House of Representatives

Superannuation Legislation Amendment Bill (No. 3) 1999

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Senator the Hon Rod Kemp)

Outline

This Bill gives effect to the changes to the regulation of small superannuation funds announced by the Government in the 1998-99 Budget. In this respect, the Bill also reflects the Government's response to the recommendations of the Financial Systems Inquiry (FSI) concerning the organisational framework for the regulation of small superannuation funds.

The Bill contains two schedules.

Schedule 1 Amendments of the Superannuation Industry (Supervision) Act 1993 relating to self managed superannuation funds

Schedule 1 of the Bill amends the Superannuation Industry (Supervision) Act 1993 (SIS Act) to establish a new category of small superannuation fund with fewer than 5 members to be called a self managed superannuation fund. It also provides for the transfer of the regulation of self managed superannuation funds from the Australian Prudential Regulation Authority (APRA) to the Australian Taxation Office (ATO) with effect from 1 July 1999.

The existing definition of an excluded superannuation fund will be replaced with a new definition of a self managed superannuation fund that, in addition to requiring the fund to have fewer than five members, will also require all members of the fund to have a business or family relationship and to be trustees of the fund. As members of self managed superannuation funds will able to protect their own interests these funds will be subject to a less onerous prudential regime under the SIS Act.

A fund that has fewer than five members that is not a self managed superannuation fund will continue to be subject to prudential supervision by APRA and will be required to appoint an independent trustee approved under Part 2 of the SIS Act.

Part 1 of Schedule 1 includes amendments the SIS Act to:

replace the existing definition of an 'excluded fund' with a definition of a 'self managed superannuation fund';
confer powers and the administration of relevant Parts of the SIS Act in respect of self managed superannuation funds on the Commissioner of Taxation;
provide for an annual return to be lodged with the ATO for self managed superannuation funds;
remove the application of the 'culpability test' when determining whether a self managed superannuation fund should be treated as a complying superannuation fund for taxation purposes;
place a duty on a fund that changes regulators to notify the ATO;
require a fund that has fewer than five members (that is not a self managed superannuation fund) to have an approved trustee;
enable APRA or the Commissioner of Taxation to give a notice to a fund requesting certain information to determine whether the fund is a self managed superannuation fund or an APRA regulated fund;

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a contravention notice prescribing a penalty will be able to be served on a person who fails to comply with the notice within a specified period; and

insert secrecy provisions to protect information and documents provided to the ATO under the SIS Act.

Part 1 of Schedule 1 also inserts a number of transitional and savings provisions relating to the regulation of self managed superannuation funds by the ATO. These will ensure that when a fund changes regulators that instruments issued by the previous regulator, and obligations owed by or to the previous regulator will carry over to the new regulator.

Part 2 of Schedule 1 changes references to 'APRA' to 'the Regulator', in order to facilitate the transfer of the regulation of self managed superannuation funds to the ATO.

Part 3 of Schedule 1 inserts a number of transitional and savings provisions which will apply following the transfer of regulation of self managed superannuation funds to the ATO. These provisions allow:

a fund that has been a self managed superannuation fund for only part of the 1999-2000 income year to submit an annual return for that year to only one regulator;
existing excluded funds until 31 March 2000 to adjust their structure to meet the new definition of a self managed superannuation fund; and
the transfer of records relating to self managed superannuation funds from APRA to the ATO.

Schedule 2 Consequential amendments of other Acts

Schedule 2 of the Bill implements consequential amendments to the Australian Prudential Regulation Authority Act 1998, the Financial Institutions Supervisory Levies Collection Act 1998, the Income Tax Assessment Act 1936, the Superannuation (Excluded Funds) Taxation Act 1987, the Superannuation (Excluded Funds) Supervisory Levy Imposition Act 1991, the Superannuation (Resolution of Complaints) Act 1993 and the Superannuation Supervisory Levy Imposition Act 1998.

The amendments give effect to the transfer of the regulation of self managed superannuation funds to the ATO. The amendments also provide for a reduced supervisory levy to be payable by self managed superannuation funds.

Financial Impact Statement

The financial impact of this Bill is considered to be low. Changes to the superannuation supervisory levy are expect to have a Budget revenue cost of around $19 million dollars in each of the financial years to 1999-00 to 2001-02.

Regulation Impact Statement

Background

The Australian Prudential Regulation Authority (APRA) administers the Superannuation Industry (Supervision) Act 1993 (the 'SIS Act'). The SIS Act regulates all superannuation entities, including industry funds, public offer funds, employer related funds and excluded superannuation funds.

At present, an excluded superannuation fund is a superannuation fund with fewer than five members. The number of excluded superannuation funds has grown rapidly from a low of around 60,000 in 1991 to a current estimate of 180,000, representing some $42 billion in assets under management. Excluded superannuation funds comprise 97% of the total number of funds but account for only 12% of total industry assets and 1.8% of fund members.

A. PROBLEM IDENTIFICATION

At present the definition of an excluded superannuation fund is simply a superannuation fund with fewer than five members. Excluded superannuation funds are subject to less onerous prudential requirements under the SIS Act. They are exempt from, among other things:

the requirements to establish internal complaints resolution systems and the operation of the Superannuation (Resolution of Complaints) Act 1993;
the requirement to have a registered company auditor;
many of the detailed requirements to regularly report to members.

Excluded funds are exempted from these requirements on the basis that members of these funds are capable of looking after their own interests. Members of such funds are normally related (e.g.husband and wife, or business partners) and usually act as trustees and therefore can readily influence the investment strategy and administration of the fund.

The definition of excluded fund does not currently require a particular relationship or common interest between members, nor does it ensure that all fund members have equal influence or power within the fund. As a result the situation arises where excluded superannuation funds include members who are not in a position to protect their own interests.

There are, for example, excluded funds where a 'mum and dad' or 'family' fund has been extended to include a non-related employee of the fund's employer-sponsor. The employee is then an arm's length member, as he or she generally lacks a clear commonality of interest with other members. Further, as the employee is not normally a trustee or related to a trustee he or she lacks equality of influence and thus the ability to be involved in trustee decision making.

APRA's annual return data indicates that approximately 16% of excluded superannuation funds contain arm's length members (i.e. members who are not relatives or associates of trustees of the fund), who are not in a position to look after their own interests. Despite this, these members do not have the protection of the additional prudential requirements (as outlined above) which are designed to protect members in such a situation.

To overcome these problems, the Bill proposes to amend the definition of an excluded superannuation fund (to be renamed a self managed superannuation fund). Requirements are included for both a commonality of interest between members (i.e. all members to be related or business partners) and a mechanism for all members of such funds to be involved in trustee decision making (i.e. all members to be trustees).

The proposed change will ensure that excluded funds that currently contain arm's length members in need of prudential protection and do not choose to transfer those members out of the fund will not be classified as self managed superannuation funds. They will remain regulated by APRA and the added prudential requirements will apply to protect the interests of the arm's length members in such funds. Alternatively, such funds can transfer an arm's length member(s) to a prudentially regulated fund to satisfy the definition of a self managed superannuation fund.

B. POLICY OBJECTIVE

The policy objective of the amendment to the definition of excluded superannuation fund under the Superannuation Industry (Superannuation) Act 1993 is to ensure that all members of excluded superannuation funds are able to protect their interests.

C. IDENTIFICATION OF ALTERNATIVES

The following options were identified as being capable, at least partly, of achieving the objectives outlined above:

Option 1
Proceed with the proposed change to the definition of an excluded fund (to be renamed a self managed superannuation fund); or
Option 2
Do not change the definition of 'excluded superannuation fund' but instead apply to all excluded funds the additional prudential requirements from which they are currently exempt.

D. IMPACT ANALYSIS

1. Impact group identification

The following groups are likely to be significantly affected by the proposal amendment to the definition of an excluded superannuation fund.

Industry

Excluded funds containing members who are not trustees will be required to either:

a)
transfer the arm's length members to another fund;
b)
have these members become trustees (where this is possible in accordance with the changed definition);
c)
cease to be an excluded fund and appoint an approved trustee within the meaning of the SIS Act; or
d)
have the existing trustee become an approved trustee within the meaning of the SIS Act.

Approved trustee companies may see an increase in the number of small funds under their trusteeship.

Members

Arm's length members of an excluded fund may have their benefit transferred to a prudentially regulated superannuation fund and receive regular detailed reports, access to complaints resolution schemes and possibly more investment options.

Trustees

Small trustee companies with no family or business relationship to the members will no longer be able to be trustees.

Employers/small business

Employers, including small business employers, will be required to pay superannuation contributions for arm's length employees into a different fund than the employer's existing excluded fund.

Government

The proposed change in definition of excluded superannuation fund will not have any major impact on APRA.

Option 1: Proceed with the proposed change to the definition of an excluded fund (to be renamed a self managed superannuation fund)

COSTS

The change in the definition will not impose a cost on all excluded superannuation funds, rather only on the trustees of excluded superannuation funds that currently contain arm's length members. The extent of these costs will depend on whether the trustees decide to transfer the arm's length members to a prudentially regulated superannuation fund, or whether the trustees wish to keep arm's length members in the fund and appoint an approved trustee.

Due to the diversity of excluded funds it is not possible to quantify the likely costs of the proposed amendment as such costs will not be uniform. There may however, be some 'one-off' costs for both trustees of excluded funds and for some employers.

For trustees transferring members to other superannuation funds these costs will include some accounting costs to establish the amount of the member's benefit. These costs are likely to be minimal as funds are required to keep current records of member balances. There will also be expenses resulting from transferring an arms length member's benefit to a new fund.

Where an arms length member becomes a trustee or a director of the trustee company there may be some additional legal costs in preparing appropriate documentation or amending the fund's trust deed.

The employer may have some additional administrative and financial costs in determining new superannuation arrangements for employees (e.g. finding an appropriate master trust or industry fund).

It is not anticipated that there will be any additional 'on-going' costs to either trustees or employers as a result to the proposed change to the definition where a fund transfers an arm's length member, or where such a member becomes a trustee.

If the trustees of an existing excluded superannuation fund wish to keep their arm's length members they will be required to either:

a)
resign as trustee for the superannuation fund and appoint an approved trustee (a trustee approved by the Commissioner to act as trustee to public offer funds); or
b)
become an approved trustee within the meaning of the SIS Act.

Where a trustee of the excluded superannuation fund resigns and installs an approved trustee there may be administration and financial costs associated with the winding up of the excluded superannuation fund (if required), joining fees (if any) of the approved trustee and costs associated with the transfer of assets (including stamp duty, where appropriate) between the funds. The approved trustee will also charge an ongoing administration fee to manage the fund though this will to some extent offset the prior cost of managing the excluded fund.

It is also possible that the approved trustee will not allow, or have the necessary systems in place, to manage the same investments that were previously conducted by the trustee of the excluded superannuation fund, requiring a change in the fund's investment mix.

Few, if any, existing excluded fund trustees are likely to apply to become approved trustee themselves. The requirements involved in becoming an approved trustee are quite extensive and the costs likely to be prohibitive (for example, normally the trustee company must have $5 million in net assets).

It is expected that this proposal will result in negligible additional cost to Government.

BENEFITS

The proposed changes give arm's length members far greater access to information about their superannuation benefits whichever option an excluded fund takes in order to satisfy the new definition. These members will receive regular information about the operations and investments of their superannuation fund. This will give them a clearer picture of how their superannuation benefits are being managed to provide a retirement income. They will also have access to regular and detailed member information. This will ensure that the member is better informed about the growth of their benefits.

In addition, where such members are transferred out of an excluded fund to a public offer fund they will be able to choose between various options in order to maximise their long term retirement income, because many public offer funds provide a range of investment options. Such a facility is rarely available to members of excluded superannuation funds.

Option 2: Apply the additional prudential requirements to all funds

COSTS

This would impose change on the full 180,000 excluded funds rather than only 16% of these funds, which currently contain arm's length members. It would, for example, require all these funds to establish complaints resolution mechanisms even though the only decisions they could complain about would be decisions made by themselves (as trustees). This would lead to unnecessary bureaucratic red tape that would achieve little benefit at a significant cost.

BENEFITS

As the additional prudential requirements would apply to all funds, arm's length members currently in excluded funds would have their interests better protected than is currently the case, though no better protected than would be the case under Option 1.

E. RECOMMENDATION

Option 1 is the preferred option as it ensures that the interests of arm's length members are properly protected, without impacting unnecessarily on the vast majority of excluded funds, as would be the case with Option 2.

F. OTHER ISSUES

Invitations were extended to a range of industry bodies with an interest in excluded superannuation funds to make submissions to APRA when it was the Insurance and Superannuation Commission (ISC) during the ISC' review of excluded superannuation funds. Industry bodies consulted included the Australian Society of CPAs; Association of Superannuation Funds of Australia (ASFA); Life, Investment and Superannuation Association of Australia (LISA); and the Trustee Corporations Association of Australia. A range of issues were considered by these organisation. Only two written submissions, from ASFA and LISA, considered changes to the definition of excluded funds in any detail.

ASFA recommended that the current definition of excluded fund be changed so that there be no arm's length members. The submission recommended that the fewer than five members, aspect of the definition be considered and that any change to the definition allow for transitional arrangements. Generous transitional arrangements have been included in the Bill. LISA submitted that excluded funds be defined as those with fewer than five members, none of which are non-associates and that for the purpose of associate that section 26AAB of the Tax Act be used.

As part of the review of excluded superannuation fund operations, the views of individual trustees and their advisers about regulatory changes were sought and considered as part of the project. While individual views varied widely, anecdotal evidence suggested a overall belief by trustees that excluded funds were generally family or business oriented funds and should not contain arm's length members.

A draft of the Bill was released for public comment. In addition to this, consultation on the draft Bill was undertaken with a large number of industry bodies, including the ASFA, the Australian Society of Certified Practicing Accountants, the Australian Taxpayers Association, and the Small Superannuation Funds Association.

IMPACT ON COMPETITION

It is expected that the adoption of Option 1 will have a minimal impact on competition.

There will be no negative flow-on effects to the rest of the community.

Abbreviations

The following abbreviations are used in this explanatory memorandum:

APRA - Australian Prudential Regulation Authority
ATO - Australian Taxation Office
FSI - Financial System Inquiry
ASIC - Australian Securities and Investment Commission
SIS Act - Superannuation Industry (Supervision) Act 1993
ITAA - Income Taxation Assessment Act 1936

Preliminary

Overview

This part of the Bill sets out the preliminary details of the Act.

Purpose of the Provisions

The purpose of the provisions is to:

Establish the title, scope and commencement date of the Act.

Explanation of Provisions

Clause 1 - Short Title

This clause provides the mode of citation of the Act.

Clause 2 - Commencement

Subclause (1) provides that, subject to this section, the Act commences on 1 July 1999.

Subclause (2) provides that items 29 and 54 of Schedule 1 commence on 1 April 2000.

Subclause (3) provides that items 44 and 50 of Schedule 1 commence on 1 July 2000.

Clause 3 - Schedules

This clause provides that, subject to section 2 of the SIS Act, each Act specified in a Schedule to this Act is amended or repealed as set out in the Schedule.

Schedule 1 - Amendment of the Superannuation Industry (Supervision) Act 1993 Relating To Self Managed Superannuation Funds

Explanation of Provisions

Part 1 Regulation of self managed superannuation funds

Items 1 - 14

In order to facilitate the transfer of the regulation of self managed superannuation funds from APRA to the ATO, the Bill proposes a number of amendments to section 6 of the SIS Act, which deals with the general administration of the Act. The Commissioner of Taxation will have general administration of various parts of the SIS Act to the extent that they relate to self managed superannuation funds ( item 10 ). The SIS Act Parts that are not referred to in item 10 are those that are not relevant to self managed superannuation funds. APRA will be removed as the general administrator of self managed superannuation funds ( items 2, 3, 4, 5, 6, 7, 8, 9, 11 ) to the extent that the administration is conferred on the Commissioner of Taxation by item 10.

In addition, to give effect to the ATO's role as a regulator of self managed superannuation funds, the Commissioner of Taxation will be included as one of the three supervisory agencies under subsection 3(1) of the SIS Act by the Bill ( item 1 ). (The other two will continue to be APRA and ASIC.)

Powers and Duties will also be conferred on the Commissioner of Taxation for the purpose of the administration of the provisions of the SIS Act he or she administers ( item 13 ). To ensure consistency in the application of the SIS Act, the modifications power, (which empowers APRA to make modifications to certain provisions of the Act and the regulations), will remain the sole responsibility of APRA in respect of all superannuation entities. Similarly, it is proposed that the discretion to waive disqualified person status will, for prudential reasons, be the sole responsibility of APRA. In addition, those Parts of the SIS Act that are currently administered by ASIC will continue to be administered by ASIC in respect of self managed superannuation funds.

At present, if a fund is deemed not to be a complying superannuation fund, then APRA must provide a notice to that effect, setting out the reasons why the fund is not a complying fund (Subsection40(1) and 40(2) of the SIS Act). For a fund that is a self managed superannuation fund on the last day of a year of income this responsibility will be transferred to the ATO ( item 14 ). For all other funds this responsibility will remain with APRA. In addition, item 14 specifies that APRA (unless another body is specified in the regulations), has general administration of subparagraphs 42(1AA)(b)(ii) and (c)(ii) and subsection 42(1AC) and subparagraphs 42A(c)(ii) and (d)(ii) and subsection 42A(4), which extend the circumstances in which an entity may be taken to be a complying superannuation fund.

Item 12 will correct an error in the earlier legislation. The note to section 6(2) of the SIS Act presently refers to Section 16 for the description of a Regulator, when it should refer to Section 10.

Items 15 - 20

Section 10 of the SIS Act defines the terms used in the Act. The definition of excluded funds will be repealed, and a new class of funds will be created (self managed superannuation funds). Item 19 links the definition of a self managed superannuation fund in section 10 of the SIS Act with new section 17A (see item 22 below), which inserts a detailed definition of a self managed superannuation fund into the SIS Act. In addition, the definition of an excluded superannuation fund will be repealed ( items 15 and 16 ). The term 'Regulator' as defined in the SIS Act will also be amended to reflect the inclusion of the ATO as a regulator of self managed superannuation funds for certain purposes ( item 18 ).

Some sections of the SIS Act confer powers on a 'member of staff' of APRA or of ASIC. The Bill extends these to include taxation officers, in relation to the Commissioner of Taxation ( item 17 ). Item 20 inserts the definition of a taxation officer into subsection 10(1) of the SIS Act. A taxation officer is defined as a Second Commissioner of Taxation, a Deputy Commissioner of Taxation, or an officer or employee of the Australian Public Service or authority of the Commonwealth who is performing duties in the ATO. It would also include a person engaged to provide services to the ATO.

Items 21 and 22

The definition of a member of self managed superannuation fund will be amended to include a person who receives a pension from the fund, or a person who has deferred his or her entitlement to receive a benefit from the fund, as a member of a self managed superannuation fund ( item 21 ).

Item 22 will insert a new section 17A into the SIS Act. This defines a self managed superannuation fund for the purpose of the Act.

Under the new definition of a self managed superannuation fund, it must be the case that:

(A)
the fund has fewer than five members; and
(B)
all of the members are trustees and there are no other trustees; and
(C)
there is a family or business relationship between the members of the fund, i.e. each member of the fund is linked to each other member of the fund.

A. Fewer than five members

This is included in the existing definition of an excluded superannuation fund.

B. All members are trustees and there are no other trustees

Under the existing definition an excluded superannuation fund may contain members that are at arm's length from the trustees, for example, non-related employees of the fund's employer-sponsor. These members often lack a clear commonality of interest and equality of influence over the management of the fund in comparison to other members of the fund.

The requirement that all members be trustees will ensure that each member is fully involved and has the opportunity to participate equally in the decision making processes of the fund (i.e. that the fund is truly self managed).

New paragraph 17A(1)(b) allows a body corporate to be a trustee of a self managed superannuation fund where each director of the body corporate is also a member of the fund. In addition, each member of the fund must be a director of the body corporate.

Single Member Funds

Under trust law it is not possible for an individual to be both the sole trustee and the sole beneficiary of a trust. In this circumstance the legal and equitable interest in the trust property merge and there is no trust. Therefore, the new subsection 17A(2) introduces specific conditions for single member funds.

A self managed superannuation fund with only one member must have either: a body corporate as the trustee, where the member is the sole director of the body corporate or alternatively where the member is one of two linked directors of the body corporate; or two individual trustees, one of which is the member and the other a natural person with a business or family relationship to the member (as defined in (C)).

C. There is a family or business relationship between fund members.

As with (B), this requirement will ensure that there is commonality of interest and equality of influence between the members of a self managed superannuation fund.

The new paragraph 17A(1)(e) will require each member of the fund to be linked to each other member of the fund. This means that each member must have a direct relationship with at least one other member and an indirect relationship with all other members of the fund. The nature of these relationships must be at least one of the following:

A relative as defined by new subsection 17A(7);
Directors of a company, partners in a partnership, or trustees of the same trust, where the company, partnership, or trust is carrying on a business;
Directors of different companies where these companies are in a partnership that is carrying on a business;
Directors of a company that is the trustee of a trust that is carrying on a business; or
individuals who satisfied one of the above descriptions of a business relationship immediately prior to the retirement of one or both of those individuals.

Exceptions to the Above Definition of a Self Managed Superannuation Fund

Where a member dies, the legal personal representative of that member may act as a trustee of the fund, or a director of the body corporate that is a trustee of the fund. Where this is the case, the fund will remain a self managed superannuation fund during the period from the death of the member until the payment of death benefits commence in respect of the member. To remain a self managed superannuation fund after the payment of death benefits commence, the fund must meet the definition of a self managed superannuation fund, given by (A), (B) and (C) above.

A fund will also remain a self managed superannuation fund when a member of a fund is under a legal disability, or the legal personal representative has an enduring power of attorney in respect of a member, and the legal personal representative of the member is a trustee of the fund, or a director of a body corporate that is a trustee of the fund, in place of the member of the fund (new paragraph 17A(3)(b)). New subsection 17A(8) clarifies that new subsection 17A(3) does not permit a person, in the capacity as a legal personal representative of a disqualified person (under Section 120 of the SIS Act), to be the trustee of a self managed superannuation fund.

The requirement that all members be trustees raises the issue of the inclusion of minors in self managed superannuation funds. Minors are under a legal disability and as such, they are not able to be trustees of a superannuation fund. To address this concern, new paragraph 17A(3)(c) enables a parent or guardian to act as a trustee of a self managed superannuation fund on a minor's behalf, where the minor is a member and where the minor does not have a legal personal representative. A parent acting as a trustee on behalf of a minor in a self managed superannuation fund may also be a member of the same fund. The minor will count as a member of the fund with regard to the requirement that a self managed fund must have fewer than five members (limb (A)).

A fund will also remain a self managed superannuation fund where the ATO appoints an acting trustee under section 134 of the SIS Act.

Examples 1 to 4 are of fund structures that meet the new definition of a self managed superannuation fund. These funds meet all (A), (B) and (C) of the definition of a self managed fund, i.e. it has fewer than five members, all members are trustees and all trustees are members. In addition, there is a family or business relationship between the members of the fund, as defined by this item.

Example 1

Example 1 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

Example 2

Example 2 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

In Example 2, Members A, B, C and D would each need to be a trustee of the fund.

Example 3 Single Member Fund

Example 3 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

Example 4 Single Member Fund

Example 4 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

Either of these fund structures satisfy the definition of a single member self managed superannuation fund.

Examples 5 and 6 do not meet the definition of a self managed superannuation fund.

Example 5

Example 5 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

In example 5, trustee 3 is not a member, thus this structure does not satisfy (B) of the definition. In addition, the fund does not satisfy (C) of the definition (i.e. of a business or family relationship between all members), because a financial advisor is not a business associate under the definition in new subsection 17A(6).

In examples 5 and 6 the fund structures do not meet (C ) (i.e. business or family relationship between members) of the definition of a self managed superannuation fund. In addition, unless all members were trustees, limb B of the definition would not be met

Example 6

Example 6 - Exceptions to the Above Definition of a Self Managed Superannuation Fund

No Trustee Remuneration

New paragraph 17A(1)(f) requires that no trustee of a self managed superannuation fund receive any remuneration for duties or services performed in relation to the fund. This is analogous to the present description of excluded funds.

Transfer Period

There is a period of time in which funds will remain self managed superannuation funds when they no longer satisfy the definition of a self managed superannuation fund. New subsection 17A(4) will ensure that a fund will remain a self managed superannuation fund for six months after the fund ceased to meet the definition of a self managed superannuation fund or until an approved trustee is appointed, whichever is the earlier of these two events. This will give funds time to restructure, or to meet the requirements of an APRA regulated fund, after an event such as the dissolution of a business partnership.

The transfer period will not apply where one of the reasons that the fund ceased to be a self managed superannuation fund was that one or more new members were admitted to the fund (new subsection 17A(5)).

Items 23 - 25

Section 18 of the SIS Act sets out circumstances under which a superannuation fund is a public offer fund for the purposes of the SIS Act. At present certain excluded funds can be public offer funds. Under the definition in new section 17A, a self managed superannuation fund will not be able to be a public offer fund, and therefore the definition of a public offer fund will reflect this ( items 23 and 24 ).

Section 18A of the SIS Act outlines the conditions under which an excluded fund is not a public offer fund. This section will no longer be relevant under the new definition of a self managed superannuation fund and the Bill will repeal this section ( item 25 ).

Items 26 - 27

In order to receive concessional taxation treatment, a superannuation fund must elect to become regulated under subsection 19(4) of the SIS Act. At present, to be a regulated fund the trustees of that fund must lodge an election form with APRA. Item 26 will enable a body or person other than APRA to be specified in the regulations for the purpose of receiving an election form. Item 27 will enable the regulations to specify different persons or bodies who could accept election forms in respect of different classes of superannuation funds. Election forms will continue to be lodged with APRA in respect of self managed superannuation funds until regulations are made for the purpose of subsection 19(4).

Items 28 and 29

Funds with fewer than five members, but which include arm's length members (that is, members who do not have a family or business relationship as defined in new subsection 17A(7)), will no longer be considered self managed superannuation funds and will be subject to prudential regulation by APRA. In addition, these funds will be required to have an approved trustee under Part 2 of the SIS Act, (i.e. an independent trustee company that meets prescribed financial or custodial requirements and proves itself to be a fit and proper body) ( item 28 ).

Item 29 amends the SIS Act to recognise that the failure of an APRA regulated fund with fewer than 5 members to appoint an approved trustee is a ground for suspension or removal of the trustee(s). This item commences on 1 April 2000. Existing excluded superannuation funds that do not meet the definition of a self managed superannuation fund and remain regulated by APRA, will be required to appoint an approved trustee by 31 March 2000 (see item 133).

Items 30 - 32

Item 30 replaces the reference to APRA in the title of Part 4 of the SIS Act, with 'the Regulator'. A definition of the Regulator introduced by an earlier item in the Bill includes the ATO.

At present, annual returns must be lodged with APRA by all regulated superannuation funds. Item 32 inserts new section 36A, which will require the ATO to receive annual returns from superannuation funds that were self managed superannuation funds at any time during a year of income ( item 31 ).

As a transitional arrangement, 1999-2000 returns need only be lodged with one regulator for a fund that is a self managed superannuation fund on the last day of the 1999-2000 year of income it will be the ATO, for all other funds it will be APRA. From 2000-2001 onwards, a fund that switches regulator in a year of income (i.e. is a self managed superannuation fund for only part of a year of income), must lodge an annual return with both APRA and the ATO (see items 134 and 135).

New subsection 36A(2) will provide for a reporting period, within which an annual return must be lodged after the end of a year of income to be specified in the SIS Regulations. When the reporting period is not specified in the SIS Regulations, then it will be specified by the Commissioner of Taxation in the Gazette. The Commissioner of Taxation will have the discretion to extend the reporting period.

An annual return for a self managed superannuation fund must be in a form approved by the Commissioner of Taxation and may be attached to, or physically form part of another document (new subsection 36A(3) and new paragraph 36A(4)(a)). This will provide the Commissioner of Taxation with the flexibility to accept the annual return together with, or as part of, the self managed superannuation fund's taxation return.

The new paragraph 36A(4)(b) allows the ATO to accept electronic lodgment of annual returns, where the return contains the electronic signature of the appropriate person (new paragraph 36A(6)(a)), as well as hard copy documents. Where a return is lodged electronically, a hard copy must be signed and retained by the fund for 10 years.

New subsection 36A(8) specifies that where the reporting period for lodgment of an annual return is specified by notice in the Gazette, the notice will be a disallowable instrument for the purpose of section 46A of the Acts Interpretation Act 1901.

Items 33 - 38

Section 42 of the SIS Act sets out circumstances where an entity is a complying superannuation fund in relation to a year of income and therefore eligible for concessional taxation treatment. To be eligible for concessional taxation treatment a superannuation fund must, among other things, lodge an election form with APRA electing that the fund be regulated under the SIS Act. Subsections 42(1AA) and 42(1AB) of the SIS Act extend the circumstances where a entity may be taken to be a complying superannuation fund, in particular by conferring a discretion on APRA to extend the time within which the lodgment of an election to be regulated must be made with APRA and to enable trustees to rectify invalid elections.

Section 42 will no longer apply to entities that have been self managed superannuation funds at any time during the year of income ( items 33, 34 and 35 ). New section 42A will set out the circumstances where an entity, that has been a self managed superannuation at any time during a year of income, is a complying superannuation fund ( item 38 ). Further, new subsection 42(3) recognises that a person or body, other than APRA, may be specified in the regulations for the purposes of receiving an election form ( item 37 ).

New section 42A is based on section 42 of the SIS Act. The new section differs from section 42 of the SIS Act in that the requirement that an entity, in relation to any contravention of the SIS Act and regulations, did not fail the culpability test set out in subsection 42(1A) is replaced with a requirement that the entity pass a compliance test set out in new subsection 42A(5). The culpability test, which is designed to protect arm's length members who are not involved in trustee decision making, is not appropriate for self managed superannuation funds given that all members will generally be trustees of the self managed superannuation fund. The culpability test is still applicable to a fund that has been a self managed superannuation fund during only part of a year of income ( item 36 ).

The compliance test set out in new subsection 42A(5) applies in respect of entities that were self managed superannuation funds throughout a year of income, and in respect of the part or parts of the year of income during which an entity was a self managed superannuation fund. The culpability test set out in subsection 42(1A) continues to apply in respect of any part or parts of the year of income during which an entity was not a self managed superannuation fund.

An entity passes the compliance test set out in new subsection 42A(5), if the entity did not contravene the SIS Act or regulations during the year of income or the part of the year of income; or, if the trustee contravened the SIS Act or regulations during the year of income, the Regulator, after considering:

the taxation consequences of treating the entity as a non-complying fund; and
the seriousness of the contravention; and
all other relevant circumstances,

thinks that a compliance notice should nevertheless be given in relation to the year of income.

It should be noted that if, a compliance notice has already been given, or applies, in relation to a year of income and has not been revoked under section 40 of the SIS Act, then a second compliance notice would not need to be given for the purposes of new subsection 42A(5).

Item 39

Excluded funds are currently exempted from section 58 of the SIS Act which limits circumstances in which trustees can be subject to a direction from another person. As a result members of excluded funds are able to direct trustees to purchase certain assets that accord with the overall investment strategy of the fund. This item will enable this exception to continue for all regulated superannuation funds with fewer than 5 members (including those that are regulated by APRA) and excluded approved deposit funds.

Items 40 - 41, 46, 51 - 53, 55

These items replace references in the SIS Act to 'excluded funds' with references to 'self managed superannuation funds'. They will enable existing exceptions under the SIS Act for excluded funds to continue where a fund meets the definition of a self managed superannuation fund.

Item 42

Section 66 of the SIS Act contains a general prohibition on superannuation funds acquiring assets from members. This rule does not apply to the acquisition of exempt real business property by an excluded superannuation fund. This item will enable the exception to continue for all regulated superannuation funds with fewer than 5 members (including those that are regulated by APRA).

Item 43

Section 101 of the SIS Act requires the trustee of a superannuation fund other than an excluded superannuation fund, or an approved deposit fund other than an excluded approved deposit fund to establish arrangements for dealing with inquiries and complaints. This item will enable the existing exception from section 101 for excluded superannuation funds to continue where a fund meets the definition of a self managed superannuation fund. However, the exception for excluded approved deposit funds will no longer apply. This recognises that there is a separation between the members and the trustee of an excluded approved deposit fund (as with other APRA regulated funds with fewer than five members) and therefore members of these entities are in need of the protection of the complaints provisions of the SIS Act.

Item 44

This item inserts new section 106A which requires a superannuation fund to notify the Commissioner of Taxation if the fund moves from the regulation of APRA to the ATO and if the fund ceases to be self managed superannuation fund. A notice must be provided to the Commissioner of Taxation as soon as practicable and no later than 21 days after the trustee becomes aware of the change of the funds status. This item commences on 1 July 2000.

A fund that is a self managed superannuation fund at the time it elects to become a regulated superannuation fund does not need to notify the Commissioner of Taxation of its status under new section 106A at the time of its election.

Item 45

This item replaces the reference to 'excluded fund' with a reference to 'funds with fewer than 5 members', so that all funds with fewer than 5 members will not be required to establish procedures for appointing member representatives under section 107 of the SIS Act.

Items 47 and 48

Section 117 of the SIS Act describes the circumstances in which amounts may be paid out of an employer-sponsored fund to an employer-sponsor. This section does not apply to excluded superannuation funds at present. These items will enable the exception from section 117 of the SIS Act for funds that have, at all times, been excluded superannuation funds to continue to apply to funds that, from the commencement of new subsection 117(2A) are, at all times, self managed superannuation funds.

Items 49 and 50

Item 49 inserts new subsection 121A which prohibits a person acting as a trustee of a superannuation fund with fewer than five members (other than a self managed superannuation fund) unless the person is an approved trustee. Item 50 inserts a strict liability offence, with a penalty of imprisonment for six months, for a breach of new subsection 121A. Item 50 commences on 1July2000.

Item 54

This item will enable APRA to suspend or remove the trustee of a superannuation fund with fewer than five members (other than a self managed superannuation fund) if that trustee is not an approved trustee. This will provide APRA with a means of ensuring that the interests of arms length members in these funds are protected. This item commences on 1 April 2000.

Item 56

This item inserts new part 24B into the SIS Act.

Division 1 - Monitoring of superannuation funds with fewer than 5 members

New section 252A of this part will give APRA and the ATO the ability to serve a notice requesting funds to provide information on their structure, in order to assess whether a fund is an APRA regulated fund or a self managed superannuation fund. The purpose of the notice power is to allow the ATO and APRA to determine which funds each regulator is responsible for, and as such, whether a fund complies with the relevant regulations. Further, the notice power will allow APRA and the ATO to request information about whether the fund intends to change its status (and hence regulator). A response to the notice will be required in 21 days (or longer if specified), from the date the notice is sent.

Failure to comply with the notice will be a strict liability offence, which can be enforced through the issuing of a contravention penalty notice, as specified in new section 252B. A contravention notice will specify various particulars including the alleged contravention and the prescribed penalty for the contravention. It will state that if the recipient of the notice does not wish the matter to be dealt with by a court, he or she may lodge with the Commissioner of Taxation, or with APRA, as the case requires, a signed statement to that effect and pay the prescribed penalty for the contravention.

The prescribed penalty will be 2 penalty units per month up to a maximum of 10 penalty units, for the period during which the contravention continues. Once the penalty is paid any liability of the person in respect of the contravention will be discharged and no conviction would be recorded. There is no obligation on APRA or the ATO to issue a contravention notice.

Division 2 - Secrecy provisions relating to the Commissioner of Taxation

The transfer of responsibility for the regulation of self managed superannuation funds to the Commissioner of Taxation will require those funds to provide the Commissioner of Taxation with detailed information on their operations. Some of this information will be commercially sensitive or of a personal nature, therefore it is necessary that secrecy provisions be in place to ensure that the information is properly protected.

New section 252C protects information and documents given to the Commissioner of Taxation (apart from those already made public from other sources) from being disclosed without authorisation, while allowing for efficient and effective information exchange between the Commissioner of Taxation and supervisory and regulatory agencies such as the ASIC, APRA and foreign regulators. These information exchange provisions will ensure that self managed superannuation funds do not have to provide the same or similar information to several regulators thereby reducing the compliance costs to industry.

New section 252C also prevents taxation officers or any person, who because of their employment may acquire protected information or documents, from being required to produce protected information to a Court (new subsection 252C(8)) or a person except where:

that information is produced to meet a requirement under the SIS Act, or an Act covered by this section (new subsection 252C(3)),
the provider of that information agrees in writing to its disclosure (new subsection 252C(4)); or
the disclosure of information would assist another financial regulator or other agency specified in the regulations to perform its function or exercise its powers (new paragraph 252C(5)(a));
the Commissioner of Taxation provides approval for such a disclosure by instrument in writing (new paragraph 252C(5)(b)); or
the disclosure is to the Commissioner of Taxation or a taxation officer for the purpose of carrying out the functions or exercising the powers of the Commissioner of Taxation (new subsection 252C(6)); or
the information forms part of some composite data, where the information about a particular person could not be identified (new subsection 252C(7)).

The regulations may impose conditions in relation to the disclosure of information or the production of documents under new section 252C (new subsection 252C(9)). New subsection 252C(10) makes it an offence if a person fails to comply with a condition.

Protected information or a protected document cannot be released under any freedom of information request. Such information will be treated as exempt for the purposes of the Freedom of Information Act 1982 (new subsection 252C(11)).

Division 3 - Transitional and savings provisions relating to the regulation of self managed superannuation funds by the Commissioner of Taxation

New section 252D states that, for the purposes of this Division, commencement day is defined to be the day on which section 1 of the Superannuation Legislation Amendment Act (No. 3) 1999 commenced.

Instruments made or issued by APRA or by the Commissioner of Taxation

New section 252E ensures that a legislative instrument in relation to a superannuation fund that is in force immediately before the switching time will continue to have effect notwithstanding that a fund switches regulator. That is, if an instrument in relation to a superannuation fund was made or issued by APRA under the SIS Act and the fund switches to be regulated by the ATO (i.e. becomes a self managed superannuation fund), that instrument has effect as if it had been made or issued by the Commissioner of Taxation. Further, an instrument in relation to a superannuation fund that was made or issued by the Commissioner of Taxation under the SIS Act has effect as if it had been made or issued by APRA.

The reference to instruments in force includes those that have been made but are not yet in operation.

Obligations owed to or by APRA or the Commissioner of Taxation

New section 252F provides that, subject to section 252G, an obligation owed by or to a superannuation fund under the SIS Act immediately before the switching time will continue to have effect notwithstanding that the fund may have switched regulator. That is, if an obligation in relation to a superannuation fund was owed by or to APRA under the SIS Act and the fund switches to be regulated by the ATO (i.e. becomes a self managed superannuation fund), that obligation continues to have effect as if it had been owed by or to the Commissioner of Taxation. Further, an obligation owed by or to the Commissioner of Taxation under the SIS Act has effect as if it had been owed by or to APRA.

Similarly, new section 252F also provides that a right or power of APRA (the ATO) in relation to a superannuation fund, will continue to have effect if the fund switches regulator, i.e. that right or power will be transferred to the Commissioner of Taxation (APRA).

Outstanding annual returns and amounts

New section 252G provides that, if the trustee of a self managed superannuation fund:

At the end of the 1999-00 income year or a later income year; or
If the fund ceases to exist during the 1999-00 or a later income year at the time the fund ceases to exist;

has an obligation to submit to APRA an annual return (or any other report or information) for a previous income year, the trustee is taken to be under an obligation immediately after that time to submit the outstanding annual return (or report or information) to the Commissioner of Taxation.

Further, if the trustee of an APRA regulated superannuation fund:

At the end of the 1999-00 income year or a later income year; or
If the fund ceases to exist during the 1999-00 or a later income year at the time the fund ceases to exist;

has an obligation to submit to the Commissioner of Taxation an annual return (or any other report or information) for a previous income year, the trustee is taken to be under an obligation immediately after that time to submit the outstanding annual return (or report or information) to APRA.

Outstanding levy

New section 252G also provides that any amount payable:

At the end of the 1999-00 income year or a later income year; or
If the fund ceases to exist during the 1999-00 or a later income year at the time the fund ceases to exist;

by the trustee of a self managed superannuation fund to APRA on behalf of the Commonwealth under a prescribed Act in respect of a previous income year is taken to be payable immediately after that time to the Commissioner of Taxation on behalf of the Commonwealth.

Further, an amount payable:

At the end of the 1999-00 income year or a later income year; or
If the fund ceases to exist during the 1999-00 or a later income year at the time the fund ceases to exist;

by the trustee of an APRA regulated fund to the Commissioner of Taxation on behalf of the Commonwealth under a prescribed Act in respect of a previous income year is taken to be payable immediately after that time to APRA on behalf of the Commonwealth.

Prescribed Act means the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987, the Financial Institutions Supervisory Levies Collection Act 1998 and any other Act prescribed in the regulations.

These provisions do not apply to current year annual returns or amounts payable. Outstanding annual returns or other reports or information must be submitted in the approved form.

Exceptions to the rules set out in 252G may also be prescribed in regulations.

New section 252H provides that regulations may deal with other transitional matters arising from the enactment of the Superannuation Legislation Amendment Act (No. 3) 1999.

Item 57

Requires that ASIC and the ATO provide each other with a copy of any report prepared in relation to a self managed superannuation fund under section284 of the SIS Act.

Part 2 Consequential changes to references to APRA

The transfer of responsibility for the regulation of self managed superannuation funds from APRA to the Commissioner of Taxation will involve various provisions of the SIS Act being administered by the Commissioner of Taxation, to the extent that they relate to self managed superannuation funds. Currently many of these provisions are the sole responsibility of APRA. Many of the SIS provisions must be amended to reflect the new role the Commissioner of Taxation will have in this area.

Items 58 - 114 and 118 - 132

The changes described in these items have the effect of including the Commissioner of Taxation as a regulator in respect of provisions that apply to self managed superannuation funds, as well as funds regulated by APRA. In most cases this is achieved by simply omitting references to APRA and substituting them with the Regulator, which may be either APRA or the Commissioner of Taxation, depending on the class of fund.

Items 58 - 114 and 118 - 132 relate to the following sections of the SIS Act:

reviewable decisions definitions (subsection 10(1));
lodgment of trustee's annual return (section 35);
written notices to trustees regarding fund status (sections 40 & 41);
when an entity is a complying superannuation fund (section 42);
complying superannuation funds (section 45);
late lodgment of election by trustee of super fund (section 50);
sole purpose test (section 62);
providing direction to trustees regarding employer-sponsor contributions (section 63);
borrowing (section 67);
determination of employer-sponsor by regulator (section 70A);
determination of in-house asset by regulator (section 71);
responsibilities of trustees where events significantly adversely affect an entity (section 106(1));
notification by trustee that they are a disqualified person (section 121(3));
obligations of actuaries and auditors when there is a suspected contravention of provisions (section 129);
obligations of actuaries and auditors when a fund is suspected to be insolvent (section 130);
disqualification of auditors (section 131);
referral of matters to a professional association (section 131A);
suspension or removal of trustee (section 133);
appointment of acting trustee (section 134);
terms and conditions of the appointment of an acting trustee (section 135);
termination of the appointment of an acting trustee (section 136);
resignation of acting trustee (sections 137);
vesting of property in acting trustee (section 138)
right of regulator to direct acting trustee (section 141);
winding up and/or dissolution of superannuation entity (section 142);
application for civil penalty orders (sections 197 & 201);
enforcement of orders to pay monetary penalty (section 200);
provisions relating to tax file numbers (TFNs) (part 25A); and
collection and publishing of statistical information (sections 299E, 299F, 299G, 299M, 299N, 299P, 347A & 348).

Items 115 - 117

Item 115 amends subsection 254(1) to enable a body or person, other than APRA, to be specified in the regulations for the purpose of receiving prescribed information in relation to elections to be regulated under the SIS Act. Item 116 will enable the regulations to specify different persons or bodies who can accept election forms in respect of different classes of superannuation funds (subsection 254 (1A)). Item 117 requires the recipient of information under subsection 254(1) to provide a written statement to the trustee acknowledging the information was received (section 254(3)).

Part 3 Transitional and Savings provisions

Item 133

This item will provide for a transitional period for excluded superannuation funds to restructure following the passage of the Bill. There will be some funds that were excluded superannuation funds prior to 1 July 1999 (the changeover date) that intend to restructure to meet the definition of a self managed superannuation fund at some point beyond 1 July 1999. These funds will remain APRA regulated funds until they meet the definition.

As a result of item 133 , these funds will not be required to comply with provisions that self managed superannuation funds would not be subject to, or that excluded superannuation funds were not previously subject to, in the transfer period before they restructure to become self managed superannuation funds. For example, they would not be subject to requirements to develop complaints procedures and be subject to the Superannuation Complaints Tribunal.

This part has the effect that a fund is not considered to have breached the SIS Act if the following conditions are met:

The breach occurs in the period from 1 July 1999 to 31 March 2000 (the transitional period); and
The fund is not a self managed fund, but does have fewer than five members and also had fewer than five members immediately before the later of 1 July 1999 and the day on which this Act received Royal Assent; and
The breach would not have been a breach if the fund had been a self managed superannuation fund.

Items 134 and 135

The amendments to the SIS Act made by items 31 and 32 of Part 1 of Schedule 1 apply only to the 1999-2000 and later income years. All funds must lodge annual returns under section 36 of the SIS Act for the 1998-99 income year. The amendments made by items 31 and 32 are also subject to a transitional provision. The transitional provision allows a fund that was a self managed superannuation fund for only part of the 1999-2000 income year to submit an annual return to only one regulator ( item 134 ).

A fund that is a self managed superannuation fund as at the end of the 1999-2000 year of income must lodge an annual return with the ATO under new section 36A, all other funds will continue to lodge annual returns with APRA under section 36 of the SIS Act. If a fund ceased to exist during the 1999-2000 income year and it was a self managed superannuation fund at the time it ceased to exist, a 1999-2000 annual return must be submitted to the ATO under new section 36A, all other funds which cease to exist will continue to lodge an annual return with APRA ( item 135 ).

From 2000-2001 onwards, a fund that switches regulator in a year of income (i.e. is a self managed superannuation fund for only part of a year of income), must lodge an annual return with both APRA and the ATO. (See item 32.)

Item 136

This item will provide for records kept by APRA concerning a fund which was previously regulated as an excluded superannuation fund, but will be regulated as a self managed superannuation fund by the ATO, to be transferred to the ATO. Only records that relate to functions performed by the ATO as the regulator of self managed superannuation funds will be transferred.

Schedule 2 - Consequential Amendments of Other Acts

Explanation of Provisions

Australian Prudential Regulation Authority Act 1998

Items 1 and 2 amend the APRA Act so that documents and information given or produced under the SIS Act as administered, or applied for the purpose of administering a provision, by the Commissioner of Taxation, are not considered protected under the APRA Act. These changes ensure documents and information available to a regulator are protected under the appropriate Act. The provision removes information or documents in respect self managed superannuation funds from the coverage of the APRA secrecy provisions, except where a provision of the SIS Act in respect of a self managed superannuation fund remains administered by APRA (i.e. the disqualified person discretion).

Financial Institutions Supervisory Levies Collection Act 1998

Item 3 Section 7 (paragraph (b) of the definition of superannuation entity)

Replaces the reference to 'excluded superannuation fund' in the definition of superannuation entity with 'self managed superannuation fund'.

This ensures that, with effect from 1 July 1999, self managed superannuation funds are not subject to a liability to a levy under the Financial Institutions Supervisory Levies Collection Act 1998.

Item 4 At the end of section 11

Inserts a note highlighting that any outstanding levy and late payment penalty may be payable to the Commissioner of Taxation on behalf of the Commonwealth as a result of section 252G of the Superannuation Industry (Supervision) Act 1993.

Income Tax Assessment Act 1936

Item 5 Subsection 160ZZPIA(5) (paragraph (a) of the definition of qualifying superannuation fund)

Replaces the reference to 'excluded superannuation fund' with 'self managed superannuation fund'.

Item 6 Section 161

Adds new subsection 161(3) to the Act that allows a return required under section 36A of the Superannuation Industry (Supervision) Act 1993 to be attached to or physically form part of a return under section 161 of the Act.

Superannuation (Excluded Funds) Supervisory Levy Imposition Act 1991

Item 7 Section 1

Amends the Short Title of the Act to the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 with effect from 1 July 1999.

Item 8 Section 4

Omits section 4 of the Act.

Item 9 Section 5

Replaces the reference to 'Excluded Funds' with 'Self Managed Superannuation Funds' reflecting the amended Short Title of the Superannuation (Self Managed Superannuation Funds) Taxation Act 1991.

Items 10 - 11 Section 6

Amends subsection 6(1) of the Act to provide that the amount of levy payable on the lodgment of a return for a year of income is the sum of the amount (not exceeding $200) specified in the regulations and, if the return is not lodged by the due date specified in the regulations, the amount of any late return lodgment penalty the trustee is liable to pay under section 6(2) of the Act ( item 10 ).

Omits subsection 6(2), (3), (4) and (5) of the Act and inserts a new subsection 6(2) into the Act that provides that the late lodgment amount in relation to a return is the amount (not exceeding $25) specified in the regulations in respect of the calendar month beginning the day after the due date for the return and each subsequent calendar month before the return is lodged ( item 11 ).

Item 12 Subsections 7(2) and (3)

Omits subsection 7(2) and (3) from the Act.

Superannuation (Excluded Funds) Taxation Act 1987

Item 13 Section 1

Amends the Short Title of the Act to the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987 with effect from 1 July 1999.

Items 14 - 16 Section 3 (definitions)

Omits the definition of APRA ( item 14 ). Replaces the reference to 'APRA' in the definition of reviewable decision with 'the Commissioner of Taxation' ( item 15 ). Omits the definition of unit trust ( item 16 ).

Item 17 Part III (heading)

Replaces the reference to 'APRA' in the Part III heading with 'the Commissioner of Taxation'.

Item 18 Section 9

Replaces the reference to 'APRA' with 'the Commissioner of Taxation'.

Item 19 Part IIIAA (heading)

Replaces the reference to 'Excluded Funds' in the Part IIIAA heading with 'self managed superannuation funds'.

Items 20 - 24 Section 15DAA (definitions)

Omits the definition of basic levy amount ( item 20 ). Replaces the reference to 'Excluded Funds' with 'Self Managed Superannuation Funds' reflecting the amended Short Title of the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 ( item 22 ). Repeals the definition of minimum basic levy amount ( item 23 ). Omits the definition of excluded superannuation fund ( item 21 ). Inserts a definition of self managed superannuation fund with the meaning given by subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 ( item 24 ).

Items 25 and 26 Section 15DA

Amend section 15DA of the Act to provide that the trustee of a self managed superannuation fund who lodges a return under section 36A of the Superannuation Industry (Supervision) Act 1993 is liable to pay a levy on that lodgment.

Items 27 and 28 Subsection 15DB(1)

Amends subsection 15DB(1) of the Act to provide that the levy payable by a person on the lodgment of a return is due and payable on the day specified in the regulations ( item 27 ).

Inserts new subsection 15DB(1A) which provides that without limiting subsection 15DB(1), the regulations may provide that the levy is due and payable on a day specified in a notice given to the person by the Commissioner of Taxation ( item 28 ).

Items 29 and 30 Subsections 15DC (1), (2) and (3)

Amends subsection 15DC(1) of the Act to provide that if any levy payable by a person in relation to a return remains unpaid throughout the whole or part of the calendar month beginning the day after the day on which the levy became due and payable, or a later calendar month, the person is liable to pay to the Commonwealth in respect of that calendar month the penalty amount specified, or worked out in the manner specified, in the regulations ( item 29 ).

Omits section 15DC(2) and (3) of the Act and inserts a new subsection 15DC(2) that provides that any late levy payment penalty amount for a month must not exceed $25 ( item 30 ).

Items 31 and 32 Section 15DE

Replaces the reference to 'APRA' with 'Commissioner of Taxation' ( item 31 ).

Inserts a note highlighting that any outstanding levy and late payment penalty may be payable to APRA on behalf of the Commonwealth as a result of section 252G of the Superannuation Industry (Supervision) Act 1993 ( item 32 ).

Items 33 - 37 Sections 15DF, 15DG, 16, 17 and 22

Replaces the reference to 'APRA' wherever occurring in sections 15DF, 15DG, 16 and 17 with 'Commissioner of Taxation' ( items 33, 34, 35 and 36 ). Omits subsection 22(2) of the Act ( item 37 ).

Superannuation (Resolution of Complaints) Act 1993

Item 38 - 40

Substitutes references to 'excluded fund' with 'self managed superannuation fund' and 'excluded approved deposit fund'.

Superannuation Supervisory Levy Imposition Act 1998

Item 41 Section 5 (paragraph (b) of the definition of superannuation entity)

Replaces the reference to 'excluded superannuation fund' in the definition of superannuation entity with 'self managed superannuation fund'.

Item 42 Application Provisions

All excluded superannuation funds will pay a supervisory levy on lodgment of an annual return in respect of the 1998-99 income year in accordance with the Superannuation (Excluded Funds) Taxation Act 1987. The Superannuation (Resolution of Complaints) Act 1993 continues to apply to excluded superannuation funds until 1 April 2000.


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