House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Ralph Willis, MP)

SCHEDULE 4 AMENDMENTS OF THE SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993

Item 1 - Section 10 (definition of independent director )

11. This item amends section 10 of the SIS Act to include at the end of the definition of 'independent director' a note. This note alerts the reader to the new subsection 10(2), inserted by item 10, which sets out the circumstances in which a director of a corporate trustee of a fund is not taken to be an associate of an employer-sponsor of the fund.

Item 2 - Section 10 (after paragraph (a) of the definition of reviewable decision )

12. This item inserts after paragraph (a) of the definition of 'reviewable decision' in section 10 of the SIS Act paragraphs (aa) and (ab). New paragraph (aa) is necessary to include as a reviewable decision, a decision by the Insurance and Superannuation Commissioner (the Commissioner) (under new subsection 18(7A) - refer item 12) to make a declaration under subsection 18(7) subject to conditions.

13. New paragraph (ab) is necessary to include as a reviewable decision, a decision by the Commissioner (under new subsection 18(7C) - refer item 12) to revoke a declaration under subsection 18(7).

Item 3 - Section 10 (after paragraph (b) of the definition of reviewable decision )

14. This item inserts after paragraph (b) of the definition of 'reviewable decision' in section 10 of the SIS Act paragraph (ba). This amendment is necessary to include as a reviewable decision, a decision by the Commissioner (under new subsection 24(2) - refer item 15) to treat an application for approved trustee status as withdrawn.

Item 4 - Section 10 (after paragraph (d) of the definition of reviewable decision )

15. This item inserts after paragraph (d) of the definition of 'reviewable decision' in section 10 of the SIS Act paragraphs (da), (db) and (dc). This amendment is necessary to include as reviewable decisions:

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a decision by the Commissioner under subsection 27A(4) (refer item 18) to treat an application for variation of approved trustee status as withdrawn; and

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decisions of the Commissioner to vary or refuse to vary the approval of a trustee under new sections 27B and 27C (refer item 18).

Item 5 - Section 10 (after paragraph (h) of the definition of reviewable decision )

16. This item inserts after paragraph (h) of the definition of 'reviewable decision' in section 10 of the SIS Act paragraphs (ha) and (hb). This amendment is necessary to include as reviewable decisions, those decisions made under new subsection 70A(1) (refer item 28).

Item 6 - Section 10 (after paragraph (n) of the definition of reviewable decision )

17. This item inserts after paragraph (n) of the definition of 'reviewable decision' in section 10 of the SIS Act paragraphs (na), (nb) and (nc). This amendment is necessary to include as reviewable decisions those decisions made under new subsections 93A(2), 93A(3), 93A(4) and 93A(5) (refer item 32).

Item 7 - Section 10 (paragraph (r) of the definition of reviewable decision )

18. This item amends paragraph (r) of the definition of 'reviewable decision' in section 10 of the SIS Act and inserts paragraphs (ra) and (rb). This amendment is necessary to include as a reviewable decisions, a decision of the Commissioner:

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refusing to allow a longer period than 14 days to make an application for waiver under (new subsection 126B(4) - refer item 52);

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refusing to make a declaration waiving an applicant's status as a disqualified person (under new subsection 126D(3) - refer item 52); and

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refusing to waive the payment of the whole, or part of the reimbursement of fees (under new subsection 126F(3) - refer item 52).

19. The existing paragraph (r) is deleted as it relates to subsections 126(2) and (4) which have been deleted by item 50.

Item 8 - Section 10 (definition of superannuation standards officer )

20. This item amends the definition of superannuation standards officer in section 10 of the SIS Act to exclude an officer of the Australian Bureau of Statistics who obtains protected information or documents through paragraph 346(6)(da). These officers are covered by the secrecy provisions in the Census and Statistics Act 1905 .

21. It is proposed that paragraph (d) of the definition of superannuation standards officer will be inserted by the Taxation Laws Amendment Bill (No. 2) (refer item 2 of Schedule 6 of that Bill).

Item 9 - Section 10

22. This item amends section 10 of the SIS Act by inserting a definition of 'written custody requirements' for the purposes of the amendments being made by item 18.

Item 10 - Section 10

23. This item inserts new subsection 10(2) which prescribes that a director of a corporate trustee of a fund that is also an employer-sponsor of the fund is not taken to be an associate of that employer-sponsor by reason only of being such a director. This amendment removes an unintended effect of the definition of 'independent director' that a director appointed to the board of a corporate trustee which is also an employer-sponsor is taken to be an associate of the employer-sponsor, thus failing the definition of 'independent director'.

24. This amendment replaces the changes made by Temporary Modification Declaration No. 9 made by the Commissioner. Accordingly, subclause 4(1) provides for Temporary Modification Declaration No. 9 to effectively be revoked.

Item 11 - Subsection 18(1)

25. This item amends subsection 18(1) of the SIS Act to make it subject to inserted section 18A (refer item 13).

Item 12 - After subsection 18(7)

26. This item inserts new subsections 18(7A), 18(7B) and l8(7C) into the SIS Act. Subsection 18(7A) allows the Commissioner to place conditions on a superannuation fund that is declared not to be a public offer superannuation fund under subsection 18(7). If a fund breaches one of these conditions the trustee must immediately inform the Commissioner in writing of the breach (subsection 7B). Failure to comply with subsection 18(7B) could make the trustee liable to a penalty of 30 penalty units. Subsection 7C allows the Commissioner to revoke a declaration under subsection 18(7) if he or she becomes aware that a condition to which the declaration was subject has been breached.

Item 13 - After section 18

27. This item inserts after section 18 of the SIS Act new section 18A. This amendment exempts certain excluded superannuation funds from being a public offer superannuation fund. These funds are generally where the trustee and members are closely related and the trustee does not receive any remuneration from the fund or any person. For these funds to be regarded as public offer superannuation funds it would be disproportionately expensive for such funds and, given their small size and the close relationship between the members and the trustee, unnecessary. This new section 18A is largely the same as the "section 18(1A)" inserted into the SIS Act by Temporary Modification Declaration No. 7 made by the Commissioner. Accordingly, subclause 4(2) provides for Temporary Modification Declaration No. 7 to effectively be revoked.

Item 14 - Section 22

28. This item inserts a new subsection 22(2) which states that a reference in section 27A, 27B, 27C, 27D, 27E, 28 or 29 to an approval includes a references to an approval as varied under new sections 27B or 27C (refer item 18).

Item 15 - Section 24

29. This item amends section 24 of the SIS Act to allow the Commissioner to request further information when deciding an application for approval as a trustee of a public offer entity. It also gives the Commissioner the discretion to treat an application as withdrawn if the applicant does not provide the requested information. The Commissioner must inform the applicant of a decision to treat the application as withdrawn.

Item 16 - Section 26

30. This item amends section 26 of the SIS Act by inserting subsection 26(6). This subsection requires an instrument of approval to state the particular subparagraph of paragraph 26(1)(b) that was the basis of the applicant's approval. This amendment is made for the purposes of amendments to paragraphs 28(2)(c), (d), (da) and (e) and paragraphs 29(2)(b)(, (c), (ca) and (d) (refer items 20 and 21). It will also assist the trustee in any variation of approval requests they may have in the future by providing them with a readily accessible reference to the subparagraph that they have been approved under.

31. If a particular subparagraph of 26(1)(b) 'applied' to the approval of a trustee before the commencement of these provisions, that subparagraph is the subparagraph 'designated' for the purposes of new subsection 26(6).

Item 17 - Paragraph 27(b)

32. This item amends paragraph 27(b) of the SIS Act to make it consistent with amendments made by item 18 which allow an approval for an approved trustee to be varied.

Item 18 - After section 27

33. This item inserts after section 27 of the SIS Act new sections 27A, 27B, 27C, 27D and 27E. These sections provide a mechanism for varying the conditions applying to a trustee's approval to be a trustee of a public offer entity. The Commissioner can also vary the written custody requirements with which the trustee is required to comply and, the particular subparagraph of paragraph 26(1 )(b) which apply to the approval of the trustee.

34. A variation can generally occur either at the written request of the trustee, or on the initiative of the Commissioner. Currently, Part 2 of the SIS Act does not contain any mechanism for changing the conditions attaching to the approval, or the written custody requirements with which an approved trustee is required to comply, or the particular subparagraph of paragraph 26(l)(b) which applies to an approval. Situations can arise where a trustee's changed circumstances make a variation to one or more of these conditions or requirements either necessary or reasonable.

35. New section 27A provides that an approved trustee can apply to the Commissioner to have the designation of the subparagraph of paragraph 26(1)(b), conditions of approval, or written custody requirements varied. It also states how an application must be made and what an application must include and certain circumstances where an application is regarded as withdrawn.

36. New section 27B provides the time within which the Commissioner must decide an application for a variation of approval (generally within 60 days).

37. New section 27C provides that the Commissioner can vary the conditions of approval, or written custody requirements, on his or her own initiative.

38. New section 27D provides that the Commissioner must notify the trustee of any decision to vary, or refusing to vary, an approval under section 27B or 27C. It also prescribes the requirements for a notice varying an approval and a notice refusing to vary the approval of a trustee.

39. New section 27E provides that a variation of approval comes into force at the time specified in the notice varying the approval and is revoked at a time when the approval is revoked or a new variation comes into force.

40. These new sections are largely the same as the "section 27A and 27B" inserted into the SIS Act by Temporary Modification Declarations Nos. 4 and 17 made by the Commissioner. Accordingly, subclause 4(3) provides for Temporary Modification Declarations Nos. 4 and 17 to effectively be revoked.

Item 19 - Transitional provisions relating to Temporary Modification Declaration Nos. 4 and 17

41. Temporary Modification Declaration No. 4 made by the Commissioner allows the Commissioner to vary the approval of a trustee under Part 2 of the SIS Act on an application by the trustee. Temporary Modification Declaration No. 17 made by the Commissioner allows the Commissioner to vary the approval of a trustee under Part 2 on his or her own initiative. The Bill will insert (refer item 18) into the SIS Act provisions making these Temporary Modification Declarations redundant. Accordingly they will be effectively revoked by subclause 4(3).

42. This item provides for transitional provisions related to those revocations. The item provides that variations of approvals, applications made, or instruments made under the provisions of Temporary Modification Declarations Nos. 4 and 17 have effect as if they were made under the inserted sections 27A, 27B, 27C and 27D of this Bill. This makes it clear that variations made under Temporary Modification Declarations Nos. 4 and 17 continue to be valid despite their revocation and are themselves able to be varied under the new provisions inserted by this Bill.

Item 20 - Paragraphs 28(2)(c), (d), (da) and (e)

43. This item makes a minor amendment to paragraphs 28(2)(c), (d), (da) and (e) so that the wording in those paragraphs is consistent with new subsection 26(6) (refer item 16) and new subsection 27D(2)(c) (refer item 18). Paragraph 28(2)(da) is proposed to be inserted by the Taxation Laws Amendment Bill (No. 2)1995.

Item 21 - Paragraphs 29(2)(b), (c), (Ca) and (d)

44. This item makes a minor amendment to paragraphs 29(2)(b), (c), (ca) and (d) so that the wording in those paragraphs is consistent with new subsection 26(6) (refer item 16) and new subsection 27D(2)(c) (refer item 18). Paragraph 29(2)(ca) is proposed to be inserted by the Taxation Laws Amendment Bill (No. 2)1995.

Item 22 - Paragraph 36(1)(c)

45. This item amends paragraph 36(1)(c) of the SIS Act so that trustees of superannuation entities do not have to lodge the original auditor's report with their annual return. Many trustees will want to keep the original report for their records. The amendment requires the trustee to provide a copy of the auditor's report, certified by the trustee as being a true copy.

46. This amendment replaces the changes made by Temporary Modification Declaration No. 15 made by the Commissioner. Accordingly, subclause 4(1) provides for Temporary Modification Declaration No. 15 to effectively be revoked.

Item 23 - Subsection 36(4)

47. This item amends subsection 36(4) of the SIS Act to make it consistent with the amendment to paragraph 36(1)(c) by making section 36(4) refer to the 'report' in section 36(1)(c) not the 'certificate'.

Item 24 - Paragraph 42(1)(a)

48. This item amends paragraph 42(1)(a) of the SIS Act to allow an approved deposit fund to convert to a superannuation fund during a year of income without jeopardising its compliance status. This amendment will make it more efficient for approved deposit funds to so convert.

49. This amendment replaces Temporary Modification Declaration No. 18 made by the Commissioner. Accordingly, subclause 4(1) provides for Temporary Modification Declaration No. 18 to effectively be revoked.

Item 25 - Section 42

50. This item amends section 42 by inserting subsection 42(2). This subsection clarifies that a reference to a member, means beneficiary when that entity was an approved deposit fund. This is necessary because of the amendment made in item 24.

Item 26 - After subsection 62(1)

51. This item inserts after subsection 62(1) of the SIS Act new subsection 62(1A). The purpose of subsection 62(1A) is to remove confusion about the terms 'for each member of the fund' and 'in respect of each member' in subsection 62(1). This amendment makes it clear that the SIS Act does not require funds to provide the same types of benefits for all members.

Item 27 - After section 64

52. This item inserts after section 64 of the SIS Act new section 64A. Section 64A provides that a person, other than a trustee or insurer, who is joined to a disability complaint under the Superannuation (Resolution of Complaints) Act 1993 , must comply with any determination made by the Superannuation Complaints Tribunal in relation to that complaint. This is consistent with amendments being made to the Insurance Act 1973 and the Life Insurance Act 1995 which require life insurers and other insurance providers to comply with determinations made by the Tribunal in relation to disability complaints.

Item 28 - After section 70

53. This item inserts after section 70 of the SIS Act new section 70A. Section 70A allows the Commissioner to determine a person to be a standard employer-sponsor for the purposes of Part 8. Part 8 prescribes the amount of assets that can be invested in a standard employer- sponsor of the fund, or an associate of a standard employer-sponsor. These are referred to as the in-house asset rules. In certain circumstances it may be appropriate for the Commissioner to determine a person to be a standard employer-sponsor of the fund for the purposes of Part 8 and thus restrict the level of investments in that person. This will provide further protection for the members of the fund.

54. If the Commissioner makes or revokes such a declaration, he or she must inform the trustee as soon as practicable after doing so.

Item 29 - Paragraph 71(4)(b)

55. This item amends paragraph 71(4)(b) of the SIS Act to make a consequential amendment to the wording of that paragraph to reflect the new section 70A (refer item 28).

Item 30 - Section 92

56. This item amends section 92 of the SIS Act by inserting subsection 92(13). Different equal representation requirements apply depending on the size of the fund membership, and accordingly transitional rules generally apply when a fund changes size. However, there are currently no transitional rules for funds which change from having less than 5 members to 5 or more but less than 50 members.

57. The amendment inserts transitional rules for such funds.

Item 31 - Section 93(5)

58. There are currently no transitional rules for funds with less than 5 members to meet the equal representation requirements if they grow to 50 or more members. This item amends subsection 93(5) to insert transitional rules for such funds.

Item 32 - After section 93

59. This item inserts after section 93 of the SIS Act new section 93A. Sections 92 and 93 require a public offer superannuation fund covered by these sections to either have an independent trustee or comply with the equal representation rules. The definition of 'independent trustee' in section 10 of the SIS Act states that an independent trustee must not be an employer-sponsor or an associate of an employer-sponsor. However, the definition also has the effect that if employees of a professional trustee join a public offer fund operated by the professional trustee, the trustee would fail the independence test.

60. It is considered appropriate to allow such employees to join a public offer fund operated by the professional trustee without jeopardising the effective independence of the trustee from both the employer-sponsors and members of the fund. To allow this to occur it is proposed to amend the SIS Act so that, provided the number of employees who are members of the fund, and the amount of benefits of such employees is kept to an appropriate level, then the trustees will still be considered independent. Subsections 93A(2) and 93A(3) provides that the 'appropriate' level is 10% or such higher percentage approved by the Commissioner.

61. This amendment replaces Modification Declaration No. 1 made by the Commissioner. Accordingly, clause 3 provides for Modification Declaration No. 1 to effectively be revoked.

Item 33 - Transitional provisions relating to Modification Declaration No. 1

62. The new section 93A means that Modification Declaration No. 1 is no longer necessary and it is revoked by clause 3. To make it clear that approvals given under Modification Declaration No. 1 continue to have effect after revocation, item 22A provides that approvals made under Modification Declaration No. 1 are taken to be approvals given under section 93A (as inserted by item 32).

Item 34 - Paragraphs 101(1)(a) and (b)

63. This item amends paragraphs 101(1 )(a) and (b) of the SIS Act to make a reference to inserted subsection 101(1 A).

Item 35 - After subsection 101(1)

64. This item inserts after subsection 101(1) of the SIS Act subsection l0l(lA). This amendment removes an inconsistency between the SIS Act and the Superannuation (Resolution of Complaints) Act 1993 (the SRC Act). Before a complaint can be heard by the Superannuation Complaints Tribunal (the Tribunal) it must have been through the internal complaints system of the superannuation fund or approved deposit fund. Currently section 101 of the SIS Act only allows beneficiaries of the fund to make a complaint. This means that certain persons who are eligible to make a complaint to the Tribunal under section 14 of the SRC Act, are unable to do so because they are not in the class of people who can first make a complaint to the fund.

65. Subsection 101(1A) extends the range of persons who can make a complaint to a fund's internal complaints system to include those who can complain under section 14 of the SRC Act. This will remove the inconsistency between the SIS Act and the SRC Act.

Item 36 - After subsection 109(1)

66. This item inserts after subsection 109(1) of the SIS Act subsection 109(1 A). Subsection 109(1 A) introduces a requirement that investments must at all times be maintained as if they were arms-length investments. This works in conjunction with existing section 109 which ensures that all dealings regarding entering into an investment are also carried out on an arms-length basis.

Item 37 - Subsection 109(2)

67. This item amends subsection 109(2) of the SIS Act by referring to inserted subsection (1 A), thus making it a civil penalty provision and providing for civil and criminal consequences for breaching subsection 109(1A).

Item 38 - Subsection 109(3)

68. This item amends subsection 109(3) of the SIS Act by referring to inserted subsection 109(1A).

Item 39 - Heading to Part 13

69. This item amends the heading of Part 13 by adding 'statements and audits' after 'accounts'. This amendment makes the heading consistent with amendments made to Part 13.

Item 40 - Section 110

70. This item amends section 110 of the SIS Act by inserting 'statements and audits' after 'accounts'. This amendment makes the object of the Part consistent with amendments made to Part 13.

Item 41 - After paragraph 112(1)(b)

71. This item inserts after paragraph 112(1)(b) of the SIS Act paragraph 112(1)(ba). This provides that the trustee of a superannuation entity, except where the regulations provide otherwise, must have a statement of cash flows prepared for each year of income.

72. Accounting standards generally require superannuation entities to have prepared a statement of cash flows. This amendment makes the SIS Act consistent with these accounting standards.

Item 42 - Section 113

73. This item amends section 113 of the SIS Act so that a trustee must make the necessary arrangements to enable an approved auditor to give the trustee a report of the operations of the entity in the approved form. An approved form must relate to the audit of the accounts and statements required by the SIS Act, or other accounts and statements prepared in respect of that year of income as identified in the form. It must also include a statement by the auditor that the entity has complied with certain provisions of the SIS Act and Regulations as identified in the form. A trustee who intentionally or recklessly fails to make the necessary amendments will be liable to a penalty of up to 2 years imprisonment. An auditor who intentionally or recklessly fails to provide the report by the prescribed time will be liable to a penalty of up to 6 months imprisonment

74. This amendment replaces the need for Temporary Modification Declaration No. 13 made by the Commissioner. Accordingly, subclause 4(2) provides for Temporary Modification Declaration No. 13 to effectively be revoked.

Item 43 - Application of items 39, 40,

41 and 42

75. This item restricts the amendments made by items 39, 40, 41 and 42 to the entity's 1995-96 year of income and subsequent years of income. This means that the trustee and approved auditor of a superannuation entity will only have to comply with the new requirements for accounts, statements and reports that relate to the 1995-96 years of income and subsequent years of income. In respect of reports that relate to the 1994-95 year of income, the provisions of the SIS Act continue to apply (as modified by Temporary Modification Declaration No. 13) as they existed immediately before these amendments commence.

Item 44 - Paragraph 117(5)(c)

76. This item amends paragraph 117(5)(c) of the SIS Act to include a reference to subparagraph 117(5)(b)(iii). Two of the preconditions that must be met before a payment can be made to a standard employer-sponsor of a fund are that an actuary has given the trustee a certificate stating that the fund would remain in a satisfactory position and the trustee is satisfied that the payment was reasonable. Currently these requirements do not apply to funds which do not have either a corporate trustee or a group of 2 or more individual trustees.

77. The amendment will make these two preconditions apply irrespective of the trustee structure of the fund.

Item 45 - Section 117

78. This item amends section 117 of the SIS Act by inserting subsection 117(11). The current provisions of section 117 apply only to standard employer-sponsored funds and standard employer-sponsors. The amendment will extend the application of the section to former standard employer-sponsored funds and former standard employer-sponsors.

Item 46 - Paragraph 120(2)(a)

79. This item amends paragraph 120(2)(a) of the SIS Act by referring to inserted subsection (2A) (refer item 48).

Item 47 - Paragraph 120(2)(c)

80. This item amends paragraph 120(2)(c) of the SIS Act to insert 'administrator'. This amendment makes this provision consistent with the repeal of Part 5.3 and enactment of Part 5.3A of the Corporations Law .

Item 48 - After subsection 120(2)

81. This item inserts after subsection 120(2) of the SIS Act subsection 120(2A). Subsection 120(2A) prescribes when a body corporate with a responsible officer who is, or may be, a disqualified person, will become a disqualified person. A body corporate will be a disqualified person if:

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the body corporate knows, or has reasonable grounds to suspect, a person who is, or is acting as a responsible officer of the body corporate is a disqualified person; and

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the body corporate knows, or has reasonable grounds to suspect, that either the person is not eligible to make an application under section 126B, or if they are eligible, they will not make a application to have their disqualified person status waived within 14 days of becoming a disqualified person.

Item 49 - Subsection 121(2)

82. This item amends subsection 121(2) of the SIS Act so that a person cannot intentionally remain a responsible officer of a body corporate, which is a trustee of a superannuation entity, when they are a disqualified person. A person who intentionally breaches this provision will be liable to a penalty of imprisonment of up to 2 years.

Item 50 - Subsections 126(2), (3), (4), (5) and (6)

83. This item omits subsections 126(2), (3), (4), (5) and (6). This effectively removes the 28 day time period that investment managers which were disqualified persons had to resign. This will ensure that disqualified persons are not in a position of responsibility of superannuation entities.

84. This item also inserts a new subsection 126(2) of the SIS Act so that a person cannot intentionally remain a responsible officer of a body corporate which is an investment manager of a superannuation entity (other than an excluded fund) when they are a disqualified person. A person who intentionally breaches this provision will be liable to a penalty of imprisonment of up to 2 years.

Item 51 - Subsections 126A(2), (3), (4), (5) and (6)

85. This item omits subsections 126A(2), (3), (4), (5) and (6). This effectively removes the 28 day time period that custodians which were disqualified persons had to resign. This will ensure that disqualified persons are not in a position of responsibility in superannuation entities.

86. This item also inserts a new subsection 126A(2) of the SIS Act so that a person cannot intentionally remain a responsible officer of a body corporate which is a custodian of a superannuation entity (other than an excluded fund) when they are a disqualified person. A person who intentionally breaches this provision will be liable to a penalty of imprisonment of up to 2 years.

Item 52 - After section 126A

87. This item inserts after section 126A of the SIS Act section 126B, 126C, 126D, 126E and 126F. These sections have been inserted to allow the Commissioner to waive the disqualified person requirements for trustees, and responsible officers of trustees, investment managers and custodians of superannuation entities, if the Commissioner believes, given the information provided, that the person is highly unlikely to be a prudential risk to a superannuation entity.

88. Currently the impact of the disqualified person provisions means, for example, that even persons whose only offence was a minor offence involving dishonesty 20 years ago, for example shoplifting, are disqualified persons and cannot act as a trustee, or as responsible officers of trustees, investment managers or custodians. These new sections will enable the Commissioner to waive the disqualified person status of such an individual.

89. Section 126B prescribes the persons who are eligible to make an application for a waiver of the disqualified persons provisions. A person will be able to make an application if they have not been convicted of an offence which resulted in a penalty of imprisonment of 2 years or more, or a fine of 120 penalty units or more. These levels may be increased in the regulations. The section also prescribes the requirements for an application.

90. Section 126C prescribes the time period within which the Commissioner must decide an application (generally 60 days). If the application has not been decided at the end of that period it is taken to have been refused.

91. Section 126D provides that the Commissioner must notify the person of the result of their application. It also prescribes the criteria that the Commissioner will take into consideration when determining a application. Even though the Commissioner may waive the applicant's status as a disqualified person, this declaration will be void if the applicant has been convicted of an offence in respect of dishonest conduct that was not included in the application, a civil penalty order has been made against the person, or the applicant is insolvent. If the Commissioner decides not to waive the requirements he or she must advise the applicant of his or her decision and that the applicant must resign immediately. The Commissioner must also advise the applicant that is he or she fails to so resign and is the responsible officer of a body corporate, the Commissioner will tell the body corporate of the applicant's status as a disqualified person. If the Commissioner becomes aware that the person has not resigned from being a responsible officer of a body corporate that is a trustee, investment manager, or custodian of a superannuation entity, than the Commissioner must tell the body corporate that the person is a disqualified person.

92. Section 126E provides that a person will not be regarded as a disqualified person while the application is being considered provided it is made within 14 days of the person's conviction or the commencement of the section. If the Commissioner decides to waive an applicant's disqualified persons status the person will be treated as if they were never disqualified. If a person makes an application outside this time period, under subsection 126B(4), that person continues to be a disqualified person but if the Commissioner decides to waive the disqualified person provisions they will be treated as if they were never a disqualified person.

93. Section 126F provides that the Commissioner may request further information from the applicant in relation to the application. The Commissioner may also request the applicant to pay for the cost of the Commissioner attaining information from certain persons (such as a police force). However the Commissioner also has the ability to waive the whole, or part, of the amount. If the applicant fails to pay the amount requested the Commissioner must treat the application as being withdrawn. The section also provides that nothing in this section or section 126B prevents the Commissioner from deciding an application before all the requirements of 126B(3) have been complied with.

Item 53 - Savings provision concerning Temporary Modification Declaration No. 14

94. The amendments made by item 52 mean that Temporary Modification Declaration No. 14 is no longer necessary and it is revoked by subclause 4(2). To make it clear that applications, declarations, and any periods of grace which were made for the purposes of Temporary Modification Declaration No. 14 continue to have effect after revocation, this item provides that applications, declarations, and periods of grace made under Temporary Modification Declaration No. 14 are taken to be valid under the amendments made by this Act.

Item 54 - Subsection 129(1)

95. This item amends subsection 129(1) of the SIS Act to remove unnecessary references to the 'first person'.

Item 55 - Subsection 129(2)

96. This item amends subsection 129(2) of the SIS Act to remove unnecessary references to the 'first person'.

Item 56 - Subsection 129(3)

97. This item amends subsection 129(3) of the SIS Act to clarify the circumstances when an auditor or actuary must tell the trustee of a breach, or likely breach, of the SIS Act or the regulations. New subsection 129(3A) provides that an auditor or actuary does not have to tell the trustee of a breach, or likely breach, only if:

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they have been told by another auditor or actuary that the other auditor or actuary has already informed the trustee or Commissioner about the breach or likely breach in writing; and

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they have no reason to not believe that person.

98. Subsection (3B) provides that if the other auditor or actuary intentionally states that they have informed the trustee or Commissioner of the breach, or possibility of a breach, and they have not done so, then they are liable to a penalty of up to 12 months imprisonment.

Item 57 - Subsection 129(4)

99 This item amends subsection 129(4) of the SIS Act to remove unnecessary references to the 'first person'.

Item 58 - Subsection 129(5)

100. This item amends subsection 129(5) of the SIS Act to remove unnecessary references to the 'first person'.

Item 59 - Subsection 129(6)

101. This item amends subsection 129(6) of the SIS Act to remove unnecessary references to the 'first person'.

Item 60 - Subsection 130(1)

102. This item amends subsection 130(1) of the SIS Act to remove unnecessary references to the 'first person'.

Item 61 - Subsection 130(2)

103. This item amends subsection 130(2) of the SIS Act to clarify the circumstances when an auditor or actuary must tell the trustee if the financial position of the entity is unsatisfactory, or about to become unsatisfactory. New subsection 130(2A) provides that an auditor or actuary does not have to tell the trustee only if:

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they have been told by another auditor or actuary that the other auditor or actuary has already informed the trustee or the Commissioner about the unsatisfactory financial position of the entity; and

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they have no reason to not believe that person.

104. Subsection (3B) provides that if the other auditor or actuary intentionally states that they have informed the trustee or Commissioner that the financial position of the entity is unsatisfactory, or is about to become unsatisfactory, and they have not done so, then they are liable to a penalty of up to 12 months imprisonment.

Item 62 - Subsection 130(3)

105. This item amends subsection 130(3) of the SIS Act to remove unnecessary references to the 'first person'.

Item 63 - Subsection 130(4)

106. This item amends subsection 130(4) of the SIS Act to remove unnecessary references to the 'first person'.

Item 64 - Subsection 130(5)

107. This item amends subsection 130(5) of the SIS Act to remove unnecessary references to the 'first person'.

Item 65 - Paragraph 131(1)(a)(ii)

108. This item inserts a new paragraph 131(1)(a)(iii). Paragraph 131(1)(a)(iii) will clarify the circumstances when the Commissioner can disqualify an auditor. This paragraph includes the situation where the auditor has failed to adequately and properly perform any functions that an auditor is entitled to perform in relation to the SIS Act or the regulations. This paragraph is consistent with the new subparagraph 131A(1)(a)(iii) inserted by item 66.

Item 66 - After section 131

109. This item inserts after section 131 of the SIS Act section 131A. Currently section 131 of the SIS Act allows the Commissioner to disqualify a person from being an approved auditor. There may be circumstances where, rather than, or perhaps in addition to, disqualifying an auditor, it would be appropriate for the Commissioner to refer a matter to an auditor's professional association for appropriate disciplinary action. While actuaries may not be disqualified this amendment provides the power to refer matters to an actuary's professional association.

110. This amendment allows the Commissioner to refer details of a matter to the auditor's or actuary's professional association for any necessary disciplinary action. The Commissioner must inform the auditor or actuary that they have referred a matter to the professional association as soon as practicable, and no later than 7 days after the referral has occurred.

111. This amendment will give the Commissioner an option, other than, or in addition to, disqualification, to deal with auditors who, in the opinion of the Commissioner, fail to adequately and properly carry out their duties, and will also provide a mechanism for relevant professional associations to reprimand auditors and actuaries.

Item 67 - After paragraph 193(j)

112. This item inserts after paragraph 193(j) of the SIS Act paragraph 193(ja). Section 193 prescribe the provisions of the SIS Act that are civil penalty provisions. This amendment is necessary to make inserted subsection 109(1A) (refer item 36) a civil penalty provision.

Item 68 - Section 270

113. This item amends section 270 of the SIS Act to broaden the categories of people from whom an inspector may require assistance and/or information during an investigation. This amendment will provide an inspector with similar investigatory powers as the Australian Securities Commission under the Australian Securities Commission Act 1989 . In particular, an inspector will be able to obtain assistance from relevant persons, former relevant persons and other persons whom the inspector reasonably believes may be able to assist.

Item 69 - Paragraph 288(2)(a)

114. This item amends paragraph 288(2)(a) of the SIS Act to insert 'administration' and 'administrator'. This amendment makes this provision consistent with the repeal of Part 5.3 and enactment of Part 5.3A of the Corporations Law.

Item 70 - Subsection 310(5) (paragraph (c) of the definition of officer)

115. This item amends subsection 310(5) (paragraph (c) of the definition of 'officer') of the SIS Act to insert 'administrator'. This amendment makes this provision consistent with the repeal of Part 5.3 and enactment of Part 5.3A of the Corporations Law.

Item 71 - After subsection 313(1)

116. This item inserts after subsection 313(1) of the SIS Act subsections 313(1A) and 313(1B). Subsection 313(1A) allows the Commissioner to make an application to the Court for an order to be made against a trustee for the protection of any or all beneficiaries of a superannuation entity, without the need for an investigation, prosecution or civil proceeding to have begun. The types of orders that can be made include orders prohibiting money being sent out of Australia and orders appointing a receiver.

117. At the moment section 313 provides that a State/Territory Supreme Court, or the Federal Court of Australia, may, if the Court considers it necessary or desirable, make certain types of orders to protect the interests of an aggrieved person. The ability of the Commissioner to seek such orders from the Court is currently restricted to circumstances where an investigation, prosecution or civil proceeding has begun against a person.

118. There are circumstances where the need for such orders, to protect beneficiaries, will arise where no such investigation, prosecution or civil proceeding is underway. The amendment will provide greater protection to beneficiaries, by allowing the Commissioner to seek an order whenever he or she is of the opinion that such action is necessary to protect one or more beneficiaries of the superannuation entity.

119. Subsection 313(1 B) provides that for the purposes of section 313(1 A) any reference to contravening person in subsection 313(2) is a reference to the trustee.

Item 72 - Subsection 313(5)

120. This item amends subsection 313(5) of the SIS Act by referring to inserted subsection 313(IA).

Item 73 - Subsection 313(6)

121. This item amends subsection 313(6) of the SIS Act by referring to inserted subsection 313(1A).

Item 74 - Subsection 313(7)

122. This item amends subsection 313(7) of the SIS Act by referring to inserted subsection 313(1A).

Item 75 - Subsection 313(9)

123. This item amends subsection 313(9) of the SIS Act by referring to inserted subsection 313(1A).

Item 76 - Subsection 344(12)

124. This item amends subsection 344(12) of the SIS Act by referring to the new paragraph (ba) of the definition of 'reviewable decision' in section 10 of the SIS Act,

Item 77 - Subsection 344(12)

125. This item amends subsection 344(12) of the SIS Act by referring to the new paragraphs (ra) and (rb) of the definition of 'reviewable decision' in section 10 of the SIS Act.

Item 78 - After subsection 346(2)

126. This item amends subsection 346(2) of the SIS Act by inserting a penalty provision of imprisonment for up to 2 years for a superannuation standards officer who breaches the secrecy provisions. This is the same penalty as applies under section 70 of the Crimes Act 1914 .

Item 79 - Before subsection 346(3)

127. This items inserts subsection 346(2A) into the SIS Act. Subsection 346(2A) provides that any information relating to convictions, attained in relation to an application for waiver of the person's status as a disqualified person, must not be disclosed to any other person. A superannuation standards officer who breaches this requirement is liable to a penalty of up to 2 years imprisonment.

Item 80 - After subsection 346(4)

128. This item inserts after subsection 346(4) of the SIS Act subsection 346(4A). This amendment allows the Commissioner to provide information to a professional association under inserted subsection 131A(1) without breaching the secrecy provisions of the SIS Act.

Item 81 - After subsection 346(5)

129. This item inserts new subsection 346(5A) into the SIS Act. Subsection 346(5A) provides that subsection 346(2) does not prohibit a superannuation standards officer from disclosing personal information, or providing a document which includes personal information relating to an individual if that individual has consented in writing to that disclosure. This is consistent with an equivalent exception in subsection 346(5).

Item 82 - Paragraph 346(6)(da)

130. This item amends paragraph 346(6)(da) so that it is consistent with terminology used in the Census and Statistics Act 1905 . Paragraph 346(6)(da) is proposed to be inserted into the SIS Act by the Taxation Laws Amendment Bill (No. 2)1995.

Item 83 - After subsection 346(6A)

131. This item inserts after subsection 346(6A) of the SIS Act subsections 346(6B) and Subsection 346(6B) prescribes that information or a document provided to persons under inserted subsection 131A(1) must not be disclosed to any other person. Also the information can only be used in deciding whether any disciplinary or other action should be taken against the auditor or actuary by the professional association. The maximum penalty for breaching this requirement is imprisonment for 2 years.

132. Subsection 346(6C) provides that the requirements of subsection 346(6B) do not prevent information or documents being provided to a court for the purposes of proceedings in relation to any disciplinary action taken against an auditor or actuary.

Item 84 - Subsection 346(9)

133. This item amends subsection 346(9) of the SIS Act by inserting a penalty provision of imprisonment for 2 years for a Secretary of a Department or an officer of that department who breaches the secrecy provisions. This is the same penalty as applies under section 70 of the Crimes Act 1914.

Item 85 - Subsections 346(9A) and (9B)

134. This item amends subsection 346(9A) of the SIS Act by providing that if protected information is produced under paragraph 346(6)(da) to the Australian Statistician or an officer of the Australian Bureau of Statistics, then it is taken to be information given in pursuance of the Census and Statistics Act 1905 and accordingly is protected by the secrecy provisions in that Act. As a result of this change subsection (9B) is unnecessary and has been deleted.

135. Subsections 346(9A) and (9B) are proposed to be inserted into the SIS Act by the Taxation Laws Amendment Bill (No. 2)1995.

Item 86 - After section 349

136. This item inserts after section 349 of the SIS Act section 349A. There are a number of provisions in the SIS Act and Regulations that on their own would (or may) restrict a fund trustee from paying benefits out of the fund (or restrict the manner in which such benefits could be paid out of the fund), even though those benefits may be benefits that the Bankruptcy Act 1966 specifically recognises as being available to creditors in the event of bankruptcy.

137. The amendment clarifies that fund trustees may pay benefits out of a regulated superannuation fund or approved deposit fund in accordance with the requirements of the Bankruptcy Act 1966.