Mon 08 2018

New ASIC industry funding legislation: regulated entities now required to pay annual levy to ASIC

The Federal Government’s new industry funding laws have changed the way the Australian Securities & Investments Commission (ASIC) is funded, with compliance costs being passed on to organisations regulated by ASIC. Regulated entities are now required to pay an annual levy to fund ASIC’s regulatory activities, with industry subsectors that create a greater need for ASIC regulation paying a higher levy.

Who will be affected?

The levy applies to organisations regulated by ASIC including all corporate entities subject to the Corporations Act 2001 (Cth), auditors, insolvency practitioners, credit licensees, Australian Financial Service licensees and other regulated entities and individuals.

However, you will not be required to pay an annual levy if you are:

  • a small proprietary company which does not operate in one of the 48 subsectors1 that are subject to the levy2 or
  • a registered charity.

How is the levy calculated?

From July to September each year (starting this year), regulated entities are required to provide certain details and business activity metrics (if applicable) to ASIC by lodging an industry funding return via the new ASIC Regulatory Portal.

In January, you will be invoiced by ASIC for the levy payable for the previous financial year. Your entity’s annual levy will be calculated based on the data ASIC collects from the industry funding returns and ASIC’s actual cost of regulating the subsector(s) in which you operated during the previous financial year. The levy payable will be a flat or graduated levy3 depending on the subsector(s).

For a complete list of the subsectors and the relevant levies and metrics that apply to each subsector for FY2017-18, see ASIC’s business activity metric checklist.

What if my entity operates in more than one subsector?

If your entity operated in multiple subsectors within the previous financial year, you will be charged the relevant levy for each subsector.

Can I predict how much my entity will be required to pay?

Indicative levies4 for each subsector are released by ASIC in its annual Cost Recovery Implementation and are based on ASIC’s expected regulatory activity in each subsector for the financial year.

A summary of FY2017-18 indicative levies can be viewed here.

What does my entity need to do?

In brief, your entity will need to:

  1. register with the new ASIC Regulatory Portal (Portal) using your entity’s unique industry funding key
  2. submit the industry funding return via the Portal by 27 September 2018 – failure to do so is an offence and
  3. pay the levy within 30 business days of receiving the invoice from ASIC (which will be sent to you via the Portal in January 2019).

Registering an ASIC Regulatory Portal account

In June this year, ASIC sent a letter to the registered office of each regulated entity with instructions on how to lodge the industry funding form and including the entity’s unique industry funding security key to be used to register with and access the Portal.

If you have lost or didn’t receive the industry funding letter and security key you can still register by using your corporate key or ASIC key. If you don’t have a corporate key or ASIC key, you will need to request to be sent another industry funding letter by contacting ASIC.

The initial registration to the Portal can only be done by a director or secretary of your entity. Once registered, the director or secretary can assign their rights to an authorised person who can then access the Portal and perform the required duties on behalf of the entity.

Lodging the industry funding return

Regulated entities must lodge the industry funding return via the Portal by 27 September 2018.

When lodging the return via the Portal, you will be required to submit or validate (where the information is pre-filled by ASIC) certain details and business activity metrics (if applicable) for the previous financial year.

The relevant information and business activity metrics your entity is required to submit will depend on the subsector(s) in which you operated during the previous financial year. ASIC’s business activity metric checklist lists the business activity metric information required for each subsector.

For many subsectors, the entity’s business activity metrics will be pre-filled by ASIC based on ASIC’s records. Where this is the case, your entity will need to confirm whether the pre-filled information is correct and accurate. If the information is not correct and accurate, your entity must contact ASIC to correct the information before submitting the industry funding return via the Portal.

Paying levy on time

In January 2019 (and each January going forward), your entity will receive an invoice via the Portal with respect to your levy(s) payable for the previous financial year. You must pay the levy within 30 business days or penalties will apply.

Penalties

Late payment of the levy will result in penalty interest of 20% per annum to be charged monthly.

Penalties also apply if an entity makes false or misleading statements (or omissions) that result in a smaller levy being paid than is payable. Where this occurs, you will be charged a shortfall penalty equal to twice the shortfall amount.


1Regulated entities are categorised into 48 subsectors, and the levy payable by a regulated entity will be reflective of the real cost of regulating the relevant subsector(s) in which they operate.
2Small proprietary companies not operating in one of the 48 subsectors are exempt from having to submit or validate business activity metrics on the Portal. However, their annual review fee increased by $4 from 1 July 2018.
3A flat levy apportions the total cost of regulating a subsector equally among the entities operating in that subsector. A graduated levy on the other hand requires entities to pay a minimum levy and an additional graduated component based on the entity’s share of business activity within the subsector.
4Indicative levies are estimates only, and your entity’s final invoice (based on ASIC’s actual regulatory costs and the data it collects) will ultimately determine the actual levy payable.

Contact

Oliver is a corporate partner, whose practice focuses on mergers & acquisitions, corporate advisory, divestments, foreign investments and start-up capital raising.

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