The insolvency profession will be facing its “toughest period in a generation” under ASIC’s new industry funding model, with uncertainty over final costs placing pressure on practitioners, says one association body.
‘Extraordinary impost’ prompts insolvency exodus
As part of the industry funding arrangement, ASIC has announced that it has begun issuing letter to organisations impacted to complete their business activity statements before 27 September 2018.
Organisations must submit or confirm pre-populated business activity metric data on the operation of their business from the previous financial year via the new online ASIC Regulatory Portal for the corporate regulator to calculate an entity's share of the regulatory costs for the previous financial year.
Speaking to Accountants Daily, Australian Restructuring Insolvency & Turnaround Association (ARITA) chief executive John Winter said that while the industry has started to better understand the metrics involved, there was still uncertainty over final costs.
“Liquidators have started receiving correspondence from ASIC which outlines the metrics that will make up their ASIC Industry Funding payments for last year, but they still have no idea what it’s actually going to cost them,” said Mr Winter.
“At this stage, liquidators are only being told how many ‘metric events’ ASIC believes they have incurred. We don’t know the aggregate number of those, yet, to finalise what the actual cost per event will be, so liquidators are still left uncertain as to the budget impact. At least now they can get a better handle on it, but they certainly don’t know the definite cost.”
Earlier this year, the corporate regulator published indicative levies, with registered liquidators having to pay a minimum of $2,500, with a further $125 per appointment and notifiable event, in a bid to achieve a budgeted cost recovery amount of $10.121 million.
According to Mr Winter, the pool of liquidators has dropped by close to 10 per cent to 658 liquidators over the last year, with more expected to exit the industry as a result of the additional costs.
“In combination with a record quiet period of insolvencies and the impact of ASIC’s industry funding costs, more liquidators will exit in the coming 12 months, possible as much as 20 per cent,” said Mr Winter.
“The reduction in liquidator numbers also means fewer liquidators to pay the more than $10 million ASIC charges those 658 liquidators for its oversight – now an average of more than $15,000 per person. The minimum cost will be $2,500 per liquidator. Some firms are expecting to pay well over half a million dollars in ASIC costs. It’s an extraordinary impost, the likes of which is not found anywhere else in the world.
“The insolvency profession is undoubtedly going through its toughest period in a generation, especially as we contend with dodgy, unregulated pre-insolvency advisers ripping off the market who, most ironically, get away without paying any of these fees. This is just going to make it so much tougher on good insolvency practitioners.”
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