Life Insurance Supervisory Levy Imposition Determination 2014

Administered by Department of the Treasury

Legislation au F2014L00949 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Life Insurance Supervisory Levy Imposition Determination 2014

This determination relates to a levy imposed on life insurance entities by the Life Insurance Supervisory Levy Imposition Act 1998 (the Act).

This determination commences on 1 July 2014 and relates to the 2014‑15 financial year.  The Life Insurance Supervisory Levy Imposition Determination 2013 is repealed upon commencement of this determination.  Consistent with section 7 of the Acts Interpretation Act 1901, any obligation or liability incurred in previous financial years remains valid.

The determination will commence before it is registered.  Commencement prior to registration, however, does not disadvantageously affect the rights of any person as at the date of registration or impose any liability on any person in respect of anything done or omitted to be done before the date of registration.  Commencement prior to registration is therefore consistent with subsection 12(2) of the Legislative Instruments Act 2003.

Subsection 7(3) of the Act requires the Treasurer, by legislative instrument, to determine:

(a)           the maximum restricted levy amount for each financial year;

(b)          the minimum restricted levy amount for each financial year;

(c)           the restricted levy percentage for each financial year;

(ca) the unrestricted levy percentage for each financial year; and

(d)          how a life insurance company’s levy base asset is to be worked out.

This determination provides that the restricted component of the 2014‑15 levy will be calculated at 0.00478 per cent of assets held by the entity, subject to a minimum of $490 and a maximum of $1,320,000.  The unrestricted component of the 2014-15 levy will be calculated at 0.002388 per cent of assets held by the entity.

Although this determination does not allude specifically to friendly societies, they are considered as leviable bodies, as they are registered under the Life Insurance Act 1995 and consequently fall under the definition of ‘life insurance company’ of the Financial Institutions Supervisory Levies Collection Act 1998.  As subsection 16C(1) of the Life Insurance Act 1995 notes, item 11 of Schedule 8 to the Financial Sector Reform (Amendments and Transitional Provisions) Act 1999 provided that friendly societies existing then are taken to be registered under the Life Insurance Act 1995.

In 2013-14 APRA and Treasury reviewed the methodology for imposing levies on the finance industry. Thirteen submissions were received from industry as part of this process, and the APRA and Treasury response to submissions was released on 16 April 2014. 

The finance sector has been consulted on the 2014‑15 supervisory levies through a Treasury and Australian Prudential Regulation Authority discussion paper released on the Treasury website on 26 May 2014.  The paper discusses potential impacts of the levies on each industry sector and institution regulated by APRA.  Fourteen submissions were received during the consultation process, and no submission specifically raised issues in relation to the Life Insurance Supervisory Levy Imposition Determination 2014.

The Office of Best Practice Regulation has previously advised that a Regulatory Impact Statement is not required as supervisory levies are considered machinery‑of‑government in nature. 

This determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

A statement of compatibility with human rights for the purposes of Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is set out in Attachment 1.


Attachment 1

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Life Insurance Supervisory Levy Imposition Determination 2014

 

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

This determination relates to a levy imposed on life insurance entities by the Life Insurance Supervisory Levy Imposition Act 1998.

Subsection 7(3) allows the Minister to determine:

(e)           the maximum restricted levy amount for each financial year;

(f)           the minimum restricted levy amount for each financial year;

(g)          the restricted levy percentage for each financial year;

(ca) the unrestricted levy percentage for each financial year; and

(h)          how a life insurance company’s asset value is to be calculated.

 

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.

 

Overview

The Life Insurance Supervisory Levy Imposition Determination 2014, enacted under the Life Insurance Supervisory Levy Imposition Act 1998, was introduced to establish the specific parameters of the supervisory levy for the 2014-15 financial year. This determination, which commenced on 1 July 2014, outlines the restricted and unrestricted levy percentages, the maximum and minimum restricted levy amounts, and the calculation of a life insurance company's levy base asset. The enactment of this determination follows a review of the methodology for imposing levies on the finance industry, with consultations involving the Australian Prudential Regulation Authority (APRA) and Treasury. The objective of the determination is to ensure the financial stability of life insurance entities by imposing a levy that is proportionate to the assets held by these entities. The determination also ensures that the transition from the previous year's levy determination is smooth and does not adversely affect any existing rights or liabilities.

Scope and Application

The Life Insurance Supervisory Levy Imposition Determination 2014 sets out the parameters for the levy imposed on life insurance entities under the Life Insurance Supervisory Levy Imposition Act 1998. This levy applies to entities that are considered life insurance companies, including those registered under the Life Insurance Act 1995, such as friendly societies. The levy is applicable to the 2014-15 financial year, with the determination repealing the previous year's levy upon commencement. The restricted component of the levy is calculated at 0.00478 per cent of the entity’s assets, subject to a minimum of $490 and a maximum of $1,320,000, while the unrestricted component is calculated at 0.002388 per cent of the entity's assets. The determination specifies how the levy base asset of a life insurance company is to be worked out, ensuring compliance with the Act's requirements. This legislative instrument is designed to facilitate the imposition of the supervisory levy on life insurance entities within the Commonwealth of Australia.

Key Provisions

The main provisions of the Life Insurance Supervisory Levy Imposition Determination 2014 (the Determination) are set out in subsection 7(3) of the Life Insurance Supervisory Levy Imposition Act 1998 (the Act). This Determination outlines the specifics of the levy imposed on life insurance entities for the 2014-15 financial year. It includes the maximum and minimum restricted levy amounts, the restricted and unrestricted levy percentages, and the methodology for calculating a life insurance company’s levy base asset. Specifically, for the restricted component of the levy, the rate is 0.00478 per cent of assets, with a minimum of $490 and a maximum of $1,320,000. The unrestricted component is calculated at 0.002388 per cent of assets (subsections 7(3)(a)-(d)). The Determination imposes obligations on life insurance entities, including those registered under the Life Insurance Act 1995, to pay the specified levy based on their assets. This includes entities that are considered as leviable bodies, such as friendly societies, which are subject to the same levy rates and calculations as other life insurance companies. These entities must calculate their levy based on the specified percentages and asset values as outlined in the Determination. They are also required to ensure that they comply with the requirements of the Act and any other relevant legislation, such as the Financial Institutions Supervisory Levies Collection Act 1998. Breaches of the provisions outlined in the Determination may result in penalties. However, the specific penalties are not detailed in the Determination itself, but rather in the broader legislative framework provided by the Life Insurance Supervisory Levy Imposition Act 1998 and related Acts. Non-compliance could potentially lead to financial penalties or other enforcement actions as prescribed by these Acts. The Determination specifies that any obligations or liabilities incurred in previous financial years remain valid, and commencement prior to registration does not affect the rights of any person or impose any liability for actions taken before registration. This is consistent with subsection 12(2) of the Legislative Instruments Act 2003.

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