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Senate

Superannuation Contributions Tax (Assessment and Collection) Bill 1997

Superannuation Contributions Tax (Assessment and Collection) Act 1997

Explanatory Memorandum

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

General outline and financial impact

Superannuation Contributions Surcharge (Assessment and Collection) Bill

This Bill forms part of a package of legislation designed to give a legislative framework for the introduction of a superannuation contributions surcharge for high income earners. The other components of the legislative package are: the Superannuation Contributions Surcharge Imposition Bill 1997, the Termination Payments Surcharge (Assessment and Collection) Bill 1997, the Termination Payments Surcharge Imposition Bill 1997 and the Superannuation Contributions Surcharge (Consequential Amendments) Bill 1997.

Date of effect: 20 August 1996

Proposal announced : The introduction of the superannuation contributions surcharge for high income earners was announced by the Government in the 1996-97 Budget and was incorporated in the Treasurer's Press Release No. 87 of 20 August 1996 entitled 'Superannuation Reform'.

Financial impact:

It is estimated that the revenue impact of the surcharge will be $480 million in 1997-98, $470 million in 1998-99 and $530 million in 1999-2000.

Compliance cost impact:

This statement has been prepared against the background that the administrative requirements for the surcharge are essentially similar to processes that superannuation funds already undertake as part of normal business operations. The design of the surcharge recognises these similarities, but takes into account reductions in compliance costs that can be achieved by aligning surcharge requirements with normal operations of superannuation funds. For example, in some cases seeking tax file numbers for surcharge purposes may be included in annual member statements. Other recent changes in superannuation administration (in particular, extending the use of tax file numbers for superannuation purposes and electronic reporting of member details to establish and operate the register of lost members) will also reduce surcharge-related compliance costs.

Actual compliance costs will vary between superannuation entities depending on the degree of development of existing administrative systems, and whether those systems are provided "in-house", as part of a corporate structure or through an external service provider. However, additional costs related solely to the surcharge to be incurred by a superannuation fund using a contemporary administration system, ie; a system using computerised member information and accounting systems, would include:

·
updating staff training to include the surcharge;
·
transmitting member information between the fund and the ATO;
·
adjusting member accounts to record surcharge liabilities and paying surcharge assessments;
·
updating explanatory material for members and in responding to member inquiries; and
·
enhancing data on members who have exited the fund.

In addition to the above, defined benefit funds will need to obtain actuarial advice regarding the notional surchargeable contributions factor (although it is expected that this advice will need to be updated infrequently). Unfunded defined benefit schemes will need to establish and maintain a surcharge debt account for each of their members.

The Government remains committed to ongoing consultation with the superannuation industry to further reduce compliance costs associated with the surcharge and other aspects of superannuation.

Chapter 1 Preliminary

Overview

1.1 Part 1 of the Bill sets out the preliminary details of the Act.

Purpose of the provisions

1.2 The purpose of the provisions is to:

·
establish the title, scope and commencement date of the Act; and
·
provide an outline of the purpose and operation of the Act.

Explanation of the provisions

Title and Commencement of the Act

1.3 When the Bill is enacted it will be called the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997. [Clause 1]

1.4 The Act is to commence on the day it receives the Royal Assent. [Clause 2]

Scope of the Act

1.5 The Act binds the Crown in the Commonwealth, the Australian Capital Territory, the Northern Territory and all the external Territories. The Crown cannot be prosecuted for any offences under this Act. The application of the Act in relation to Australia's external territories is limited in its application to entities that are not exempt from income tax for the purposes of Division 1A of Part III of the Income Tax Assessment Act 1936 (refer to subclause 7(3) of the Bill). [Clauses 3 and 4]

Object of the Act

1.6 The object of the Act is to provide for the assessment and collection of the superannuation contributions surcharge payable on the surchargeable superannuation contributions of high income earners. [Clause 5]

Outline of the Act

1.7 Clause 6 highlights significant features of the operation of the Act.

Chapter 2 Liability to surcharge and advance instalments

Overview

2.1 This chapter explains when liability to the surcharge and advance instalment will arise and who must pay the liability. The provisions discussed in this chapter are contained in Part 2 of the Bill.

Purpose of the provisions

2.2 The purpose of the provisions is to:

·
identify the amounts which will be subject to the surcharge or advance instalment;
·
explain when the surcharge or advance instalment is payable; and
·
identify who will be liable to pay the surcharge or advance instalment.

Explanation of the provisions

What amounts will surcharge be paid on?

2.3 The surcharge is imposed on surchargeable contributions . [Subclause 7(1)]

2.4 Clause 8 determines the amount of a member's surchargeable contributions for a financial year. The basis for working out a member's surchargeable contributions depends on whether the holder of the contributions is a superannuation provider that is a superannuation (accumulated benefits) provider or a superannuation (defined benefits) provider.

2.5 A superannuation provider is:

·
the trustee of a complying superannuation fund or complying ADF;
·
an RSA provider; or
·
a life assurance company or registered organisation.

[Clause 41 - definition of superannuation provider]

Contributions held by a superannuation (accumulated benefits) provider

2.6 A superannuation (accumulated benefits) provider is defined in Clause 41 to mean a superannuation provider that is not a superannuation (defined benefits) provider. Generally, a superannuation (accumulated benefits) provider is the provider of an accumulation fund or a defined contribution fund. An accumulation fund or a defined contribution fund is a fund where the benefit a member receives is the total of contributions made plus net earnings on those contributions and includes a fund which provides death benefits only (that is, where the only asset of the fund is a life assurance policy). A superannuation (accumulated benefits) provider also includes an RSA, a complying ADF, a life assurance company or a registered organisation

2.7 If contributions are paid by or for a member during the financial year to a superannuation (accumulated benefits) provider, surchargeable contributions are the sum of:

·
contributions that are taxable contributions under:
·
subparagraph 274(1)(a)(i) of the Income Tax Assessment Act - that is, contributions made to a complying superannuation fund by an employer or by another person who is not the member;
·
subparagraph 274(1)(b)(ii) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to a complying superannuation fund;
·
subparagraph 274(1)(ba)(i) of the Income Tax Assessment Act - that is, contributions made to an RSA by an employer or by another person who is not the member;
·
subparagraph 274(1)(ba)(iv) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to an RSA;
·
paragraph 274(1)(d) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to a complying ADF; and
·
paragraph 274(1)(e) of the Income Tax Assessment Act - that is, amounts paid by the Commissioner to a complying superannuation fund or an RSA from the Superannuation Holding Accounts Reserve; and
·
personal contributions paid to a complying superannuation fund or RSA that are allowed as a deduction to the member under section 82AAT of the Income Tax Assessment Act because:
·
the member does not receive any employer superannuation support; or
·
the member does receive employer superannuation support but his or her income from the employer who provides that support is less than 10% of his or her total assessable income; and
·
specified roll-over amounts that are the roll-over of an amount that is an eligible termination payment (ETP) under paragraph (a) of the definition of ETP in subsection 27A(1) of the Income Tax Assessment Act received by a complying superannuation fund, an RSA, a complying ADF, a life assurance company or a registered organisation. Generally, a paragraph (a) ETP is a lump sum payment received from an employer on termination of employment. A specified roll-over amount is the untaxed element of the post-June 1983 component of the ETP that is rolled-over to a superannuation provider.

[Subclause 8(2)]

Contributions held by a superannuation (defined benefits) provider

2.8 A superannuation (defined benefits) provider is a superannuation (funded defined benefits) provider or a superannuation (unfunded defined benefits) provider. Generally, a superannuation (defined benefits) provider is the provider of a fund or scheme with defined benefit members. A defined benefit member is a member who is entitled to a benefit based on:

·
the amount of the member's salary at a particular date or the average of the member's salary over a period; and/or
·
an amount stated in the constituent document for the superannuation fund or scheme.

[Clause 41 - definitions of superannuation (defined benefits) provider and defined benefit member]

2.9 For members of defined benefits superannuation schemes the member's surchargeable contributions for a financial year are the amount worked out using the following formula:

Members superannuation salary x Notional surchargeable contributions factor where:

·
the member's superannuation salary is the annual salary used by the fund or scheme to calculate the amount of contributions and/or the amount of benefits payable; and
·
the notional surchargeable contributions factor is the factor applying to the member for that year certified by an eligible actuary according to Australian actuarial practice. The Institute of Actuaries will publish a Guidance Note (which will be developed in conjunction with the Australian Government Actuary and the Australian Taxation Office (ATO)) relating to the calculation of the notional surchargeable contributions factor to be used by a superannuation (defined benefits) provider to calculate the surchargeable contributions for a member. [Clause 41 - definition of notional surchargeable contributions factor]

[Subclause 8(3)]

Transitional arrangements for the 1996-97 financial year

2.10 For the 1996-97 financial year surchargeable contributions are only those amounts that:

·
were paid to a superannuation (accumulated benefits) provider after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996 (Budget night); or
·
if the member is a member of a defined benefits superannuation scheme and the member's surchargeable contributions were certified by an eligible actuary to relate to the part of the financial year that started immediately after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996 (Budget night).

[Subclause 8(4)]

When is surcharge payable?

2.11 Surcharge is payable only if a member's adjusted taxable income exceeds the surcharge threshold . [Subclause 7(2)]

2.12 A member's adjusted taxable income for a financial year is the sum of:

·
the member's taxable income of that financial year; and
·
the member's surchargeable contributions for that financial year unless those contributions are included in his or her taxable income because they have been paid out as an ETP.

2.13 The member's taxable income is the total of his or her assessable income reduced by allowable deductions as reported by the member on his or her tax return for a year. The member's surchargeable contributions (see paragraphs 2.5 - 2.10) are added to ordinary taxable income to produce the adjusted taxable income.

[Clause 41 - definition of adjusted taxable income]

2.14 The surcharge threshold for the 1996-97 financial year is $70,000. [Subclause 9(1)] The surcharge threshold will be indexed in subsequent financial years by movements in full-time adult average weekly ordinary time earnings (AWOTE). [Subclauses 9(2) to (7)] This will ensure that the surcharge threshold amount will increase in line with movements in salary and wages and will retain its real value over time.

Examples

2.15 David has taxable income for the 1996-97 financial year of $40,000 and surchargeable contributions made by his employer (after 20 August 1996) of $20,000. David's adjusted taxable income is $60,000. David's superannuation fund would not be liable to surcharge because his adjusted taxable income was below $70,000.

2.16 Chloe has taxable income for the 1996-97 financial year of $65,000 and surchargeable contributions made by her employer (after 20 August 1996) of $25,000. Chloe's adjusted taxable income is $90,000. Chloe's superannuation fund would be liable to surcharge because her adjusted taxable income was more than $70,000.

Who is liable to pay the surcharge?

2.17 Clause 10 identifies the person who is liable to pay the surcharge. A person is liable to pay the surcharge if he or she is the holder of the surchargeable contributions at the time when liability to the surcharge is assessed and notified to the provider. [Subclause 10(2)] Usually this will be the superannuation provider who actually received the surchargeable contributions.

2.18 However, if prior to the surcharge being assessed the superannuation provider has paid the member an ETP which has been rolled-over to a new superannuation provider, the new superannuation provider will be liable to pay the surcharge on surchargeable contributions because he or she is the holder of the surchargeable contributions at the time the assessment is made. [Subclause 10(2)]

Example

2.19 Max's superannuation fund received surchargeable contributions of $10,000 in the 1996-97 financial year. Max received an ETP from the fund in July 1998 which was rolled-over to an ADF. Subsequently a surcharge liability of $1,500 is raised in relation to the surchargeable contributions. Max's ADF will be liable to pay the surcharge because it will be the superannuation provider that is the holder of the surchargeable contributions at the time of assessment.

2.20 If prior to the surcharge being assessed the superannuation provider has paid the member an ETP which the member has retained or commences to pay the member a pension or annuity, the member is liable to pay the surcharge on surchargeable contributions because he or she is the holder of the surchargeable contributions at the time the assessment is made. [Subclauses 10(3) and (4)]

Example

2.21 Catharine's superannuation fund received surchargeable contributions of $5,000 in the 1996-97 financial year. Catharine received an ETP from the fund in August 1998. Subsequently a surcharge liability of $750 is raised in relation to the surchargeable contributions. Catharine will be liable to pay the surcharge because she is the holder of the surchargeable contributions at the time of assessment.

2.22 However, if the surchargeable contributions are paid out to a person other than another superannuation provider or the member, the surcharge is not payable. This situation will generally arise where a death benefit is paid out by a superannuation provider to an estate or dependant upon the death of a member. No surcharge will be payable in these circumstances. [Subclause 10(4)]

Who is exempt from the surcharge?

2.23 Surcharge is not payable by genuine residents of Norfolk Island as identified in Division 1A of Part III of the Income Tax Assessment Act. That Division exempts such residents from income tax. It is consistent to also exempt such residents from the surcharge. [Subclause 7(3)]

When is an advance instalment payable?

2.24 If surcharge is payable in a financial year for a member, an advance instalment of surcharge is payable. The amount of advance instalment is equal to one-half of the surcharge payable in the financial year. However, in some circumstances the liability to pay advance instalment is removed (see paragraph 3.78). [Clause 11]

2.25 The advance instalment is payable so that some part of the surcharge liability for a financial year is paid in the financial year the contributions are received. The process for raising the advance instalment and its application when a surcharge assessment is raised are discussed in paragraphs 3.72 - 3.80.

Example

2.26 Amy's superannuation fund is liable to pay surcharge of $1,800 on surchargeable contributions received for Amy in the 1996-97 financial year. The surcharge will be raised and become payable in the 1997-98 financial year. An advance instalment of $900 will also be payable by the 15th of June 1998 for anticipated surchargeable contributions received by the fund in the 1997-98 year for Amy.

Who is liable to pay the advance instalment?

2.27 A superannuation provider (other than a superannuation (unfunded defined benefits) provider) who is liable to pay the surcharge is also liable to pay the advance instalment. [Subclause 12(4)]

2.28 However, no advance instalment is payable if:

·
before the 15th of June of the financial year in which the advance instalment is payable an ETP or pension or annuity containing the surchargeable contributions has been paid out of the fund and retained by the member; or [Subclause 12(2)]
·
on 15 June in the financial year a superannuation (unfunded defined benefits) provider is the holder of the contributions. [Subclause 12(3)] A superannuation (unfunded defined benefits) provider is defined in Clause 41 to mean a superannuation provider that is the trustee of a superannuation fund established for the purposes of an unfunded defined benefits superannuation scheme. The arrangements for collecting the surcharge from superannuation (unfunded defined benefits) providers is explained in paragraphs 3.58 - 3.70.

Chapter 3 Assessment and collection of surcharge and advance instalments

Overview

3.1 Part 3 of the Bill deals with the assessment and collection of the surcharge and advance instalments.

Purpose of the provisions

3.2 The purpose of the provisions is to:

·
explain what information must be given by superannuation providers to the Commissioner, to other superannuation providers and to members;
·
allow the Commissioner to determine the form in which information must be provided;
·
establish how and when assessments of the surcharge are to be made;
·
outline the conditions under which new or amended assessments of the surcharge may be made and when interest will be payable;
·
allow for objections against assessments of surcharge;
·
outline the special assessment and collection arrangements for unfunded defined benefits schemes;
·
establish how and when determinations of advance instalment are to be made; and
·
provide for the use of tax file numbers to facilitate the effective administration of the Act.

Explanation of the provisions

Superannuation providers must give certain information to the Commissioner

When provider is the holder of contributions at end of financial year

3.3 If at the end of a financial year a superannuation provider is the holder of any surchargeable contributions for a member the superannuation provider must give the following information to the Commissioner:

·
the member's name;
·
the member's home, business or work address;
·
the member's date of birth;
·
the member's tax file number, if the provider has been given it in connection with the operation of this Act;
·
details of contributed amounts held by the provider for the member (see paragraphs 3.4 - 3.5); and
·
any other information which may be specified in regulations.

[Subclause 13(2)]

What details of contributed amounts must be given?

3.4 The details of amounts paid to or contributed to superannuation (accumulated benefit) providers that must be given to the Commissioner are:

·
the total contributions received in the financial year by the superannuation provider for the member. Usually the total contributions will be the sum of contributions made by the member to the fund and employer contributions made to the fund for the member;
·
the total of contributions that are taxable contributions under:

·
subparagraph 274(1)(a)(i) of the Income Tax Assessment Act - that is, contributions made to a complying superannuation fund by an employer or by another person who is not the member;
·
subparagraph 274(1)(b)(ii) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to a complying superannuation fund;
·
subparagraph 274(1)(ba)(i) of the Income Tax Assessment Act - that is, contributions made to an RSA by an employer or by another person who is not the member;
·
subparagraph 274(1)(ba)(iv) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to an RSA;
·
paragraph 274(1)(d) of the Income Tax Assessment Act - that is, a superannuation guarantee shortfall component paid by the Commissioner to a complying ADF; and
·
paragraph 274(1)(e) of the Income Tax Assessment Act - that is, amounts paid by the Commissioner to a complying superannuation fund or an RSA from the Superannuation Holding Accounts Reserve; and

·
the total of specified roll-over amounts that are the roll-over of an amount that is an ETP under paragraph (a) of the definition of ETP in subsection 27A(1) of the Income Tax Assessment Act.

[Paragraph (a) of subclause 13(7)]

3.5 The details of amounts paid to or contributed to superannuation (defined benefits) providers that must be given to the Commissioner are:

·
the total contributions received in the financial year by the superannuation provider for the member; and
·
the amount of surchargeable contributions worked out using the formula (see paragraph 2.9):

Member's superannuation salary x Notional surcgargable contributions factor [Paragraph (b) of subclause 13(7)]

Date by which information must be given

3.6 The date by which information must be given to the Commissioner of contributed amounts held by the provider at the end of the financial year is referred to as the notification date . For the 1996-97 financial year this date is 15 December 1997. For all subsequent financial years it is 31 October following the financial year. [Clause 41 - definition of notification date]

Penalty

3.7 Failure to provide this information is punishable by a fine of not more than 300 penalty points. [Subclause 13(6)]

When provider has paid out contributions to the member

3.8 Where a superannuation provider pays out an ETP (which will include any surchargeable contributions made by or for the member for the financial year) to the member before the end of the financial year, the superannuation provider must give the Commissioner the following information:

·
the member's name;
·
the member's home, business or work address;
·
the member's date of birth;
·
the member's tax file number, if the provider has been given it in connection with the operation of this Act;
·
details of contributed amounts that were held by the provider for the member when the benefit was paid out (see paragraphs 3.4 - 3.5); and
·
the date on which the ETP was paid to the member.

[Subclause 13(3)]

Date by which information must be given

3.9 Details of contributed amounts paid out to a member must be given to the Commissioner not later than the notification date for the financial year in which the amount was paid. [Subclause 13(3)]

3.10 Failure to provide this information is punishable by a fine of not more than 300 penalty points. [Subclause 13(6)]

Superannuation providers must give certain information to other superannuation providers

3.11 If a superannuation provider rolls-over any contributed amounts to another provider (the new provider) after the 1997-98 financial year, the original provider must give the new provider a statement setting out details of the contributed amounts (see paragraphs 3.4 - 3.5) that were included in the rolled-over amount. [Paragraph (b) of subclause 13(4)] This ensures that the fund who holds contributed amounts for a member at the end of financial year is able to report all contributed amounts, even when the member has changed funds during the year.

Example

3.12 On 1 January 1999, Sarah decides to roll-over her benefit from the Yarran Pty Ltd Superannuation Fund to the Bella Enterprises Superannuation Fund. The amount to be rolled-over includes contributed amounts made by or for Sarah so far during the 1998-99 financial year. In this case the Yarran Pty Ltd Superannuation Fund will have to give the Bella Enterprises Superannuation Fund a statement of these surchargeable contributions. This will allow the Bella Enterprises Superannuation Fund to report the full amount of Sarah's contributed amounts to the Commissioner, if it still holds Sarah's benefit at the end of the 1998-99 financial year.

3.13 Sarah decides to roll-over her benefit from the Bella Enterprises Superannuation Fund to the Isis Corporation Superannuation Fund on 5 May 1999. The Bella Enterprises Superannuation Fund must give the Isis Corporation Superannuation Fund a statement of all contributed amounts made by or Sarah so far during the 1998-99 financial year, including those made when Sarah was a member of Yarran Pty Ltd Superannuation Fund and those made when Sarah was a member of the Bella Enterprises Superannuation Fund. This will enable the Isis Corporation Superannuation Fund to report all contributed amounts to the Commissioner if it still holds Sarah's benefit at the end of the 1998-99 financial year.

Date by which information must be given

3.14 Information of contributed amounts rolled-over must be given to the new superannuation provider within 30 days of the transfer of the amount. [Paragraph (b) of subclause 13(4)]

Transitional arrangements for the 1996-97 and 1997-98 financial years

3.15 For the 1996-97 and 1997-98 financial years, superannuation providers will not be required to provide information to other superannuation providers on roll-over of contributed amounts. Instead they will be required to report the following information to the Commissioner:

·
the member's name;
·
the member's home, business or work address;
·
the member's date of birth;
·
the member's tax file number, if the provider has been given it in connection with the operation of this Act; and
·
details of all contributed amounts that were held by the provider for the member when the benefit was paid out (see paragraphs 3.4 - 3.5).

[Paragraph (a) of subclause 13(4)]

3.16 This will allow providers sufficient time to implement the systems necessary to allow reporting of this information to other providers.

Date by which information must be given

3.17 Information on contributed amounts rolled-over to a new superannuation provider must be given to the Commissioner not later than the notification date for the financial year. [Paragraph (a) of subclause 13(4)]

Penalty

3.18 Failure to provide this information is punishable by a fine of not more than 300 penalty points. [Subclause 13(6)]

Superannuation providers must give certain information to members

3.19 When a superannuation provider gives a statement of contributed amounts to another superannuation provider on roll-over of a benefit, a copy of that statement must also be given to the member. [Subclause 13(5)] This copy must be provided within 12 months of the original statement.

3.20 This timeframe will enable funds to reduce their compliance costs by providing these copies to members at the same time as they report to members for the purposes of the Superannuation Industry (Supervision) Act 1993 (SIS). As a notice of any assessment made is provided to the member by the Commissioner, it is not necessary for members to immediately receive a copy of the statement given by the provider to the Commissioner.

Penalty

3.21 Failure to provide this information is punishable by a fine of not more than 300 penalty points. [Subclause 13(6)]

Form the information must be given in

3.22 The Commissioner may set out in what way the information is to be given by publishing a notice in the Gazette. [Subclause 14(1)] This flexibility will enable the Commissioner to ensure the most efficient reporting systems are adopted in response to technological change.

Information held in electronic form

3.23 Specifically, the Commissioner may set out the way in which information that is kept by means of a data processing device by a superannuation provider is to be provided to the Commissioner. [Subclause 14(3)] This provision is designed to facilitate the effective use of electronic commerce between superannuation providers and the Commissioner. It is envisaged that the use of electronic commerce will reduce compliance costs for superannuation providers.

Exemptions

3.24 The Commissioner may chose to exempt a superannuation provider from the requirements set out in a notice relating to the giving of information in electronic form. [Subclause 14(5)] Such an exemption is a disallowable instrument for purposes of section 46A of the Acts Interpretation Act 1901. [Subclause 14(7)]

Penalty

3.25 Failure to comply with these requirements is punishable by a fine of not more than 300 penalty points. [Subclause 14(4)] In prosecuting for such an offence, the burden of proving that an exemption is not in force is on the prosecution. [Subclause 14(6)]

How is liability to the surcharge assessed?

3.26 To make an assessment of surcharge the Commissioner must:

·
calculate a member's surchargeable contributions; [Subparagraph (b)(i) of subclause 15(1)]
·
calculate a member's adjusted taxable income; [Paragraph (a) of subclause 15(1)]
·
if the adjusted taxable income is more than the surcharge threshold:

·
calculate the rate of surcharge; [Subparagraph (b)(ii) of subclause 15(1)]
·
make an assessment to the superannuation provider holding the contributions; [Subparagraph (b)(iii) of subclause 15(1)]
·
provide a copy of the assessment to the person to whom it is directed, setting out the amount of surchargeable contributions, the amount of surcharge payable and the due date for payment; [Subclauses 15(7) and (9)] and
·
provide a notice to the member containing certain information (including the member's surchargeable contributions and adjusted taxable income and the amount of surcharge payable). [Subclause 15(10)]

3.27 If the Commissioner calculates that no surcharge is payable by a taxpayer for a financial year, the calculation is taken to be an assessment of a nil amount of surcharge. [Subclause 15(12)]

When is liability to the surcharge assessed?

3.28 The Commissioner is able to make an assessment of surcharge at any time. However, administrative arrangements will be put in place for the Commissioner to hold assessments and issue grouped assessments at specific times during the year.

3.29 The surcharge grouped assessments will issue three times a year, in February, May and August.

Assessment dates for 1997-98

3.30 For the 1996-97 year the reporting date is 15 December 1997. The group assessment date is 15 March 1998.

3.31 The following table illustrates the assessment dates for 1997-98:

Group assessment date Date payment due
15 March 1998 15 April 1998
15 May 1998 15 June 1998

Assessment dates for subsequent financial years

3.32 In future years (1998-99) the superannuation surcharge grouped assessments will be issued as follows:

Group assessment date Date payment due
15 August 15 September
15 February 15 March
15 May 15 June

When is surcharge payable?

3.33 Surcharge is payable within 1 month of the day after the assessment is made. [Subclause 15(3)]

Amended assessments

Under what circumstances will an assessment be amended?

3.34 The Bill provides for the Commissioner to amend assessments of surcharge where a member's circumstances have changed, to either increase or decrease a surcharge liability. [Subclause 19(2)]

3.35 Changes in a member's circumstances that would lead to an amended assessment include a change in the member's adjusted taxable income, a change in the amount of the member's surchargeable contributions or the quotation of the member's tax file number. [Subclause 19(1)]

Payment of additional surcharge

3.36 Where an amendment increases the liability to the surcharge the additional amount must be paid within 1 month of the amendment. [Subclause 19(3)]

Amendment reducing surcharge

3.37 If the Commissioner makes an amendment reducing the surcharge which has been paid by the holder of the surchargeable contributions, the amount by which the surcharge is reduced will be repaid to the holder of the surchargeable contributions. [Subclause 19(4)]

Interest

When is interest payable?

3.38 Where an amended assessment increases liability to the surcharge the person must pay interest to the Commonwealth on the increased liability. [Subclause 21(1)]

What amount of interest is payable?

3.39 Interest is payable from the 15th of June of the financial year to which the assessment relates until the date of the amended assessment. Interest is to be paid at rates provided for under section 214A of the Income Tax Assessment Act. [Subclause 21(2)]

3.40 If the Commissioner has calculated that no surcharge is payable by a taxpayer for a financial year and subsequently makes an assessment of surcharge, the assessment is taken to be an amended assessment. [Subclause 21(3)]

When is interest not payable?

3.41 Interest is not payable where the amount is less than 50 cents. [Subclause 21(4)]

Commissioner to notify of interest payable

3.42 The Commissioner must notify the person liable to the interest of the period for which interest is payable, the amount of the interest and the due date for payment of the interest. [Subclause 21(5)]

Commissioner may remit interest

3.43 The Commissioner may remit the whole or any part of the interest payable. A decision of the Commissioner not to remit interest is reviewable by the AAT (see paragraph 4.12). [Subclause 21(6)]

Assessments of additional surcharge

Under what circumstances will a new assessment be made?

3.44 Where there is a change to a member's adjusted taxable income or amount of surchargeable contributions and the provider to whom the original assessment was made is no longer the holder of the contributions a new assessment may be made to the current holder of the surchargeable contributions. [Subclause 20(1)]

Payment of additional surcharge

3.45 If the new assessment increases liability only the excess is assessed as payable by the new provider. [Subclause 20(3)]

No change in liability to surcharge

3.46 If the new assessment results in no change to the amount payable under the original assessment, no amount of surcharge is assessed under the new assessment. [Subclause 20(4)]

Reduction in liability to surcharge

3.47 If the new assessment reduces liability to surcharge the reduction is to be refunded to the new provider. [Subclause 20(5)]

Example

3.48 Abiona had a surcharge liability of $1,500 which was paid by the Yarran Pty Ltd Superannuation Fund. The liability was based on an adjusted taxable income of $90,000 for the 1996/97 financial year. Abiona transferred her benefit to the Bella Enterprises Superannuation Fund and due to a successful objection to her income tax assessment, her taxable income was reduced to $80,000. As a result, her surcharge liability was reduced to $1,000. As the Yarran Pty Ltd Superannuation Fund had paid the original surcharge of $1,500, the difference of $500 would be refunded to the Bella Enterprises Superannuation Fund.

Interest

3.49 Similar provisions apply for the payment of interest on new assessments to those that apply for amended assessments. [Clause 22]

Objections against assessments

Who may object to an assessment?

3.50 Where a member is dissatisfied with a surcharge assessment based on the calculation of adjusted taxable income the member may object to the calculation in the manner set out in Part IVC of the Taxation Administration Act 1953. [Clause 24]

When must the objection be made?

3.51 Under the Taxation Administration Act a taxpayer generally has 60 days from receiving a notice of assessment to object against the assessment. An objection may be lodged after the 60 day period but must be accompanied by a request for an extension of time (section 14ZW of the Taxation Administration Act). The Commissioner must then decide whether to consider the objection as lodged on time. A decision not to extend the lodgement time is reviewable by the AAT (section 14ZX).

How must the objection be made?

3.52 The objection must be in writing, and must fully and in detail state the grounds that the taxpayer is relying upon (section 14ZU). If an amendment is made to an assessment the taxpayer can only object to the alterations (section 14ZV).

How must the Commissioner respond to an objection?

3.53 If an objection is lodged within time, the Commissioner must decide whether to allow in full, allow in part, or disallow the objection (section 14ZY). A person who has lodged an objection may give the Commissioner a notice requiring the Commissioner to make a decision, where the Commissioner has failed to make a decision on the objection by the later of:

·
60 days after the objection was lodged with the Commissioner;
·
60 days after the day on which the Commissioner decides to agree to accept an objection lodged out of time; or
·
if the Commissioner has requested further information relating to the objection - 60 days after the receipt of that information.

3.54 If the Commissioner does not make a decision within 60 days of receiving the notice, the Commissioner is deemed to have disallowed the objection and is required to serve a notice of the objection decision on the person (section 14ZYA).

Review by the AAT or Federal Court

3.55 If the objection is not allowed in full the taxpayer has the option to apply either to the AAT or the Federal Court depending upon the circumstances of the case (section 14ZZ).

3.56 An application to the AAT or Federal Court must be made within 60 days of receiving the notice of the Commissioner's decision. Once again the application must be in writing and set out the grounds for the application (sections 14ZZC and 14ZZN). The applicant is then limited to these grounds of objection, unless the court or tribunal orders otherwise. The applicant also has the burden of proof (sections 14ZZK and 14ZZO).

Will the surcharge still be payable while an objection is being made?

3.57 Despite appeal and review proceedings pending, any superannuation contributions surcharge owing is still payable as if there was no review or appeal being undertaken (sections 14ZZM and 14ZZR).

Special arrangements for unfunded defined benefits superannuation schemes

Who will be subject to these special arrangements?

3.58 An unfunded defined benefits superannuation scheme is a defined benefits superannuation scheme where some or all of the contributions to fund benefits are not made to the fund until the member becomes entitled to receive their benefits. The scheme is not funded to pay benefits until the member's benefit entitlement is due to be paid.

3.59 Similar administrative arrangements to those proposed for accumulation schemes will apply for assessment of the surcharge for both funded and unfunded defined benefits schemes.

3.60 However, unfunded defined benefits schemes will not have to pay the surcharge at the same time as funded schemes, due to arrangements that exist for the payment of benefits from unfunded schemes.

How will unfunded defined benefit schemes be assessed?

3.61 Unfunded defined benefits schemes will receive assessments each year. They will be not be required to pay the surcharge at this time.

3.62 Instead unfunded defined benefits schemes will be required to maintain a surcharge debt account for each member of the scheme. [Subclause 16(2)] Each year the provider will be required to debit the account of each member who is affected by the surcharge. [Subclause 16(3)] The amount debited to the account will be the amount of surcharge assessed for the member for that year.

How will the value of the surcharge liability be maintained?

3.63 Where unfunded defined benefits schemes accumulate surcharge liabilities until the benefits become payable, the value of the surcharge is to be maintained to ensure that no advantage would be obtained by deferring the payment. This is to be achieved by debiting the account with an amount of interest on the balance of the account using the 10 year Treasury bond rate. [Subclauses 16(4) and (5)]

When will payment be made?

3.64 For unfunded schemes the Bill provides that the surcharge will only become payable when the member's end benefit first becomes payable. [Subclause 16(6)]

3.65 This will avoid the need for unfunded schemes to be funded purely for surcharge purposes.

How will payment be made?

Lump sums

3.66 Where an unfunded scheme pays a lump sum benefit (including on roll-over to another superannuation provider) the accrued surcharge liability becomes payable and must be deducted from the lump sum benefit (see Clause 33 ).

Pensions

3.67 With pensions paid from unfunded defined benefits schemes the surcharge will be accumulated and must be paid to the Commissioner before any benefits are paid to the member (see Clause 33 ).

3.68 To achieve this pensions are to be converted (commuted) to a lump sum before the benefit is paid. Once the pension is commuted to a lump sum the balance of the surcharge debt account can be reduced to zero and the amount of the surcharge offset against the lump sum. The amount of surcharge is then paid to the Commissioner in satisfaction of the debt. After the surcharge has been paid the balance of the lump sum can be converted back into a pension and then paid to the member as a pension benefit.

3.69 The effect of this is that such schemes will need to commute the value of a pension benefit to obtain a capital value of the benefit which would then be reduced by the accumulated surcharge debt and the reduced capital value would then be re-converted to produce a pension benefit.

How will the surcharge debt account operate?

3.70 The surcharge debt account will operate in the following manner:

·
a member's surcharge debt account will be debited with the amount of surcharge liability for each year;
·
the 10 year Treasury bond rate will be applied to the account balance; and
·
upon entitlement to a benefit an amount sufficient to reduce the account balance to zero is credited to the account and remitted to the ATO. The balance of the account is then available to the member.

Penalty

3.71 Failure to comply with these requirements is punishable by a fine of not more than 300 penalty points. [Subclause 16(7)]

Advance instalment

How is liability to the advance instalment determined?

3.72 To make a determination of advance instalment the Commissioner must:

·
determine whether surcharge has been assessed on a member's surchargeable contributions for a financial year; [Subclause 15(2)]
·
where there was a liability for surcharge on the surchargeable contributions of a member in the previous financial year, calculate the amount of advance instalment;
·
notify the provider to whom the surcharge assessment was directed of the amount of advance instalment payable;
·
provide a copy of the determination to the person to whom it is directed, [Subclause 15(9)] setting out the amount of surchargeable contributions for the previous financial year, the amount of advance instalment payable and the due date for payment; and [Subclause 15(8)]
·
provide a notice of determination to the member containing certain information (including the member's surchargeable contributions for the previous year and the amount of advance instalment payable). [Subclause 15(11)]

When is liability to the advance instalment determined?

3.73 A determination of liability to advance instalment of the surcharge will be made at the time of the assessment of surcharge liability.

When is advance instalment payable?

3.74 Any advance instalment must be paid by the 15th of June in the financial year. [Subclause 15(4)]

Who is liable to pay the advance instalment?

3.75 The superannuation provider who is liable to pay the surcharge on surchargeable contributions for a financial year is liable to pay the advance instalment in that year.

3.76 If the member transfers his or her benefit to another superannuation provider after the original provider has paid the surcharge, the original provider will remain liable to pay the advance instalment and will need to retain part of the benefit to pay that liability.

Example

3.77 On 15 April 1998 the Yarran Pty Ltd Superannuation Fund paid surcharge on surchargeable contributions held for Greta and received a determination for advance instalment of $800. In May 1998 Greta transferred her benefits to the Bella Enterprises Superannuation Fund. Greta's accumulated benefits at that time were $194,000. The Yarran Pty Ltd Superannuation Fund will need to retain $800 to pay the advance instalment on 15 June 1998 and will transfer $193 200 of Greta's benefit to the Bella Enterprises Superannuation Fund.

When is advance instalment not payable?

3.78 A determination is taken not to have been made if the provider has not paid the instalment and has paid the contributions out as part of an ETP to a person other than another superannuation provider or began to pay a pension or annuity before the 15th of June in the financial year in which the instalment is payable. [Subclause 15(6)] In these circumstances no instalment is payable.

Credits of advance instalment

3.79 Advance instalment is payable by the 15th of June. Where advance instalment is paid for a member, it will be applied to reduce the surcharge assessed in the following financial year for that member. [Clause 17]

Refunds of advance instalment

3.80 If the amount of advance instalment paid is more than the surcharge liability (including where there is no surcharge liability), then the excess advance instalment will be refunded to the holder of the contributions. [Clause 17]

TFNs

What happens if a TFN is quoted after a surcharge assessment is made?

3.81 Where a surcharge liability is raised due to the non-quotation of a TFN and the TFN is subsequently quoted (or ascertained by the Commissioner) the Commissioner must amend the assessment or determination and refund the excess to the holder of the contributions. [Clause 18]

Commissioner may use TFNs to assist the efficient administration of the Act

3.82 The Commissioner may use TFNs for the purposes of this Act where the TFNs have been provided to the Commissioner for income tax or superannuation purposes. [Subclause 23(1)] This is to facilitate the efficient operation of the surcharge, whilst ensuring that TFNs have still been provided on a voluntary basis.

Commissioner may seek members authority to give TFN to superannuation provider

3.83 The Bill also provides that the Commissioner may seek authorisation from the member to enable the Commissioner to pass the member's TFN on to the member's superannuation provider. The member has the right to refuse to give the Commissioner this authorisation. [Subclause 23(2)]

3.84 It is likely that where an amended assessment is made the Commissioner will seek such authorisation from the member at that time. This will reduce the need for surcharge assessments to be raised purely as a consequence of a superannuation provider not having a member's TFN.

Example assessment process

3.85 Assume the Yarran Pty Ltd Superannuation Fund has 10 members, Maggie Johnson, Babette Innes, Savitri Stobutski, Ashok Banerjee, Meng Wu, Roberta Bierzonski, Melissa Peterson, Sam McFadden, Oscar Ross-Wilson and John Stidworthy. On 15 December 1997 the Yarran Pty Ltd Superannuation Fund reports the following information to the Commissioner:

Information provided by fund
Name Address, date of birth TFN Surchargeable Contributions
Maggie Johnson 14A Baker Street, etc21/12/1977 123 583 111 1,000
Babette Innes 23 Rowe Avenue, etc26/01/1956 591 456 112 15,000
Savitri Stobutski 125 William Lamerton Drive, etc23/08/1945 789 130 113 8,000
Ashok Benerjee 27 Keats Crescent, etc27/03/1970 889 123 114 20,000
Meng Wu 73 Wallace Street,etc12/12/1955 456 451 115 30,000
Roberta Bierzonski 52 Campbell Avenue, etc12/11/1971 139 789 116 12,000
Melissa Peterson 42 Cook Street, etc04/09/1967 321 871 117 5,000
Sam McFadden 81 Moore Street, etc24/10/1938 090 654 118 1,000
Oscar Ross-Wilson 1/23 Thorton Place, etc10/07/1939 987 591 119 500
John Stidworthy 4 Owen Crescent, etc17/05/1956 111 321 120 10,000

3.86 Maggie Johnson, Babette Innes, Savitri Stobutski, Ashok Banerjee, and Meng Wu all lodge their income tax returns on 31 October 1997. Roberta Bierzonski, Melissa Peterson, Sam McFadden, Oscar Ross-Wilson and John Stidworthy all lodge their tax returns on 1 April 1998.

Assessment of surcharge

3.87 The income and surcharge details of the mebers are as follows:

Member Taxable income Surchargeable Contributions Adjusted taxable income Surcharge liability
Maggie Johnson 42,000 1,000 43,000 Nil
Babette Innes 60,000 15,000 75,000 750
Savitri Stobutski 65,000 8,000 73,000 240
Ashok Benerjee 50,000 20,000 70,000 Nil
Meng Wu 80,000 30,000 110,000 4,500
Roberta Bierzonski 45,000 12,000 57,000 Nil
Melissa Peterson 60,000 5,000 5,000 Nil
Sam McFadden 50,000 1,000 51,000 Nil
Oscar Ross-Wilson 30,000 30,000 30,500 Nil
John Stidworthy 70,000 10,000 80,000 1,000

Notification of fund

3.88 On 15 March 1998 the Commissioner would send the following assessment to the Yarran Pty Ltd Superannuation Fund.

Name Address, date of birth TFN Surchargeable Contributions Surcharge payable Advance instalment
Babette Innes 23 Rowe Avenue, etc26/01/1956 591 456 112 15,000 750 375
Savitri Stobutski 125 William Lamerton Drive, etc23/08/1945 789 130 113 8,000 240 120
Meng Wu 73 Wallace Street, etc12/12/1955 456 451 115 30,000 4,500 2,250
Total surcharge payable by April 1998 9,240
Total advance instalment payable by 15 June 1998 2,745

3.89 The Commissioner would then advise Babette Innes, Savitri Stobutski and Meng Wu of their taxable income, surchargeable contributions, adjusted taxable income and the amount of the surcharge and advance instalment assessed to the Yarran Pty Ltd Superannuation Fund.

Information shown on assessment

3.90 On 15 May 1998 the Commissioner would send the following assessment to the Yarran Pty Ltd Superannuation Fund:

Name Address, etc TFN Surchargeable Contributions Surcharge payable Advance instalment
John Stidworthy 4 Owen Crescent, etc17/05/1956 111 321 120 10,000 1,000 500
Total surcharge payable by 15 June 1998 1,000
Total advance instalment payable by 15 June 1998 500

3.91 The Commissioner would notify John Stidworthy of his taxable income, surchargeable contributions, adjusted taxable income and the amount of surcharge and advance instalment assessed to the Yarran Pty Ltd Superannuation Fund.

Chapter 4 Recovery of unpaid surcharge or advance instalment

Overview

4.1 Part 4 of the Bill deals with a number of issues relating to the payment of a surcharge or advance instalment liability.

Purpose of the provisions

4.2 The purpose of the provisions in Part 4 of the Bill is to provide for:

·
late payment penalties for surcharge and advance instalment;
·
recovery of unpaid amounts of surcharge, advance instalment, interest and late payment penalty;
·
application of payments to debts; and
·
review of decisions not to remit late payment penalties and interest.

Explanation of the provisions

Late payment penalty

When will a late payment penalty be applied?

4.3 Where there is a liability to surcharge or advance instalment and the debt has not been paid, a penalty will apply. The penalty will arise if any surcharge or advance instalment remains unpaid after the day on which the surcharge or advance instalment becomes due and payable. [Subclause 25(1)]

How will the penalty be calculated?

4.4 Where a late payment penalty arises the penalty starts to accrue from the day after the due date for payment of the surcharge or advance instalment on a 'calendar month' basis (calendar month is defined in section 22 of the Acts Interpretation Act 1901).

4.5 The amount of penalty is worked out on a monthly basis in the following way:

Unpaid amount x 0.2/12

[Subclause 25(2)]

Due date for payment of penalty

4.6 The penalty is due and payable at the end of that month. [Subclause 25(3)]

Commissioner may remit late payment penalty

4.7 The Commissioner may remit the whole or part of a late payment penalty.

4.8 A decision by the Commissioner not to remit late payment penalty is reviewable by the AAT (see paragraph 4.12).

[Subclause 25(4)]

Recovery

4.9 The following amounts may be recovered by the Commonwealth as debts due to the Commonwealth:

·
surcharge due and payable;
·
advance instalments due and payable;
·
interest due and payable; and
·
late payment penalty due and payable. [Clause 26]

Payment

4.10 Amounts due and payable to the Commonwealth are payable to the Commissioner. [Clause 27]

Application of payments

4.11 Where a person owes two or more debts to the Commonwealth under this Act and they pay part of the total amount of the debt, the Commissioner may apply the payment in partial discharge of the debt and the Commonwealth may recover the remaining amount of the debt. [Clause 28]

Review of certain decisions

What decisions can be reviewed?

4.12 The following decisions by the Commissioner may be reviewed:

·
a decision not to remit the whole or any part of interest; and
·
a decision not to remit the whole or any part of late payment penalty.

[Subclause 29(1)]

Who may request a review?

4.13 The person liable to the late payment penalty or interest may request the Commissioner to review the decision. [Subclause 29(2)]

When must the request be made?

4.14 The request must be made within 21 days, or within such further period as the Commissioner allows, of the Commissioner's notice of the decision. [Subclause 29(2)]

How must the request be made?

4.15 The person must make a written request setting out reasons why they wish the decision to be reviewed. [Subclause 29(3)]

How must the Commissioner respond to a request?

4.16 The Commissioner must reconsider the request and either confirm, revoke or vary the decision. Where the Commissioner finalises the decision the Commissioner must provide written notification of that decision to the person. Where such reconsideration is not completed by the Commissioner within 21 days, the Commissioner is taken to have confirmed the decision. [Subclauses 29(4), (5) and (6)]

Review by the AAT

4.17 Where the person is still not satisfied with the Commissioner's decision they may request the matter be referred to the Administrative Appeals Tribunal. Application for review must be made within 28 days of the Commissioner's decision. The hearing of a proceeding before the Administrative Appeals Tribunal is to take place in private and the Tribunal may give directions in accordance with the Administrative Appeals Tribunal Act 1975. [Subclauses 29(7), (8), (9) and (10)]

Chapter 5 Administration

Overview

5.1 Part 5 of the Bill deals with the administration of the Act.

Purpose of the provisions

5.2 Part 5 of the Bill makes provision for:

·
the general administration of the Act;
·
an annual report to be given to Parliament on the operation of the Act; and
·
the protection of information obtained under the Act.

Explanation of the provisions

Administration of the Act

5.3 The Commissioner of Taxation is to be responsible for the general administration of the Act. These responsibilities include assessment of liability to the surcharge and advance instalment, collection of the surcharge and advance instalment payable, and ensuring compliance with the provisions of the Act. [Clause 30]

Annual Report

5.4 The Commissioner will be required to provide an annual report on the working of the Act to the Treasurer for presentation to Parliament. [Clause 31]

Secrecy

5.5 The Bill imposes an obligation of secrecy on persons who, in the course of their duties relating to the administration of the Act, acquire information on the affairs of another person. [Clause 32] The secrecy provisions are consistent with those in other Commonwealth Acts administered by the Commissioner.

5.6 The secrecy provisions apply to a person who is or has been:

·
the Commissioner, a Second Commissioner or a Deputy Commissioner; or
·
an officer or employee of the ATO; or
·
otherwise appointed or employed by, or a provider of services for, the Commonwealth.

[Subclauses 32(1) and (2)]

5.7 A person is not allowed to make a record of, or divulge or communicate protected information about another person except in the course of their duties or if it is necessary to do so for the purpose of giving effect to the provisions of the Act. This obligation extends to divulging or communicating protected information to a Minister or a court. [Subclauses 32(2), (4) and (6)]

5.8 However, the Commissioner, a Second Commissioner or a Deputy Commissioner or a person authorised by them is not prevented from communicating or divulging protected information to a person to enable that person to perform duties for the purposes of an Act (including associated regulations) of which the Commissioner has the general administration. [Subclause 32(3)]

5.9 Similarly, nothing in an Act administered by the Commissioner can prohibit the Commissioner, a Second Commissioner, a Deputy Commissioner or a person authorised by them from communicating or divulging any information to a person performing duties under this Act, or to disclose information or comments to a court where it is for the purpose of this Act. [Subclauses 32(6) and (7)]

5.10 Information will also be able to be divulged to the Insurance and Superannuation Commissioner for the purposes of the administration of the SIS Act. [Subclause 32(8)]

5.11 A person must make a written oath or declaration to maintain secrecy in accordance with the secrecy provisions of this Act, if it is required by the Commissioner, a Second Commissioner or a Deputy Commissioner. [Subclause 32(9)]

Penalty

5.12 The penalty for failure to adhere to the secrecy provisions is imprisonment for two years. [Subclause 32(2)]

Chapter 6 Miscellaneous

Overview

6.1 This chapter deals with a number of miscellaneous provisions contained in Part 6 of the Bill.

Purpose of the provisions

6.2 These provisions set out a number of miscellaneous aspects of the operation of the Act, including:

·
the giving of information to the Commissioner by a superannuation provider when paying surcharge or advance instalment;
·
evidence;
·
access to premises;
·
obtaining information and evidence;
·
record keeping requirements;
·
application of the criminal code; and
·
regulations.

Explanation of the provisions

No amount to be payable by the Commonwealth

6.3 Clauses 33A and 33B of the Bill ensure the constitutional validity of the Bill by providing that the Commonwealth will not be liable to pay any amount under the Act and that the Act will not operate when it would operate in contravention of the Constitution

Information to be given to Commissioner when paying surcharge or advance instalment

6.4 When a superannuation provider pays surcharge or advance instalment they must provide the Commissioner with the following information:

·
the member's name;
·
the member's home, business or work address;
·
the member's date of birth;
·
the member's tax file number, if the provider has been given it in connection with the operation of this Act;
·
when surcharge is paid - the amount of surchargeable contributions on which it is paid; and
·
when advance instalment is paid - the amount of surchargeable contributions for the previous financial year on which it was calculated.

[Clause 33]

6.5 A superannuation provider will also need to advise the Commissioner if an assessment is made in relation to a member who is no longer a member of the fund. This will allow the assessment to be raised on the current holder of the contributions.

Authorised officers

6.6 The Commissioner may authorise a person who is an officer or employee under the Public Service Act 1922 to be an authorised officer for the purposes of this Act. [Clause 34]

Evidence

6.7 The Bill specifies the evidentiary value of certain documents and copies of documents. This is to ensure that the only avenue of appeal is to dispute the amount of the liability for the superannuation contributions surcharge.

6.8 The documents covered include those issued or given, or purporting to be issued or given, under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner. The rules applying to such documents are as follows:

·
the production of an assessment or determination or document purporting to be a copy of an assessment or determination is conclusive evidence of the due making of the assessment or determination and that the amounts and all particulars of the assessment or determination are correct, except in proceedings before a tribunal or court; [Subclause 35(1)]
·
the production of a document purporting to be a copy of a document issued or given by the Commissioner, a Second Commissioner or a Deputy Commissioner is prima facie evidence of the original document being issued or given; [Subclause 35(2)]
·
the production of a document purporting to be a copy of, or extract from an assessment or determination is evidence of the matters in the document to the same extent as the original document had it been produced; and [Subclause 35(3)]
·
the production of a signed certificate certifying an amount of superannuation surcharge, advance instalment of surcharge, interest or late payment penalty payable at the date of the certificate is prima facie evidence of the matter stated in the certificate. [Subclause 35(4)]

Access to premises and obtaining information and evidence

6.9 The Bill contains provisions dealing with access to premises and information gathering powers. Similar provisions are found in other Acts administered by the Commissioner - for example, sections 263 and 264 of the Income Tax Assessment Act. The provisions are necessary for the Commissioner to ensure compliance with the Act. [Clauses 36 and 37]

6.10 The access and information gathering powers may be used, for example, to ensure that a superannuation provider has reported the full amount of surchargeable contributions it has received in a financial year for a member. In such a case, it may be necessary for the Commissioner to inspect documents which may not otherwise be available for inspection if access and information gathering powers were not included in the Bill.

6.11 Under these powers, an authorised officer must be given entry at any reasonable time, to land or premises. The officer must also be given full and free access to all books, records and other documents held by any person, and right to inspect, examine or make copies therefrom. [Subclause 36(1)] An 'authorised officer' is an officer or employee within the meaning of the (Commonwealth) Public Service Act 1922 who has been authorised in writing by the Commissioner of Taxation to carry out certain duties.

6.12 The officer is not entitled to remain on the land or premises unless a written authority signed by the Commissioner is produced at the request of the occupier. [Subclause 36(2)]

6.13 The occupier of land or premises entered or proposed to be entered by an authorised officer is required to provide the officer with all reasonable facilities and assistance to carry out official duties. [Subclause 36(3)] For example, an authorised officer will be entitled to reasonable use of photocopying, telephone, fax and light and power facilities and of work space and facilities to extract relevant information stored on computer. In addition, the officer will be entitled to reasonable assistance in the form of, for example, advice as to where relevant documents are located and access to areas where such documents are located.

6.14 The maximum penalty on conviction for failure to comply with the access to premises provisions is a fine of 10 penalty units. [Subclause 36(3)]

6.15 The Commissioner will also be able to require, by notice in writing, any person to:

·
give information on oath or otherwise;
·
attend before the Commissioner and answer questions on oath or otherwise; or
·
produce any documents in the custody or under the control of that person.

[Subclauses 37(1), (2) and (3)]

6.16 The regulations must prescribe scales of expenses to be allowed to persons required to attend before the Commissioner. [Subclause 37(4)]

Record keeping requirements

6.17 The Bill imposes certain record keeping requirements on superannuation providers. [Clause 38] Superannuation providers must keep records of all transactions taken under the Act. [Subclause 38(1)]

6.18 The records must be kept:

·
in writing in the English language or, if not in writing (eg., in an electronic medium such as magnetic tape or computer disc), in a form which is readily accessible and convertible into writing in English; and [Paragraph (a) of subclause 38(2)]
·
so that the superannuation provider's liability under the Act can be readily worked out. [Paragraph (b) of subclause 38(2)]

6.19 The records must be retained for 5 years. The 5 year period runs from the day on which the records were prepared or obtained, or from when the transactions or acts to which those records relate were completed, whichever is the later. [Subclause 38(3)]

6.20 A superannuation provider does not have to keep records if the Commissioner notifies the provider that it is not required to do so, or if the provider is a company that has gone into liquidation and has been dissolved. [Subclause 38(4)]

6.21 The maximum penalty on conviction for failure to comply with the record keeping requirements is a fine of not more than 300 penalty units. [Subclause 38(5)]

Application of the Criminal Code

6.22 Chapter of 2 of the Criminal Code applies to offences against this Act. [Clause 39]

Regulations

6.23 The Bill provides that the Governor-General may make regulations for the purposes of the Act. [Clause 40]

Chapter 7 Interpretation

Overview

7.1 This chapter provides definitions of terms contained in Part 7 of the Bill. Some of these terms are explained in detail in other Parts of the Bill and other chapters of this document. In such cases the terms will not be explained in this chapter but a reference will be given to the chapter and paragraph where the term is discussed. Definitions which are self explanatory are not specifically discussed.

Explanation of the provisions

7.2 adjusted taxable income of a member for a financial year means the sum of:

·
the member's taxable income of that financial year; and
·
the member's surchargeable contributions for that financial year unless those contributions are included in the member's taxable income because they have been paid out as an ETP.

7.3 The definition is relevant for working out whether surcharge is payable by a superannuation fund for a member and the appropriate rate of surcharge.

7.4 The member's taxable income is the total of his or her assessable income reduced by allowable deductions as reported by the member on his or her tax return for a year. The member's surchargeable contributions (see paragraphs 2.4-2.10) are added to ordinary taxable income to produce the adjusted taxable income.

7.5 annuity has the same meaning as in section 10 of the SIS Act and includes an allocated annuity and a deferred annuity.

7.6 complying approved deposit fund is a complying approved deposit fund that has been given a notice of compliance under section 47 of the SIS Act.

7.7 complying superannuation fund is a superannuation fund that has been given a notice of compliance under section 45 of the SIS Act.

7.8 defined benefits superannuation scheme is:

·
a public sector superannuation scheme that is a regulated superannuation fund or an exempt public sector superannuation scheme that has at least one defined benefit member; or
·
a regulated superannuation fund (other than a public sector superannuation scheme) that has at least one defined benefit member where some or all of the contributions paid into a fund are not allocated to any individual member.

7.9 defined benefit member is a member who is entitled to a benefit based on:

·
the amount of the member's salary at a particular date or the average of the member's salary over a period; and/or
·
an amount stated in the constituent document for the superannuation fund or scheme.

7.10 eligible termination payment (ETP) has the same meaning as in subsection 27A(1) of the Income Tax Assessment Act. Generally an ETP is a lump sum payment received from an employer upon termination of employment or a lump sum payment from a superannuation fund, RSA or roll-over fund.

7.11 exempt public sector superannuation scheme has the same meaning as in as in section 10 of the Superannuation Industry (Supervision) Act 1993.

7.12 funded defined benefits superannuation scheme is a defined benefits superannuation scheme that is not an unfunded defined benefits superannuation scheme.

7.13 holder is either the relevant superannuation provider or the person (other than a superannuation provider) to whom amounts have been paid.

7.14 life assurance company has the same meaning as in subsection 110(1) of the Income Tax Assessment Act. That is, a life assurance company is:

·
a company whose sole or principal business is life assurance and includes a company that is registered under the Life Insurance Act 1995 and is carrying on life assurance business; and
·
an SGIO - that is, a State or Territory body that is constituted by a law of a State or Territory and carries on life insurance business within the meaning of section 11 of the Life Insurance Act 1995.

7.15 A life assurance company is liable to the surcharge when an ETP containing surchargeable contributions is rolled over to a life assurance company to purchase an immediate annuity or a deferred annuity.

7.16 member is:

·
a member of a superannuation fund or scheme or of an approved deposit fund
·
the holder of an RSA; and
·
the purchaser of an annuity from a life assurance company or registered organisation.

7.17 notification date is:

·
for the 1996-97 financial year - 15 December 1997;
·
for all subsequent financial years - 31 October following the year of income. For example, for the 1997-98 financial year the notification date is 31 October 1998.

7.18 The notification date is the date by which superannuation providers are required to provide the information specified in Clause 9 to the ATO.

7.19 notional surchargeable contributions factor is, for contributions paid to a superannuation (defined benefits) provider for a member during the financial year, the factor applying to the member for that year certified by an eligible actuary according to Australian actuarial practice. The notional surchargeable contributions factor is the factor to be used to work out the amount that is to be treated as surchargeable contributions paid for a member of a defined benefits superannuation scheme. The Institute of Actuaries will publish a Guidance Note (which will be developed in conjunction with the Australian Government Actuary and the ATO) relating to the calculation of the notional surchargeable contributions factor.

7.20 public sector superannuation scheme is a superannuation scheme established:

·
by or under a law of the Commonwealth, a State or a Territory; or
·
under the authority of the Commonwealth or the government of a State or Territory or of a municipal corporation, another local governing body or a public authority constituted by a law of the Commonwealth, a State or a Territory.

7.21 registered organisation has the same meaning as in subsection 116E(1) of the Income Tax Assessment Act. That is, generally, a registered organisation is:

·
an association registered under any State Act or law of a Territory as a trade union;
·
a friendly society; or
·
an association of employees that is an organisation within the meaning of the Industrial Relations Act 1988.

7.22 A registered organisation is liable to the surcharge when an ETP containing surchargeable contributions is rolled over to a registered organisation to purchase an immediate annuity or a deferred annuity.

7.23 regulated superannuation fund has the same meaning as in the SIS Act. A fund is a regulated superannuation fund if it meets the conditions in section 19 of the SIS Act.

7.24 RSA , or retirement savings account, has the same meaning as in the Retirement Savings Account Act 1997. An RSA is an account or policy that meets the conditions in section 8 of that Act.

7.25 RSA has the same meaning as in the Retirement Savings Account Act 1997. An RSA provider is a person who provides one or more RSAs (section 12 of the Retirement Savings Accounts Act).

7.26 specified roll-over amount has the same meaning as in subsection 110(1), subsection 116E(1) and subsection 267(1) of the Income Tax Assessment Act. That is, a specified roll-over amount is the untaxed element of the post-June 1983 component of an ETP that is rolled-over to a superannuation provider.

7.27 superannuation (accumulated benefits) provider is a superannuation provider that is not a superannuation (defined benefits) provider.

7.28 superannuation (defined benefits) provider is a superannuation (funded defined benefits) provider or a superannuation (unfunded defined benefits) provider. That is, a superannuation provider who provides defined benefits to its members.

7.29 superannuation fund is:

·
a provident, benefit, superannuation or retirement fund that is an indefinitely continuing fund; or
·
a public sector superannuation scheme.

7.30 superannuation (funded defined benefits) provider is a superannuation provider that is the trustee of a superannuation fund established for the purposes of a funded defined benefits superannuation scheme.

7.31 superannuation provider is:

·
the trustee of a complying superannuation fund or complying ADF;
·
an RSA provider; or
·
a life assurance company or registered organisation.

7.32 superannuation (unfunded defined benefits) provider is a superannuation provider that is the trustee of a superannuation fund established for the purposes of an unfunded defined benefits superannuation scheme.

7.33 surchargeable contributions is discussed in paragraphs 2.4 - 2.10.

7.34 taxable income is the member's taxable income as assessed under the Income Tax Assessment Act. That is, taxable income is the member's assessable income reduced by allowable deductions as reported by the member on his or her tax return for a year.

7.35 trustee of a superannuation fund means a trustee within the ordinary meaning of the term or the person who manages the fund.

7.36 unfunded defined benefits superannuation scheme is a defined benefits superannuation scheme where some or all of the contributions to fund benefits are not made to the fund until the member becomes entitled to receive their benefits. That is, the scheme is not funded to pay benefits until the member's benefit entitlement is due to be paid.

[Clause 41]


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