Revised Explanatory Memorandum(Circulated by the authority of the Minister for Financial Services and Superannuation, the Hon Bill Shorten)
General outline and financial impact
Loss relief and asset roll-over for transfer of amounts to a MySuper product
Schedule1 to this Bill amends the Income Tax Assessment Act 1997 to facilitate the Government's MySuper reforms by providing income tax relief to superannuation funds where there is a mandatory transfer of default members' account balances to a MySuper product in another superannuation fund.
Date of effect: These amendments apply to the income year of the superannuation fund that includes 1 July 2013 and the following income years if the accrued default amounts of members are transferred between 1 July 2013 and 1 July 2017. These dates are consistent with the date of introduction of MySuper and the deadline for the transfer of default members' accrued default amounts to a MySuper product.
Proposal announced: This measure was announced in the Minister for Financial Services and Superannuation's Media Release No. 020 of 24 April 2012. Extensions to this measure were announced in the Minister's Media Release No. 046 of 3 August 2012.
Financial impact: These amendments have a small unquantifiable cost to revenue over the forward estimates, estimated to be less than $10 million per annum.
Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.67 to 1.77.
Compliance cost impact: Low overall, comprising a low implementation impact and no change in ongoing compliance costs for the affected group.
Sustaining the superannuation contribution concession - consequential amendments: Defence force superannuation
Schedule 2 to this Bill amends the Defence Force Retirement and Death Benefits Act 1973 to make consequential changes to enable the Commonwealth Superannuation Corporation to pay amounts and to adjust the benefits under the Defence Force Retirement and Death Benefits scheme to reflect those payments.
Date of effect: This measure applies from the later of Royal Assent of this Bill and Royal Assent of the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013. This measure does not apply if the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 does not receive Royal Assent.
Proposal announced: Not previously announced.
Financial impact: These amendments are part of the sustaining the superannuation contribution concession and were included in the financial impact of that measure. There is no additional financial impact.
Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.22 to 2.26.
Compliance cost impact: These amendments are part of the sustaining the superannuation contribution concession and were included in assessing the compliance cost impact of that measure. There is no additional compliance cost impact.
Schedule 3 to the Bill amends the Fair Work Amendment Act 2012 (FW Amendment Act) to introduce new requirements in relation to terms in modern awards that nominate default superannuation funds for employees who have not chosen a fund ('default fund terms'), and a process under which the Fair Work Commission (FWC) will review such terms every four years. The first such review must be conducted as soon as practicable after 1 January 2014.
Four yearly reviews of default fund terms operate in addition to the requirement that default funds must be authorised by the Australian Prudential Regulation Authority to offer a MySuper product, and are intended to provide a transparent and contestable process under which only funds that are in the best interests of employees are selected for inclusion as default funds in modern awards.
Under the current provisions of the FW Amendment Act, an 'employer MySuper product' (that is, a 'tailored MySuper product' or 'corporate MySuper product') cannot be reviewed by the FWC. Following the first four yearly review, superannuation contributions for default fund employees to whom a modern award applies will therefore not be permitted to be directed to a corporate MySuper product. Such contributions will only be able to be directed to a tailored MySuper product if the fund is specified in the relevant modern award, following positive assessment by the FWC of the fund's 'generic MySuper product'.
On 29 May 2013, the Minister for Superannuation and Financial Services, the Hon Bill Shorten MP, introduced the Superannuation Laws Amendment (MySuper Capital Gains Tax Relief and Other Measures) Bill 2013 (the Bill). The Bill includes measures to facilitate the Government's MySuper reforms.
The amendments to the Bill amend the FW Amendment Act to allow contributions for default fund employees to whom a modern award applies to be directed to an employer MySuper product, subject to the product being approved by the FWC and specified on the Schedule of Approved Employer MySuper Products.
The approval process for employer MySuper products is to be conducted by an Expert Panel of the FWC (constituted by both full-time members and experts in finance, investment management or superannuation) in two stages. In the first stage, the corporate or tailored MySuper product will be assessed against legislated criteria relating to the performance of the product. In the second stage, the Expert Panel will assess whether including the product on the Schedule of Approved Employer MySuper Products would be in the best interests of relevant default fund employees. The FWC will be required to ensure that employers and employees to which the product relates, and any organisation entitled to represent their industrial interests, have a reasonable opportunity to make submissions.
An application to the FWC to have an employer MySuper product included on the Schedule of Approved Employer MySuper Products can be made by the relevant employer or the fund, either as part of a four yearly review of default fund terms or within an interim period between such reviews. Allowing interim applications is intended to facilitate assessment of employer MySuper products for newly established employers and employers seeking to change their default superannuation arrangements to a more competitive employer MySuper product.
Employer MySuper products specified on the Schedule of Approved Employer MySuper Products will be required to be reassessed in the next four yearly review.
The FW Amendment Act currently requires the FWC to vary modern awards in four yearly reviews of default fund terms to specify at least two, but generally no more than 10, superannuation funds in relation to generic MySuper products. An amendment will change the maximum number of funds that can generally be specified in a modern award from 10 to 15. This is intended to ensure that funds (including those that offer high performing employer-specific subplans within a generic MySuper product) have a reasonable opportunity to be positively assessed by the FWC and specified in relevant modern awards.
A further amendment will ensure that the new requirements included in the FW Amendment Act in relation to both generic MySuper products and employer MySuper products do not apply before 1 January 2015.
Date of effect: Items 1-9 and 11-34 of Schedule 3 to the Bill commence on the day the Bill receives Royal Assent. Item 10 of Schedule 3 to the Bill commences on the later of either the start of the day the Bill receives Royal Assent, or immediately after the commencement of item 47 of Schedule 1 to the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Act 2013 , but does not commence at all if item 47 does not commence.
Financial Impact Statement: Nil.
Human rights implications: Nil.