Stephen Jones (Whitlam, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill is the first of two bills which form the levy framework to fund the Financial Services Compensation Scheme of Last Resort, hereafter 'the CSLR'.

The Commonwealth will fund the establishment of the CSLR, which is intended to be operational from December this year. The Commonwealth will also fund the scheme's initial operation until 30 June 2024.

A backlog of complaints that have been lodged with the Australian Financial Complaints Authority (AFCA) and that are expected to be eligible to claim on the CSLR will be funded through a one-off levy on Australia's 10 largest banking and insurance groups.

The costs of the CSLR from 1 July 2024 are to be funded fully through industry funded levies. The levy framework provides for an ongoing annual levy on entities that fall within a subsector within the scope of the scheme. The framework will issue levies in advance of a financial year, based on expected claims, AFCA fees and administration costs in that upcoming financial year. The ongoing annual levy will follow an approach already applied under the Australian Securities and Investments Commission industry funding model. The first ongoing annual levy notices are expected to be issued by ASIC in May 2024 to fund the scheme for the 2024-25 financial year.

The CSLR is designed to be financially sustainable and provide assurance to relevant financial market subsectors about the maximum amount expected to be levied. The scheme applies subsector caps of $20 million and an overall scheme cap of $250 million. This limits the amount leviable within a single levy period, whilst maintaining the ability to accommodate any unexpected large-scale events or failures. The levy framework provides the minister with the ability to issue special levies to in-scope and out-of-scope entities, in response to higher-than-expected outlays such as may be experienced with the failure of a large financial firm.

The financial market subsectors that will pay the ongoing annual levy will be detailed in regulations. The regulations will also detail the methodology to be applied by ASIC in its calculation of levy notices.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.