The Australian Prudential Regulation Authority will have the scope to greatly increase the levies it applies to financial institutions, following the passage of legislation last week.

Under the old law, the statutory upper limit of the financial institution supervisory levy was set at A$1.5 million in 2005 and was increased by an indexation factor each year.

Under the new law, the upper limit is $10 million for the financial year commencing 1 July 2020 and will be increased by an indexation factor each year.

Starting on July 1, the law also amends the formula for the factor used to index the limit. The limit will be indexed by the change in CPI over 12 months plus 0.03.

The new rules are in a package of Levy Imposition Acts covering authorised deposit-taking institutions, authorised non-operating holding companies, general insurers, life insurers, retirement savings account providers and superannuation funds.

The items for which costs can be recovered has been expanded. Under the old law the levy could be used to cover the cost of: providing market integrity and consumer protection functions for prudentially regulated institutions; administering the functions of making determinations about the release on compassionate grounds of benefits that are in a superannuation entity or retirement savings account; and governing and maintaining the superannuation transactions network.

The new law introduces several additional items: costs incurred in connection with promoting the interests of consumers in markets in which leviable bodies operate; and costs relating directly or indirectly to the regulation of leviable bodies.

The intention of the bills is to ensure that the Commonwealth can recover the costs of a wider range of activities that are recoverable through the financial institution supervisory framework.