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ASFA, AIST seek greater supervisory levy transparency

By Keith Ford
3 minute read

AIST and ASFA have both called for more transparency around the Financial Institutions Supervisory Levies.

In response to the Treasury consultation on proposed Financial Institutions Supervisory Levies (FISLs) for the 2023-24 financial year, the Association of Superannuation Funds of Australia (ASFA) and the Australian Institute of Superannuation Trustees (AIST) have said that there needs to be greater transparency and accountability around the regulator’s use of the funding.

“ASFA supports the adequate and appropriate funding of APRA, ASIC and other regulators for the superannuation industry. Further, ASFA considers that all regulated entities should contribute to that funding,” ASFA said.

“That outcome is, in ASFA’s view, far more equitable and appropriate than funding regulators solely from consolidated revenue.

“That said, where industry does contribute to regulators’ funding, it is incumbent upon those regulators to provide genuine transparency and accountability regarding the manner in which they determine their funding requirements and utilise their funding.

“Genuine transparency and accountability provides industry with greater insight into regulators’ activities and builds confidence within industry that regulators are functioning well.”

ASFA added that while there is more information in the 2023–24 consultation paper than previous years, there is still not “sufficient detail for industry to adequately understand how the proposed levies are determined”.

The superannuation industry will see a significant boost in its levy funding, with the consultation paper proposing an $8.8 million, or 14.4 per cent, increase from $61.3 million in 2022–23 to $70.1 million. However, this number includes $5 million for the recovery of under-collected levies from the previous financial year.

“The paper does not provide sufficient detail regarding the composition of APRA’s broader regulatory costs (and associated cost recovery) in respect of the superannuation industry,” ASFA added.

The AIST agreed with this stance, also pointing to the lack of transparency in the funding.

“It is difficult to reconcile the significant cost increase to industry without additional transparency detail that is not included within the levy papers and must be separately deduced from other disclosure materials, including APRA’s corporate plans, annual reports and portfolio budget statements,” AIST said.

“AIST supports having strong, well-resourced, highly skilled regulators and has repeatedly called for increased scrutiny and supervisory activities on new and newly reporting products to ensure they meet the same standards applying to other products.”

It added that given the levies ultimately come from members’ accounts, an equitable approach is needed.

“AIST advocates that any risk-based approach to levy raising should take into account the volume of regulator activities spent on various entities and sub-sectors. We continue to maintain this position and believe that any CRIS and performance assessment should contain this information,” AIST said.

Citing APRA’s corporate plans, which refer to APRA’s intensified supervision and engagement with trustees of products that failed or were at risk of failing the MySuper performance test, AIST said a user pays model would be more equitable.

“The weight of APRA’s supervisory activity within the superannuation industry is targeted to specific areas of focus and concern but is ultimately being cross subsidised by other trustees where it would appear such concerns may not exist,” AIST said.

“As such, the existing model of applying levies on the basis of a fund’s assets should be reviewed and AIST instead suggests a user-pays model similar to that applied by AFCA in its complaint-handling duties be considered.”