Government scraps ASIC levy freeze
The government has announced it will end the ASIC levy freeze implemented by the previous government during the pandemic.
The freeze was introduced in August 2021 by then-treasurer Josh Frydenberg as “temporary and targeted relief” for financial advisers. Among other things, it saw ASIC levies charged for personal advice to retail clients restored to their 2018–19 level of $1,142 per adviser.
“The sub-sector as a whole will pay an estimated $46 million less in ASIC levies in 2020–21 alone, with further savings flowing in 2021–22,” Mr Frydenberg said at the time.
Despite calls for its immediate extension, in announcing the release of the final report on the review of the Australian Securities and Investments Commission (ASIC) Industry Funding Model (IFM) on Monday, Financial Services Minister Stephen Jones said the freeze will not be extended.
“The review also considered the temporary levy relief for personal financial advice licensees that was in place for 2020–21 and 2021–22. The temporary levy relief for this sub‑sector will not be extended further,” he said.
“The review recommends reviewing each of the four sub‑sectors that fall within the financial advice sector and whether the existing sub‑sector definitions, metrics, and formulas remain appropriate. This will be progressed alongside implementation of the government’s Delivering Better Financial Outcomes package which includes our response to the Quality of Advice Review,” he added.
According to the review, the levy relief cut the total regulatory costs for the sub-sector from $60 million in 2020–21 to $25.8 million, and from $56.7 million in 2021–22 to $22.8 million.
The advice community has for some time been concerned about the 2022–23 financial year, which many predicted would see a big increase in fees paid by financial advisers following the apparent expiration of the two-year freeze.
Namely, despite calls from advice groups, Labor didn’t extend the freeze when it assumed government, signalling that costs would rise exponentially.
Speaking to ifa in April, Financial Advice Association Australia (FAAA) head of policy, Phil Anderson, said: “We are now in a year where financial advisers are exposed to the prospect of a significant increase in the levy”.
“There are a number of factors in play with this, including the significant reduction in adviser numbers, an expected decline in the spend on enforcement activity, however an increase in other ASIC costs, such as through the creation of the FSCP (Financial Services and Credit Panel).”
“We have previously called for an extension of the ASIC funding levy relief in the context of the review of the ASIC funding model. We are, however, not aware of any plans by the government to provide any further relief or make short-term changes to the model that could lead to a reduction in the amount of the likely increase,” he explained.
Additionally, Mr Anderson cautioned that from 1 July 2024, financial advisers could also be exposed to a further increase to fund the proposed Compensation Scheme of Last Resort (CSLR).
10 recommendations made
Led by Treasury in consultation with ASIC and several government departments, the review has found that while settings of the ASIC IFM remain appropriate, refinements can be made to improve the way regulatory costs are recovered and to communicate IFM settings to industry more effectively.
As such, the review made 10 recommendations, of which four are directed to ASIC.
Key recommendations include:
- Spreading the costs of certain regulatory activities (taking action against unlicensed operators, regulating emerging sectors, and capital expenditure) either across a wider population or over time to recognise the wider benefits of those activities
- Undertaking further consultation to ensure sub‑sector definitions, metrics and formulas used to calculated levies remain fit‑for‑purpose
- Delegating the fee‑setting power to ASIC to ensure fee amounts continue to reflect full cost recovery
- ASIC to enhance its reporting, transparency, and consultation arrangements on the IFM
“The Albanese government is committed to maintaining appropriate industry funding arrangements for ASIC. The government will work with ASIC, industry, and other stakeholders to implement these recommendations,” Mr Jones said.
“The government also supports ASIC taking action to implement the recommendations directed to it, to improve its engagement with industry and to streamline its reporting arrangements, particularly through its Cost Recovery Implementation Statement.”
