Explanatory Memorandum(Circulated by authority of the Assistant Treasurer, Senator the Hon Rod Kemp)
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;
- 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 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.
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.