ASIC Fleecing Brokers Again
You should by now be aware that the ASIC Credit Licensing Fee structure is about to change fairly dramatically on 1st July 2018, with some elements being passed on to Credit Reps.
In January 2019, all Credit Licensees with Credit Representatives will be invoiced by ASIC for an amount based on the number of Credit Reps that they have as at 30 June 2018.
There is also a "base levy" for all Licensees of $1,000 per year. We currently think that this will also be invoiced in January 2019 but that's still to be confirmed.
The amount per Credit Rep is based on a formula that boils down like this:
(ASIC cost Base for our Sector - Amount of Base levy collected) x (Number of Reps you have / Total Reps in our sector)
ASIC performed a dummy run on their 2017 financial year numbers and published estimates of the Levy. For the "credit intermediary" sector, ASIC's cost base was $9.008 mil, there were 5,242 Licensees - therefore Base Levy allocation of $5.242 mil - meaning a nett cost base of $3.766 mil. There were 36,710 Credit Reps in the sector, so ASIC's estimate of the Levy is $104 per Credit Rep. Yes, if you crunched the numbers yourself, there's a $2 rounding error in there.
Note that the number of Reps you'll be levied for includes Corporate Credit Reps as well as natural person Reps. If you have two Reps, each operating through a company structure, then that will be a total of $416 plus your base Levy of $1,000.
What can affect the per-Rep amount?
If ASIC's cost base increases, this will increase the Levy. There's an interesting point here - despite this fee accruing in 2017/18, ASIC has still been collecting the Annual Compliance Certificate (ACC) fee all along. Will that fee be netted from ASIC's cost base? We don't think it will. This is technically a "tax" that ASIC collects. It does not go to ASIC, it goes straight through to consolidated revenue. We think that this is morally reprehensible. As the new Levy is replacing the ACC fee, why has the fee been charged in 2017/18 when the Levy has also been accruing? It would be logical to assume that the fee that has been charged and is being replaced would be netted against ASIC's costs, but we don't think it will.
Similarly, if the number of Credit Reps in the sector decreases, this will also increase the levy.
QED knows that there are many Credit Reps on the ASIC Register that shouldn't be there. If you are an employee or director of a Licensee, you are covered by the Licence and do not need to be appointed as a Credit Rep. However, QED knows from first-hand experience that many Licensees didn't understand this and have appointed directors and employees as Credit Reps. If they suddenly realise this before 30 June 2018, the abovementioned 37,710 Credit Reps could dramatically decrease. Even if the number were reduced to 30,000 the Levy would rise to $125 per Credit Rep.
One more technicality - if, like QED's Licensee business Pursuit Broker Services, the Licensee intends to pass the Levy on to its Credit Reps, it will attract GST so $104 becomes $114.40.
Finally, with all the uncertainty going on in the market at the moment with accreditations, compliance and some aggregators refusing to take new Licensee members now, brokers have been considering their options and part of this consideration is cost.