House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 1 - Overview and Preliminary

Overview

1.1 This Bill provides for a scheme relating to unclaimed superannuation money (unclaimed money) and lost superannuation members (lost members).

1.2 This Bill consists of 8 Parts. The main provisions are contained in Parts 3, 4 and 5 of this Bill and govern the reporting and payment of unclaimed money and the reporting of lost members. The ancillary provisions of this Bill (ie. preliminary, interpretative and administrative provisions etc.) are contained in Parts 1, 2, 6, 7 and 8 of this Bill.

Summary

Purpose

1.3 This Bill improves the efficiency of existing arrangements for reuniting people with their superannuation by:

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extending the use of tax file numbers (TFNs) for superannuation purposes to the Commonwealth lost members register and the State and Territory unclaimed money registers (currently, the use of TFNs for superannuation purposes is limited to the Commonwealth unclaimed money register);

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improving the definition of unclaimed money to better target cases of unclaimed money (eg. unpresented cheques);

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allowing the Commissioner of Taxation (the Commissioner) to publish details relating to unclaimed money (eg. publish the names of people with unclaimed money as currently permitted for unclaimed bank money subject to safeguards such as subclause 44(2) of this Bill which expressly prohibits the Commissioner from publishing TFNs);

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facilitating greater co-operation between Commonwealth, State and Territory unclaimed money registers; and

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including regulated exempt public sector superannuation schemes within the unclaimed money and lost members scheme.

1.4 This Bill also consolidates existing provisions relating to unclaimed money and lost members which are currently spread over 4 items of legislation. The existing provisions are set out in Part 22 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), regulation 11.08 of the Superannuation Industry (Supervision) Regulations (the SIS Regulations), Part 8 of the Retirement Savings Accounts Act 1997 (the RSA Act) and regulation 6.09 of the Retirement Savings AccountsRegulations (the RSA Regulations).

1.5 This Bill also ensures that consistent taxation arrangements (eg. the eligible termination payment and reasonable benefit limits provisions) apply to unclaimed money paid from State and Territory unclaimed money registers as currently apply to superannuation payments from complying superannuation funds, retirement savings accounts (RSAs) and the Commonwealth unclaimed money register.

Date of effect

1.6 Subject to transitional arrangements, this Bill will apply from Royal Assent. [Clause 2]

Transitional arrangements

1.7 The reporting and payment of unclaimed money to Commonwealth, State and Territory unclaimed money registers is currently linked to half-calendar years (ie. 1January to 30June and 1July to 31December). Superannuation providers must determine the unclaimed money they have at the end of each half-year and pay those monies and report information in respect of those monies within 4 months from the end of the half-year.

1.8 This Bill continues this half-calendar year cycle of reporting and payment, however to ensure that the effect of this Bill is prospective, this Bill will apply in respect of the next half-year after Royal Assent. [Clause 3]

1.9 The Superannuation (Unclaimed Money and Lost Members)Consequential and TransitionalBill1999 (the Consequential Amendments Bill) contains a transitional provision for State and Territory unclaimed money registers. Currently, a precondition for State and Territory unclaimed money registers receiving unclaimed money is that the relevant State or Territory legislation must satisfy the requirements of subsections 225(9), (9A) and (9B) of the SISAct and subsections 84(1), (2) and (3) of the RSA Act. Similar requirements are contained in clause18 of this Bill.

1.10 Clause5 of the Consequential Amendments Bill provides that if State or Territory unclaimed money legislation does not satisfy the requirements of clause18 of this Bill on commencement of this Bill, the legislation will despite that non-satisfaction, continue to apply to unclaimed money until the end of a transitional period of 2 years, or the State or Territory unclaimed money legislation satisfies the requirements, whichever is the earlier.

1.11 As clause18 of this Bill is in similar terms to existing subsections 225(9), (9A) and (9B) of the SISAct and subsections 84(1), (2) and (3) of the RSAAct, existing State and Territory unclaimed money legislation may satisfy the requirements.

1.12 If the unclaimed money legislation of a State or Territory does not satisfy the requirements of clause18 of this Bill, the 2 year transitional period will provide the State or Territory with an opportunity to amend the legislation to make it satisfy the requirements.

Background to the legislation

1.13 The Superannuation Guarantee (Administration) Act 1992 and the Superannuation Guarantee Charge Act 1992 provided a major extension of superannuation to the workforce. With the increased coverage, many casual and itinerant workers and those with broken employment patterns became lost members in the sense that they lost the paperwork associated with their account, were never given the paperwork because they terminated employment before their superannuation guarantee contributions were made or lost contact with their fund in other circumstances .

1.14 The Commonwealth Government policy document Strengthening Superannuation Security (21October1992) announced the establishment of the Commonwealth unclaimed money register and the Commonwealth lost members register to maximise the prospect of superannuation members receiving contributions made on their behalf. Along with State and Territory unclaimed money registers, the Commonwealth registers are currently operating under the SISAct and the RSAAct.

1.15 This Bill will strengthen arrangements for reuniting people with their superannuation (particularly casual and itinerant workers and workers with broken employment patterns). The existing structure of the registers (which is outlined in the following paragraphs) will remain unchanged.

Commonwealth, State and Territory unclaimed money registers

1.16 Unclaimed money is governed by Commonwealth legislation (Part 22 of the SISAct and Part 8 of the RSAAct). However, if a State or Territory has consistent legislation, superannuation providers are required to pay and report information in respect of unclaimed money to State and Territory unclaimed money registers (rather than the Commonwealth unclaimed money register).

1.17 Due to the preservation rules governing superannuation, superannuation money is only considered to be unclaimed if the member has reached eligibility age (60 years for women and 65 years for men) or has died. In contrast, the Commonwealth lost members register only requires superannuation providers to report information (rather than pay money) and aims to reunite members with their money before their money is deemed to be unclaimed and has to be paid to an unclaimed money register.

1.18 The Commonwealth unclaimed money register applies where no State or Territory unclaimed money scheme applies to the particular unclaimed money of a superannuation provider. This may involve:

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cases where the State or Territory has no unclaimed money legislation (eg. Western Australia);

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cases where the State or Territory has inconsistent unclaimed money legislation; or

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cases where the State or Territory has consistent unclaimed money legislation but the legislation does not extend to the particular case of unclaimed money (eg. certainCommonwealth superannuation schemes).

1.19 The Commonwealth unclaimed money register has been operational since 1July1997 and except for Western Australia, State and Territory unclaimed money registers became operational at or shortly after this time. Western Australia has not enacted unclaimed money legislation and therefore unclaimed money in Western Australia is paid to the Commonwealth unclaimed money register.

1.20 The Commonwealth unclaimed money register is administered by the Commissioner under:

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a SISAct Modification for regulated superannuation funds and approved deposit funds (Australian Securities and Investments Commission Digest Class Order 99/1); and

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Part 8 of the RSAAct for RSAs.

1.21 When the SIS Act commenced on 1December1993, provision was made for the Insurance and Superannuation Commissioner (ISC) to administer the register but before the register became operational it was decided to pass responsibility for the register to the Commissioner on the basis of the greater experience and efficiencies that the Australian Taxation Office has in system administration. This decision was announced on 4April1996 in ISC Modification Declaration No.13.

Commonwealth lost members register

1.22 The reporting of information in respect of lost members is governed by Commonwealth legislation (regulation 11.08 of the SISRegulations and regulation 6.09 of the RSARegulations). The information is required to be reported to the Commonwealth lost members register.

1.23 As with the Commonwealth unclaimed money register, the Commonwealth lost members register is administered by the Commissioner. The register has been operational since 1July1996.

1.24 In addition to reuniting people with their superannuation, the register is a preventative measure aimed at minimising the number of cases which become unclaimed money.

Preliminary

Overview

1.25 Part1 of this Bill sets out the preliminary provisions of the Superannuation (Unclaimed Money and Lost Members) Act 1999 (the Act). [Clauses 1to7]

Purpose of the provisions

1.26 The purpose of the provisions is to determine the ambit of the Act and provide an overview of the Act.

Explanation of the provisions

Title and Commencement of the Act

1.27 When this Bill is enacted it will be called the Superannuation (Unclaimed Money and Lost Members) Act 1999 . [Clause 1]

1.28 The Act will commence on the day it receives the Royal Assent, and will apply from the next half-year after that date. [Clauses 2and3]

Scope of the Act

1.29 The Act binds the Crown in right of the Commonwealth, the States, the Australian Capital Territory, the Northern Territory and Norfolk Island and applies to external Territories. The Crown cannot be prosecuted for any offences under the Act. [Clauses 4and5]

Objects of the Act

1.30 The general object of the Act is to reunite people with their superannuation and improve and consolidate existing arrangements relating to unclaimed money and lost members (eg. provide for greater co-operation and co-ordination between the Commonwealth, States and Territories).

1.31 The specific objects of the Act are set out in clause6 of this Bill and are to provide for:

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the keeping of registers of details relating to unclaimed money, so that the money can be claimed by persons entitled to it;

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the keeping of a register of details relating to lost members, so that the benefits of lost members can be claimed by persons entitled to them;

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the matching of unclaimed money and persons entitled to it;

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the matching of benefits of lost members and persons entitled to them;

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the safe-keeping of unclaimed money until the money is claimed by a person entitled to it;

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the co-ordination of the collection of unclaimed money between the Commonwealth, States and Territories; and

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the co-ordination of the matching of unclaimed money and persons entitled to it between the Commonwealth, States and Territories.

Outline of the Act

1.32 Clause7 highlights the significant features of the operation of the Act.