Explanatory Memorandum(Circulated by authority of the Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan)
2 - Outline
2.1 The Superannuation Safety Amendment Bill 2003 (the Bill) introduces a range of reforms that are designed to modernise and strengthen the prudential regulation of superannuation.
2.2 The reforms contained in the Bill give effect to the Government's response to the recommendations of the Superannuation Working Group (SWG). The report of the SWG, together with the Government's response, was released on 28 October 2002.
2.3 The Bill provides for the Australian Prudential Regulation Authority (APRA) to license trustees of those superannuation entities it regulates. The new trustee licences will be subject to conditions, including requirements for trustees to meet minimum standards of fitness and propriety and maintain risk management strategies governing the trustee's operations and risk management plans for each fund under the trustee's control. Different classes of licences will be able to be issued for licensees operating different classes of funds.
2.4 Transitional provisions will allow existing trustees to continue to operate under existing arrangements, but they are required to have obtained a licence by the end of the transitional period of 2 years. The reforms will provide for the orderly exit of trustees that are unable or unwilling to meet the new licensing requirements at the end of the transition period.
2.5 In addition to the licensing of trustees, the Bill facilitates the registration of superannuation entities, other than self-managed superannuation funds, that are regulated by the SIS Act. Registration aims to serve as a mechanism enabling APRA to gain important information about the superannuation entities that it regulates. This will help to enhance APRA's capacity to supervise these entities.
2.6 New provisions are introduced requiring actuaries and auditors to report information to APRA about the activities of trustees and the operation of superannuation entities in certain circumstances.
2.7 The Bill also provides for appropriate enforcement powers, supported by penalty provisions, to underpin the new framework. Consistent with existing provisions in the SIS Act of a comparable nature, many of the penalty provisions contained in the Bill have both a fault and a strict liability component. This two-tiered regime aims to create a more robust regulatory framework and improve the enforceability of the provisions to which strict liability is attached. By facilitating more effective enforcement, the regulatory framework for superannuation will be strengthened to help ensure that superannuation entities are administered prudently and that superannuation savings of members are adequately protected.
2.8 The Bill contains a number of formal provisions giving effect to commencement of a range of Schedules which amend the Superannuation Industry (Supervision) Act 1993, to ensure a smooth transition to the new trustee licence arrangements. It is intended that the new arrangements will commence on proclamation on 1 July 2004.