Explanatory Memorandum
(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon Michael Sukkar MP.)Chapter 2 - Payment of amounts to KiwiSaver scheme provider
Outline of chapter
2.1 Schedule 2 to the Bill amends the SUMLM Act and the ITAA 1997 to facilitate the payment of money held by the Commissioner under the SUMLM Act directly to New Zealand KiwiSaver schemes.
Context of amendments
2.2 The Australian and the New Zealand Governments signed the Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability (the Arrangement) in 2009.
2.3 The Arrangement establishes a scheme which enables Australians and New Zealanders to transfer their retirement savings between Australia and New Zealand.
2.4 Currently, under the Arrangement and associated legislation, retirement savings can only be transferred between Australian complying superannuation funds and New Zealand KiwiSaver schemes. A KiwiSaver scheme is part of New Zealand's retirement saving scheme which is broadly analogous to a complying superannuation fund in Australia's superannuation system.
2.5 As such, New Zealand residents who have superannuation money held by the Commissioner in respect of them under the SUMLM Act are unable to have the money paid directly to their New Zealand KiwiSaver account. Rather, individuals must transfer their superannuation money from the Commissioner to an Australian complying superannuation fund and then request the fund to transfer the money to a KiwiSaver scheme provider (who will then credit the amount to their KiwiSaver account).
2.6 The current mechanism to transfer superannuation money to KiwiSaver scheme providers is inefficient and causes both individuals and the superannuation system to incur unnecessary costs.
2.7 The amendments made by schedule 2 to the Bill provide that the Commissioner can, if directed by the person, pay amounts held in respect of the person under the SUMLM Act directly to a KiwiSaver scheme provider.
Summary of new law
2.8 Schedule 2 to the Bill amends the SUMLM Act to allow individuals to direct the Commissioner to pay amounts the Commissioner holds in respect of them under the SUMLM Act directly to KiwiSaver scheme providers.
2.9 Further, where the Commissioner makes a payment to a KiwiSaver scheme provider, the Commissioner may also be required to pay an amount of interest.
2.10 Schedule 2, Part 1 of the Bill commences on a single day to be fixed by Proclamation. However, if Part 1 does not commence within the period of 12 months beginning on the day the Bill receives Royal Assent, the Part commences on the day after the end of that period.
2.11 The period of 12 months is necessary and appropriate in these circumstances to ensure sufficient time for corresponding legislation to be passed by the New Zealand Parliament and for the Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability, which Schedule 2 to the Bill will give effect to, to be amended.
Detailed explanation of new law
Allowing the Commissioner to pay lost and unclaimed superannuation money to KiwiSaver scheme providers
2.12 The definitions of KiwiSaver scheme and KiwiSaver scheme provider are inserted into the SUMLM Act with their meanings both provided by subsection 995-1(1) of the ITAA 1997. [Schedule 2, item 9, section 8 of the SUMLM Act]
2.13 Schedule 2 to the Bill inserts new paragraphs into the various payment provisions throughout the SUMLM Act. These paragraphs require the Commissioner to pay relevant amounts they hold in respect of a person to a single KiwiSaver scheme provider if the Commissioner is satisfied, upon application in the approved form or on the Commissioner's own initiative, that the person has directed the Commissioner to do so and the matters prescribed by the regulations are satisfied. [Schedule 2, items 10, 16, 20, 27 and 36, sections 17(2)(a), 20H(2)(b), 20QF(2)(a), 24G(2)(a) and 21E(2)(a) of the SUMLM Act]
2.14 Schedule 2 to the Bill also amends various provisions throughout the SUMLM Act which deal with the circumstances in which the Commissioner must pay amounts they hold in respect of a person under the SUMLM Act directly to the person. The amendments ensure that the Commissioner is not required to pay the amount to the person if the Commissioner is already required to pay the amount to a KiwiSaver scheme provider. [Schedule 2, items 21, 28, and 37, sections 20QF(3)(a), 24G(2A)(a) and 21E(3)(a) of the SUMLM Act]
Overpayments
2.15 Schedule 2 to the Bill amends various provisions throughout the SUMLM Act which allow the Commissioner to recover amounts which exceed the amount properly payable under the relevant payment provision. The amendments provide that these provisions do not apply to amounts paid to KiwiSaver scheme providers. [Schedule 2, items 14, 18, 25, 32 and 41 sections 18B(1)(a), 20L(1)(a), 20QK(1)(a), 24K(1)(a) and 21G(1)(a) of the SUMLM Act]
Requirement to return payments
2.16 Schedule 2 to the Bill amends various provisions throughout the SUMLM Act which require superannuation providers to repay amounts they receive under the SUMLM Act if they do not credit the amount to the relevant person's account within a certain time. The amendments ensure that these provisions do not apply to payments to KiwiSaver scheme providers under the SUMLM Act. [Schedule 2, items 15, 19, 26, 33 and 42, sections 18C(1)(a), 20M(1)(a), 20QL(1)(a), 24L(1)(a) and 21H(1)(a) of the SUMLM Act]
Interest on payments
2.17 Where the Commissioner makes a payment to a KiwiSaver scheme provider, the Commissioner may be required to pay interest on such amounts worked out in accordance with the regulations. [Schedule 2, items 11, 12, 13, 17, 22, 23, 24, 29, 30, 31, 38, 39 and 40, sections 17(2AB)(a), 17(2AB)(b), 17(2AB), 20H(2AA), 20QF(5)(a), 20QF(5)(b), 20QF(5), 24G(3A)(a), 24G(3A)(b), 24G(3A), 21E(5)(a), 21E(5)(b), 21E(5) of the SUMLM Act]
Consequential amendments
2.18 Consistent with payments made from complying superannuation funds to KiwiSaver scheme providers, the ITAA 1997 is amended to provide that payments made by the Commissioner to a KiwiSaver scheme provider under the SUMLM Act are non-assessable non-exempt income of the individual in respect whom the payment was made. [Schedule 2, items 1-6, sections 11-55 (table item headed "superannuation"), 312-1, 312-5, 312-15 (heading) and 312-20 of the ITAA 1997]
Application and transitional provisions
2.19 The amendments made by schedule 2 to the Bill apply in relation to payments made by the Commissioner on or after commencement of this schedule, regardless of when the amounts attributable to the payments were received by the Commissioner. [Schedule 2, items 34 and 43]