Proposed changes to the NICNAS
registration charge to recover the
cost of implementing the NICNAS
reforms
Background
The Australian Government has decided to implement a number of reforms to the
industrial chemicals regulatory framework, following a review of the National
Industrial Chemicals Notification and Assessment Scheme (NICNAS). The reforms
will achieve a significant reduction in regulatory costs to the Australian industrial
chemicals industry and also implement elements of the Prime Minister’s Industry
Innovation and Competitiveness Agenda, specifically the increased use of trusted
international assessment materials.
The review of NICNAS identified a number of problems affecting the delivery of
efficient and effective regulatory outcomes:


the assessment framework, for new industrial chemicals and those already on the
Australian market, does not adequately take into consideration the potential risk of
chemicals when determining the nature and extent of assessment required,
creating inefficiencies and delays to market; and
the structure of the Industrial Chemicals (Notification and Assessment) Act 1989
(ICNA Act) and its interaction with the broader chemical regulatory framework
create inefficient regulatory processes and uncertainty in regulatory coverage and
associated community protection.
The NICNAS reforms will achieve more risk-based and proportionate regulation by:






establishing three classes of chemicals with different pre- and post-market
requirements that match the indicative risk profile of a chemical and improve
alignment with overseas arrangements;
streamlining the existing risk assessment process for new and existing chemicals,
including greater utilisation of international assessment materials,
revising the interface with risk managers including reporting responses to risk
management recommendations and the sharing of commercial-in-confidence
materials;
establishing contemporary regulatory tools to enable NICNAS to appropriately
fulfil its regulatory functions;
transferring functions to other agencies where they do not directly relate to
notification and assessment for the introduction of industrial chemicals; and
making technical and consequential amendments to remove unintended anomalies
that limit clarity around the administration of the framework and the effective
application of cost recovery arrangements.
The reforms will reduce the regulatory burden on the 5,500 companies introducing
industrial chemicals into Australia. Of the approximate 9,000 new chemical
introductions per annum, less than 1 per cent will incur the costs associated with the
lodgement of data or the delay to market associated with pre-market risk assessment.
These reforms are expected to deliver a $22.7 million per annum reduction in the
industry’s regulatory costs.
As the reforms introduce a new framework for the regulation of industrial chemicals,
it is anticipated that there will be changes to the cost recovery arrangements. In
particular, a new fee model for the assessment of new chemicals and revised
registration charges will be implemented.
Extensive stakeholder consultation has occurred since the review commenced in
September 2011; a full description of stakeholder views and engagement is provided
in the Options for reforming the National Industrial Chemicals Notification and
Assessment Scheme Regulation Impact Statement, November 2014, which will be
available on the Office of Best Practice Regulation (OBPR) website
(http://ris.dpmc.gov.au).
Further consultation with stakeholders will be undertaken during the development of
key components of the reforms to ensure that they continue to deliver the anticipated
efficiencies and maintain the protection of public health and the environment.
Current NICNAS funding arrangements
The full cost of NICNAS activities is recovered through fees and charges paid by
industrial chemical importers and manufacturers (introducers), except for a minor
appropriation from government by way of a notional interest payment on the balance
of cash/Official Public Account holdings. Cost recovery is appropriate because
introducers create the need for the regulatory activity through having an industrial
chemical in the marketplace. Fees and charges are prescribed in the ICNA Act and
associated regulations made under the ICNA Act. Other enabling legislation includes
the Industrial Chemicals (Registration Charges – General) Act 1997, the Industrial
Chemicals (Registration Charges – Customs) Act 1997 and the Industrial Chemicals
(Registration Charges – Excise) Act 1997.
Most of NICNAS’s operational income is collected from the annual registration of
introducers of industrial chemicals. Registrants pay an annual application fee to be
listed on the Register of Introducers of Industrial Chemicals and also pay an annual
registration charge, which is a levy that varies depending on the introduction value of
relevant industrial chemicals in that year. The registration charges relate to the
regulation of the market as a whole and may not be attributable to regulatory activities
relating to a specific introducer. The annual registration charge is administratively
simple to collect and pays for activities that regulate the industry as a whole (e.g.
existing chemicals assessments, post-market monitoring, information provision and
statistical collection).
The table below provides a summary of the 2014-15 and 2015-16 registration fee and
charge (the latter component of which varies according to the total value of chemicals
introduced by a registrant) as forecast in the NICNAS Cost Recovery Impact
Statement 2012-13 to 2015-16.
Level
A
B
C
D
Applicable
Approx.
introduction no. of
value
companies
$1 - $99,999
2720
$100,000 750
$499,999
$500,000 940
$4,999,999
$5,000,000+
380
Total amount recovered
2014-15
2015-16
Fee
$138
$138
Charge
$0
$267
Total
$138
$405
Fee
$143
$143
Charge
$0
$272
Total
$143
$415
$138
$1842
$1980
$143
$1892
$2035
$138
$19,662 $19,800
$10,061,310
$143
$20,207 $20,350
$10,346,100
NICNAS also collects fees for services provided to new industrial chemical notifiers,
holders of confidence and other parties, based on ‘fee for service’ schedules in
accordance with the administered regulations.
Number of registered companies expected in 2015-16
When the NICNAS Cost Recovery Impact Statement 2012-13 to 2015-16 was
developed, the number of companies registered at each level was assumed to remain
static. This assumption has been reviewed and updated.
Based on the number of companies registered for 2012-13, 2013-14 and 2014-15, the
expected number of companies registering at levels A, B and C (see table below) has
been revised. This change in company registrations means that the registration charge
will not need to be increased for 2015-16 to recover the expenses required for the
normal activities of NICNAS.
The proposed base registration fee and charge to cover NICNAS’s normal activities in
2015-16 is shown below.
Level
A
B
C
D
Applicable
introduction value
$1 - $99,999
$100,000 - $499,999
$500,000 $4,999,999
$5,000,000+
Approx. no.
of companies
Fee
$138
$138
$138
2800
1300
1000
380
2015-16
Charge
$0
$267
$1842
$138
$19,662
Total amount recovered
Total
$138
$405
$1,980
$19,800
$10,416,900
Cost recovery of reform implementation costs
Implementation of the reforms will involve:




changes to the ICNA Act and associated regulations;
development of new guidance materials and information resources for
stakeholders;
preparation and delivery of an industrial chemicals risk assessment manual;
implementation of new internal standard operating procedures for the notification
and assessment of new and existing chemicals.

the procurement, development, testing and delivery of a new ICT system to
support the notification of lower risk chemicals and streamlining of risk
assessments.
The NICNAS reforms will cost $12.4 million to implement ($5.4 million non-capital
for operational expenses associated with the implementation and $7 million capital for
new ICT systems). The reforms to chemical assessments will have transition
arrangements expected to take effect from 1 September 2016, with full
implementation of the new arrangements by 1 September 2018.
The Australian Government has decided that the cost of implementation of reforms
will be recovered from industry in line with the Cost Recovery Guidelines (July
2014).
The non-capital costs associated with the implementation of the reforms will be
recovered during 2015/16-2016/17.
The Australian Government will make an upfront investment for the capital cost. The
capital costs will be recovered over the subsequent five year period (2017/182021/22) in a depreciation-like manner. The impact of this additional cost will be
offset by the expected industry regulatory savings associated with the reformed
regulatory arrangements.
Thus, while the implementation of the reforms is expected to be completed by
1 September 2018, the full costs of the reforms will be recovered over a longer period
to reduce the impact on industry. The majority of the costs will be recovered after the
reforms have delivered a significantly reduced regulatory cost environment.
Policy authority to cost recover
Policy authority to recover the costs of implementing the reforms was given in the
2015-16 Budget under the ongoing measure “Reducing the Burden of Industrial
Chemicals Regulatory Framework to Industry”.
Amount to be recovered
Based on the proposed changes and the work required to implement these changes,
the following expenses and revenue have been agreed by Government.
Operational
expenses
Capital
expenses
Total
expenses
Operational
revenue
Capital
revenue
Total
revenue
2015-16
($)
2016-17
($)
2.5M
2.5M
3.5M
3.5M
6.0M
6.0M
0.4M
2.5M
2.5M
0.4M
2.5M
2.5M
2017-18
($)
2018-19
($)
2019-20
($)
2020-21
($)
2021-22
($)
0.4M
1.4M
1.4M
1.4M
1.4M
1.4M
1.4M
1.8M
1.4M
1.4M
1.4M
Basis of charging – fee or levy
As outlined in the Cost Recovery Guidelines, a cost recovery fee is the preferred
charging basis for the recovery of costs. A cost recovery fee is a type of cost recovery
charge used when a good or service, or, in certain circumstances, regulation is
provided directly to a specific individual or organisation. The collection of cost
recovery fees also needs to be efficient. A fee will not be efficient if it is difficult to
establish a fee that accurately attributes the costs of an activity to a regulated entity, or
the fee is costly to collect because it is difficult or resource-intensive to identify and
bill each regulated entity.
In considering the basis of charging for the reform implementation costs, it is difficult
to apportion costs to individual companies. As a result, it does not appear that a fee
for service arrangement for the reform implementation costs would be efficient.
It is therefore proposed that the costs associated with the reform implementation be
recovered through the annual registration charge.
Option 1
As discussed above, the current registration charge is based on the introduction value
of the industrial chemicals. Level A registrants pay a fee matching the administration
cost for listing on the Australian Register of Introducers. The registration charge for
Levels B-D is proportionate to the minimum introduction value for that level.
Using this model, a summary of the changes to the registration charge to recover the
additional costs of implementing the NICNAS reforms is included in Attachment A.
The charge on Registration Levels B-D will increase by approximately 25 per cent per
registrant in 2015-16. This registration charge increase will continue in 2016-17,
decrease in 2017-18 as a lower amount is required to be recovered, increase slightly
again in 2018-19 to recover the cost of a review, then decrease back to the 2017-18
level until the capital costs have been recovered However, as noted earlier, the base
registration fee and charge may also change due to changes in costs and/or activity
level as a result of the reforms. Any change in the base level will be subject to
consultation before the change is made and will be reflected in the Cost Recovery
Implementation Statement.
The proposed total amount payable by registrants in 2015-16 is shown in the table
below.
Level
A
B
C
D
Applicable
introduction
value
$1 - $99,999
$100,000 $499,999
$500,000 $4,999,999
$5,000,000+
Approx.
no. of
companies
2800
1300
Base Charge
2015-16
Additional Charge
Total
$138
$405
$0
$100
$138
$505
1000
$1,980
$500
$2,480
380
$19,800
$5,000
Total amount recovered
$24,800
$12,946,900
Option 2
A second option would be to use a model in which the registration charge is increased
by the same amount for all levels to cover the costs of the reforms. Thus, all
registrants liable to pay a registration charge will pay an equal amount for the
reforms, irrespective of the value of relevant industrial chemicals introduced.
The changes to the registration charge to recover the additional costs of implementing
the NICNAS reforms using this model are included in Attachment A.
This model would result in an increase in the registration charge for all registrants of
$939 in 2015-16, $933 in 2016-17, followed by lower amounts in subsequent years as
a lower amount needs to be recovered. Again, as noted earlier, the base registration
fee and charge may also change due to changes in costs and/or activity level as a
result of the reforms. Any change in the base level will be subject to consultation
before the change is made and will be reflected in the Cost Recovery Implementation
Statement.
The proposed total amount payable by registrants in 2015-16 is shown in the table
below.
Level
A
B
C
D
Applicable
introduction
value
$1 - $99,999
$100,000 $499,999
$500,000 $4,999,999
$5,000,000+
Approx.
no. of
companies
2800
1300
Base Charge
2015-16
Additional Charge
Total
$138
$405
$0
$939
$138
$1,344
1000
$1,980
$939
$2,919
380
$19,800
$939
Total amount recovered
$20,739
$12,933,900
Next Steps
Providing comments on the cost recovery options
NICNAS is seeking comment on the preferred model (options 1, 2 or an alternative
option, noting that the recovery of the costs of reform implementation may only occur
via the NICNAS registration charge payable by level B, C and D registrants, as the
cost recovery fees reflect the actual cost of each relevant service). Comments can be
sent to nicnas.consultations@nicnas.gov.au.
Submissions must be received at NICNAS by Noon Friday 12 June 2015.
Please note that submissions received on or before the closing date may be published
following removal of confidential information. It is up to the person making the
submission to highlight any information which they wish to be considered as
confidential.
Implementation of new registration charges
Changes to the registration charges will be made for the 2015-16 registration year
(i.e., for registration charges due 31 August 2015). It is anticipated that invoices for
the 2015-16 registration year will be issued in early August 2015.
Updated Cost Recovery Implementation Statement (CRIS)
The Australian Government has reviewed its Cost Recovery Guidelines, resulting in a
new cost recovery framework which came into effect from 1 July 2014. Further
information on the Cost Recovery Guidelines is available at:
http://www.finance.gov.au/resource-management/cost-recover/
It is anticipated that the current CRIS will be updated in August 2015 and will reflect
the new registration charges. The updated CRIS will be available from the NICNAS
website.
Staying involved with the NICNAS reforms
Further consultation with stakeholders will be undertaken during the development of
key components of the reforms to ensure they continue to deliver the anticipated
efficiencies and maintain the protection of public health and the environment.
Information on the reforms and consultations will be published on the NICNAS
website.
Attachment A: Proposed increases to registration fees and charges
Proposed increases in registration fees and charges to recover the costs of implementing the reforms.
Option 1 Level
A
B
C
D
Applicable
Approx. no.
introduction
of
value
companies
$1 - $99,999
2800
$100,000 1300
$499,999
$500,000 1000
$4,999,999
$5,000,000+
380
Additional amount recovered
Implementation expenses
Difference
additional
2015-16
charge
$0
$100
additional
2016-17
charge
$0
$100
additional
2017-18
charge
$0
$55
additional
2018-19
charge
$0
$75
additional
2019-20
charge
$0
$55
additional
2020-21
charge
$0
$55
additional
2021-22
charge
$0
$55
$500
$500
$275
$365
$275
$275
$275
$5,000
$2,530,000
$2,517,000
$13,000
$5,000
$2,530,000
$2,501,000
$29,000
$2,275
$1,391,500
$1,398,000
-$6,500
$3,650
$1,849,500
$1,825,000
$24,500
$2,275
$1,391,500
$1,398,000
-$6,500
$2,275
$1,391,500
$1,398,000
-$6,500
$2,275
$1,391,500
$1,398,000
-$6,500
additional
2015-16
charge
$0
$939
additional
2016-17
charge
$0
$933
additional
2017-18
charge
$0
$522
additional
2018-19
charge
$0
$681
additional
2019-20
charge
$0
$522
additional
2020-21
charge
$0
$522
additional
2021-22
charge
$0
$522
$939
$933
$522
$681
$522
$522
$522
$939
$2,517,000
$2,517,000
$0
$933
$2,501,000
$2,501,000
$0
$522
$1,398,000
$1,398,000
$0
$681
$1,825,000
$1,825,000
$0
$522
$1,398,000
$1,398,000
$0
$522
$1,398,000
$1,398,000
$0
$522
$1,398,000
$1,398,000
$0
Option 2 Level
A
$0
C
D
Applicable
Approx. no.
introduction
of
value
companies
$1 - $99,999
2800
$100,000 1300
$499,999
$500,000 1000
$4,999,999
$5,000,000+
380
Additional amount recovered
Implementation expenses
Difference