Financial Services Compensation Scheme of Last Resort Levy Act 2023

The Financial Services Compensation Scheme of Last Resort Levy Act 2023 is a Commonwealth Act that imposes levy on persons relating to the AFCA scheme and for related purposes. It is one part of a broader legislative framework. The Act itself creates the levy-imposition rules, while other parts of the framework deal with collection, estimates and related determinations.

The Act commenced the day after Royal Assent. The commencement table in the legislation states that the whole Act commenced on 4 July 2023. The current compilation referred to in the legislation extract shows the law as amended and in force on 20 October 2023.

For businesses, the key point is that this law is a framework Act. It tells you when levy can be imposed, who must pay it, the broad categories of levy, and the cap structure. It does not itself set a simple fixed amount for each business. Instead, the amount is worked out under methods prescribed by regulations, and some levy pathways depend on revised estimates and Ministerial determinations under the Corporations Act 2001.

That means the practical compliance task is broader than reading the Act once. A business needs to identify whether it falls within a prescribed sub-sector, whether it may be in more than one sub-sector, what levy period is relevant, whether any revised estimate has come into force, and whether any Ministerial determination affects the business or its sub-sector.

The Act can apply to both financial services and credit businesses. It uses the concept of a sub-sector, which has the same meaning as in the ASIC Supervisory Cost Recovery Levy Act 2017. The Act also notes that a person may form part of more than one sub-sector. That is important because a business may need to assess levy exposure across multiple regulated activities rather than assuming it sits in only one category.

For the second levy period and later levy periods, annual levy can be imposed if, at any time during the qualifying period for the levy period, the person is a member of a sub-sector of a kind prescribed by regulations and any prescribed general conditions are met. The qualifying period is defined as the 12-month period starting 24 months before the start of the levy period. In practice, that means the test is not limited to your status on one day. A business can be affected because of its position during an earlier look-back period.

The Act also contains a separate first levy period rule for unpaid claims and AFCA unpaid fees for complaints given to AFCA before the accumulation recovery day. That rule is narrower. It applies to a person for the first levy period if, during the 12 months before the start of the first levy period, the person is a body regulated by APRA other than specified private health insurers and specified trustees, section 3C of the Taxation Administration Act 1953 applies to the person for the 2021-2022 income year, and the person's total income for that year is one of the 10 highest among the relevant persons.

The first levy period itself is not simply hard-coded by date. The Act says it starts on the day specified in a Ministerial notifiable instrument and ends on 30 June 2024. If you are assessing exposure for that first period, you need to confirm the relevant instrument as well as the Act.

The Act creates several levy pathways.

First, there is annual levy under section 8(1) for the second levy period and later levy periods. This is the ordinary recurring levy mechanism. It applies where the person was a member of a prescribed sub-sector during the qualifying period and any prescribed general conditions are met.

Secondly, there is further levy under section 8(2). This can apply for a levy period and sub-sector if, immediately before a revised claims, fees and costs estimate comes into force, the sub-sector levy cap has not been exceeded and the revised estimate specifies that further levy needs to be imposed. The Act notes that further levy under this pathway can be imposed more than once for the same levy period and sub-sector if more than one revised estimate comes into force.

Thirdly, there is special levy under section 8(3). This applies where both a revised claims, fees and costs estimate and a determination under section 1069H of the Corporations Act 2001 come into force for the levy period and sub-sector, and the determination specifies that levy needs to be imposed by that subsection. The notes to the Act explain that this is the pathway used where the Minister decides special levy needs to be imposed across that sub-sector when the revised estimate causes the sub-sector levy cap to be exceeded.

Fourthly, section 9 creates another special levy pathway where a revised estimate exceeds the sub-sector levy cap and the burden is to be spread across several sub-sectors or otherwise across specified sub-sectors. In that case, levy can be imposed for the second levy period or a later levy period if a revised estimate comes into force, a determination under section 1069H of the Corporations Act 2001 specifies that levy needs to be imposed across all members of one or more specified sub-sectors, the person was a member of one of those specified sub-sectors at any time during the levy period or the previous levy period, and any prescribed general conditions are met.

This is commercially significant because a business may be affected by a Ministerial determination even where the revised estimate relates to a different sub-sector. The Act expressly says the specified sub-sectors need not include the sub-sector to which the revised estimate relates.

Finally, section 10 deals with the first levy period for unpaid claims and AFCA unpaid fees for complaints given to AFCA before the accumulation recovery day. That is a special transitional rule and should be read separately from the ordinary annual, further and special levy pathways for later periods.

A central feature of this Act is that it does not itself set the actual levy amount payable by each business. Instead, sections 12 to 16 say the amount of levy is worked out in accordance with methods prescribed by regulations. That applies to annual levy, further levy, special levy under section 8(3), special levy under section 9, and the first levy period levy under section 10.

The Act does, however, set objectives that those regulations must be consistent with. Before the Governor-General makes regulations for these calculation methods, the Minister must be satisfied that the regulations are consistent with the relevant statutory objectives.

For annual levy, the objectives include that the total amount imposed across all members of a sub-sector for a levy period does not exceed the initial claims, fees and costs estimate for that sub-sector, does not cause the sub-sector levy cap to be exceeded, and does not cause the scheme levy cap to be exceeded.

For further levy, the objectives include that the total amount imposed across all members of a sub-sector for a revised estimate does not exceed the difference between the revised estimate and the total amount of levy already paid under section 8 for that levy period, does not cause the sub-sector levy cap to be exceeded, and does not cause the scheme levy cap to be exceeded.

For special levy under section 8(3), the objectives include that the total amount imposed across all members of the sub-sector does not exceed the total amount specified in the Minister's determination and does not cause the scheme levy cap to be exceeded.

For special levy under section 9, the objectives include that the total amount imposed across all members of each specified sub-sector does not exceed the amount specified for that sub-sector in the Minister's determination, and that the sum of the total amounts specified in the determination does not cause the scheme levy cap to be exceeded.

For the first levy period levy under section 10, the objectives include that the total amount imposed across all persons does not exceed the estimate determined under section 11 of the Levy Collection Act and does not cause the scheme levy cap to be exceeded.

The Act also allows the prescribed method to have regard to one or more ASIC determinations under regulations made for the purposes of section 9 of the ASIC Supervisory Cost Recovery Levy Act 2017. That is another reason businesses should not rely on the Act alone when trying to estimate exposure.

On caps, the scheme levy cap is clear. The total amount of levy that may be imposed for any levy period across all persons across all sub-sectors must not exceed $250 million. The sub-sector levy cap for the second levy period and later levy periods is the higher of $20 million or an amount prescribed, or worked out under a prescribed method, by regulations for that levy period and sub-sector. However, the Act also says that this sub-sector cap can be exceeded, or further exceeded, because of a determination under section 1069H of the Corporations Act 2001 specifying that levy needs to be imposed by section 8(3) or section 9. So the ordinary sub-sector cap is important, but it is not always the final limit in a special levy scenario.

Section 11 states the basic rule that levy imposed on a person for a levy period is payable by the person. That sounds simple, but the definition of person is affected by section 18, which is where many businesses need to pay close attention.

For partnerships, the Act applies as if the partnership were a person. However, obligations that would be imposed on the partnership are imposed instead on each partner, although they may be discharged by any of the partners.

For unincorporated associations, the Act applies as if the association were a person. However, an obligation that would otherwise be imposed on the association is imposed on each member of the association's committee of management instead, and may be discharged by any of those members.

For an RSE licensee that is a group of individual trustees, the Act applies as if the group were a person. However, an obligation that would otherwise be imposed on the group is imposed on each individual, and may be discharged by any of them.

The Act also deals with multiple trustees treated as a single legal entity under section 761FA of the Corporations Act 2001 or as a single person under section 15 of the National Consumer Credit Protection Act 2009. In those cases, the Act applies to the notional entity as if it were a person, but if the trust has two or more trustees, an obligation that would otherwise be imposed on the notional entity is imposed instead on each trustee and may be discharged by any trustee. If the trust has only one trustee, the obligation is imposed on that single trustee.

For businesses, this is not just a technical drafting point. It affects who should monitor notices, who may be legally exposed if levy is imposed, and how internal governance documents should allocate responsibility. If your business uses partnerships, committees, corporate trustees or multiple trustees, you should map the legal responsibility carefully rather than assuming the trading name or group chart tells the full story.

The Act was made in 2023 and the legislation metadata records Royal Assent on 3 July 2023. The commencement table states that the whole Act commenced on 4 July 2023. The compilation referred to in the legislation extract is Compilation No. 1, showing the law as amended and in force on 20 October 2023, and registered on 10 November 2023.

The Act is in force. Even so, businesses should remember that the practical operation of the levy regime depends heavily on regulations and related determinations. The legislation extract also notes that uncommenced amendments are not shown in the compiled text and that modifications may affect how the law operates without changing the text of the Act itself. Before relying on this page for a live compliance decision, check the current Register entry, current regulations, and any relevant instruments or determinations for your levy period.

The first levy period has a special timing rule. It starts on the day specified in a Ministerial notifiable instrument and ends on 30 June 2024. Later levy periods are financial years starting after the end of the first levy period.

If your business may be affected, the safest approach is to run a short structured review rather than waiting for a notice. Start with classification. Identify each legal entity, trust, partnership or committee structure involved in the regulated activity. Then identify which sub-sector or sub-sectors may apply.

Next, check timing. Work out the relevant levy period and, for annual levy, the qualifying period. If you are looking at a special levy issue, check whether a revised claims, fees and costs estimate has come into force and whether there is a Ministerial determination under section 1069H of the Corporations Act 2001. If you are looking at the first levy period, confirm the start day set by notifiable instrument and whether the APRA and income criteria could apply.

Then check the current regulations. This is essential because the Act leaves the amount calculation and some coverage conditions to regulations. You should also check whether the prescribed method has regard to ASIC determinations relevant to your sub-sector.

Finally, check responsibility. If your business operates through a partnership, unincorporated association, RSE trustee group or multiple trustee structure, confirm who is legally responsible under section 18 and who will handle payment in practice.

These checks are especially important during restructures, licence changes, trustee changes, expansion into new regulated activities, or annual budgeting cycles. The Act creates a recurring regulatory cost risk, not just a one-off legal issue.

This page is based on the in-force text of the Financial Services Compensation Scheme of Last Resort Levy Act 2023 on the Federal Register of Legislation, including the compilation dated 20 October 2023 and registered on 10 November 2023. The Act commenced on 4 July 2023.

Because the Act relies on regulations, estimates and determinations for important practical details, businesses should check the latest Register materials before acting. This page is general information, not legal advice.