House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 2 Amendment of the Australian Prudential Regulation Authority Act 1998

Outline of chapter

2.1 Part 2 of Schedule 1 to this Bill contains amendments to the Australian Prudential Regulation Authority Act 1998 (APRA Act) to include the costs of the administration of the early release of superannuation on compassionate grounds by DHS as one of the costs covered by the determination to be made by the Minister, for each financial year, of the amount of the levy money collected by APRA from the superannuation industry which is payable to the Commonwealth.

Context of amendments

2.2 Under the Financial Institutions Supervisory Levies Collection Act 1998 , APRA is presently funded to administer the function of making determinations about the release of benefits from a retirement savings account or a superannuation entity on compassionate grounds through levies paid by retirement savings account providers and APRA-regulated superannuation entities.

2.3 Under subsection 50(1) of the APRA Act, the Minister is to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth, in respect of levy (or each class of levy) for that financial year. The amount specified in the determination is to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions.

2.4 With the transfer of the administration of the early release of superannuation benefits on compassionate grounds from APRA and the Commissioner of Taxation to the Chief Executive Medicare, the costs of administering this function will be borne directly by the Commonwealth. It is appropriate that the costs to the Chief Executive Medicare of undertaking this function in relation to retirement savings account providers and APRA-regulated superannuation entities continue to be recovered from the industry. This amendment will enable the funds raised for this function to go to the Commonwealth rather than to APRA.

Summary of new law

Amendments to the APRA Act

2.5 The amendments in Part 2 of Schedule 1 provide that the Minister's determination under subsection 50(1) of the APRA Act will include an amount of levy money to also cover the costs of administering the function of making determinations about the release of benefits on compassionate grounds from a retirement savings account or APRA-regulated superannuation entity.

Comparison of key features of new law and current law

Detailed explanation of new law

2.6 Subsection 50(1) of the APRA Act presently provides for the Minister to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth in respect of levy (or each class of levy) for that financial year, to set out the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions.

2.7 Subsection 50(1) will be amended such that the Minister's determination will also cover the costs to the Commonwealth of administering the function of making determinations about the release of benefits in a retirement savings account or a superannuation entity on compassionate grounds. A note is inserted at the end of subsection 50(1) to explain that regulations made under the SIS Act and RSA Act provide for the making of determinations about the release of benefits on compassionate grounds. [Schedule 1, item 17, subsection 50(1)]

2.8 Definitions of retirement savings account and superannuation entity are being inserted into subsection 50(6) as a consequence of the amendments to subsection 50(1). [Schedule 1, items 18 and 19, subsection 50(6)]

Application provision

2.9 The amendments to the APRA Act apply to the financial year in which Schedule 1 commences, and any subsequent financial year. [Schedule 1, item 22]