EXPLANATORY STATEMENT
Issued by authority of the Compensation Scheme of Last Resort Limited
Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023
Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for 2024-25 Levy Period) Determination 2024
Section 9 of the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023 (the Act) provides that the Compensation Scheme of Last Resort (CSLR) operator, the Compensation Scheme of Last Resort Limited (CSLRL), may determine an estimate of the sum of the total amount of compensation that will be payable during the levy period, the Australian Financial Complaints Authority’s (AFCA) unpaid fees expected for each of the months in the levy period, the CSLR’s expected administrative costs for the levy period, the Australian Securities and Investment Commission’s (ASIC) expected administrative costs notified to CSLR for the levy period, and the relevant amount of the capital contribution in accordance with the Act .
The purpose of the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2024-25 Levy Period) Determination 2024 is to determine that estimate for the 2024-25 levy period. This will allow ASIC to impose a levy of the specified amount under section 8 of the Financial Services Compensation Scheme of Last Resort Levy Act 2023 in accordance with the calculations detailed in regulation 9 of the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
The Act requires that the CSLR operator reasonably believes the estimate to be accurate having had regard to actuarial principles. To this end, CSLRL engaged actuarial expertise to inform the estimate for the 2024-25 levy period. CSLRL did not engage in public consultation on this instrument as it reasonably believes the inputs to the specified amount to be accurate.
The Act does not specify any conditions that needs to be satisfied before the power to make the Determination may be exercised.
The Determination is a legislative instrument for the purposes of the Legislation Act 2003.
The Determination commenced on the day after Registration on the Federal Register of Legislation.
Details of the Determination are set out in Attachment A.
A statement of Compatibility with Human Rights is at Attachment B.
ATTACHMENT A
Details of the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2024-25 Levy Period) Determination 2024.
Section 1 – Name
This section provides that the name of the instrument is the Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2024-25 Levy Period) Determination 2024.
Section 2 – Commencement
The Determination commences on the day after the instrument is registered on the Federal Register of Legislation.
Section 3 – Authority
The Determination is made under the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023 (the Act).
Section 4 – Definitions
In this Determination:
2024-25 levy period means the 12-month period starting after the end of the first levy period.
credit intermediaries sub-sector has the same meaning as in the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
credit providers sub-sector has the same meaning as in the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
financial services compensation scheme of last resort has the same meaning as in the Corporations Act 2001.
licensed personal advice sub-sector has the same meaning as in the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
securities dealers sub-sector has the same meaning as in the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
the Act are references to the Financial Services Compensation Scheme of Last Resort Levy (Collection) Act 2023.
Sections 5 to 8 – Initial estimates of unpaid claims, fees and costs for 2024-25 levy period
The initial estimate for the 2024-25 levy period is determined to be the sum of what CSLRL reasonably believes (having regard to actuarial principles) of:
- the total amount of compensation that will be payable under section 1063 of the Corporations Act 2001 during the levy period and for the sub-sector, other than any such compensation relating to pre-CSLR complaints; and
- AFCA’s unpaid fees expected for each of the months in the levy period, and
- the CSLR’s expected administrative costs for the levy period, and
- ASIC’s expected administrative costs notified to CSLR for the levy period, and
- the relevant amount of the capital reserve establishment contribution in accordance with the Act.
The following table includes the estimate by sub-sector:
Act references | Description | Sub-sectors | |||
Credit intermediaries | Credit providers | Licensed personal advice | Securities dealers | ||
Paragraph 9(1)(a) | Compensation claims | $359,721.54 | $14,752.20 | $11,377,857.89 | $759,445.28 |
Paragraph 9(1)(b)(i) | AFCA unpaid fees | $126,498.55 | $162,323.36 | $1,978,098.65 | $193,006.55 |
Paragraph 9(1)(b)(ii) | CSLR’s administrative costs | $535,952.51 | $542,879.98 | $4,428,288.86 | $557,621.73 |
Paragraph 9(1)(b)(iii) | ASIC’s administrative costs | $361,146.50 | $361,146.50 | $361,146.50 | $361,146.50 |
Paragraph 9(1)(b)(iv) | Capital reserve establishment | $416,666.67 | $416,666.67 | $416,666.67 | $416,666.67 |
Paragraph 9(1)(b) |
| $1,440,264.23 | $1,483,016.51 | $7,184,200.68 | $1,528,441.45 |
Subsection 9(1) | Total | $1,799,985.77 | $1,497,768.71 | $18,562,058.57 | $2,287,886.73 |
ATTACHMENT B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Financial Services Compensation Scheme of Last Resort Levy (Collection) (Initial Cost Estimates for the 2024-25 Levy Period) Determination 2024
This Legislative Instrument 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 of the Legislative Instrument
Section 9 of the Act provides that CSLRL, may determine an estimate of the sum of the total amount of compensation that will be payable during the levy period, AFCA’s unpaid fees expected for each of the months in the levy period, the CSLR’s expected administrative costs for the levy period, ASIC’s expected administrative costs notified to CSLR for the levy period, and the relevant amount of the capital contribution in accordance with the Act .
The purpose of the Determination is to determine that estimate for the 2024-25 levy period. This will allow ASIC to impose a levy of the specified amount under section 8 of the Financial Services Compensation Scheme of Last Resort Levy Act 2023 in accordance with the calculations detailed in regulation 9 of the Financial Services Compensation Scheme of Last Resort Levy Regulations 2023.
The Act requires that the CSLR operator reasonably believes the estimate to be accurate having had regard to actuarial principles. To this end, CSLRL engaged actuarial expertise to inform the estimate for the 2024-25 levy period. CSLRL did not engage in public consultation on this instrument as it reasonably believes the inputs to the specified amount to be accurate.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.