Last resort compensation scheme bill introduced as Treasury consultation opens

Treasury today released for consultation the exposure draft regulations for the planned compensation scheme of last resort after the introduction of the legislation in parliament this morning.

The scheme – recommended by the Ramsay Review in 2017 and later backed by the Hayne royal commission – will provide compensation where a determination issued by the Australian Financial Complaints Authority (AFCA) remains unpaid and the determination relates to a financial product or service within the scope of the scheme.

Treasury says the draft regulations specify matters relating to the scheme operator’s reporting requirements and identify persons upon whom a levy will be imposed.

The draft regulations also outline the methods that underpin the calculation for the amount of levy payable and how they differ based on the type of levy being imposed, Treasury says.

Financial Services Minister Stephen Jones, who introduced the legislation this morning, says the one-off levy imposed for the first year of operation, the 2023/24 year, will be issued by next August.

The ongoing annual levy will be issued in advance of each new financial year, with the first to be issued from January 2024 for the 2024-25 financial year, he said.

“The [scheme] operator will estimate compensation and AFCA complaint costs to be paid out in the upcoming financial year as well as associated administrative costs,” Mr Jones said.

“These estimates will then determine the total levy amount for each sub-sector to meet expected outlays in the upcoming financial year.”

He says levy notices will be issued by the Australian Securities and Investments Commission (ASIC).

“ASIC will also be responsible for the collection of levies and have the power to facilitate and enforce the payment of levies,” Mr Jones said.

“These powers will include the ability to seek information from relevant firms for the purpose of correctly calculating the firm’s levy, to impose penalties for late payment and to impose a shortfall penalty where incorrect information has been provided.”

Legislation for the scheme was introduced in October last year by the Morrison Government but passage was put on hold due to limited parliamentary sitting days before the May federal election.

Closing date for submission to the Treasury consultation is October 7.

Click here for the consultation paper.