Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulation 2015

Income Tax Assessment Act 1936
Retirement Savings Accounts Act 1997
Superannuation Industry (Supervision) Act 1993

Section 266 of the Income Tax Assessment Act 1936, section 200 of the Retirement Savings Accounts Act 1997 and section 353 of the Superannuation Industry (Supervision) Act 1993 provide that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulation 2015 (the Regulation) is to:

·
amend the release authority provisions in the Superannuation Industry (Supervision) Regulations 1994 (SISR) and the Retirement Savings Accounts Regulations 1997 (RSAR) to enable amounts to be paid from an individual's superannuation or income stream to meet tax liabilities arising from certain superannuation contributions;
·
amend the SISR and RSAR to correct minor technical and typographical errors in relation to the commutation of income streams; and
·
amend the Income Tax Regulations 1936 (ITR) to extend the amendment period for assessments of income tax for individuals who make an election in respect of excess non-concessional contributions.

Amendments to the release authority provisions

The Tax and Superannuation Laws Amendment (2014 Measures No. 7) Act 2015 amended the taxation laws so that individuals who exceed their non-concessional contributions cap in the 2013-14 or later financial years can elect to release from superannuation an amount equal to the contributions that exceed the cap, plus 85 per cent of an associated earnings amount.

The Regulation amends the SISR and RSAR to enable superannuation providers to pay amounts released to individuals that make such an election in accordance with a release authority issued by the Commissioner of Taxation (Commissioner).

Excess non-concessional contributions that are released from superannuation will not attract excess non-concessional contributions tax. However, individuals can elect not to release an amount from superannuation, in which case their excess non-concessional contributions will be taxed at the top marginal tax rate.

The Regulation also amends the SISR and RSAR to allow superannuation providers to make payments under release authorities issued by the Commissioner in relation to temporary residents for the purposes of the existing concessional contributions and Division 293 tax regimes. These changes should have been made by an earlier regulation, but were omitted.

Minor technical corrections - commutation of income streams

The Superannuation Legislation Amendment (2013 Measures No. 2) Regulation 2013 made errors when amending the standards for pension and annuity contracts and the definition of 'non-commutable allocated annuity' and 'non-commutable allocated pension'.

A number of minor technical corrections are required as a result of these amendments. The Regulation amends the SISR and RSAR to make these corrections. The changes do not represent a change in policy.

Extended period for amendments of assessments

The standard period for the Commissioner to amend an assessment of income tax for individuals is two years. In some circumstances a two year period for amendments would not allow the Commissioner enough time to properly take into account changes in a taxpayer's income tax liability that can arise where an individual makes an election in relation to non-concessional contributions.

The Regulation amends the ITR to prescribe that, in relation to excess non-concessional contributions, the making of an election to either release an amount from superannuation or to not release an amount if the value of the remaining superannuation interests is nil as circumstances that extend the standard period of amendment from two to four years.

Details of the Regulation are set out in Attachment A.

A Statement of Compatibility with Human Rights has been completed for the Regulation, in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement's assessment is that the measures in the Regulation are compatible with human rights. A copy of the Statement is at Attachment B.

The changes made by this Regulation are minor in nature and have a low additional compliance cost.

The amendments made by the Regulation have a nil impact on revenue over the forward estimates.

Consultation

Public consultation on a draft regulation to amend the release authority provisions, correct minor technical and typographical errors and extend the period of amendment for income tax assessments was undertaken between 18 February and 18 March 2015. Four submissions were received. The submissions broadly supported the draft regulation.

Three of the submissions raised concerns about the compliance cost of a technical correction that would have removed a condition of release for temporary residents moving superannuation to New Zealand. Those submissions also pointed out that there is little to no risk that the condition of release can be abused. To address these concerns the Regulation does not include that correction.

Conditions and commencement

The Principal Acts do not specify any conditions that need to be met before the power to make the Regulation can be exercised.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulation commences on the day after registration. Items 4, 12 and 13 apply from 17 December 2013. Item 1 applies to assessments issued for the 2013-14 income year onwards.

These amendments do not affect the rights of individuals such that they are disadvantaged and do not impose liabilities on affected individuals before the date of registration for the purposes of the Legislative Instrument Act 2003.

Items 4, 12 and 13 apply from 17 December 2013 to correct errors that arose from the Superannuation Legislation Amendment (2013 Measures No. 2) Regulation 2013. Without retrospectivity any superannuation provider that has actioned a release authority for excess concessional contributions may not technically have been able to release the money from the superannuation fund.

Item 1 applies to assessments issued for the 2013-14 income year to correspond with amendments made in Schedule 1 of the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Act 2015.

All other amendments apply from the day after registration.

ATTACHMENT A

Details of the Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulation 2015

Section 1 - Name of Regulation

This section provides that the title of the Regulation is the Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulation 2015 (the Regulation).

Section 2 - Commencement

This section provides that each provision of the Regulation specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table, and that any other statement in column 2 has effect according to its terms.

Section 3 - Authority

This section provides that the Regulation is made under the Income Tax Assessment Act 1936, the Retirement Savings Accounts Act 1997 and the Superannuation Industry (Supervision) Act 1993.

Section 4 - Schedule

This section provides that each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.

Schedule 1 - Amendments

Amendments to the release authority provisions

The Tax and Superannuation Laws Amendment (2014 Measures No.7) Act 2015 amended the Taxation Administration Act 1953 (TAA) to allow individuals who exceed their non-concessional contributions cap in the 2013-14 or later financial years to elect to release an amount equal to those excess non-concessional contributions plus 85 per cent of an associated earnings amount from superannuation. Individuals can elect not to release an amount if the value of their superannuation interests is nil or for some other reason. Excess non-concessional contributions not released from superannuation attract excess non-concessional contributions tax at the top marginal tax rate.

The Superannuation Industry (Supervision) Regulations 1994 (SISR) and the Retirement Savings Account Regulations 1997 (RSAR) contain restrictions on the payment of superannuation benefits from superannuation providers.

Superannuation benefits that are preserved or have restricted access can only be paid from a superannuation provider if a condition of release and any applicable cashing restrictions are satisfied.

Where an individual makes an election under paragraph 96-7(1)(a) of Schedule 1 to the TAA to release an amount of non-concessional contributions in excess of their non-concessional contributions cap plus 85 per cent of associated earnings, the Commissioner of Taxation (Commissioner) will be required to issue one or more release authorities to a superannuation provider that holds a superannuation interest for the individual. Each release authority will state the amount to be released by the provider. This release authority will be issued under section 96-12 of Schedule 1 to the TAA.

Items 15 and 17 of the Regulation will expand existing conditions of release in the SISR and item 6 will expand an existing condition of release in the RSAR. This will enable superannuation providers to pay amounts from an individual's superannuation interest in accordance with a release authority issued by the Commissioner to individuals who make an election under paragraph 96-7(1)(a) of Schedule 1 to the TAA.

Items 4, 12 and 13 will amend the SISR and RSAR to allow payment from a temporary resident's superannuation interest in accordance with a release authority issued by the Commissioner under Divisions 96 and 135 of Schedule 1 to the TAA and remove a reference to a non-existent condition of release. Amendments to allow these payments in relation to temporary residents should have been made in a previous regulation, but were omitted. These changes will apply retrospectively, to ensure superannuation providers that actioned release authorities issued before this Regulation was made were compliant.

Items 7, 16 and 18 make typographical corrections to delete an incorrect reference to subsection 96-10(1) of Schedule 1 to the TAA in items 111C of Part 1 and 208C of Part 2 of Schedule 1 to the SISR, and item 111C in Schedule 2 to the RSAR.

Minor technical corrections - commutation of income streams

The Superannuation Legislation Amendment (2013 Measures No. 2) Regulation 2013 made errors when amending the standards for pension and annuity contracts and the definition of 'non-commutable allocated annuity' and 'non-commutable allocated pension'. A number of minor technical corrections are required as a result of these amendments. The corrections do not represent a change in policy.

Items 3, 8, 9, 10 and 11 amend the SISR and RSAR to make these corrections. These amendments make stylistic changes that do not change the effect of the law.

Extended period for amendments of assessments

Subsection 170(1) of the Income Tax Assessment Act 1936 limits the time period for the Commissioner to amend an income tax assessment of an individual. The standard period for the Commissioner to amend an assessment of income tax for an individual is two years. This period can be extended to four years in circumstances prescribed by the Income Tax Regulations 1936 (ITR).

In some circumstances the standard period for amendments would not allow the Commissioner enough time to properly take into account changes in a taxpayer's income tax liability that can arise where an individual makes an election in respect of non-concessional contributions under paragraphs 96-7(1)(a) or (b) of Schedule 1 to the TAA.

Item 1 of the Regulation amends the ITR to provide a new circumstance that extends the standard period of amendment from two to four years. The item prescribes the making of an election to release an amount of non-concessional contributions and 85 per cent of associated earnings under paragraph 96-7(1)(a) of Schedule 1 to the TAA and the making of an election not to release an amount if the value of the individual's remaining superannuation interest is nil under paragraph 96-7(1)(b) of Schedule 1 to the TAA.

Commencement provisions

Items 2, 5 and 14 insert commencement provisions into the ITR, RSAR and SISR.

ATTACHMENT B

Statement of Compatibility with Human Rights

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

Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulation 2015

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Tax and Superannuation Laws Amendment (Release Conditions for Non-concessional Contributions) Regulations 2015 (the Regulation) is to make a number of amendments to the regulations as detailed below.

Amendments to release authority provisions

The Regulation amends the Superannuation Industry (Supervision) Regulations 1994 (SISR) and the Retirement Savings Account Regulations 1997 (RSAR) to facilitate the operation of release authorities that are given to superannuation providers under Division 96 of Schedule 1 to the Taxation Administration Act 1953 (TAA). The Regulation also amends the SISR and RSAR to allow payment under release authorities for temporary residents. The amendments ensure that superannuation providers that receive these release authorities can pay an amount from an individual's superannuation interest despite the normal restrictions on such payments.

The provisions relating to release authorities do not engage with any applicable human rights or freedoms. These merely make consequential amendments to ensure that the release authority arrangements set out in the principal legislation do not conflict with other regulatory requirements regarding payments from superannuation interests.

Minor technical corrections - commutation of income streams

The Regulation also amends the SISR and RSAR to make minor technical and typographical corrections that arose from the Superannuation Legislation Amendment (2013 Measures No. 2) Regulation 2013. These amendments do not engage any applicable human rights or freedoms as they are minor changes that give effect to arrangements already in place.

Extended period for amendments of assessments

The Regulation will amend the Income Tax Regulations 1936 to prescribe the making of an election under paragraphs 96-7(1)(a) and (b) of Schedule 1 to the TAA as circumstances that extend the standard period of amendment of income tax assessments from two to four years. This amendment is a machinery change that does not engage any applicable human rights or freedoms.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.