THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES GENERAL INSURANCE SUPERVISORY LEVY IMPOSITION AMENDMENT BILL 2006

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1 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES GENERAL INSURANCE SUPERVISORY LEVY IMPOSITION AMENDMENT BILL 2006 EXPLANATORY MEMORANDUM Circulated by the authority of the Minister for Revenue and Assistant Treasurer, The Hon Peter Dutton, MP

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3 Table of Contents OUTLINE...1 FINANCIAL IMPACT STATEMENT...2 NOTES ON INDIVIDUAL CLAUSES...2 SCHEDULE 1 AMENDMENTS TO THE GENERAL INSURANCE SUPERVISORY LEVY IMPOSITION ACT General Insurance Supervisory Levy Imposition Amendment Bill 2006 iii

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5 1 Outline 1.1 The purpose of the General Insurance Supervisory Levy Imposition Amendment Bill 2006 (the Bill) is to enable a special levy component to be imposed on a class of general insurance company regulated by the Australian Prudential Regulation Authority (APRA). 1.2 The Bill will amend the General Insurance Supervisory Levy Imposition Act 1998 to allow for the Treasurer to determine the special levy component to be imposed on a class of general insurance company. 1.3 The measures contained in the Bill are designed to provide for increased flexibility in the recovery of costs incurred by APRA. The Bill provides that costs incurred by APRA in performing an activity relating to a class of general insurance company are not necessarily recovered from all general insurance companies. For example, the Bill will enable costs associated with the National Claims and Policies Database (NCPD) to be recovered only from those general insurance companies which contribute to, and thereby can benefit from, the NCPD rather than all general insurance companies. A class of general insurance company can be determined by the classes of business written by the general insurance company. General Insurance Supervisory Levy Imposition Amendment Bill

6 1 Financial Impact Statement 1.1 It is not envisaged that the Bill will have a financial impact on the Government. The Bill provides the legislative scope for the determination of a special levy component for a class of general insurance company. This levy will be determined in accordance with the process followed for the application of all financial sector levies. 1.2 Regulated general insurance companies will continue to pay existing levies which are used to fund the operations of APRA as well as certain related activities undertaken by the Australian Securities and Investments Commission and the Australian Taxation Office. 1 Notes on individual clauses Clause 1 Short title 1.1 Clause 1 is a short title specifying the Short Title of the Bill. Clause 2 Commencement 1.2 Clause 2 indicates that the Bill will commence the day after Royal Assent. Clause 3 Schedule 1.3 Clause 3 indicates that each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule 2 General Insurance Supervisory Levy Imposition Amendment Bill 2006

7 concerned, and any other item in a Schedule to this Act has effect according to its terms. 1 Schedule 1 Amendments of the General Insurance Supervisory Levy Imposition Act 1998 Item Item 1 defines the special statutory upper limit as $500,000 in relation to the financial year commencing on 1 July In later years the special statutory upper limit will be calculated by multiplying the relevant special statutory upper limit and the relevant indexation factor calculated under section 9 in the existing legislation. Item Item 2 specifies that the levy payable each financial year by a general insurance company comprises both a general component (the existing levy) and the special component. Item Item 3 distinguishes the general component from the total levy payable. Item Item 4 distinguishes the general component from the total levy payable. Item Item 5 inserts the provisions for a special levy component. It specifies whether the special component is payable and provides for minimum and General Insurance Supervisory Levy Imposition Amendment Bill

8 maximum special levy amounts. Item 5 also contains the operative provisions for circumstances in which the special levy component is not payable by a general insurance company. A special component is only payable by a general insurance company if it has eligible premium income as defined in the Treasurer s determination. Item Item 6 clarifies that the Treasurer s determination is a legislative instrument. Item Item 7 provides that the Treasurer s determination will specify how a general insurance company s eligible premium income is to be worked out in order to calculate the amount of the special levy component payable by a general insurance company. Item 7 also notes that the determination will specify the special minimum levy amount, the special maximum levy amount and the special levy percentage for each financial year. Item Item 8 provides that the special maximum levy amount must not exceed the special statutory upper limit. Item Item 9 repeals subsection 8(6) in the existing legislation. It also provides that the Treasurer s determination is to work out the special levy component from a general insurance company s eligible premium income. This will include, but is not limited to, describing the part of the premium income that is eligible and the period for which there is eligible premium income. Item Item 10 provides for the amendments made in this Bill to have effect on amounts payable by regulated general insurance companies from 1 July General Insurance Supervisory Levy Imposition Amendment Bill 2006