
and the second instalment in the second levy period) - each instalment
is to be due on a business day specified in the notice given by ASIC -
the day specified in the notice for payment cannot be before the 30th
day after the day the notice is given.
[Section 13 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.119 ASIC may give the person the notice for payment of the second instalment in
the first levy period. This allows the person to be able to pay both instalments
in the first levy period.
[Section 13 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Late payment penalty
2.120 If an instalment of levy payable by a person has not been paid at the start of a
levy month after the instalment becomes due for payment, the person is liable
to pay a late payment penalty for that levy month.
[Section 14 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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2.121 For example, if the due date for payment of a levy is 12 March, the person
becomes liable for a late payment penalty at the start of the next levy month
(that is, 1 April).
2.122 The late payment penalty is owed to the Commonwealth. In practice, the late
payment penalty would be collected by ASIC on behalf of the Commonwealth.
[Section 14 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.123 The late payment penalty amount constitutes 20 per cent simple interest on the
outstanding levy amount, calculated monthly. This is worked out using the
following formula:
Amount of the instalment remaining 0.2
unpaid at the start of the levy month 12
[Section 14 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2022]
2.124 Late payment penalty for a levy month is due and payable at the end of the
levy month.
[Section 14 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2022]
2.125 However, ASIC may, by written notice given to the person before, on, or after
the day on which late payment penalty would be due and payable, specify a
later day as the day on which the late payment penalty is due and payable. The
notice has effect, and is taken always to have had effect, according to its terms.
[Section 14 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2022]
Shortfall penalty
2.126 A person is liable to pay a shortfall penalty if:
• a person makes a statement to ASIC in response to a request for
information from ASIC for the levy period;
• the statement is false or misleading in respect of a material point (this
could include the omission of material information);
• the amount of levy the person was required to pay for the levy period
was worked out on the basis of the person's statement; and
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Financial services compensation scheme of last resort levy
• the levy amount paid for the levy period falls short of the amount that
would have been payable for that levy period had the information
provided not been false or misleading.
[Section 16 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2022]
2.127 If each of these conditions are satisfied for a person, the person is liable to pay
a shortfall penalty. The shortfall penalty amount is equal to twice the amount
of the shortfall (the difference between the amount of levy the person paid for
the levy period and the levy amount they would have paid for the levy period
had the information they provided not been false or misleading).
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.128 However, a person is not liable to pay a shortfall penalty if they took
reasonable steps to ensure that the statement was correct.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.129 A shortfall penalty is due and payable on a business day specified in a notice
given by ASIC to the person. The day specified in the notice for payment of
the shortfall penalty must not be before the 30th day after the day on which the
notice is given.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.130 However, ASIC may, by written notice given to the person before, on, or after
the day on which the shortfall penalty is due, grant an extension for payment of
the shortfall penalty. The notice has effect, and is taken always to have had
effect, according to its terms.
[Section 16 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Payment to ASIC on behalf of the Commonwealth
2.131 Each of the following types of payment are payable to ASIC on behalf of the
Commonwealth:
• an instalment of levy;
• late payment penalty (if applicable); and
• shortfall penalty (if applicable).
[Section 17 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
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2.132 When these payments become due and payable, ASIC is authorised, as an
agent of the Commonwealth, to bring proceedings in the name of the
Commonwealth for the recovery of these payments as a debt due to the
Commonwealth.
[Section 19 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.133 ASIC may also, on behalf of the Commonwealth, waive the payment of all or
part of an instalment of levy, a late payment penalty or shortfall penalty, if it is
satisfied that there are exceptional circumstances justifying the waiver. ASIC
may make a waiver on its own initiative or in response to a written application
made by the person in the approved form.
[Section 18 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Review of Decision
2.134 A person affected by ASIC's decision to waive (or to not waive) some or all of
an instalment of levy, late payment penalty or shortfall penalty, and who is
dissatisfied with the decision, may request ASIC to reconsider its decision.
[Section 24 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2022]
2.135 The request for an internal review of ASIC's decision must be made by notice
given to ASIC in the approved form within 21 calendar days after the day on
which the person first receives notice of ASIC's decision (or a further period
that ASIC allows). The notice must set out the person's reasons for making the
request.
[Section 24 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.136 After receiving the request, ASIC must review the decision or cause the
decision to be reviewed by a person:
• to whom ASIC's power to review the decision is delegated; and
• who was not involved in making the original decision.
[Section 24 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.137 Within 30 business days after receiving the request for an internal review, the
reviewer must reconsider the decision and either confirm, revoke or vary the
original decision, as they think fit.
[Section 24 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.138 If the reviewer does not confirm, revoke or vary the decision after 30 business
days, they are taken to have confirmed the original decision, with the
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Financial services compensation scheme of last resort levy
confirmation taking effect immediately after the end of the 30 business day
period.
[Section 24 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.139 The reviewer must give a notice in writing to the person who requested the
internal review notifying them of the result of the reconsideration of the
decision and provide their reasons.
[Section 24 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.140 If ASIC decides to confirm, vary or revoke its original decision to waive (or
not waive) a payment, the affected person may make an application to the
Administrative Appeals Tribunal for merits review of that decision.
[Section 25 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Other features of the levy framework
Collection of information and substantiation of that information
2.141 The CSLR levy framework adopts a number of the same administrative
features as the ASIC supervisory cost recovery levy framework. This includes
the requirements for the collection of information for the levy period, and
substantiation of that information, to inform the calculation of the levy amount
the person is required to pay for that levy period.
2.142 Before the start of a levy period, ASIC may notify a person, in writing, of the
person's obligation to provide information for the levy period to ASIC in the
approved form.
[Section 8 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.143 The approved form may require information to be provided about the person or
one or more persons who are required to pay the levy for the levy period.
[Section 8 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.144 In practice, the information required for the purposes of the CSLR levy
framework significantly overlaps with the information that is already required
to be collected under the ASIC supervisory cost recovery levy framework.
Therefore, to streamline the relevant administrative processes, an approved
form for the purposes of the CSLR levy framework may be the same form
required to make returns under section 11 of the ASIC Supervisory Cost
Recovery Levy (Collection) Act 2017. This means that, where a single form is
used, the person may only need to complete one approved form, which could
be used to collect the required information for both levies.
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[Section 8 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.145 The information in the approved form must be provided to ASIC by:
• 28 calendar days after the day the notice is given; or
• if ASIC publishes a notice on its website - the day specified on the
website (which must be at least two months after the notice is first
lodged on the website). The website may impose different due dates
for different classes of person.
[Section 8 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.146 If a person provides ASIC with the requested information, ASIC may also give
the person a written notice requiring them to give information or produce
documents that could substantiate the information they provided for the levy
period. The person must comply with a substantiation notice by:
• the date specified in the substantiation notice given by ASIC; or
• if the person makes an application to ASIC within 21 calendar days
after the day the substantiation notice is given, ASIC may agree to
extend the day for compliance with the substantiation notice.
[Sections 20 and 21 of the Financial Services Compensation Scheme
of Last Resort Levy (Collection) Bill 2023]
2.147 Unless a person has a reasonable excuse, a person commits an offence of strict
liability if they do not comply with a requirement to provide information, or
comply with a substantiation notice. The maximum penalty for both offences is
10 penalty units.
[Sections 8 and 22 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.148 A person who is required to give information or produce documents in
compliance with a substantiation notice does not commit an offence if they
comply to the extent they are able to comply with it (even if that means they do
not fully comply with the notice).
[Section 22 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.149 The requirement to provide information and comply with a substantiation
notice is important in calculating the amount of levy that a person is required to
pay for a levy period and could impact the amount of levy payable by other
members of a sub-sector. Given this, the use of strict liability offences is
considered appropriate to deter misconduct. The use of strict liability is
intended to reduce non-compliance, bolster the integrity of the CSLR levy
framework and maintain industry confidence in the regime.
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Financial services compensation scheme of last resort levy
2.150 The penalty for failing to provide information or comply with a substantiation
notice is 10 penalty units. This is consistent with the Guide to Framing
Commonwealth Offences, which states that the maximum penalty for strict
liability offences should not exceed 60 penalty units for individuals or 300
penalty units for a body corporate. Furthermore, the use of strict liability
(rather than absolute liability) preserves the defence of honest and reasonable
mistake of fact to be proved by the accused on the balance of probabilities.
This defence maintains adequate checks and balances for persons who may be
accused of such offences.
2.151 In relation to these offences, the following offence-specific defences may also
be available:
• the defence of 'reasonable excuse' is available in relation to the
requirement to provide information, or comply with a substantiation
notice; and
• the defence that a person complied to the extent to which they were
capable is available in relation to the requirement to comply with a
substantiation notice.
[Sections 8 and 22 of the Financial Services Compensation Scheme
of Last Resort Levy (Collection) Bill 2023]
2.152 Under subsection 13.3(3) of the Criminal Code, a defendant bears an evidential
burden to prove that they have a reasonable excuse or have complied with an
obligation to the extent to which they were capable. In each of these cases, the
evidence needed to prove the defence is of a kind that is peculiarly within the
knowledge of the defendant who has specific knowledge of their reason for
failing to provide information or for not complying with a substantiation
notice. It would be significantly more difficult and time-consuming for the
prosecutor to disprove the existence of these defences, than it would be for the
defence to establish the matter.
2.153 In accordance with subsection 13.3(3) of the Criminal Code Act 1995, a
defendant who wishes to rely on either of these defences, bears an evidential
burden in relation to that matter. If the defendant discharges this evidential
burden, the prosecution must prove those matters beyond a reasonable doubt.
2.154 It is a reasonable excuse for an individual to refuse or fail to answer a question
or produce a document on the ground that to do so might tend to incriminate
the individual or expose the individual to a penalty. This provision expressly
provides that the requirement to provide information or comply with
substantiation notices does not abrogate the privilege against self-
incrimination.
[Section 22 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
Default notices
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2.155 ASIC may give a person a notice stating the amount of levy that, in ASIC's
opinion, is the amount that person is required to pay for a levy period, if:
• the person fails to comply with a requirement to provide information
for the levy period to ASIC;
• ASIC is not satisfied with the information the person provides for the
levy period; or
• the person fails to comply with a substantiation notice in relation to the
information they have provided for the levy period.
[Section 15 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.156 If a default notice is given to a person, the amount stated in the notice is taken
to be the instalment of levy payable by the person for the levy period, unless
the contrary is proved.
[Section 15 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.157 Under these circumstances (that is, where ASIC has issued a default notice to a
person for a levy period), the person has an opportunity to challenge the levy
amount stated in the notice by proving the contrary. In the event of such a
challenge, the person bears the evidential burden for proving the contrary,
given that this is a matter that is peculiarly within the knowledge of the
defendant who has specific knowledge of the relevant information (as reflected
by the fact that they were required to provide this information in the first
instance).
2.158 This power is consistent with ASIC's power to issue default notices for the
purposes of the ASIC supervisory cost recovery levy framework (under
section 12 of the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017).
This power is important for the effective operation of the CSLR levy
framework as it ensures that a person is not able to avoid paying the CSLR
levy for the levy period by failing to provide the information required to
calculate the amount of levy they are required to pay for the levy period. The
ability for ASIC to issue default notices ensures the equitable distribution of
the levy amount for the levy period across all members of a particular sub-
sector, and ensure that the CSLR is fully funded, which is necessary for proper
administration of the CSLR.
Approved form
2.159 For the purposes of the CSLR levy framework, information, a notice,
statement, application or other document is in the approved form if it is:
• in the manner and form prescribed in the regulations; or
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Financial services compensation scheme of last resort levy
• if the regulations do not prescribe a manner and/or form - it is in the
manner and/or form approved in writing by ASIC.
[Section 30 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.160 Different approved forms may be prescribed or approved for different classes
of persons.
[Section 30 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.161 The regulation-making power to prescribe the manner and form of approved
forms reduces the complexity of the Act by removing technical and
administrative matters from the primary law, which accords with hierarchy of
laws principles and increases the readability of the Act. Regulations are subject
to disallowance and parliamentary scrutiny and sunset after 10 years.
Exempting laws ineffective
2.162 Nothing in a law that is passed before the commencement of the Financial
Services Compensation Scheme of Last Resort Levy (Collection) Act 2023 is
taken to exempt a person from their liability to pay a levy under the CSLR levy
framework.
[Section 23 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.163 If a law (or a provision of a law) that is passed after the commencement of the
Financial Services Compensation Scheme of Last Resort Levy (Collection)
Act 2023 exempts a person from liability to pay taxes (or certain taxes) under
laws of the Commonwealth, that would otherwise result in the person being
exempt from the requirement to pay the levy, that law (or provision) is not
sufficient to exempt the person from the liability to pay the CSLR levy unless
the exemption in that law specifically refers to the levy established by the
Financial Services Compensation Scheme of Last Resort Levy (Collection)
Act 2023.
[Section 23 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
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2.164 However, this does not restrict the operation of an exemption from the liability
to pay the CSLR levy granted under either the Financial Services
Compensation Scheme of Last Resort Levy Act 2023 or the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Act 2023.
[Section 23 to the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2022]
Commencement, application, and machinery
provisions
2.165 The Financial Services Compensation Scheme of Last Resort Levy Act 2023
commences on the day after this Act receives the Royal Assent.
[Section 2 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023]
2.166 To ensure the effective operation of the CSLR levy framework, the
commencement of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Act 2023 is contingent on the commencement of the
Financial Services Compensation Scheme of Last Resort Levy Act 2023. This
means that:
• the Financial Services Compensation Scheme of Last Resort Levy
(Collection) Act 2023 commences at the same time as the Financial
Services Compensation Scheme of Last Resort Levy Act 2023; or
• the Financial Services Compensation Scheme of Last Resort Levy
(Collection) Act 2023 does not commence at all if the Financial
Services Compensation Scheme of Last Resort Levy Act 2023 does not
commence.
[Section 2 of the Financial Services Compensation Scheme of Last
Resort Levy (Collection) Bill 2023]
2.167 Both Acts bind the Crown in right of each of the States, of the Australian
Capital Territory, of the Northern Territory and of Norfolk Island. However,
they do not bind the Crown in right of the Commonwealth.
[Section 3 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2023; and section 4 of the Financial Services Compensation
Scheme of Last Resort Levy (Collection) Bill 2023]
2.168 This means that entities that are considered to be the Commonwealth, such as a
'Commonwealth entity' (within the meaning of the Public Governance,
Performance and Accountability Act 2013) cannot be made liable to pay a levy
even where it would otherwise apply to them. Other entities that are not
considered to be the Commonwealth may, however, be liable to pay a levy,
such as a Commonwealth company (within the meaning of the Public
Governance, Performance and Accountability Act 2013).
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Financial services compensation scheme of last resort levy
2.169 The Crown is not liable to a pecuniary penalty or to be prosecuted for an
offence under this regime.
[Section 4 of the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023]
2.170 The operation of the CSLR levy framework extends to every external territory
and to acts, omissions, matters and things outside Australia.
[Sections 4 and 5 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2032; and sections 5 and 6 of the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023]
2.171 The CSLR levy framework does not impose a tax on property of any kind
belonging to a State within the meaning of section 114 of the Constitution.
[Section 6 of the Financial Services Compensation Scheme of Last Resort
Levy Bill 2022]
2.172 The Governor-General may make regulations prescribing matters:
• required or permitted by the Act to be prescribed by the regulations; or
• necessary or convenient to be prescribed for carrying out or giving
effect to the Act.
[Section 19 of the Financial Services Compensation Scheme of Last
Resort Levy Bill 2022; and section 31 of the Financial Services
Compensation Scheme of Last Resort Levy (Collection) Bill 2023]
72
Statement of
Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Treasury Laws Amendment (Financial Services Compensation Scheme
of Last Resort) Bill 2023
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023
Table of Contents:
Treasury Laws Amendment (Financial Services Compensation Scheme
of Last Resort) Bill 2023....................................................................... 74
Overview ....................................................................................... 74
Human rights implications ............................................................. 74
Conclusion .................................................................................... 77
Financial Services Compensation Scheme of Last Resort Levy Bill 2023
............................................................................................................. 78
Overview ....................................................................................... 78
Human rights implications ............................................................. 78
Conclusion .................................................................................... 78
Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 ............................................................................ 79
Overview ....................................................................................... 79
Human rights implications ............................................................. 80
Conclusion .................................................................................... 83
73
Statement of Compatibility with Human Rights
Treasury Laws Amendment (Financial Services
Compensation Scheme of Last Resort) Bill 2023
3.1 The Treasury Laws Amendment (Financial Services Compensation Scheme of
Last Resort) Bill 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
3.2 The Treasury Laws Amendment (Financial Services Compensation Scheme of
Last Resort) Bill 2023 amends the Corporations Act, the ASIC Act and the
Credit Act to establish a CSLR.
3.3 The objective of the CSLR is to provide compensation to eligible consumers in
circumstances where an AFCA determination awarding monetary
compensation has been made in their favour, but which the relevant entity has
not paid.
3.4 The Minister may authorise a person to be the operator of the CSLR if the
Minister is satisfied that the person will meet the mandatory requirements. This
includes that the operator is a company limited by guarantee and not operated
for profit.
3.5 A consumer who has not been paid in accordance with a relevant AFCA
determination may apply to the operator of the CSLR for payment. If the
eligibility criteria are met, the operator of the CSLR must compensate the
consumer, up to $150,000.
Human rights implications
3.6 The Treasury Laws Amendment (Financial Services Compensation Scheme of
Last Resort) Bill 2023 engages the following human rights and freedoms:
• the right to protection from arbitrary or unlawful interference with
privacy;
• the right to a fair trial; and
• the imposition of strict liability for an offence
Right to privacy
3.7 The following provisions in the Treasury Laws Amendment (Financial
Services Compensation Scheme of Last Resort) Bill 2023 may engage with the
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Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
right to the right to protection from arbitrary or unlawful interference with
privacy under Article 17 of the ICCPR:
• the requirement for a person to provide information to the CSLR
operator to give information or produce documents relevant to an
application for compensation under the CSLR (section 1069D of the
Corporations Act);
• the authorisation for the CSLR operator to use or disclose information
for the purposes of the CSLR or to assist other specified entities
perform their functions and exercise their powers (section 1069E of the
Corporations Act);
• the authorisation for AFCA staff to use or disclose information for the
purposes of the CSLR or to assist the CSLR operator perform its
functions and exercise its powers (section 1058A of Corporations Act);
and
• the authorisation for ASIC to use or disclose information for the
purposes of the CSLR and to assist the CSLR operator perform its
functions or exercise its powers (section 127 of the ASIC Act).
3.8 Article 17 of the ICCPR prohibits the unlawful or arbitrary interferences with a
person's privacy. The right in Article 17 may be subject to permissible
limitations, where these limitations are authorised by law and are not arbitrary.
In order for an interference with the right to privacy to be permissible, the
interference must be authorised by law, be for reason consistent with the
ICCPR, and be reasonable in the particular circumstances. The United Nations
Human Rights Committee has interpreted the requirements of 'reasonableness'
to imply that any interference with privacy must be proportional to end sought
and be necessary in the circumstances of any given situation.
3.9 The Treasury Laws Amendment (Financial Services Compensation Scheme of
Last Resort) Bill 2023 provides for the collection, storage and use of certain
information for the limited purposes of administering the CSLR and assisting
the CSLR operator, ASIC, AFCA, the Information Commissioner and the
Commissioner of Taxation perform their respective functions.
3.10 It is important for the CSLR operator to be able to collect, use and disclose the
relevant information to accurately and efficiently assess an consumer's
eligibility for compensation and determine the amount of compensation to be
paid. Consequently, non-compliance with these information requirements
provides an obstacle to the operator's ability to perform its functions and for
the CSLR to operate effectively.
3.11 To the extent that the Treasury Laws Amendment (Financial Services
Compensation Scheme of Last Resort) Bill 2023 engages the right to privacy
under Article 17 of the ICCPR, it does so in a way that is limited and
appropriate. In this case the collection, use and disclosure of information plays
75
Statement of Compatibility with Human Rights
an important role in ensuring that the CSLR is able to achieve its principal
objective (to provide compensation for eligible consumers), while continuing
to protecting confidentiality by limiting the use and disclosure of information.
Right to a fair trial and the imposition of strict liability
3.12 The new strict liability offence created by the Treasury Laws Amendment
(Financial Services Compensation Scheme of Last Resort) Bill 2023 may
engage the right to a fair trial and the presumption of innocence in Article 14
of the ICCPR.
3.13 Article 14 of the ICCPR provides that everyone shall be entitled to a fair and
public hearing by a competent, independent and impartial tribunal established
by law.
3.14 Strict liability offences engage with this right as they involve the imposition of
criminal liability without a mental fault element. However, strict liability
offences are compatible with the presumption of innocence if they are
reasonable, necessary and proportionate in pursuit of a legitimate objective.
3.15 The new strict liability offence applies to a person who fails to comply with a
notice given by the CSLR operator to give information or produce documents
relevant to an application for compensation (section 1069D of the Act).
3.16 Article 14.2 of the ICCPR states that a person shall have the right to be
presumed innocent until proven guilty according to law. To prove the ordinary
offence, the prosecution must prove that the accused engaged in the prohibited
conduct (the physical elements) and that the accused did so with a criminal
mind (the fault elements). To prove the strict liability offence, the prosecution
must only prove that the accused engaged in the prohibited conduct; there is no
requirement to prove the accused's criminal intentions.
3.17 Non-compliance with a notice to give information or produce documents can
result in severe detriment for consumers by adversely affecting the operator's
ability to efficiently and effectively assess their application for compensation.
Having strict liability apply to this offence is intended to deter non-compliance
by ensuring that regulators can efficiently and expeditiously deal with low-
level offending. This, in turn, bolsters the integrity of the CSLR and maintains
public confidence in the regime.
3.18 The maximum penalty for this new strict liability offence is 30 penalty units.
This is within the limits set out in the Guide to Framing Commonwealth
Offences, which provides that the penalty for strict liability offences should not
exceed 60 penalty units for an individual and 300 penalty units for a body
corporate. Furthermore, the use of strict liability (rather than absolute liability)
preserves the defence of honest and reasonable mistake of fact to be proved by
the accused on the balance of probabilities. This defence maintains adequate
checks and balances for persons who may be accused of such offences.
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3.19 An offence-specific defence also applies to the general offence for failing to
comply with a notice given by the CSLR operator. This means that a person
does not commit an offence if they have a reasonable excuse for not complying
with this requirement.
3.20 This offence-specific defence engages article 14(2) of the ICCPR, as it
displaces the assumption that the prosecution must prove every element of the
offence. However, the use of this defence is considered appropriate, as the
evidence needed to prove a 'reasonable excuse' defence is a matter peculiarly
within the knowledge of the defendant who has specific knowledge of the
reason they did not comply with the requirement. In this case, it would be
significantly more difficult and time-consuming for the prosecution to disprove
the existence of a reasonable excuse, than it would be for the defence to
establish the matter.
3.21 In accordance with subsection 13.3(3) of the Criminal Code Act 1995, a
defendant who wishes to rely on this exception, bears an evidential burden in
relation to that matter. If the defendant discharges this evidential burden, the
prosecution must prove those matters (and the other elements of the offence)
beyond a reasonable doubt.
3.22 To the extent the Treasury Laws Amendment (Financial Services
Compensation Scheme of Last Resort) Bill 2023 engages the right to a fair trial
and the presumption of innocence in Article 14 of the ICCPR, it does so in a
way that is appropriate and consistent with the principal objective of the
CSLR, which is to provide compensation to consumers.
Conclusion
3.23 To the extent that the Treasury Laws Amendment (Financial Services
Compensation Scheme of Last Resort) Bill 2023 engages rights under Article
14 and 17 of the ICCPR, it is compatible with human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011 as the limitations are
appropriate, proportionate and achieve a legitimate objective.
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Statement of Compatibility with Human Rights
Financial Services Compensation Scheme of
Last Resort Levy Bill 2023
3.24 The Financial Services Compensation Scheme of Last Resort Levy Bill 2023 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
3.25 The Financial Services Compensation Scheme of Last Resort Levy Bill 2023
provides for the imposition of levies to fund the CSLR and associated AFCA
fees.
3.26 The CSLR levy framework provides for the imposition of the following levies
to fund the CSLR:
• an annual levy, which is required to be paid for a levy period by all
members of specified sub-sectors;
• a further levy, which is only payable if the amount of annual levy
collected is insufficient or is likely to be insufficient to meet the
expected claims, fees and costs for the levy period;
• a special levy, which is a levy that can only be made by a Minister
determination in circumstances where the expected costs for the levy
period would exceed the sub-sector levy cap; and
• a one-off levy, this enables compensation to be paid for eligible
complaints made to AFCA prior to the commencement of the CSLR.
Human rights implications
3.27 The Financial Services Compensation Scheme of Last Resort Levy Bill 2023
does not engage any of the applicable rights or freedoms.
Conclusion
3.28 The Financial Services Compensation Scheme of Last Resort Levy Bill 2023 is
compatible with human rights as it does not raise any human rights issues.
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Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2023
Financial Services Compensation Scheme of
Last Resort Levy (Collection) Bill 2023
3.29 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 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
3.30 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 provides for the collection of levies from parts of the
financial services industry to fund the CSLR and associated AFCA fees.
3.31 The CSLR operator is responsible for making a determination, which specifies
the levy amount that is payable for a levy period and a sub-sector.
3.32 A person who is required to pay the levy is required to provide ASIC with
information for the levy period in order to assist ASIC calculate the amount of
levy that the person is required to pay for that levy period.
3.33 If required, ASIC may also issue a written notice requiring the person to give
information or produce documents to substantiate the information they have
provided for the levy period.
3.34 ASIC is responsible for issuing a notice requiring payment of the levy, and
collecting levy payments on behalf of the Commonwealth.
3.35 Where a person does not satisfy the requirement to provide ASIC with
information (or to comply with a requirement to substantiate that information)
for the levy period, ASIC may issue a default notice stating the amount of the
levy the person is required to pay, unless they are able to prove has a default
notice power, which allows it to issue a notice for payment of the levy, unless
it is proved otherwise.
3.36 Unless ASIC waives payment of the levy or grants an extension for payment of
the levy, a failure to pay an instalment of levy by the day it becomes due and
payable constitutes a late payment. A late payment of an instalment of levy
attracts a late payment penalty.
3.37 Similarly, a shortfall penalty applies where there is a shortfall in the levy
amount paid by a person because the information they provided to ASIC was
false or misleading.
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Human rights implications
3.38 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 engages the following human rights and freedoms:
• the right to protection from arbitrary or unlawful interference with
privacy;
• the right to a fair trial and the presumption of innocence; and
• the privilege against self-incrimination.
Right to privacy
3.39 The following provisions in the Financial Services Compensation Scheme of
Last Resort Levy (Collection) Bill 2023 may engage with the right to
protection from arbitrary or unlawful interference with privacy under Article
17 of the ICCPR:
• the requirement for a person who is required to pay the levy for the
levy period to provide information for the purpose of calculating the
levy amount payable by the person for the levy period (section 8 of the
Bill); and
• the requirement for a person to comply with a notice to give
information or produce information to substantiate the information
they provided to ASIC (section 20 of the Bill).
3.40 Article 17 of the ICCPR prohibits the unlawful or arbitrary interferences with a
person's privacy. The right in Article 17 may be subject to permissible
limitations, where these limitations are authorised by law and are not arbitrary.
In order for an interference with the right to privacy to be permissible, the
interference must be authorised by law, be for reason consistent with the
ICCPR, and be reasonable in the particular circumstances. The United Nations
Human Rights Committee has interpreted the requirements of 'reasonableness'
to imply that any interference with privacy must be proportional to end sought
and be necessary in the circumstances of any given situation.
3.41 The Bill requires a person to provide ASIC with information relating to one or
more persons who are required to pay the levy for levy period. This
information is used as the basis for working out the amount of levy a person in
a particular sub-sector is required to pay for the levy period. If required, ASIC
may also give the person a notice requiring them to give information or
produce documents to substantiate the information they provided for the levy
period. The information gathering powers for the purposes of the CSLR are
consistent with the ASIC supervisory cost recovery levy framework.
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3.42 The collection and use of this information relating to the collection and
imposition of levies is central to the funding and effective operation of the
CSLR.
3.43 To the extent that the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023 engages the right to protection from arbitrary or
unlawful interference with privacy under Article 17 of the ICCPR, it does so in
an appropriate manner and for the achievement of a legitimate purpose (that is,
for the effective funding and operation of the CSLR).
Right to a fair trial
3.44 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 creates two new strict liability criminal offences where:
• a person fails to provide ASIC with information used to work out the
amount of levy payable by a person for a levy period (section 8 of the
Bill);
• a person fails to comply with a substantiation notice, which requires
them to give information or produce documents to substantiate the
information they provided for the levy period (section 22 of the Bill).
3.45 Article 14 of the ICCPR provides that everyone shall be entitled to a fair and
public hearing by a competent, independent and impartial tribunal established
by law.
3.46 Strict liability offences engage with this right as they involve the imposition of
criminal liability without a mental fault element. However, strict liability
offences are compatible with the presumption of innocence if they are
reasonable, necessary and proportionate in pursuit of a legitimate objective.
3.47 Article 14.2 of the ICCPR states that a person shall have the right to be
presumed innocent until proven guilty according to law. To prove the ordinary
offence, the prosecution must prove that the accused engaged in the prohibited
conduct (the physical elements) and that the accused did so with a criminal
mind (the fault elements). To prove the strict liability offence, the prosecution
must only prove that the accused engaged in the prohibited conduct; there is no
requirement to prove the accused's criminal intentions.
3.48 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 requires persons to provide information required to work
out the levy amount payable by the person for the levy period. Non-compliance
with this requirement could adversely affect the efficient and effective
operation of the CSLR levy framework, by making it more difficult to
calculate the amount of levy payable for members of a particular sub-sector.
Having strict liability apply to these offences is intended to deter
non-compliance by ensuring that regulators can efficiently and expeditiously
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Statement of Compatibility with Human Rights
deal with low-level offending. This in turn bolsters the integrity of the CSLR
levy framework and maintains industry confidence in the regime.
3.49 The maximum penalty for these new strict liability offences is 10 penalty units.
This is within the limits set out in the Guide to Framing Commonwealth
Offences, which provides that the penalty for strict liability offences should not
exceed 60 penalty units for an individual and 300 penalty units for a body
corporate. Furthermore, the use of strict liability (rather than absolute liability)
preserves the defence of honest and reasonable mistake of fact to be proved by
the accused on the balance of probabilities. This defence maintains adequate
checks and balances for persons who may be accused of such offences.
3.50 The Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 also includes offence-specific defence to the general
offence applying to the failure to provide information and substantiate that
information. This means that a person does not commit an offence if the person
has:
• a reasonable excuse for not complying with the requirement to provide
information or a substantiate notice; and
• complied with the substantiation notice to the extent they are capable.
3.51 These offence-specific defences engage Article 14(2) of the ICCPR, as they
displace the assumption that the prosecution must prove every element of an
offence. However, these defences are considered appropriate, as in each of
these cases the evidence needed to prove the defence is peculiarly within the
knowledge of the defendant who has specific knowledge of their reason for not
complying with these requirements. It would be significantly more difficult
and time-consuming for the prosecution to disprove the existence of these
defences, than it would be for the defence to establish the matter.
3.52 In accordance with subsection 13.3(3) of the Criminal Code Act 1995, a
defendant who wishes to rely on either of these defences, bears an evidential
burden in relation to that matter. If the defendant discharges this evidential
burden, the prosecution must prove those matters (and the other elements of
the offence) beyond a reasonable doubt.
Privilege against self-incrimination
3.53 The requirement to provide information or to comply with a substantiation
notice may also engage with the privilege against self-incrimination in Article
14(3)(g) of the ICCPR. The privilege against self-incrimination is a well-
established common law principle and always applies unless expressly
abrogated by statute, with such abrogation often viewed as permissible.
3.54 However, the Financial Services Compensation Scheme of Last Resort Levy
(Collection) Bill 2023 specifically provides that it is a reasonable excuse for an
individual to refuse or fail to answer a question or produce a document on the
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ground that to do so might tend to incriminate the individual or expose the
individual to a penalty. This expressly provides that these requirements are not
intended to abrogate the privilege against self-incrimination, which is
consistent with Article 14(3)(g) of the ICCPR, which relates to matters that
may affect the law relating to self-incrimination.
Conclusion
3.55 To the extent that the Financial Services Compensation Scheme of Last Resort
Levy (Collection) Bill 2023 engages rights under Article 14 and 17 of the
ICCPR, it is compatible with human rights and freedoms recognised or
declared in the international instruments listed in section 3 of the Human
Rights (Parliamentary Scrutiny) Act 2011 as the limitations are appropriate,
proportionate and achieve a legitimate objective.
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