Explanatory Statement

Issued by the authority of the Assistant Treasurer

Explanatory Statement

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 1)

Section 353 of the Superannuation Industry (Supervision) Act 1993 (the Act) provides that the GovernorGeneral may make regulations for the purposes of the Act.

The Act and the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations) provide for the regulation of self managed superannuation funds. The Act establishes a definition of a self managed superannuation fund comprising a number of basic conditions. A key requirement, as provided by paragraph 17A(1)(e) of the Act, is that no member of a fund is an employee of another member of the fund, unless the members concerned are relatives. The Act establishes an extended meaning of the term employee for the purpose of this definition.

The Act precludes some small business people from running their own self managed fund, by requiring that an employee member must be a relative of all other members of the fund in certain circumstances. One such circumstance is where there are two directors of a company and the company employs the spouse of one of the directors. The Act may prevent these three individuals from being members of the same self managed superannuation fund by requiring the employee spouse to be a relative of both company directors.

Paragraph 17A(8)(b) of the Act provides that a member of a self managed superannuation fund is not taken to be an employee of a person belonging to a class specified in the Principal Regulations for the purposes of this paragraph. Paragraph 17A(8)(b) has the effect of authorising regulations that prescribe a class of persons deemed not to be an employer for the purpose of working out whether a member of a self managed fund is an employee under paragraph 17A(1)(e) of the Act.

The regulations amend the Principal Regulations to specify a new class of person for the purpose of ensuring that a member of a self managed superannuation fund is not taken to be an employee of a person belonging to that class. The regulations provide that a person is included in a specified class of persons in relation to a member of a self managed fund if the person is the employer but not a relative of the employee member, and another member of the fund is the employer and a relative of that employee member.

The effect of the regulations is that a member of a self managed fund who is both an employee and a relative of another member of the fund is not taken be an employee of any other member of the fund.

The regulations also make a consequential amendment to clarify that a class of persons previously specified for the purpose of paragraph 17A(8)(b) of the Act is separate and distinct from the new class of persons specified in new subregulation 1.04AA(3).

The regulations are described in detail in the attachment.

The regulations commence on gazettal.

Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 1)

Regulation 1 - Name of Regulations

The amending regulations are the Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 1).

Regulation 2 - Commencement

The regulations commence on gazettal.

Regulation 3 - Amendment of Superannuation Industry (Supervision) Regulations 1994

Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations).

SCHEDULE 1 AMENDMENTS

Item 1 - Consequential amendment

This item amends regulation 1.04AA in the Principal Regulations, to clarify that subregulations 1.04AA(I) and 1.04AA(2) link together to specify a self-contained class of persons in relation to an employee member of a self managed superannuation fund for the purposes of paragraph 17A(8)(b) of the Superannuation Industry (Supervision) Act 1993 (the Act).

Item 2 - Definition of self manned superannuation fund - persons not taken to be employees

This item inserts new subregulation 1.04AA(3) in the Principal Regulations to specify a new class of person in respect of an employee member of a self managed superannuation fund for the purposes of paragraph 17A(8)(b) of the Act. The effect of new subregulation 1.04AA(3) is that a person will be considered to be a member of a specified class of persons where the following circumstances exist:

The person is a member of a self managed superannuation fund and is the employer, but not a relative, of another employee member of the fund; and
Another member of the fund is both the employer and a relative of that employee member of the fund.