House of Representatives

Superannuation (Objective) Bill 2016

Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016

Superannuation (Excess Transfer Balance Tax) Imposition Act 2016

Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Scott Morrison MP and Minister for Revenue and Financial Services, the Hon Kelly O'Dwyer MP)

Chapter 12 - Administration and consequential amendments

Outline of chapter

12.1 Part 1 of Schedule 10 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 (the TLA Bill) amends the tax law to simplify and consolidate the range of existing processes for the release of amounts from individuals' superannuation using a release authority.

12.2 The amendments replace existing release authorities (except those relating to deferred debt account discharge liabilities for Division 293 tax) with a new simplified release authority regime. This ensures that the release of all such superannuation amounts is subject to common processes and timeframes.

12.3 Part 2 of Schedule 10 to the TLA Bill simplifies the taxation law to assist in streamlining the administration of the Division 293 tax regime.

12.4 The amendments reduce compliance costs for superannuation providers and individuals where superannuation benefits become payable from defined benefit interests. The amendments remove the requirements in the taxation law relating to superannuation interests for which a Division 293 tax debt account is to be kept for:

·
superannuation providers to notify the Commissioner of Taxation (Commissioner) of the amount of end benefit caps for their members in some circumstances; and
·
individuals to notify the Commissioner in any circumstance when their superannuation benefits from such interests first become payable.

12.5 Part 3 of Schedule 10 to the TLA Bill clarifies that the Commissioner can provide a single notice that includes two or more separate notices that are required to be provided.

12.6 Part 4 of Schedule 10 to the TLA Bill makes consequential amendments to the Superannuation Act 1976 that sets out the rules that govern the Commonwealth Superannuation Scheme (CSS) in relation to release authorities issued by the Commissioner. The amendments take account of changes made by other parts of the Superannuation Reform Package.

12.7 All legislative references, other than those to Division 293 of the Income Tax Assessment Act 1997 (Division 293) are to Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) unless the contrary is indicated. All legislative amendments referred to in this Chapter are contained in the TLA Bill 2016 unless the contrary is indicated.

Context of amendments

12.8 These measures form part of the Government's 2016-17 Superannuation Reform Package. The measures improve the administration of the superannuation system.

Release authorities

12.9 In general, individuals are only entitled to withdraw amounts of superannuation held by superannuation providers if they have satisfied a condition of release (Division 6.3 and Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994 (SISR 1994) and Division 4.3 and Schedule 2 to the Retirement Savings Account Regulations 1997 (RSAR 1997). Conditions of release include retiring after attaining preservation age or attaining age 65.

12.10 The presentation of a release authority is a special condition of release for amounts held in regulated superannuation funds and retirement savings accounts (see the tables in Parts 1 and 2 of Schedule 1 to the SISR 1994 and the table in Schedule 2 to the RSAR 1997).

12.11 In conjunction with these regulations, the Income Tax Assessment Act 1997 (ITAA 1997) and Schedule 1 to the TAA 1953 allow (and in many cases require) the superannuation provider that receives a release authority to pay an amount and reduce the value of the member's superannuation interest despite the normal restrictions on such payments.

12.12 Prior to these amendments different types of release authorities were available if an individual had:

·
excess concessional or non-concessional contributions;
·
a Division 293 tax liability or a debt account discharge liability; or
·
an excess non-concessional contributions tax liability.

12.13 There were a number of differences in the operation of these release authorities, including:

·
the entity that provided the release authority to the superannuation provider could be the Commissioner or the individual;
·
the time for the provider to comply; and
·
the entity to whom the amounts were released.

End benefit notifications for Division 293 tax

12.14 Division 133 provides for the deferral of the payment of Division 293 tax that is owed on concessional contributions for a defined benefit interest. Division 133 also provides that on payment of an end benefit from the defined benefit interest, a superannuation provider must report the end benefit cap for the defined benefit interest to the Commissioner.

12.15 The end benefit cap is 15 per cent of the employer-financed component of any part of the value of the superannuation interest that accrued after 1 July 2012. It ensures that a defined benefit member's deferred Division 293 tax debt reflects the member's defined benefit entitlement.

12.16 In particular, it protects defined benefit members from an unfair tax burden when the value of their defined benefit on exit is significantly lower than would be expected for the level of contributions that have been paid to finance the benefit - for example, when an entitlement is taken early from a scheme that does not vest its benefits evenly each year.

12.17 A superannuation provider of a defined benefit interest is required to advise the Commissioner of the amount of an end benefit cap for a member in certain situations where superannuation benefits first become payable.

12.18 Superannuation providers of defined benefit interests incur significant costs in working out the amount of their members' end benefit cap as it requires an actuarial calculation.

12.19 Prior to these amendments, superannuation providers were required to advise the Commissioner of a member's end benefit cap amount if:

·
the Commissioner had started keeping a Division 293 tax debt account for the superannuation interest for the member;
·
the Commissioner had given notice to the superannuation provider that a Division 293 tax debt account was being kept for that member; and
·
an end benefit became payable from that superannuation interest for that member.

12.20 In addition, prior to these amendments, there was also a requirement for an individual to provide the Commissioner with an individual end benefit notice if they requested a superannuation provider pay an end benefit from a superannuation interest for which the Commissioner had started keeping a Division 293 tax debt account.

Combining notices

12.21 There are a range of circumstances in which the Commissioner has an obligation or may issue a notice to a taxpayer. This includes notices of assessment, determinations, statements and other documents. For the purposes of these amendments, they are collectively referred to as 'notices'.

12.22 There is uncertainty as to whether the Commissioner can provide multiple notices and other documents such as determinations in a single notice, in the absence of this being expressly authorised by the taxation law. Some parts of the taxation law specifically allow combined notices, whilst other provisions do not expressly deal with this issue.

12.23 In the superannuation context, this inconsistency also exists. For example, subsection 292-230(3) of the ITAA 1997 contains a specific provision for excess non-concessional contributions tax assessment notices to be contained in one document with other notices, whilst the Division 293 tax assessment provisions in Subdivision 155-A of Schedule 1 to the TAA 1953 do not.

12.24 Changes to the contribution caps (annual concessional cap and annual non-concessional cap) and to the Division 293 tax income threshold discussed in Chapters 4 and 5 of this Explanatory Memorandum are likely to result in an increase in the number of individuals who receive an assessment from the Commissioner for additional tax under these regimes.

12.25 Sending out separate notices for different assessments and determinations relating to superannuation (for example, assessments of Division 293 tax, assessments of excess non-concessional contributions tax, determinations of excess non-concessional contributions and determinations of excess concessional contributions) does not provide a complete position for taxpayers and creates inefficiencies for the Commissioner.

Amendments relating to the Commonwealth Superannuation Scheme

12.26 The Commonwealth Superannuation Scheme (CSS) is a public sector superannuation scheme established on 1 July 1976 by the Superannuation Act 1976 . It was closed to new members on 30 June 1990. The CSS is a hybrid scheme (part accumulation and part defined benefit) and is partially funded.

12.27 Funded amounts are made up of:

·
basic post-tax (non-concessional) member contributions;
·
supplementary post-tax member (non-concessional) contributions;
·
accumulated funded employer productivity contributions; and
·
amounts transferred (transfer amounts) into the CSS from other superannuation schemes.

12.28 Funded amounts are invested in the CSS Fund with scheme earning rates applied to them.

12.29 Members of the CSS can make basic contributions at five per cent of their superannuation salary or elect for a zero rate. There is no upper limit on the amount of supplementary post-tax member contributions that a CSS member can make.

12.30 Unlike accumulated basic post-tax member contributions, accumulated supplementary post-tax member contributions are never used to calculate a member's unfunded Consumer Price Index (CPI) indexed pension.

12.31 Most members of the CSS are also entitled to employer provided funded productivity contributions of between two per cent and three per cent depending on the amount of their superannuation salary.

12.32 Prior to these amendments accumulated supplementary and funded employer productivity contributions could not be released in relation to a release authority issued by the Commissioner.

Summary of new law

Release authorities

12.33 Part 1 of Schedule 10 to the TLA Bill amends the tax law to simplify and consolidate the range of existing processes for the release of amounts from individuals' superannuation interests using a release authority (except release authorities relating to Division 293 debt account discharge liabilities).

12.34 Under the new approach, release authorities are issued by the Commissioner directly to superannuation providers. Superannuation providers have a standard ten business day period to comply. The Commissioner can allow further time, if appropriate.

12.35 Where the release of an amount is voluntary (for example, the release of excess concessional contributions), individuals have 60 days to request that the Commissioner arrange the release of the specified amount. The Commissioner can allow further time, if appropriate. Where the release is mandatory (for example, the release of excess non-concessional contributions tax), the individual is not involved in releasing amounts and instead the Commissioner deals with funds directly.

End benefit notifications for Division 293 tax

12.36 The amendments remove the requirements under Division 293 for superannuation providers to notify the Commissioner of the amount of end benefit caps in some circumstances. Notification is not required if the superannuation provider has confirmed with the Commissioner that the relevant member does not have a Division 293 tax debt account amount owing at the time the member's superannuation benefit first becomes payable.

12.37 The amendments also reduce the superannuation compliance burden for individuals with defined benefit superannuation interests by removing the requirement for them to notify the Commissioner when their superannuation benefits for such interests first become payable.

Combining notices

12.38 This measure clarifies that the Commissioner can provide a single notice that includes two or more separate notices that are required to be provided under the taxation law.

Amendments relating to the CSS

12.39 These amendments provide for accumulated supplementary and funded employer productivity contributions to be released pursuant to a release authority (except those relating to debt account discharge liabilities for Division 293 tax) issued by the Commissioner.

Comparison of key features of new law and current law

New law Current law
Release authorities
Individual to request the issue of a release authority
Individuals that receive excess concessional or non-concessional contributions determinations or a notice of assessment for Division 293 tax may request, in the approved form, for the Commissioner to release amounts from superannuation. This request must be made in the approved form within 60 days of the issue of the notice or determination (or such further time as the Commissioner may allow).

The amount that may be released in relation to each circumstance permitting release remains the same.

Individuals that receive excess concessional or non-concessional contributions determinations may elect in the approved form for the Commissioner to release amounts from superannuation. This request must be made within 21 or 60 days of receiving the determination (or such further time as the Commissioner may allow).

Individuals that receive a notice of assessment for Division 293 tax, also receive a release authority that they may provide to funds within 120 days of receiving the notice.

Commissioner's obligation to issue release authorities to superannuation providers
The Commissioner must provide a release authority to a superannuation provider in respect of an interest upon receiving a valid request.

The Commissioner may provide a release authority to a fund without a request if:

·
the individual is liable for excess non-concessional contributions tax;
·
the individual is liable for assessed Division 293 tax and has neither paid the tax nor released the amount of the tax from superannuation within 60 days of the issue of the notice; or
·
the individual has been issued with an excess non-concessional contributions determination and has not made a request to the Commissioner within 60 days of the issue of the determination (or been allowed more time by the Commissioner).

The Commissioner must provide a release authority to a superannuation provider in respect of an interest upon receiving a valid election.

The Commissioner may provide a release authority to a fund without an election if:

·
the individual is liable for excess non-concessional contributions tax; or
·
the individual is liable for assessed Division 293 tax and has neither paid the tax nor released the amount of the tax from superannuation in 120 days.

Superannuation providers required to action release authorities
A superannuation provider that receives a release authority must pay the lesser of the amount specified in the release authority and the value of the individual's specified superannuation interests (except interests that are defined benefit interests within the meaning of the tax law).

Payment must be provided to the Commissioner within ten business days of the issue of the release authority (or such further time as the Commissioner may allow). The superannuation provider must also notify the Commissioner in the approved form of the payment (or lack of a payment) in the same timeframe.

A superannuation provider that receives a release authority must generally pay the lesser of the amount specified in the release authority, a lesser amount specified by the entity providing the release authority or the value of the individual's specified superannuation interests.

The amount of time the fund has to pay, the entity to which payment must be provided, the reporting requirements for payment and the circumstances in which funds need not comply with a release authority differ.

Character of amounts received from superannuation due to release authorities
Amounts released from superannuation because of a release authority are generally non-assessable non-exempt income and are exempt from the proportioning rule.

Amounts released to the Commissioner are generally credited against an individual's tax liability, with any excess refunded to the individual. Interest is available for any undue delay in the payment of a refund.

Amounts released to the Commissioner in relation to Division 293 tax liabilities that are deferred to a debt account are treated as a voluntary payment towards the debt account.

Amounts released from superannuation because of a release authority are generally non-assessable non-exempt income and exempt from the proportioning rule.

Amounts released to the Commissioner are generally credited against an individual's tax liability, with any excess refunded to the individual. For some, but not all types of release authorities, interest is available for any undue delay in the payment of a refund.

Amounts released to the Commissioner in relation to Division 293 tax liabilities that are deferred to a debt account are treated as a voluntary payment towards the debt account.

Superannuation provider's notification of end benefit cap amount
The amendments do not require a superannuation provider of a defined benefit interest to disclose the amount of their member's end benefit cap when they give the Commissioner an end benefit notice if the provider has confirmed with the Commissioner that there is no amount owing on the member's Division 293 tax debt account. A superannuation provider of a defined benefit interest is required to give the Commissioner an end benefit notice disclosing their member's end benefit cap amount once the end benefit has become payable from the interest if the Commissioner has:

·
started keeping a Division 293 tax debt account for the superannuation interest; and
·
given notice to the superannuation provider that a Division 293 tax debt account is being kept.

Individuals not required to provide end benefit notices
There is no longer a requirement for an individual to provide the Commissioner with an individual end benefit notice. An individual must notify the Commissioner by providing an individual end benefit notice if the individual requests a superannuation provider pay an end benefit from a superannuation interest and the Commissioner has established a Division 293 tax debt account in relation to that interest.
Combining notices
The amendments clarify and confirm that the Commissioner can provide a single notice to a taxpayer which contains two or more separate notices for that taxpayer that are required to be given under any taxation law. The taxation law in some cases specifically provides that the Commissioner may include a notice to a taxpayer with another notice to that taxpayer. In some cases that other notice has to be issued under the same Act as the notice that is to be issued.

In other cases, there is no provision that specifically authorises a notice to be given with another notice.

Amendments relating to the CSS
Accumulated supplementary member contributions and accumulated funded employer productivity contributions can be released at any time in relation to a release authority (except those relating to debt account discharge liabilities for Division 293 tax) issued by the Commissioner. Accumulated supplementary member contributions and accumulated funded employer productivity contributions cannot be released until the member satisfies a condition of release.

Detailed explanation of new law

Release authorities

12.40 This measure introduces a common legislative framework for the release of amounts from superannuation in relation to excess contributions to superannuation, tax liabilities related to these contributions and Division 293 tax (excluding amounts relating to Division 293 tax debt account discharge liabilities).

12.41 Amounts can still be released from superannuation in similar circumstances as they were previously, but this occurs under a common simplified framework for individuals and superannuation providers.

12.42 Where an individual chooses to release an amount, they have 60 days to make a request to the Commissioner for the release of an amount from specified superannuation interests (and the Commissioner may extend this time).

12.43 Similarly, in all cases when superannuation providers receive a release authority under the new framework they have ten business days to pay the amount to the Commissioner.

When amounts may be released

Release on request

12.44 Under the new release authority framework, individuals may request the release of an amount from superannuation for a financial year, including a nil amount, if they are issued:

·
a determination that they have excess concessional or non-concessional contributions for that financial year; or
·
a notice of assessment of an amount of Division 293 tax payable for the income year corresponding to the financial year.

[Schedule 10, item 1, subsection 131-5(1)]

12.45 These circumstances are the same as those in which individuals could choose for the amounts to be released under the prior law (see the former sections 96-5, 96-7 and 135-10 in Schedule 1 to the TAA 1953).

12.46 However, in place of the range of existing timeframes for making or using a release authority, the individual always has at least 60 days from when the determination or notice is issued in which to make a request. [Schedule 10, item 1, subsections 131-5(3) and (5)]

12.47 To be valid, a request must be in the approved form. It is expected that the Commissioner will specify that requests relating to excess non-concessional contributions will need to include information about whether an individual has any superannuation interests. This facilitates the Commissioner's consideration of whether it is appropriate to issue a direction that an individual has no superannuation interests under section 292-467 of the ITAA 1997. [Schedule 10, item 1, subsection 131-5(3)]

12.48 The request must specify a valid release amount and identify the superannuation interests from which it could be released. A valid release amount is:

·
for determinations of excess concessional contributions, an amount up to 85 per cent of the excess contributions;
·
for determinations of excess non-concessional contributions, an amount which is either the full amount of the excess contributions and 85 per cent of associated earnings (referred to as the total release amount) or nil; and
·
for assessments of an amount of Division 293 tax, an amount up to the amount of the liability.

[Schedule 10, item 1, subsection 131-5(2) and section 131-10]

12.49 The amounts that can be released are also the same as the amounts that could be released previously.

12.50 Once made, a request is final and irrevocable. However, in some situations, for example, where insufficient funds remain in the superannuation interest, while an individual may make a valid request for the release of an amount from a superannuation interest, the identified amount will not be released, or will only be released in part. [Schedule 10, item 1, subsection 131-5(6)]

12.51 In this situation the Commissioner will notify the individual, who may then make a further request within 60 days, or such further time as the Commissioner may allow, for the release of the remaining amount from another superannuation interest. [Schedule 10, item 1, subsection 131-5(4)]

Example 12.1 : Request for release Isaac receives an excess non-concessional contributions determination from the Commissioner on 18 November 2019 specifying that the total release amount in respect of his excess non-concessional contributions (the amount of the excess contribution plus 85 per cent of the associated earnings) is $10,000 for the 2018-19 financial year. He also receives notice of an assessment of Division 293 tax payable, which states he has an assessed Division 293 tax liability of $5,000 for the same period.Isaac has 60 days to request that the Commissioner arrange the release of either $10,000 (the total release amount for his excess contributions and associated earnings) or a nil amount in respect of his excess non-concessional contributions. Alternatively, Isaac may choose not to make a request.In respect of his assessed Division 293 tax, Isaac also has 60 days to request the release of any amount from nil up to $5,000 (the total amount of his assessed Division 293 tax liability). Alternatively, Isaac may choose not to make a request.Isaac does not make a request to the Commissioner in respect of either his excess non-concessional contributions or his Division 293 tax liabilities. The consequences of his choice under the amended law are discussed in Example 12.2.

Release without a request

12.52 The amendments also allow the Commissioner to issue release authorities to superannuation providers without a request by the individual if:

·
the individual is liable for excess non-concessional contributions tax;
·
the individual is liable for assessed Division 293 tax in relation to contributions to an interest that is not a defined benefit interest and 60 days after the notice of the liability, the liability has not been paid and amounts equal to the liability have not been released from superannuation; or
·
the individual has:

-
received a determination that they have excess non-concessional contributions or a notice from the Commissioner that a superannuation provider was not able to release all or part of an amount identified in a prior request relating to such a determination: and
-
60 days after the issue of the determination or notice, not requested the release of an amount, including a nil amount.

[Schedule 10, item 1, section 131-15]

12.53 The first two cases - release relating to excess non-concessional contributions tax and Division 293 tax - are the same circumstances in which involuntary release currently occurs. In both of these cases, the amount to be released is also not changed - it remains the amount of the relevant tax liability. [Schedule 10, item 1, section 131-20]

12.54 The amendments make a minor change to simplify the process for release for excess non-concessional contribution tax liabilities.

12.55 Previously, individuals who were liable for excess non-concessional contributions tax were issued with a release authority for the amount of the tax. If they did not release the amount within 90 days, they were liable for an administrative penalty under section 288-90 in Schedule 1 to the TAA 1953 and the Commissioner would directly arrange for the release of the amount from superannuation.

12.56 The amendments simplify this process, removing the obligation from individuals and instead making the release of the amounts for excess non-concessional contributions tax the responsibility of the Commissioner.

12.57 The amendments also introduce a new circumstance in which mandatory release may occur - where the individual has excess non-concessional contributions and has not notified the Commissioner about the amount that they want to be released.

12.58 Previously, if an individual did not make an election about the release of an amount upon receiving an excess non-concessional contributions determination, no amount would be released from their superannuation at that time.

12.59 This was almost always to the individual's detriment. If the amount was not released, the whole value of the contribution was subject to excess non-concessional contributions tax at a rate equal to the highest marginal income tax rate on the income of an individual (47 per cent in 2017-18). Further, as outlined above, the amount of this excess non-concessional contribution tax liability would then need to be released from the individual's superannuation interests.

12.60 Given the seriousness of this consequence, it is preferable that it only apply to an individual that has specifically chosen this outcome, rather than applying by default.

12.61 The amendments change this default position, allowing the Commissioner to release the amount of an individual's excess non-concessional contributions in the absence of a request by the individual. [Schedule 10, item 1, subsection 131-15(2)]

12.62 This position is only a default. An individual may still choose for no amount to be released by requesting the Commissioner not release an amount. This request will prevent the Commissioner from seeking the release of the full amount of the excess non-concessional contributions. However, it will not affect any subsequent mandatory release relating to the consequential excess non-concessional contribution tax liability.

Example 12.2 : Release without a request Following on from Example 12.1, Isaac does not request the release of any amount from his superannuation interests.As Isaac has not made a request for the release of an amount (including a nil amount) in relation to his excess non-concessional contributions, 60 days after the issue of the determination of excess non-concessional contributions, the Commissioner may issue release authorities to superannuation providers holding superannuation interests for Isaac to seek the release of the full amount of his excess non-concessional contributions and 85 per cent of associated earnings.Without this new default rule, if Isaac had inadvertently failed to notify the Commissioner of his intention to withdraw his excess non-concessional contribution he would have been subject to excess non-concessional contributions tax of 47 per cent (in 2017-18) on the full amount of his excess contribution ($10,000).Further, unless Isaac has paid the amount of his assessed Division 293 tax liability or it has been deferred to a debt account, the Commissioner may also issue release authorities to superannuation providers holding superannuation interests for Isaac to seek the release of the full amount of his assessed Division 293 tax ($5,000).

Complying with release authorities

Superannuation providers

12.63 The framework establishes a consistent timeframe and process for superannuation providers to release amounts from superannuation interests using this type of release authority and also creates a new type of release authority.

12.64 A release authority can only be issued by the Commissioner to a single superannuation provider and states the amount to be released from each superannuation interest. It must also include the date of issue and contain any other information the Commissioner considers relevant. The Commissioner may also vary or revoke a release authority, so long as it occurs before the Commissioner is given notice by the superannuation provider that they have released the amount. [Schedule 10, item 1, sections 131-25 and 131-30]

12.65 Superannuation providers that have been issued with a release authority by the Commissioner are required to pay to the Commissioner the lesser amount of either:

·
the amount stated in the release authority; or
·
the sum of the maximum available release amounts for each of the superannuation interests held by the superannuation provider for that individual in their superannuation plans.

[Schedule 10, item 1, subsection 131-35(1)]

12.66 The maximum available release amounts for each superannuation interest includes the total amount of all the superannuation lump sums that could be payable from the interest at that time. [Schedule 10, item 1, section 131-45]

12.67 The superannuation provider has ten business days after the date of issue of the release authority to pay this amount to the Commissioner, unless a further period has been allowed by the Commissioner. [Schedule 10, item 1, subsection 131-35(1)]

12.68 By default, defined benefit interests are not included when calculating the sum of the maximum available release amounts for an individual's superannuation interests. This is consistent with the current approach for release authorities relating to excess non-concessional contributions and Division 293 tax. The new approach preserves this treatment and ensures that superannuation providers of defined benefit interests will not be required to comply with a release authority. [Schedule 10, item 1, subsection 131-35(2)]

12.69 However, this new approach differs slightly from the prior approach for excess concessional contributions. Previously subsection 96-20(2) provided that certain other kinds of superannuation interests (interests in non-complying superannuation funds and interests treated as a separate interest under section 307-200 of the ITAA 1997 that were supporting a superannuation income stream) were also not included in working out the maximum available release amount in relation to excess concessional contributions. This amendment requires the release of these amounts from these interests. It has been made to make the release process simpler and more consistent, noting that the release of amounts from such interests has not previously given rise to issues in the context of other release authorities.

12.70 However, superannuation providers of defined benefit interests have the option of complying with the release authority if it is practical in the circumstances and consistent with the provider's rules.

12.71 If the superannuation provider chooses to release an amount from a defined benefit interest, it must pay the same amount to the Commissioner as if the interest was not a defined benefit interest. [Schedule 10, item 1, section 131-40]

12.72 For all superannuation interests, the superannuation provider has ten business days after the date of issue of the release authority to pay this amount to the Commissioner, unless a further period had been allowed by the Commissioner. [Schedule 10, item 1, sections 131-35 and 131-40]

12.73 When a payment is made, the superannuation provider must notify the Commissioner of the payment in the approved form within ten business days after the date the release authority is issued. [Schedule 10, item 1, subsections 131-50(1) and (3)]

12.74 If the provider is not required to make the payment, or the amount it is required to pay is less than the amount stated in the release authority, the superannuation provider must also notify the Commissioner that it is not required to comply with the release authority. The notification must be made in the approved form within ten business days after the date the release authority is issued. [Schedule 10, item 1, subsections 131-50(2) and (3)]

The Commissioner

12.75 The Commissioner is required to notify the individual if the superannuation provider has given a notice to the Commissioner or has not paid the full amount stated in the release authority within the applicable time. This allows the individual to make a further request to release the amount from another superannuation provider or take other steps to meet any outstanding liabilities. [Schedule 10, item 1, subsection 131-55(1)]

12.76 The notice provided to the individual must be in writing, identify the superannuation provider and state how much of the amount stated in the release authority was not paid within the applicable time. [Schedule 10, item 1, subsection 131-55(2)]

12.77 Issuing and acting upon a release authority has never been found to involve an acquisition of property by the Commonwealth. However, historically provisions creating release authorities have provided for the payment of compensation should their operation be found to involve an acquisition of property, to ensure that the provisions would not be invalidated as an acquisition of property on unjust terms. For the avoidance of doubt, the TLA Bill similarly provides for the payment of compensation should the operation of the release authority provisions result in an acquisition of property. It is not expected that this provision will ever operate . [Schedule 10, item 1, section 131-60]

Consequences of release

12.78 The consequences when an amount is released have generally not changed as a result of these amendments.

12.79 Consistent with the prior regime under Division 96, released amounts are paid to the Commissioner and applied as a credit, which arises on the day the Commissioner receives the amount, against the tax liabilities of the individual. To the extent the released amount exceeds the individual's liabilities, it is refunded to the individual. [Schedule 10, item 1, subsection 131-65(1) and (2)]

12.80 The individual is entitled to the payment of interest if there is an unreasonable delay between the Commissioner receiving an amount from a superannuation provider and the payment of any refund to the individual. [Schedule 10, item 1, section 131-70]

12.81 The exception to these rules is amounts released to the Commissioner in relation to Division 293 tax liabilities that are deferred to a Division 293 tax debt account. Consistent with the prior rules for these amounts in subsection 135-90(2), they are treated as a voluntary payment towards the Division 293 tax debt account under section 133-70. Without this special rule, crediting the amount to the individual would not reduce the Division 293 tax debt account as the relevant liability has been deferred to a Division 293 tax debt account. [Schedule 10, item 1, subsection 131-65(3)]

12.82 All released amounts are non-assessable non-exempt income for the individual and are not subject to the proportioning rule (which prescribes how the components of a superannuation benefit are to be determined). [Schedule 10, items 1 and 22, sections 131-75, 303-15 and 303-17 of the ITAA 1997]

12.83 The release of an amount in response to an excess concessional or excess non-concessional contributions determination still reduces an individual's non-concessional or excess non-concessional contributions in the same way as it did previously.

12.84 However, a number of minor changes have been made to account for the changes to the release authority framework.

12.85 First, as the Commissioner is responsible for issuing release authorities to superannuation providers, the provisions that penalised individuals that misused release authorities to release excess amounts are no longer necessary. [Schedule 10, item 24, section 304-15 of the ITAA 1997]

12.86 Secondly, previously if an individual elected to release the amount of their excess non-concessional contributions and 85 per cent of associated earnings for a financial year (the total release amount), the amount of the associated earnings was included in their assessable income.

12.87 As the total release amount may now be released from an individual's superannuation interest even if they do not request the release, the amendments ensure that the amount of the associated earnings are included in the individual's assessable income regardless of whether the individual has made a request to the Commissioner in relation to the release. [Schedule 10, item 9, section 292-20 of the ITAA 1997]

12.88 However, consistent with the current law, an individual does not need to include an amount of associated earnings in relation to contributions if the individual must pay excess non-concessional contributions tax on those contributions. [Schedule 10, item 9, section 292-20 of the ITAA 1997]

12.89 Finally, the Commissioner previously could not issue a direction that an individual has no remaining superannuation interests unless the individual had made an election relating to the release of excess non-concessional contributions. As this direction prevents any further liability for excess non-concessional contributions tax for the relevant financial year from arising, this disadvantaged individuals who had no superannuation interests and failed to make that election.

12.90 The amendments allow the Commissioner to issue such a direction, regardless of whether the individual has made a request to the Commissioner. [Schedule 10, item 19, paragraphs 292-467(1)(b) and (c) of the ITAA 1997]

Superannuation provider's notification of an end benefit cap amount

12.91 Part 2 of Schedule 10 to the TLA Bill removes the need for a superannuation provider of defined benefit interests to advise the Commissioner of an end benefit cap amount if the superannuation provider has confirmed with the Commissioner that their member does not have an amount owing on the member's Division 293 tax debt account in relation to the superannuation interest. [Schedule 10, items 61 and 62, paragraph 133-140(1)(a) and subsection 133-140(1A)]

12.92 Following receipt of a member's request to pay an end benefit from a defined benefit superannuation interest the superannuation provider may request in the approved form that the Commissioner advise if there is an amount owing on the Division 293 tax debt account that is associated with the interest. The Commissioner will be required to confirm this as soon as practicable, which the Commissioner expects would generally be within two business days. [Schedule 10, item 60, section 133-135]

12.93 The superannuation provider will not need to include the amount of the end benefit cap in their end benefit notification if the superannuation provider obtains the Commissioner's confirmation that there is no amount owing on the Division 293 tax debt account. The Commissioner will develop administrative processes to provide superannuation providers with evidence of such confirmation. [Schedule 10, items 60 and 62, subsections 133-135(2) and 133-140(1A)]

12.94 Alternatively, the superannuation provider could choose not to request the above information from the Commissioner and provide an end benefit notification which includes the amount of the end benefit cap amount. Given the costs of calculating the end benefit cap amount it is expected that most superannuation providers will seek information from the Commissioner about the status of their members' Division 293 tax debt accounts.

12.95 However, the superannuation provider will still have to provide an end benefit notice as required under the existing law even if the end benefit cap amount does not have to be provided (see section 133-140). This is because the Commissioner continues to need notification of the pending payment of the superannuation benefit to close the Division 293 tax debt account in relation to the superannuation interest and to seek payment of any future Division 293 amounts payable.

Example 12.3 : Superannuation provider not required to advise of end benefit cap amount Sophie is planning to retire and has requested her superannuation provider pay her an end benefit from her defined benefit superannuation interest. Following receipt of her request, Sophie's superannuation provider contacts the Commissioner about the status of her Division 293 tax debt account. The Commissioner confirms there is no amount owing on the account.Sophie's superannuation provider will not be required to report an end benefit cap amount. However, the provider will still need to give the Commissioner an end benefit notification for her superannuation interest. This allows the Commissioner to close Sophie's Division 293 tax debt account.

12.96 In addition to making consequential changes, the amendments also simplify the existing subsection 133-120(1) by splitting it into two provisions to make it easier to apply. This is not intended to change the application of the subsection in any way. [Schedule 10, item 56, subsections 133-120(1) and (1A)]

Individuals not required to provide end benefit notices

12.97 Part 2 of Schedule 10 to the TLA Bill also removes the need for individuals with defined benefit superannuation interests to provide the Commissioner with an individual end benefit notice. Previously this notice was required by individuals who requested that their superannuation provider pay an end benefit from their superannuation interest for which the Commissioner kept a Division 293 tax debt account. [Schedule 10, item 60, section 133-135]

12.98 This amendment removes this compliance obligation on individuals, and recognises that the Commissioner will continue to receive end benefit notifications from superannuation providers which provide the Commissioner with the information the Commissioner requires.

Example 12.4 : Individual end benefit notification not required Peter is retiring and requests his superannuation provider to pay him an end benefit from his defined benefit superannuation interest for which the Commissioner has been keeping a Division 293 tax debt account. There is no need for Peter to give the Commissioner an individual end benefit notice to advise the Commissioner of the request.

Combining notices

12.99 Part 3 of Schedule 10 to the TLA Bill introduces a specific provision to clarify and remove any doubt that the Commissioner can provide a single notice that includes two or more separate notices required to be provided under a taxation law. [Schedule 10, item 65, section 990-5 in Schedule 1 to the TAA]

12.100 An approach under which the Commissioner combines multiple notices into one document reduces compliance costs for taxpayers. For example, providing one notice that contains assessment notices for Division 293 tax and excess non-concessional contributions tax and notices concerning excess concessional contributions ensures affected taxpayers receive a more comprehensive picture of their superannuation tax position and allows them to seek advice about all matters at the one time rather than at different times.

12.101 The benefits from the Commissioner being able to include multiple notifications and determinations in a single notice apply wider than just superannuation. Accordingly, this measure applies to all taxes, not just aspects of the taxation law that concern superannuation.

12.102 The Commissioner can decide if notices should be combined. In doing so, the Commissioner would take into account existing administrative practice regarding the affected notices and the benefits to taxpayers from consolidating notices.

Amendments relating to the CSS

12.103 Part 4 of Schedule 10 to the TLA Bill provides for accumulated supplementary member contributions and accumulated funded employer productivity contributions to be released in relation to a release authority (except those relating to debt account discharge liabilities for Division 293 tax) issued by the Commissioner. [Schedule 10, items 95 to 105, section 79A, subsections 79A(1),(2) and (3), subsection 79B(1), subsection 79B(1A), section 79B, subsection 79C(1)]

12.104 In addition, the opportunity is being taken to consolidate existing provisions allowing the release of amounts that have been transferred into the CSS from other superannuation schemes.

12.105 This means that provisions relating to the release of amounts in relation to relevant release authorities are set out under a single division of the Superannuation Act 1976 rather than being spread across sections.

12.106 Combined with the changes to allow the release of accumulated supplementary member contributions and accumulated funded employer productivity contributions this means that arrangements for the release of:

·
accumulated supplementary member contributions;
·
accumulated funded employer productivity contributions; and
·
funded transfer amounts:

in relation to a release authority (except those relating to debt account discharge liabilities for Division 293 tax) are dealt with under Part V of Division 4A of the Superannuation Act 1976 .

12.107 The total of these amounts is called the 'early release authority amount'. [Schedule 10, Part 4, item 2, the definition of 'early release authority amount' in subsection 79A(1) of the Superannuation Act 1976]

12.108 Amounts can be released in relation to a CSS member who is:

·
an eligible employee (a contributory member of the CSS);
·
a deferred benefit member (generally a person who has ceased contributory membership before reaching minimum retirement age, and who has elected to leave all of their benefits in the scheme); or
·
a postponed benefit member of the CSS (a person who has reached minimum retiring age (generally age 55) and became eligible for a CSS age retirement benefit, and who elected to postpone receipt of that benefit).
[Schedule 10, item 9, subparagraph 79B(1A) of the Superannuation Act 1976].

12.109 The amount that can be released cannot be greater than the 'available early release authority amount' (AERAA). This amount can be calculated by considering the definition as giving the following formula:

AERAA = (ERAA - ERDA) + (lesser of ABC and MERDA)

12.110 Where:

·
early release authority amount (ERAA) is the sum of the person's accumulated supplementary contributions, accumulated funded employer productivity contributions and accumulated funded transfer amounts); [Schedule 10, item 2, paragraph (a) of new definition 'available early release authority amount' in subsection 79A(1) of the Superannuation Act 1976] ;
·
early release deduction amount (ERDA) is the total, for a person, of all previous lump sums released under both subsections 79B(1) and (1A) plus interest on those amounts; [Schedule 10, item 2, paragraph (b) of new definition 'available early release authority amount' in subsection 79A(1) of the Superannuation Act 1976] ; and
·
accumulated basic member contributions (ABC) is the person's accumulated basic member contributions [Schedule 10, item 2, subparagraph (c)(i) of new definition 'available early release authority amount' in subsection 79A(1) of the Superannuation Act 1976] ; and
·
modified early release deduction amount (MERDA) is the total, for a person, of all previous lump sums released under subsection 79B(1) plus interest on those amounts .[Schedule 10, item 2, subparagraph (c)(ii) of new definition 'available early release authority amount'. in subsection 79A(1) of the Superannuation Act 1976].

12.111 Existing subsection 79B(1) of Superannuation Act 1976 allows the release of CSS funded amounts, including accumulated basic member contributions, on severe financial hardship or compassionate grounds as permitted by the Superannuation Industry (Supervision) Regulations 1994 .

Example 12.5 Calculation of 'available early release authority amount' Bill has:

-
accumulated basic member contributions of $1,000;
-
accumulated supplementary member contributions of $2,000; and
-
accumulated funded employer productivity contributions of $3,000.

Bill has never had any amounts released under subsections 79B(1) or 79B(1A) of the Superannuation Act 1976 .Bill's amount available for release (AERAA) under subsection 79B(1A) of the Superannuation Act 1976 is $5,000. This is calculated as follows:AERAA = ($5,000 - $0) + (lesser of $1,000 and $0)=$5,000 + $0=$5,000As intended, the amount available for release under subsection 79B(1A) does not include Bill's accumulated basic member contributions.

Example 12.6 Calculation of 'available early release authority amount' Susan has:

-
accumulated basic member contributions of $1,000;
-
accumulated supplementary member contributions of $2,000; and
-
accumulated funded employer productivity contributions of $3,000.

Susan has previously had $2,000 released under subsection 79B(1A) but has never had any amount released under subsection 79B(1).Susan's amount available for release (AERAA) under subsection 79B(1A) is $3,000. This reflects that Susan has already had $2,000 released under subsection 79B(1A) in relation to an earlier release authority and that Susan's accumulated basic member contributions cannot be released under subsection 79B(1A) in relation to a release authority.AERAA = ($5,000 - $2,000) + (lesser of $1,000 and $0)= $3,000 + $0= $3,000

Example 12.7 Calculation of 'available early release authority amount' John has:

-
accumulated basic member contributions of $1,000;
-
accumulated supplementary member contributions of $2,000; and
-
accumulated funded employer productivity contributions of $3,000.

John has previously had $4,000 released under subsection 79B(1) and has had $2,000 released under subsection 79B(1A).John's amount available for release (AERAA) under subsection 79B(1A) is $0.AERAA = ($5,000 - $6,000) + (lesser of $1,000 and $4,000)= (-$1,000) + ($1,000)=$0

12.112 Released amounts must be paid out of the CSS Fund. However, consistent with the current law (see subsections 79C(1) and (2) of the Superannuation Act 1976 ), the release of an amount does not by itself trigger the payment of a benefit to which the person is entitled under the CSS.

12.113 At the time the CSS member is paid their benefit, the amount paid must reflect amounts previously released. Section 79D of the Superannuation Act 1976 provides that the method to work out the reduction is to be determined by the Commonwealth Superannuation Corporation which is the trustee of the CSS.

Consequential amendments

12.114 Part 1 of Schedule 10 to the TLA Bill also makes consequential amendments to the ITAA 1997 and TAA 1953 to update various provisions, including guidance material, to account for the introduction of the new arrangements for release authorities and to repeal provisions that would otherwise have become inoperative. [Schedule 10, items 2 to 8, 10 to 18, 20 to 21, 23, 25 to 48, items headed "superannuation" in the tables in sections 10-5 and 11-55, subsections 280-15(3) and (4), note 3 to section 291-15, sections 292-1 and 292-15, paragraph 292-25(2)(a), notes 1 and 2 to subsection 292-25(2), paragraph 292-85(1)(b), subsection 292-85(1), paragraphs 292-85(1A)(a) and 292-90(1A)(b), sections 292-405, 292-410 and 292-415, note 1 to subsection 292-467(1), note 2 to subsection 293-70(2), the heading to section 303-20, heading to section 304-20 and the definitions of maximum available release amount and total release amount in subsection 995-1(1) of the ITAA 1997, note 4 to subsection 292-80C(1) of the Income Tax (Transitional Provisions) Act 1997, paragraph 95-5(b), Division 96, sections 135-1 and 135-5, table items 1 and 2 in subsection 135-10(1), section 135-35, section135-45, subsection 135-75(3), the note to section 135-85, subsections 135-90(1), (2) and (3), item 135R in the table in subsection 250-10(2), paragraph 286-75(2AA)(a), section 288-90, subsections 288-95(1), (3) and (4), subsection 288-100(1) and subparagraph 390-65(1)(a)(i) in Schedule 1 to the TAA 1953 and subsection 3(1) of the Taxation (Interest on Overpayments and Early Payments) Act 1983]

12.115 Part 2 of Schedule 10 to the TLA Bill also makes several consequential amendments to the TAA 1953 to facilitate the changes to Division 293 tax end benefit notification. [Schedule 10, items 55, 57 to 59 and 63, subsection 133-10(3), section 133-125 and subsection 133-145(1)]

12.116 Part 3 of Schedule 10 to the TLA Bill also makes consequential amendments to the taxation law to remove provisions allowing the Commissioner to include a notice with any other notice that the Commissioner provides to a taxpayer. These provisions will be redundant following the enactment of the new provision to combine notices contained in Part 2 of this Schedule. [Schedule 10, items 66 to 92, subsections 45D(1), 102AAM(13), 159GZZZZH(3), 177EA(6), 177EB(7) and 177F(2D) of the Income Tax Assessment Act 1936, subsections 204-50(4), 214-60(3), 214-140(1), 214-140(2), 275-615(3), 291-465(6), 292-230(3), 292-310(3), 292-465(8), 292-467(3), 295-625(1), the heading to subsection 295-625(2), 815-30(8), 815-35(8) and 815-145(6) of the ITAA 1997, subsections 214-25(3), 214-80(1) and 214-80(2) of the Income Tax (Transitional Provisions) Act 1997, subsection 98C(2) of the Petroleum Resource Rent Tax Act 1987, subsection 62(2) of the Superannuation Guarantee (Administration) Act 1992, subsection 8AAF(3) of the TAA 1953 and subsections 45-320(6), 45-473(1), 45-473(2), 97-5(4), 97-25(4), 133-30(2) and 280-110(2) in Schedule 1 to the TAA 1953]

12.117 Part 4 of Schedule 10 to the TLA Bill 2016 also makes consequential amendments to ensure that the CSS release authority provisions in the Superannuation Act 1976 correctly link to the new simplified release authority provisions being introduced into Schedule 1 to the TAA 1953 by Part 1 of Schedule 10 to the TLA Bill (except those relating to debt account discharge liabilities for Division 293 tax have not been updated). This ensures that the CSS release authority provisions can continue to operate as intended. [Schedule 10, items 94, 106 to 111, subsection 3(1), subparagraphs 110SN(2)(i) and (iii), subsection 110SN(2), subparagraphs 130D(3)(a)(i) and (iii), subsection 130D(3) of the Superannuation Act 1976]

Application and transitional provisions

12.118 The amendments in Schedule 10 to the TLA Bill excluding Parts 1 and 4 commence on the first day of the next quarter following the day of Royal Assent. The amendments in Parts 1 and 4 of Schedule 10 to the TLA Bill commence on 1 July 2018.

12.119 The amendments in Part 1 of Schedule 10 to the TLA Bill apply to all release authorities issued by the Commissioner on or after 1 July 2018.

12.120 This means that amendments apply in relation to excess concessional and excess non-concessional contributions determinations and notices of excess non-concessional contributions tax assessments issued on or after 1 July 2018, regardless of the applicable financial years to which the determinations or notices relate. In addition, these amendments will apply in relation to notices of assessments of amounts of Division 293 tax issued on or after 1 July 2018 for all income years. [Schedule 10, item 49]

12.121 It also means that from 1 July 2018, release authorities relating to valid elections made under the prior provisions or circumstances where the Commissioner could issue a release authority without a request will be issued by the Commissioner under the new release authority framework, even if they relate to circumstances before 1 July 2018. [Schedule 10, items 50 to 53]

12.122 This will be the case even if the Commissioner had issued the individual with a release authority in relation to either an excess non-concessional contributions tax assessment or a notice of assessment of an amount of Division 293 tax before 1 July 2018 under the prior provisions.

12.123 The amendments include a transitional rule providing that amounts released under the prior law will be taken into account for any release authorities issued under the new law. [Schedule 10, item 54]

12.124 The amendments in Part 2 of Schedule 10 to the TLA Bill apply to end benefit notifications for which the obligation to provide the notification arises on or after 1 July 2017. [Schedule 10, item 64]

12.125 The amendments in Part 3 of Schedule 10 to the TLA Bill apply on and from 1 July 2017. [Schedule 10, item 93]

12.126 The amendments in Part 4 of Schedule 10 apply on and from their commencement. [Item 7 of the table in section 2]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016

12.127 Schedule 10 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 (the TLA Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

12.128 Part 1 of Schedule 10 to the TLA Bill reduces compliance costs for individuals and superannuation providers by amending the tax law to simplify and consolidate the range of existing processes for the release of amounts from individuals' superannuation using a release authority.

12.129 The amendments will replace existing release authorities (except those relating to deferred debt account discharge liabilities for Division 293 tax) with a new simplified release authority regime. This will ensure that the release of all such superannuation amounts is subject to common processes and timeframes.

12.130 Part 2 of Schedule 10 reduces compliance costs for superannuation providers and individuals where superannuation benefits become payable for defined benefit interests.

12.131 The Schedule removes the requirements in the taxation law relating to superannuation interests for which a Division 293 tax debt account is being kept for:

·
superannuation providers to notify the Commissioner of Taxation (Commissioner) of the amount of end benefit caps for their members in some circumstances; and
·
individuals to notify the Commissioner in any circumstance when their superannuation benefits from such interests first become payable.

12.132 The amendments do not require a superannuation provider of a defined benefit interest to disclose the amount of their member's end benefit cap when they give the Commissioner an end benefit notice if the provider has confirmed with the Commissioner that there is no amount owing on the member's Division 293 tax debt account.

12.133 Part 3 of Schedule 10 to the TLA Bill clarifies that the Commissioner can provide a single notice in relation to multiple matters.

12.134 Part 4 of Schedule 10 to the TLA Bill makes consequential amendments to the Superannuation Act 1976 that set out the rules that govern the Commonwealth Superannuation Scheme in relation to release authorities issued by the Commissioner. The amendments take account of changes made by other parts of the Government's 2016-17 Budget Superannuation Reform Package.

Human rights implications

12.135 This Schedule does not engage any of the applicable rights or freedoms as the changes are administrative and machinery in nature.

Conclusion

12.136 This Schedule is compatible with human rights as it does not raise any human rights issues.


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