ASIC’s user-pays regime increases licensee costs

From

Lydia Carstensen

Since 1 July 2017, most businesses who are regulated by ASIC must pay a levy to fund ASIC’s work, a cost that was previously borne by taxpayers.

Who must pay

The ASIC Supervisory Cost Recovery Levy Act 2017 imposes the levy on financial services, credit service and, market infrastructure businesses, liquidators, and companies and company-like entities, unless they are specifically exempted by the regulations.

How it works

The levy applies to businesses that were regulated by ASIC for any part of the financial year. It will change annually, and may be:

  • a flat rate;
  • a graduated or variable, rate; or
  • a combination of both (a flat amount and an additional variable amount).

How the levy is calculated depends on which sub-sector your business operates in. Businesses whose products or services fall within several sub-sectors, must pay the levy for each sub-sector.

Draft regulations explain how costs will be calculated for each sub-sector. For example, licensed credit intermediaries must pay:

  • A flat $1,000 levy; plus
  • A variable component, depending on the number of credit representatives.

A few key examples include:

 

Pay or face the penalties

ASIC will notify entities what they have to pay. Businesses will have 30 days to pay once they receive the notice.

A 20% penalty payment will apply to businesses who fail to pay the levy on time. Administrative action and/or criminal charges may be taken against businesses who do not pay within 12 months.

Where the levy is calculated on the basis of information that businesses provide to ASIC, e.g. the number of authorised representatives, businesses who make a false or misleading statement to ASIC may be required to pay double the shortfall.

Managing the additional cost

Businesses who can’t afford multiple levies may need to consider reducing the services they offer.

Although the levies add a new barrier to entry to the market, those who can afford to pay multiple levies can have a presence in several markets and potentially expand their services.

By Lydia Carstensen

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