Explanatory Statement

Issued by the authority of the Assistant Treasurer

Explanatory Statement

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Regulations (Amendment)

Section 353 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.

The Superannuation Industry (Supervision) Act 1993 (the Act) and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provide for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision by the Insurance and Superannuation Commissioner.

The regulations cover a number of matters, including:

miscellaneous amendments to the Principal Regulations (comprising the majority of the regulations) as a consequence of the Retirement Savings Accounts (RSA) legislation in order to ensure, as far as practicable, consistency of treatment between RSAs (which will operate without a trust structure) and superannuation entities (which operate under a trust structure, for example, superannuation funds);
allowing public offer superannuation funds (essentially those funds which make 'offers' of superannuation to the general public) to give similar information to members as applies in respect of RSAs where the product is supported by an equivalent 'capital guarantee' (that is, the balance of the account cannot be reduced by negative investment returns) (refer regulations 6, 9, 10, 13 - 20 and 26); and
giving effect to the announcement by the Treasurer on 20 August 1996 that the age limit for making superannuation contributions will be increased from 65 to 70 years for all persons who are gainfully employed for at least 10 hours a week (refer regulations 51, 52, 53 and 55).

The Regulations are described in detail in Attachment A.

The Regulation Impact Statement in respect of these regulations is at Attachment B.

The Regulations make reference to the Retirement Savings Accounts Act 1997, which has been proclaimed to commence on 2 June 1997, and the RSA Regulations. The Regulations are made under section 4 of the Acts Interpretation Act 1901, which allows the Regulations to be made before the RSA Act comes into operation.

Subregulations 9.5, 10.5 and 15.1 commence on 1 October 1997. The remainder of the Regulations commence on 1 July 1997.

Regulation 1 - Commencement

Regulation 1 provides that subregulations 9.5, 10.5 and 15.1 of these Regulations will commence on 1 October 1997. The remainder of the Regulations will commence on 1 July 1997.

Regulation 2 - Amendment

Regulation 2 provides that the Superannuation Industry (Supervision) Regulations (the Principal Regulations) are amended as set out in these Regulations.

Regulation 3 - Regulation 1.03 (Interpretation)

Regulation 3 amends regulation 1.03 of the Principal Regulations by amending existing definitions and inserting definitions of a number of words and expressions for the purposes of the Principal Regulations. These amendments are necessary as a consequence of the Retirement Savings Accounts (RSA) legislation.

Regulation 3 also inserts a new paragraph into the definition of 'reviewable decision' in subregulation 1.03(1) of the Principal Regulations. This amendment means that the decision of the Insurance and Superannuation Commissioner to determine an acceptable form of non-written consent under new subregulation 4.12(2) and new regulation 6.27B (inserted by Regulations 29 and 48 of these Regulations respectively) for the purposes of transfers and rollovers to and from regulated superannuation funds, approved deposit funds and RSAs is a 'reviewable decision' and therefore may be subject to the provisions of Division 13.4.

Regulation 4 - Regulation 1.03A (Lost member)

Regulation 4 inserts a new paragraph 1.03A(1)(ca) into the Principal Regulations as a result of the RSA legislation. As a result of this amendment a member of a regulated superannuation fund or approved deposit fund will be taken to be a lost member of the fund if the member joined the fund from an RSA provider as a lost RSA holder (as defined by regulation 1.06 of the RSA Regulations).

This amendment recognises that although RSA providers may wish to retain lost RSA holders, they can transfer such people to eligible rollover funds if they do not wish to protect them in the manner required for lost members and lost RSA holders.

Regulation 5 - Regulation 1.04 (Section 10 of the Act - prescribed matters)

Regulation 5 makes two amendments to the meaning of the term 'pooled superannuation trust' in subregulation 1.04(5) of the Principal Regulations to correct two incorrect legislative references.

Regulation 6 - Regulation 2.01 (Interpretation)

Regulation 6 inserts new definitions into Part 2 of the Principal Regulations. Part 2 of the Principal Regulations has been amended to prescribe similar disclosure rules for certain products provided by public offer superannuation funds as apply to RSAs. In essence, these products must be supported by an equivalent capital guarantee to that which is required of and provided by RSAs. The definitions prescribe the characteristics the product must have to be eligible to use these reduced disclosure rules.

To qualify for the relaxed disclosure rules, the interest in the public offer fund must be issued by a 'capital guaranteed fund', which is a fund which has the following characteristics:

it must be provided by a public offer superannuation fund or a sub-fund of a public offer superannuation fund;
must invest only in deposits with a bank, building society, or credit union, a capital guaranteed policy with a life insurance company; and
the contributions and accumulated earnings of each member of the fund cannot be reduced by negative investment earnings or a reduction in the value of the assets of the fund.

Where the interest is part of a sub-fund of a public offer superannuation fund, then the sub-fund must have the following characteristics:

the sub-fund must have separate identifiable assets and beneficiaries to the whole of the public offer superannuation fund;
the beneficiaries of the sub-fund must only have an interest in the assets of the subfund;
there is no transfers of assets, benefits or money between sub-funds unless the beneficiary is also transferred to that sub-fund; and
the administration and insurance costs of the sub-fund are attributable only to that sub-fund.

Regulation 7 - Regulation 2.05 (Members to whom trustees are not required to give information)

Regulation 7 amends paragraph 2.05(1)(c) of the Principal Regulations to include a member who has been transferred to the superannuation entity from an RSA provider, where the requirements of paragraphs 2.04(1)(a) and (b) of the RSA Regulations had been met in relation to that member. These requirements are:

where the RSA provider is satisfied that the address they have for the RSA holder is incorrect and they are unable, after taking reasonable steps, to find the address for that RSA holder; or
they do not have an address for the RSA holder and have been unable to obtain an address after taking reasonable steps to locate the RSA holder.

Regulation 8 - Regulation 2.08 (Application)

Regulation 8 amends paragraph 2.08(2)(b) of the Principal Regulations so that information does not have to be given by the trustee of an eligible rollover fund to a person where that person has been issued with a superannuation interest as a result of section 89 of the Retirement Savings Accounts Act 1997 (the RSA Act). Section 89 of the RSA Act is equivalent to section 243 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) in that it gives an RSA provider the ability to pay the benefits of an RSA holder into an eligible rollover fund.

The regulation also amends Note 4 accompanying regulation 2.08 to include a reference to section 89 of the RSA Act.

Regulation 9 - Regulation 2.10 (Information to prospective members)

Regulation 9 makes a number of amendments to regulation 2.10 of the Principal Regulations. Regulation 2.10 of the Principal Regulations prescribes information that must be given to a person before they become a member of a public offer superannuation fund. The amendments made by Regulation 9 relate to public offer funds that meet the definition of 'capital guaranteed fund' (as inserted by regulation 6).

Regulation 9.1 omits paragraphs 2.10(1)(a) and (b) of the Principal Regulations and inserts paragraphs 2.10(1)(a), (b) and (c). The amendments provide the trustee of a capital guaranteed fund with a choice of providing to a prospective member the current information prescribed by the regulations or the reduced disclosure requirements prescribed by new subregulation 2.10(3A) of the Principal Regulations (as inserted by regulation 9.6). The reduced disclosure requirements take into account the simple, low risk 'capital guaranteed' nature of the product and are designed to achieve competitive neutrality with RSAs.

Regulations 9.2 and 9.3 amend subregulations 2.10(2) and (3) of the Principal Regulations to implement the choice of disclosure requirements to the trustee of a capital guaranteed fund made by regulation 9.1.

Regulation 9.4 changes the cross reference to subregulation 2.10(4) in paragraph 2.10(3)(d) to subregulation 2.10(6). This is as a consequence of regulation 9.7.

Regulation 9.5 inserts a new paragraph into subregulation 2.10(3) of the Principal Regulations. This new paragraph requires the trustee of a capital guaranteed fund to provide, to a prospective member, a statement that outlines:

the lower-risk/lower-return nature of the product and its effect on long term benefits;
that there are other superannuation arrangements that may provide a greater return over the long term;
that the person may wish to seek information about the rates of return of these superannuation arrangements; and
the means by which the capital guarantee is supported and the name of the institution providing the investments that back the fund.

This statement is similar to the one provided to prospective members of a capital guaranteed fund if the trustee chooses to give the relaxed information under new subregulation 2.10(3A).

Regulation 9.6 inserts new subregulation 2.10(3A) into the Principal Regulations. This subregulation prescribes the less stringent disclosure requirements that the trustee of a capital guaranteed fund must give to a prospective member of the fund. Where applicable, the information includes, but is not limited to:

a statement of the lower-risk/lower-return nature of the product and its impact on long term benefits, that other superannuation arrangements are available and that the person may wish to seek information about the rates of returns of these alternatives;
a statement on the benefits provided and when they are payable;
the taxation of the fund and the benefits;
where the product is for a fixed term or has a fixed term component, the rate of earnings and the period to which that rate applies;
where the product's, or a component of the product's, earning rate is variable, then a table of the net earning rate for each of the previous five years, and the compound average of the annual rate of net earnings for the previous five years, for similar variable-rate options (where figures for 5 years do not exist then they must show the net earning rate for the whole period of existence of the variable-rate options);
a statement of the fees and charges that may be charged directly to the fund; and
details of the internal complaints mechanisms, and of the role of the Superannuation Complaints Tribunal (the SCT).

The following is an example of information to be given under subparagraphs 2.10(3A)(k)(ii) and (iii).

Below is a table showing net rate of earnings applied to your account over the last 5 years.

1997/98 3.25%
1998/99 3.5% pa
1999/2000 3.5% pa
2000/01 4% pa
2001/02 3.75% pa

The 5 year compounded average of the net rates of earnings for these options is 3.55% per annum.

Regulation 9.7 replaces subregulation 2.10(4) of the Principal Regulations with new subregulations 2.10(4), (5) and (6). The new subregulation 2.10(4) states that where figures for 5 years do not exist for a variable-rate option then the trustee must show the net earning rate for the whole period of existence of the variable-rate option. This new subregulation has been made for the purpose of subparagraphs 2.10(3A)(k)(ii) and (iii) which has been inserted by regulation 9.6.

New subregulation 2.10(5) provides that the information mentioned in subparagraphs 2.10(3A)(k)(ii) and (iii) cannot be more than 15 months old at the time a person receives that information. For example, if a person intends to become a member of a capital guaranteed fund on 30 June 1998, then the information must relate to a period not ending before 31 March 1997. New subregulation 2.10(6) contains a definition of 'fund' which includes a reference to a capital guaranteed fund.

Regulation 10 - Regulation 2.11 (Information by public offer superannuation funds to prospective standard employer-sponsors)

Regulation 10 makes a number of amendments to regulation 2.11 of the Principal Regulations. Regulation 2.11 of the Principal Regulations prescribes information that must be given to an employer before they become a standard employersponsor of a public offer superannuation fund. The amendments made by Regulation 10 relate to public offer funds that meet the definition of 'capital guaranteed fund' (as inserted by regulation 6).

Regulation 10.1 omits paragraphs 2.11(1)(a) and (b) of the Principal Regulations and inserts paragraphs 2.11 (1)(a), (b) and (c). The amendments provide the trustee of a capital guaranteed fund with a choice of providing to a prospective standard employer-sponsor the current information prescribed by the regulations or the reduced disclosure requirements prescribed by new subregulation 2.11(3A) of the Principal Regulations (as inserted by regulation 10.6). The reduced disclosure requirements take into account the simple, low risk 'capital guaranteed' nature of the product and are designed to achieve competitive neutrality with RSAs.

Regulations 10.2 and 10.3 amend subregulations 2.11(2) and (3) of the Principal Regulations to implement the choice of disclosure requirements to the trustee of a capital guaranteed fund made by regulation 10.1.

Regulation 10.4 inserts a cross reference in paragraph 2.11(3)(d) to the definition of significant benefit' which, as a consequence of regulation 10.7, has been moved from subregulation 2.11(4) into the new subregulation 2.11(6).

Regulation 10.5 inserts a new paragraph into subregulation 2.11(3) of the Principal Regulations. This new paragraph requires the trustee of a capital guaranteed fund to provide, to a prospective standard employer-sponsor, a statement that outlines:

the lower-risk/lower-return nature of the product and its effect on long term benefits;
that there are other superannuation arrangements that may provide a greater return over the long term;
that the person may wish to seek information about the rates of return of these superannuation arrangements; and
the means by which the capital guarantee is supported and the name of the institution providing the investments that back the fund.

This statement is similar to the one provided to prospective standard employer-sponsors of a capital guaranteed fund if the trustee chooses to give the relaxed information under new subregulation 2.11(3A).

Regulation 10.6 inserts new subregulation 2.11(3A) into the Principal Regulations. This subregulation prescribes the less stringent disclosure requirements that the trustee of a capital guaranteed fund must give to a prospective standard employer-sponsor of the fund. Where applicable, the information includes, but is not limited to:

a statement of the lower-risk/lower-return nature of the product and its impact on long term benefits, that other superannuation arrangements are available and that the person may wish to seek information about the rates of returns of these alternatives;
a statement on the benefits provided and when they are payable;
the taxation of the fund and the benefits;
where the product is for a fixed term or has a fixed term component, the rate of earnings and the period to which that rate applies;
where the product's, or a component of the product's, earning rate is variable, then a table of the net earning rate for each of the previous five years, and the compound average of the annual rate of net earnings for the previous five years, for similar variable-rate options (where figures for 5 years do not exist then they must show the net earning rate for the whole period of existence of the variable-rate options);
a statement of the fees and charges that may be charged directly to the fund; and
details of the internal complaints mechanisms, and of the role of the Superannuation Complaints Tribunal (the SCT).

The following is an example of information to be given under subparagraphs 2.11(3A)(j)(ii) and (iii).

Below is a table showing net rate of earnings applied to your account over the last 5 years.

1997/98 3.25%
1998/99 3.5% pa
1999/2000 3.5% pa
2000/01 4% pa
2001/02 3.75% pa

The 5 year compounded average of the net rates of earnings for these options is 3.55% per annum.

Regulation 10.7 replaces subregulation 2.11(4) of the Principal Regulations with new subregulations 2.11(4), (5) and (6). The new subregulation 2.11(4) states that where figures for 5 years do not exist for a variable-rate option then the trustee must show the net earning rate for the whole period of existence of the variable-rate option. This new subregulation has been made for the purpose of subparagraphs 2.11(3A)(j)(ii) and (iii) which have been inserted by regulation 10.6.

New subregulation 2.11(5) provides that the information mentioned in subparagraphs 2.11(3A)(j)(ii) and (iii) cannot be more than 15 months old at the time a person receives that information. For example, if a person intends to become a standard employer sponsor of a capital guaranteed fund on 30 June 1998, then the information must relate to a period not ending before 31 March 1997. New subregulation 2.11(6) contains a definition of 'fund' which includes a reference to a capital guaranteed fund.

Regulation 11 - Regulation 2.11A (Information by eligible rollover funds to trustees of transferor funds and to RSA providers)

Regulation 11 omits subregulation 2.11A(1) of the Principal Regulations and replaces it with a new subregulation. The amendment requires the trustee of an eligible rollover fund to provide the same information to an RSA provider who transfers an RSA holder to the fund that they would provide to the trustee of a superannuation fund or approved deposit fund. This information is prescribed by subregulation 2.11A(2) of the Principal Regulations.

Regulation 12 - Regulation 2.12 (Application)

Regulation 12 amends subparagraph 2.12(1)(b)(ii) of the Principal Regulations as a result of the RSA legislation. This will extend the application of Division 2.3 and thus the exemption for eligible rollover funds to give information to members who have exercised no choice in the decision as to whether or not to join the fund from an RSA. Members will receive new member information (information set out in Division 2.3 of the Principal Regulations) after, rather than before, joining the eligible rollover fund. This is identical to the situation that exists for those members transferred to an eligible rollover fund under section 243 of the SIS Act.

Regulation 13 - New regulation 2.14A (Compliance by trustee of capital guaranteed fund)

Where a person becomes the member of a public offer superannuation fund, the trustee is required to give certain information to that person. This information is currently prescribed under regulation 2.15 and 2.16 of the Principal Regulations. New Principal Regulation 2.14A provides the trustee of a 'capital guaranteed fund' with the option of either complying with regulations 2.15 and 2.16 or the requirements of new regulation 2.16A (inserted by Regulation 16 of these Regulations).

Regulation 14 - Regulation 2.15 (General requirement)

Regulation 14 inserts new subregulation 2.15(2) into the Principal Regulations. The regulation defines 'fund' to include a capital guaranteed fund.

Regulation 15 - Regulation 2.16 (Specific requirements in all cases)

Regulation 15 inserts new paragraph 2.16(1)(k) into the Principal Regulations. If the trustee of a capital guaranteed fund decides to provide information under regulation 2.16 of the Principal Regulations, then they must provide to a new member of a capital guaranteed fund a statement that outlines:

the lower-risk/lower-return nature of the product and its effect on long term benefits;
that there are other superannuation arrangements that may provide a greater return over the long term;
that the person may wish to seek information about the rates of return of these superannuation arrangements; and
the means by which the capital guarantee is supported and the name of the institution providing the investments that back the fund.

This statement is similar to the one provided to new members of a capital guaranteed fund if the trustee chooses to give the reduced disclosure information under new regulation 2.16A (inserted by Regulation 16 of these Regulations).

Regulation 15.2 amends subregulation 2.16(2) of the Principal Regulations to insert a definition of 'fund' which includes a reference to a capital guaranteed fund.

Regulation 16 - New regulation 2.16A (Specific requirement in relation to capital guaranteed funds)

Regulation 16 inserts new regulation 2.16A into the Principal Regulations. This regulation applies to a capital guaranteed fund which is providing information under Division 2.3 of the Principal Regulations. Regulation 2.16A prescribes the less stringent disclosure requirements that the trustee of a capital guaranteed fund must give to a new member of the fund. Where applicable, the information includes, but is not limited to:

a statement of the lower-risk/lower-return nature of the product and its impact on long term benefits, that other superannuation arrangements are available and that the person may wish to seek information about the rates of return of these alternatives;
a statement on the benefits provided and when they are payable;
the taxation of the fund and the benefits;
where the product is for a fixed term or has a fixed term component, the rate of earnings and the period to which that rate applies;
where the product's, or a component of the product's, earning rate is variable, then a table of the net earning rate for each of the previous five years, and the compound average of the annual rate of net earnings for the previous five years, for similar variable-rate options (where figures for five years do not exist then they must show the net earning rate for the whole period of existence of the variable-rate options);
a statement of the fees and charges that may be charged directly to the fund; and
details of the internal complaints mechanisms, and of the role of the Superannuation Complaints Tribunal (the SCT).

Regulation 16 provides, for the purposes of subparagraphs 2.16A(1)(j)(ii) and (iii), that where figures for five years do not exist for a variablerate option, then the trustee must show the net earning rate for the whole period of existence of the variable-rate option.

The following is an example of information to be given under subparagraphs 2.16A(1)(j)(ii) and (iii).

Below is a table showing net rate of earnings applied to your account over the last 5 years. 1997/98 1998/99 1999/2000 2000/01 2001/02 3.25% 3.5% pa 3.5% pa 4% pa 3.75% pa

The 5 year compounded average of the net rates of earnings for these options is 3.55% per annum.

The information mentioned in subparagraphs 2.16A(1)(j)(ii) and (iii) cannot be more than 15 months old at the time a person receives that information. For example, if a person becomes a member of a capital guaranteed fund on 30 June 1998, then the information must relate to a period not ending before 31 March 1997.

Regulation 17 - Regulation 2.22 (General requirement)

Regulation 17 amends regulation 2.22 of the Principal Regulations to exclude trustees of capital guaranteed funds from the requirements of that regulation. Instead, trustees of capital guaranteed funds will have to comply with the requirements of new regulation 2.24A (inserted by Regulation 20 of these Regulations).

Regulation 18 - Regulation 2.23 (Specific requirements in all cases)

Regulation 18 amends regulation 2.23 of the Principal Regulations to exclude trustees of capital guaranteed funds from the requirements of that regulation. Instead, trustees of capital guaranteed funds will have to comply with the requirements of new regulation 2.24A (inserted by Regulation 20 of these Regulations).

Regulation 19 - Regulation 2.24 (Specific requirements in particular cases)

Regulation 19 amends subregulation 2.24(1) of the Principal Regulations to exclude trustees of capital guaranteed funds from the requirements of that regulation. Instead, trustees of capital guaranteed funds will have to comply with the requirements of new regulation 2.24A (inserted by Regulation 20 of these Regulations).

Regulation 20 - New regulation 2.24A (Specific requirements in relation to capital guaranteed funds) and 2.2413 (Information if benefits in capital guaranteed fund reaches $10,000)

Regulation 20 inserts new regulation 2.24A into the Principal Regulations. New regulation 2.24A prescribes the information that must be provided to a member of a capital guaranteed fund for each member reporting period. These requirements are separated into information that must be given for each period and information that must be given if it is applicable. The information that must be given each member reporting period includes, but is not limited to:

a statement of the lower-risk/lower-return nature of the product and its impact on long term benefits, that other superannuation arrangements are available and that the person may wish to seek information about the rates of returns of these alternatives;
a statement that outlines the means by which the fund maintains the guarantee and the name of the institution providing the investments that back the fund;
the amount of a person's withdrawal benefit (amount received if they voluntarily ceased to be a member) at the start and end of the reporting period; and
the amount of withdrawal benefits that are preserved, restricted non-preserved and unrestricted non-preserved at the end of the reporting period.

The information that must be given if applicable includes, but is not limited to:

the amount of contributions made by the member and/or their employer during the period;
fees and charges deducted by the fund in respect of the member during the period;
the amount of any withdrawals during the period; and
the amount and rate of net earnings credited during the period.

A trustee does not have to disclose a nil amount (for example, if no contributions are made during the period then they do not have to disclose this).

Regulation 20 also inserts new regulation 2.24B in the Principal Regulations. Regulation 2.24B prescribes that where, at the end of a reporting period, a member's balance in a capital guaranteed fund is $10,000 or more, then the trustee of the capital guaranteed fund must give the member a notice which:

outlines the effect of the lower-risk/lower-return nature of the product on possible benefits in the long term; and
that they may wish to consider, other superannuation arrangements that may provide a greater return over the long term, and seek advice on alternative strategies which may be more suitable.

The notice must be given at the time that the next member information is sent to the member and must be on a in bold print on a separate sheet of paper.

Regulation 21 - Regulation 2.28 (Specific requirements in all cases)

Regulation 21 amends regulation 2.28 of the Principal Regulations to remove the requirement to inform members, each fund reporting period, of the existence and functions of the Superannuation Complaints Tribunal (the SCT). This information will be required to be given in the circumstances prescribed by new regulation 2.41A (inserted by regulation 25 of these Regulations).

Regulation 22 - Regulation 2.36 (Specific requirements)

Regulation 22 inserts a new subregulation 2.36(3) into the Principal Regulations as a result of the RSA legislation. This amendment will require the trustee of a transferor fund to give information to a member in the event of the benefits of the member being transferred to an RSA, as well as in the event of the member being transferred to a different category of membership or a different fund (as currently exists).

Regulation 23 - Regulation 2.36A (Specific requirements - benefit to be paid to eligible rollover fund)

Regulation 23 makes a number of amendments to regulation 2.36A of the Principal Regulations as a result of the RSA legislation.

Regulation 2.36A currently imposes a requirement on trustees of regulated superannuation funds and approved deposit funds to give appropriate 'significant event' information to members who will be transferred to an eligible rollover fund unless they choose another entity to which those benefits will be paid. The amendments to regulation 2.36A will extend the choice available to members to include RSAs.

This is to ensure that beneficiaries being transferred to eligible rollover funds, when given the option of choosing another entity, make an informed choice whether to have benefits paid to an eligible rollover fund, or to a superannuation entity or an RSA of their choice. The term 'transfer' when used in relation. to a member connotes either the transfer or rollover of a member's benefits.

Regulation 24 - Regulation 2.40 (General requirement)

Regulation 24 amends paragraph 2.40(2)(c) of the Principal Regulations to clarify that the duty of non-disclosure outlined in this paragraph is not the superannuation entity's, but rather belongs to the trustee of the superannuation entity. This is consistent with trust law principles.

Regulation 25 - New Division 2.6A (Information in respect of inquiries and complaints)

Regulation 25 inserts a new Division 2.6A into the Principal Regulations. Division 2.6A prescribes when and what information should be prescribed in relation to the SCT.

New regulation 2.41A states that the Division applies where the trustee of a regulated superannuation fund or approved deposit fund, receives a complaint from a person mentioned in subsection 101 (1A) of the SIS Act after 1 July 1997. A requirement of the Division is an operating standard for the purposes of subsections 31(2) and (3) of the SIS Act.

New regulation 2.41 B requires the trustee to give the complainant details of the existence and the functions of the SCT when they are informed of the decision of the trustee in relation to their inquiry or complaint.

This is consistent with the procedures under the Superannuation (Resolution of Complaints) Act 1993, in which the SCT can only deal with a complaint after it has been dealt with by a fund's internal complaints mechanism.

Regulation 26 - Regulation 2.45 (General requirement)

Regulation 26 amends regulation 2.45 of the Principal Regulations to exclude trustees of capital guaranteed funds from the requirements to provide general information to exiting members of capital guaranteed funds. Instead, trustees of capital guaranteed are only required to comply with the specific requirements prescribed by regulation 2.46 of the Principal Regulations where a person leaves a capital guaranteed fund.

Regulation 27 - Regulation 2.46 (Specific requirements in all cases)

Regulation 27 amends paragraphs 2.46(1)(f) and (g) and paragraph 2.46(2)(a) of the Principal Regulations to remove the requirement to inform members, when they leave the fund, of the existence and functions of the SCT. This information will be required to be given in the circumstances prescribed by new regulation 2.41A (inserted by regulation 25 of these Regulations).

Regulation 28 - Regulation 2.48 (Exceptions to "exit reporting period" provisions)

Regulation 28 amends subregulation 2.48(3) of the Principal Regulations and adds a new paragraph 2.48(3)(b) to extend the current exemption provided by regulation 2.48 to a member who:

is transferring to an RSA; and
where the trustee of the fund reasonably believes that the member does not need the information because the member has received from the RSA institution information under Division 2.3 of the RSA Regulations in respect of the member's exit reporting period.

Regulation 29 - Regulation 4.12 (Operating standard - acceptance by regulated superannuation funds and approved deposit funds of rollovers and transfers)

Regulation 29 amends regulation 4.12 of the Principal Regulations to achieve two main objectives.

First, as a consequence of the RSA legislation, it amends regulation 4.12 to provide that the trustee of a regulated superannuation fund or approved deposit fund ('the receiving trustee') must not accept rollovers or transfers from an RSA (as well as from other regulated superannuation funds or approved deposit funds as is currently allowed, in other words a 'transferring entity') into the fund if.

the receiving trustee has reasonable grounds to believe that the benefit being rolled over or transferred is being rolled over or transferred on the basis of a belief held by the RSA provider or the trustee of the transferring entity (as applicable) that the receiving trustee has received the RSA holder's consent to the rollover or transfer; and
the receiving trustee has not in fact received that consent.

Second, it amends paragraph 4.12(a) and inserts a new subregulation 4.12(2) to provide that, for the purposes of this regulation, 'consent' from a member or an RSA holder can either be:

written consent; or
any other form of consent determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

Recent review of regulatory arrangements for superannuation has recognised the expanding role of electronic information transfer in the business community and the economic pressures for superannuation providers to adopt and accommodate these practices in their administration activities. This includes the use of electronic means for gaining instructions from clients and the authority to act in accordance with those instructions.

Against this background, this regulation gives the Commissioner a discretion to determine those arrangements which, while not being 'written consent', would constitute an appropriate form of authority or consent for a benefit to be rolled over or transferred. This is consistent with the view that the superannuation system should be flexible enough to cater for the expanding role of electronic media and that this should extend to adopting practices which facilitate members or RSA holders from being able to instruct fund trustees verbally.

The Commissioner's discretion to determine acceptable non-written forms of member and RSA holder authority or consent can be exercised both individually and on a class basis. It is a 'reviewable decision' under regulation 1.03 (as amended by Regulation 3 of these Regulations), and therefore may be subject to the provisions of Division 13.4.

Regulation 30 - Regulation 5.01 (Interpretation)

Regulation 30 amends regulation 5.01 of the Principal Regulations by amending existing definitions and inserting definitions of a number of words and expressions for the purposes of the Part 5 of the Principal Regulations. These amendments are required mainly as a consequence of the RSA legislation.

It should be noted that the amendments made to the definition of 'transferred' in subregulation 5.01 (1) by Modification Declaration No 12 (No GN 1 of 10 January 1996) will cease to have effect immediately before the commencement of the amendments made by these Regulations.

Regulation 31 - Regulation 5.06 (Certain benefits rolled over or transferred to regulated superannuation funds taken to be minimum benefits)

Regulation 31 inserts a new subregulation 5.06(6) into the Principal Regulations as a consequence of the RSA legislation. This amendment excludes benefits rolled over or transferred from an RSA into a regulated superannuation fund from the power given to trustees to treat benefits as not being minimum benefits contained in regulation 5.06.

This does not mean that such benefits are not minimum benefits. Rather, new Principal Regulation 5.06A (inserted by Regulation 32 of these Regulations) deems all benefits rolled over or transferred from an RSA into a regulated superannuation fund to be minimum benefits in the fund at all times. As a result, such benefits rolled over or transferred from an RSA have to be excluded from regulation 5.06, as the existing regulation allows the trustee of a fund to treat benefits as not being minimum benefits if they are satisfied that they should not be treated as such under the ordinary rules. In other words, a trustee cannot use this 'opt out power' in relation to benefits rolled over or transferred from an RSA.

Regulation 32 - New regulation 5.06A (Benefits rolled over or transferred from an RSA to regulated superannuation funds taken to be minimum benefits)

Regulation 32 inserts a new regulation 5.06A into the Principal Regulations as a consequence of the RSA legislation. This regulation provides that all benefits rolled over or transferred from an RSA into a regulated superannuation fund are taken to be minimum benefits in the fund at all times.

This new regulation is necessary as it reflects the particular legal nature of benefits held in (and consequently, rolled over or transferred from) an RSA. Benefits in RSAs provided by most types of RSA providers (that is, banks, building societies and credit unions) are in effect deposits, and a contractual arrangement exists between the RSA holder and the RSA provider for this 'deposit', that is, the benefits held in the RSA, to be maintained until payable to the RSA holder, whether by means of cashing directly to the RSA holder, or by rollover or transfer of benefits to another superannuation provider. This is not the case with existing 'trust based' superannuation products, where the amount of benefits that must be maintained until payable to the member is often dependent on the governing rules of the fund.

Therefore, as a result of the different legal nature of RSAs, when benefits are rolled over or transferred to a regulated superannuation fund, all of these benefits must be treated as minimum benefits for the member in the fund. This is consistent with the requirement in regulation 3.04 of the RSA Regulations that all benefits in an RSA be treated as minimum benefits.

Regulation 33 - Regulation 5.17 (Member-protection standards)

Regulation 33 amends subregulation 5.17(6) of the Principal Regulations as a result of the RSA legislation in general, and, in particular, as a result of the definition of capital guaranteed funds (as defined by subregulation 2.01 (1) as amended by Regulation 6 of these Regulations).

One of the characteristics of a 'capital guaranteed fund' is that the contributions and accumulated earnings of each member of the fund may not be reduced by negative investment returns or any reduction in the value of the assets of the fund (subparagraph (b)(ii)). This is inconsistent with the exception to the memberprotection standards that is prescribed in subregulation 5.17(6) for 'bad investment periods' (that is, when total fund administration costs exceed the total investment return of the fund). In such periods, administration costs charged to member's benefits can exceed the investment return credited to these benefits .

This would not be appropriate for capital guaranteed funds in terms of the relevant definition. To ensure consistency with this definition, sub-regulation 5.17(6) has been amended, in effect, to provide that under no circumstances will the trustee of a capital guaranteed fund be permitted to charge administration costs that exceed the investment return credited to member's benefits, or credit any negative investment returns in relation to these benefits.

Regulation 34 - Regulation 6.01 (Interpretation)

Regulation 34.1 makes an amendment to subregulation 6.01(2) of the Principal Regulations as a consequence of the RSA legislation. The insertion by Regulation 34.1 of a definition of 'RSA changeover day' is necessary because of the insertion of new Principal Regulations 6.04A and 6.09A by Regulations 36 and 40 of these Regulations respectively.

Regulation 34.2 amends subregulation 6.01(2) of the Principal Regulations to correct an incorrect legislative references.

Regulation 34.3 inserts a new subregulation 6.01(8) into the Principal Regulations as a consequence of the RSA legislation to clarify that references in Part 6 of the Principal Regulations to the terms 'preserved benefits', 'restricted non-preserved benefits', 'restricted non-preserved contributions', 'unrestricted non-preserved benefits' and 'post-65 employer-financed benefits' include those benefits or contributions of that type (as defined in Part 4 of the RSA Regulations) that were received from an RSA.

Regulation 35 - Regulation 6.02 (Preserved benefits in regulated superannuation funds -before the changeover day)

Regulation 35 makes an amendment to subregulation 6.02(1) of the Principal Regulations as a consequence of the RSA legislation to provide that the calculation of preserved benefits in a regulated superannuation fund before the 'changeover day' is subject to the rollover or transfer of preserved benefits from an RSA (in respect of which an 'RSA changeover day' has already occurred) during 1998. This is necessary because of the insertion of new Principal Regulation 6.04A by Regulation 36 of these Regulations.

Regulation 36 - New regulation 6.04A (Preserved benefits in RSAs - rollover or transfer to regulated superannuation funds during 1998)

Regulation 36 inserts a new regulation 6.04A into the Principal Regulations as a consequence of the RSA legislation. This new regulation provides that, if

on a day during the 1998 calendar year that is after the day that is the 'RSA changeover day' in relation to an RSA held by an RSA holder, benefits of that RSA holder in the RSA are rolled over or transferred into regulated superannuation fund ('the receiving fund'); and
the trustee of 'the receiving fund' does not decide, on or before the day on which it receives those benefits, that that day is the changeover day in respect of these benefits;

then the portion of those benefits that is to be taken to be preserved benefits in the, receiving fund is the same as the portion of those benefits that comprised preserved benefits in the RSA immediately before the rollover or transfer.

The intention of this regulation is to ensure that preserved benefits maintain their character, in spite of being transferred or rolled over. If this provision was not included in the Principal Regulations, it may be possible for benefits that were preserved benefits in an RSA to lose their 'preserved character' when transferred or rolled over to a regulated superannuation fund (that is, become restricted non-preserved benefits or unrestricted non-preserved benefits) by operation of other provisions in Part 6.

This regulation also recognises that unlike members of regulated superannuation funds who may have a 'changeover day' in either the 1996, 1997 or 1998 calendar year, RSA holders can only have a 'changeover day' (that is, the 'RSA changeover day') in the 1998 calendar year. Therefore, the only time in which a person's 'RSA changeover day' could precede their 'changeover day' is during the 1998 calendar year.

Regulation 37 - Regulation 6.07 (Restricted non-preserved benefits in regulated superannuation funds - before the changeover day)

Regulation 37 makes an amendment to regulation 6.07 of the Principal Regulations as a consequence of the RSA legislation to provide that the calculation of restricted non-preserved benefits in a regulation superannuation fund before the 'changeover day' is subject to the rollover or transfer of restricted non-benefits from an RSA (in respect of which an 'RSA changeover day' has already occurred) during 1998. This is necessary because of the insertion of new Principal Regulation 6.09A by Regulation 40 of these Regulations.

Regulation 38 - Regulation 6.08 (Restricted non-preserved benefits in regulated superannuation funds - on and after the changeover day)

Regulation 38 makes a number of amendments to regulation 6.08 of the Principal Regulations as a consequence of the RSA legislation. In short, these amendments allow restricted non-preserved benefits and contributions (as applicable) that were transferred or rolled over from an RSA into a regulated superannuation fund to:

be included in the formula used for determining a member's restricted non-preserved benefits in the fund as specified in subregulation 6.08(1);
continue to be subject to indexation requirements specified in subregulation 6.08(2); and
remain as restricted non-preserved contributions in the fund under subregulation 6.08(3).

Regulation 39 - Regulation 6.09 (Restricted non-preserved benefits in regulated superannuation funds - rollover or transfer between funds during 1996, 1997 or 1998)

Regulation 39 amends regulation 6.09 of the Principal Regulations to correct a drafting error.

Regulation 40 - New regulation 6.09A (Restricted non-preserved benefits in RSAs -rollover or transfer to regulated superannuation funds during 1998)

Regulation 40 inserts a new regulation 6.09A into the Principal Regulations as a consequence of the RSA legislation. This new regulation provides that, if

on a day during the 1998 calendar year that is after the day that is the 'RSA changeover day' in relation to an RSA held by an RSA holder, benefits of that RSA holder in the RSA are rolled over or transferred into regulated superannuation fund ('the receiving fund'); and
the trustee of 'the receiving fund' does not decide, on or before the day on which it receives those benefits, that that day is the changeover day in respect of these benefits;

then the portion of those benefits that is to be taken to be restricted non-preserved benefits in the receiving fund is the same as the portion of those benefits that comprised restricted non-preserved benefits in the RSA immediately before the rollover or transfer.

The intention of this regulation is to ensure that restricted non-preserved benefits maintain their character, in spite of being transferred or rolled over. If this provision was not included in the Principal Regulations, it may be possible for benefits that were restricted non-preserved benefits in an RSA to lose their 'restricted non-preserved character' when transferred or rolled over to a regulated superannuation fund (that is, become preserved benefits or unrestricted non-preserved benefits) by operation of other provisions in Part 6.

This regulation also recognises that unlike members of regulated superannuation funds who may have a 'changeover day' in either the 1996, 1997 or 1998 calendar year, RSA holders can only have a 'changeover day' (that is, the 'RSA changeover day') in the 1998 calendar year. Therefore, the only time in which a person's 'RSA changeover day' could precede their 'changeover day' is during the 1998 calendar year.

Regulation 41 - Regulation 6.10 (Unrestricted non-preserved benefits - regulated superannuation funds)

Regulation 41 inserts a new subparagraph 6.10(2)(b)(iv) into the Principal Regulations as a consequence of the RSA legislation. In effect, this amendment provides that an eligible termination payment received from a source other than an RSA (as well as from a superannuation fund, an approved deposit fund or a deferred annuity as currently exists) will be treated as an unrestricted non-preserved benefit, and, as a result, unrestricted non-preserved benefits received from an RSA in respect of a member will continue to be unrestricted non-preserved benefits in the regulated superannuation fund.

Regulation 42 - Regulation 6.11 (Unrestricted non-preserved benefits - approved deposit funds)

Regulation 42 inserts a new subparagraph 6.11(2)(b)(iv) into the Principal Regulations as a consequence of the RSA legislation. In effect, this amendment provides that an eligible termination payment received from a source other than an RSA (as well as from a superannuation fund, an approved deposit fund or a deferred annuity as currently exists) will be treated as an unrestricted non-preserved benefit, and, as a result, unrestricted non-preserved benefits received from an RSA in respect of a member will continue to be unrestricted nonpreserved benefits in the approved deposit fund.

Regulation 43 - Regulation 6.16 (Redistribution of member benefits within a fund in certain circumstances by operation of governing rules or action of trustee)

Regulation 43 amends regulation 6.16 of the Principal Regulations by substituting a new subregulation 6.16(2) in its place. This amendment is necessary to correct a drafting error that had the effect of only allowing the trustee of a fund to alter the category of benefits if the governing rules of the fund allowed the category of benefits to be altered. This is contrary to the intention of the provision, which was to allow both the trustee or the governing rules of the fund to alter the category of benefits independently of each other.

Regulation 44 - Regulation 6.21 (Compulsory cashing of benefits in regulated superannuation funds)

The purpose of the amendments to regulation 6.21 of the Principal Regulations is to allow benefits attributable to mandated employer contributions to be retained in a regulated superannuation fund in respect of persons aged 65 or over. They largely incorporate the provisions of Modification Declaration No. 5 (No GN 49 of 14 December 1994), which was inserted into the Principal Regulations using the Insurance and Superannuation Commissioner's modification powers. Modification Declaration No. 5 took effect from 1 December 1993. The amendments are outlined below:

1.
Subregulation 6.21(1) is amended to allow a member's post-age 65 employed-financed benefits to be retained in a regulated superannuation fund until post-age 65 mandated employer contributions properly cease to be made in respect of the member.
2.
New subregulation 6.21(1A) is inserted to permit the post-65 employer-financed benefits of a member who is age 65 or over to be retained in a regulated superannuation fund until mandated employer contributions have ceased to be p made, and are not liable to be made, in respect of the member to the fund or to another regulated superannuation fund or to an RSA, or until the member dies.
3.
Subregulation 6.21(3) is amended to provide that for the purposes of both subregulations 6.21 (1) and 6.21 (1A), it is sufficient if, instead of being cashed, benefits may be rolled over as soon as practicable for immediate cashing.
4.
A new subregulation 6.21(4) is inserted into the Principal Regulations to give legislative backing to the manner in which post-65 employer-financed benefits must be treated when they are rolled over or transferred to another regulated superannuation fund or to an RSA. These benefits keep their status as post-65 employer-financed benefits when they are rolled over or transferred to another regulated superannuation fund or to an RSA.
5.
A new subregulation 6.21(5) is inserted into the Principal Regulations. This new provision defines 'post-65 employer-financed benefits' as being the sum of:

mandated employer contributions made to the fund as at a particular date after the member reached age 65;
mandated employer contributions rolled over to or transferred to another regulated superannuation fund or to an RSA in the same period; and
investment earnings on those amounts during the same period; less the costs applicable to those amounts during that period.

Subregulations 6.21(1) and (1A) are mutually exclusive, so that the former will continue to apply to benefits other than post-65 employer-financed benefits.

This means that all of a member's benefits in a regulated superannuation fund that are not post65 employer-financed benefits must still be cashed at either age 65 or 70.

The reference in subregulation 6.21(1A) to mandated employer contributions ceasing to be made, and not being liable to be made, in respect of the member is intended to cover situations where an employer-sponsor initially makes mandated employer contributions in respect of a member, for example, under an industrial award or agreement, but then fails or refuses to continue making them even though the employer is still obliged under the terms of the industrial award or agreement to continue making them.

If the only reason why mandated employer contributions have ceased to be made in respect of a member is because the member's employer-sponsor has wrongfully stopped or suspended making the contributions, then the fund will not be obliged to cash that member's post-65 employer-financed benefits.

However, if mandated employer contributions properly cease to be made in respect of a member who is age 65 or over (for example, because the member retires from the work force altogether, or ceases to be employed in a job in respect of which mandated employer contributions are payable), then the fund will have to cash that member's post-65 employer-financed benefits.

A contribution that an employer has to make in respect of a member in order to reduce the employer's liability for the superannuation guarantee charge imposed by section 5 of the Superannuation Guarantee Charge Act 1992 is a contribution that is "liable to be made in respect of the member" within the meaning of subregulation 6.21(1A). At present, the superannuation guarantee charge does not apply in respect of employees who are age 65 or over (section 26 and paragraph 27(1)(a) of the Superannuation Guarantee (Administration) Act 1992 refer).

Regulation 45 - Regulation 6.22 (Limitation on cashing of benefits in regulated superannuation funds in favour of persons other than members or their legal personal representatives)

Regulation 45 makes a consequential amendment to subregulation 6.22(1) of the Principal Regulations necessary as a result of the insertion of a new Principal Regulation 6.22B (see Regulation 46 below).

If subregulation 6.22(1) was not amended as a result of the insertion of new regulation 6.22B, then because an approval of provision of benefits under subparagraph 62(1)(b)(v) of the SIS Act does not override the provisions governing the cashing, rollover and transfer of benefits contained in Part 6 of the Regulations, the provision of the benefits under new regulation 6.22B would result in a breach of regulation 6.22. This amendment ensures that such a situation will not occur.

Regulation 46 - New regulation 6.22B (Circumstances in which benefits in regulated superannuation funds may be cashed in favour of persons other than members)

Regulation 46 inserts a new regulation 6.22B into the Principal Regulations. The purpose of this amendment is to incorporate the amendments made by Modification Declaration No 9 (No GN 20 of 24 May 1995) into the body of the Principal Regulations.

The amendment enables members' superannuation benefits in regulated superannuation funds to be cashed in favour of a person other than the member if, and only to the extent that, the cashing is expressly permitted by an instrument of approval of provision of benefits made under subparagraph 62(1)(b)(v) of the SIS Act.

Regulation 47 - Regulation 6.25 (Compulsory cashing of benefits in approved deposit funds)

Regulation 47 amends regulation 6.25 of the Principal Regulations as a consequence of the RSA legislation. It allows the benefits of a member who is gainfully employed on at least a part-time basis held in an approved deposit fund to be rolled over to an RSA (as well as to a regulated superannuation fund or for immediate cashing as is currently allowed).

Regulation 48 - New regulation 6.27B (Interpretation)

Regulation 6.27B provides that, for the purposes of the provisions in Division 6.4 which deal with the rollover and transfer of benefits, 'consent' from a member can either be:

written consent; or
any other form of consent determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

The same reasoning that applied for the amendments made to Principal Regulation 4.12 by Regulation 29 of these Regulations also applies for the insertion of this new regulation.

Regulation 49 - Regulation 6.28 (Rollover - regulated superannuation funds and approved deposit funds)

Regulation 49 amends regulation 6.28 of the Principal Regulations in two ways. First, it deletes the word "written" from paragraph 6.28(a). This amendment is a consequence of the insertion by Regulation 48 of these Regulations of a new Principal Regulation 6.27B, which allows a member's consent to a rollover to be given either in a written form or in a form determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

Regulation 49 also inserts a new paragraph 6.28(b) into the Principal Regulations as a result of the RSA legislation. As a result of this amendment, a member's benefits can be rolled over from a regulated superannuation fund or an approved deposit fund into an RSA (as well as into a regulated superannuation fund or an approved deposit fund as is currently allowed) if the trustee of such a fund has reasonable grounds to believe that the RSA institution providing the RSA into which the benefits are to be rolled over has received the member's consent to the rollover. As provided for in the new Principal Regulation 6.27B (inserted by Regulation 48 of these Regulations), this consent may written or in a form determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

Regulation 50 - Regulation 6.29 (Transfer - funds)

Regulation 50 amends regulation 6.29 of the Principal Regulations in three ways. First, it incorporates into the Principal Regulations an amendment made to regulation 6.29 by Modification Declaration No. 12 (No GN 1 of 10 January 1996) that allowed transfers to be made to and from approved deposit funds, as well as to and from regulated superannuation funds (Modification Declaration No. 12 was inserted into the Principal Regulations using the Insurance and Superannuation Commissioner's modification powers, and took effect from 11 March 1994).

Second, Regulation 50 deletes the word "written" from paragraph 6.29(a). This amendment is a consequence of the insertion by Regulation 48 of these Regulations of a new Principal Regulation 6.27B, which allows a member's consent to a transfer to be given either in a written form or in a form determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

Regulation 50 also inserts a new paragraph 6.29(b) into the Principal Regulations as a result of the RSA legislation. As a result of this amendment, a member's benefits can be transferred from a regulated superannuation fund or an approved deposit fund into an RSA (as well as into a regulated superannuation fund or an approved deposit fund as is currently allowed) if the trustee of such a fund has reasonable grounds to believe that the RSA institution providing the RSA into which the benefits are to be transferred has received the member's consent to the transfer. As provided for in the new Principal Regulation 6.27B (inserted by Regulation 48 of these Regulations), this consent may written or in a form determined by the Insurance and Superannuation Commissioner as sufficient in the circumstances.

Regulation 51 - Regulation 7.02 (Application)

Regulation 51 inserts a new regulation 7.02 into the Principal Regulations. This new provision provides that Part 7 of the Principal Regulations is no longer subject to regulation 13.04. This is because regulation 13.04 has been deleted as a result of these regulations (regulation 55 refers).

Regulation 52 - Regulation 7.04 (Acceptance of contributions - regulated superannuation funds)

Regulation 52 inserts new subregulations 7.04(1B) and 7.04(1C) into the Principal Regulations and amends subregulation 7.04(2).

Subregulation 7.04(1B) allows contributions to be accepted in respect of members who are between the age of 65 and 70 if the contributions are attributable to mandated employer contributions, or the member is gainfully employed on a part-time or fulltime basis. This amendment gives effect to the Treasurer's announcement of 20 August 1996 to increase the age limit for contributions from age 65 to 70 years.

Subregulation 7.04(1C) allows a regulated superannuation fund to accept contributions in respect of a member aged 70 or over only where the contributions are mandated employer contributions. This new subregulation allows the accommodation that was given by Modification Declaration No. 5 (No GN 49 of 14 December 1994) for mandated employer contributions made under industrial agreements or awards to continue. (Modification Declaration No. 5 was inserted into the Principal Regulations using the Insurance and Superannuation Commissioner's modification powers, and took effect from 1 December 1993).

Subregulation 7.04(2) is amended so that it applies in respect of the existing subregulation 7.04(1) and in respect of the new subregulations 7.04(1B) and 7.04(1C). Subregulation 7.04(2) allows a regulated superannuation fund to accept contributions made after the periods specified in subregulations 7.04(1), (1B) and (1C) if the trustee is reasonably satisfied that the contribution concerned is in respect of such a period, even if it later transpires that the contribution was not in respect of such a period.

Regulation 53 - Regulation 7.05 (Accrual of benefits - defined benefit funds)

Regulation 53 inserts new subregulations 7.05(1B) and 7.05(1C) into the Principal Regulations and amends subregulation 7.05(2).

Subregulation 7.05(1B) allows an accrual of benefits to be granted in respect of members who are between the age of 65 and 70, if the contributions are attributable to mandated employer contributions, or the member is gainfully employed on a part-time or full-time basis. This amendment gives effect to the Treasurer's announcement of 20 August 1996 to increase the age limit for contributions from age 65 to 70 years.

Subregulation 7.05(1C) allows a defined benefit fund to grant an accrual of benefits in respect of a member aged 70 or over only if the accrual is attributable to mandated employer contributions. This new subregulation allows the accommodation that was given by Modification Declaration No. 5 (No GN 49 of 14 December 1994) for mandated employer contributions made under industrial agreements or awards to continue. (Modification Declaration No. 5 was inserted into the Principal Regulations using the Insurance and Superannuation Commissioner's modification powers, and took effect from 1 December 1993).

Subregulation 7.05(2) is amended so that it applies in respect of the existing subregulation 7.05(1) and in respect of the new subregulations 7.05(1B) and 7.05(1C). Subregulation 7.05(2) allows a defined benefit fund to grant an accrual of benefits in respect of a member if the trustee is reasonably satisfied that the accrual is in respect of a period during which, under subregulation 7.05(1), (1B) or (1C), the fund may grant an accrual of benefits in respect of that member, even if it later transpires that the accrual was not in respect of that period.

Regulation 54 - Regulation 10.06 (Operating standards - eligible rollover funds)

Regulation 54 inserts a new paragraph 10.06(2)(a) into the Principal Regulations as a result of the RSA legislation. This amendment ensures that eligible rollover funds must accept payment of benefits (other than pension benefits) from RSAs, as well as from those superannuation funds and approved deposit funds that are not eligible rollover funds.

Regulation 55 - Subdivision 13.1.2 (Contribution and benefit accrual standards)

Regulation 55 omits Subdivision 13.1.2 of the Principal Regulations. Regulation 13.04 contained transitional provisions which are no longer relevant as a result of other provisions inserted by these Regulations, namely by regulations 52 and 53. As stated previously, these Regulations give effect to the Treasurer's announcement of 20 August 1996 to increase the age limit for contributions from age 65 to 70 years.

Regulation 56 - Regulation 13.25 (Reconsideration of certain decisions)

Regulation 56 amends subregulation 13.25(4) of the Principal Regulations by replacing the words "21 days" with "60 days". The purpose of this amendment is to achieve consistency with subsection 344(5) of the SIS Act on the time given to the Commissioner to confirm, vary or revoke a reviewable decision.

Regulation 57 - Transitional

Regulation 57 provides that the amendments made by regulation 56 of these Regulations to the Principal Regulations in relation to the time given to the Commissioner to confirm, vary or revoke a reviewable decision have effect to decisions made by the Commissioner on or after 1 July 1997. However, the time given for the reconsideration of any decision under subregulation 13.25(4) of the Principal Regulations that commenced before 1 July 1997 will continue to be 21 days.

This will not be included as a substantive regulation into the Principal Regulations, but rather will be included for interpretation purposes as a note to the Principal Regulations.

Regulation Impact Statement for amendments to the Superannuation Industry (Supervision) Regulations

Background

On 20 August 1996 the Treasurer announced that banks, building societies, credit union and life insurance companies would be allowed to offer Retirement Savings Accounts (RSAs) from 1 July 1997. RSAs will be a superannuation product, however, they differ from traditional superannuation products in that they will not required to be offered under a trust structure. The Treasurer foreshadowed legislation to ensure that RSAs are subject to similar retirement income and other superannuation standards as those which apply to trust based superannuation entities.

As a result of the passage of legislation relating to the conduct of RSAs, a number of minor consequential amendments to the Superannuation Industry (Supervision) Regulations (the SIS Regulations) are needed to facilitate such matters as the transfer of benefits between RSAs and regulated superannuation funds.

The Treasurer also announced on 20 August 1996 that public offer complying superannuation funds will continue to operate under a trust structure as at present and will be free to offer superannuation products broadly equivalent in nature to RSAs. The intention of this measure is to ensure competitive neutrality in the superannuation market. The proposal was reinforced in the Second Reading Speech of the RSA Bill, delivered in the House of Representatives by the Hon Chris Miles, MP on 4 December 1996, which foreshadowed extensive consultation on disclosure rules and other matters to ensure neutrality between RSAs and broadly equivalent products offered by public offer superannuation funds.

Finally, the Treasurer on 20 August 1996 provided details on the 1996 election commitment that the Government would allow people over age 65 to continue contributing to a regulated superannuation fund or RSA. Under this measure, individuals will be able to continue to make superannuation contributions up to age 70, provided they maintain a bona fide link with the paid workforce, that is, they are gainfully employed for at least 10 hours per week over the year. The measure was announced to take effect from 1 July 1997.

A Statement of the issues giving rise for the need for the proposed legislative instrument

The Regulations cover three main areas as follows:

introduce consequential amendments to the SIS Regulations as a result of the introduction of the RSA legislation. Without these amendments, benefits would not be able to be transferred or rolled over between RSAs and existing superannuation providers, thereby failing to integrate RSAs into the existing superannuation system;
amend the SIS Regulations to implement the Government's Budget announcement on 'RSA look-alike' products. The current SIS Regulations impose more extensive and detailed disclosure requirements on trust based superannuation entities than the proposed RSA Regulations (which simplify disclosure for RSAs on account of their capital guaranteed nature and the fact they are provided by financial institutions subject to stringent prudential supervision). To ensure competitive neutrality between RSAs and 'RSA look-alike' products, similar disclosure requirements as those inserted in the RSA Regulations would have to be inserted into the SIS Regulations to give public offer superannuation funds the option of using reduced disclosure for 'RSA look-alike' products where the product has an equivalent capital guarantee to an RSA;
amend the SIS Regulations to implement the Govenment's Budget announcement to allow people over age 65 who are gainfully employed to continue contributing to a regulated superannuation fund. This is necessary because at present, people can generally only contribute until age 65.

B The objective of the instrument

To maintain consistency between the RSA and SIS Regulations, especially in relation to 'RSA look-alike' products and to facilitate the operation of RSAs within the superannuation system and to implement the Government's 1996-97 Budget announcement to allow people over age 65 who are gainfully employed to continue make superannuation contributions.

C Identification of alternatives

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

1. Proceed with proposed regulations

That the proposed amendments outlined above be made to the SIS Regulations.

2. No specific action

That no regulations be made for the purposes of the SIS Regulations either in relation to RSAs or in respect of the increased superannuation contribution age.

3. Information campaign for regulated superannuation funds

That the proposed regulations not proceed and instead the ISC educate regulated superannuation funds on best practices when dealing with 'RSA look-alike' products, the transfer and rollover of benefits to and from RSAs, and the acceptance of superannuation contributions from people over age 65 who are gainfully employed.

D Impact analysis

The following stakeholders will be affected directly or indirectly by the proposed legislative instrument:

Current public offer superannuation funds - the regulations will ensure a level playing field between RSAs and like superannuation products, and allow benefits to be transferred and rolled over between RSAs and other superannuation products.
RSA providers - the regulations will allow benefits to be transferred and rolled over between RSAs and other superannuation products.
Insurance and Superannuation Commission - the ISC will continue to have responsibility to regulate superannuation providers to ensure that they are complying with the retirement income standards.
Members of regulated superannuation funds and approved deposit funds - the regulations will allow members to transfer or rollover benefits into, or receive benefits from, RSAs, and will also allow them to continue making superannuation contributions past age 65.
RSA holders - the regulations will allow RSA holders to transfer or rollover benefits into, or receive benefits from, other superannuation products.

1 Proceed with proposed regulations

COSTS

The Regulations do not impose any additional compulsory requirements on RSAs and RSA providers. However, they do provide public offer superannuation funds with the option of using reduced disclosure (similar to RSAs) where they offer 'RSA lookalike' products with a capital guarantee, broadly equivalent to an RSA. To ensure neutrality between RSA providers and public offer superannuation funds offering 'RSA look-alike' products, the latter will be required to include a similar 'health warning' in their offer documents for capital guaranteed products to that which is required of RSA providers under the RSA Regulations. The 'health warning' requires the public offer superannuation fund to inform the relevant person about lower risk/lower-return nature of the product and its effect on long term benefits, that there are other superannuation arrangements that may provide a greater return over the long term, and the means by which the capital guarantee is supported and the institution providing the guarantee.

Superannuation providers will have to slightly modify their administration systems if they want to accept and permit the transfer and rollover of benefits to and from RSAs in respect of a member. Similarly, regulated superannuation funds will have to make minor modifications to their administration systems to allow persons to continue to contribute past age 65. This should only involve some initial costs in modifying their administration systems.

It is difficult to quantity these costs, but as they will simply involve an update to existing systems they should only be minor.

Public offer superannuation funds that offer 'RSA look-alike' products and opt for the reduced disclosure requirements in respect of those products will incur some initial establishment costs in adjusting their offer documents to meet the disclosure rules prescribed by the Regulations.. However, this will be offset by considerable savings in the medium to long term, given the reduced size and complexity of the documents in future. Funds that offer 'look-alike RSAs' under the existing (more extensive) disclosure requirements will incur minor costs in adjusting their offer documents to include the above mentioned 'health warning' and the requirement will not commence until 1 October 1997 to give funds time to effect this change.

There will also be a cost to the ISC in supervising the compliance of superannuation providers with the amendments made to the SIS Regulations. However, such supervision would be done under the existing review and audit program undertaken by the ISC in relation to these of superannuation providers, and therefore will be completely absorbed. In any event, these costs are fully recovered via a supervisory levy imposed on the industry under the Superannuation Supervisory Levy Act 1991, and therefore, there will be no direct cost to the Government.

BENEFITS

As mentioned above, the Regulations impose requirements on public offer superannuation funds to either comply with the existing disclosure requirements or reduced disclosure requirements when offering 'RSA look-alike' products. These reduced disclosure requirements will be beneficial to those public offer superannuation funds who use the requirements by lowering the costs of disclosure. This will also allow public offer superannuation funds to promote their 'RSA lookalike' product in the same way as RSAs.

The Regulations will also allow members to transfer or rollover benefits into their existing superannuation product from an RSA, or to transfer or rollover benefits into an RSA. This is highly beneficial to members as it will allow them to accumulate and maintain amounts of superannuation moneys in the product that best suits their needs. This also promotes a competitively neutral environment between RSAs and superannuation funds.

Allowing of gainfully employed persons to continue contributing past age 65 until age 70 removes existing inconsistencies between the treatment of superannuation contributions of different groups of individuals under age 70. It will also assist those who have had poor access to superannuation by increasing the age at which individuals are generally allowed to make superannuation contributions. In particular, the measure will benefit women who leave the workforce to care for children, and others whose workforce experience has been characterised by intermittent breaks by providing a longer period in which to accumulate an adequate retirement income.

This option meets the stated objectives of maintaining consistency between the RSA and SIS Regulations (especially in relation to 'RSA look-alike' products), facilitating the operation and integration of RSAs within the superannuation system and implementing the Government's election commitment to allow people over age 65 who are gainfully employed to continue make superannuation contributions.

2 No specific action

COSTS

This option would involve no amendments to the SIS Regulations. Therefore, there will be no costs to superannuation providers incurred in system modification.

However, this would not allow the transfer and rollover of benefits between RSAs and other superannuation products, thereby denying people the opportunity to accumulate and maintain superannuation money in the superannuation product of their choice.

It would also deny the opportunity to public offer superannuation funds to use shorter form disclosure (equivalent to the reduced RSA disclosure requirements) for their capital guaranteed products and therefore give RSA providers an unfair competitive advantage over trust-based public offer superannuation funds. This would not only reduce choice in the superannuation industry, but would also create an unlevel playing field between public offer superannuation funds and RSA providers. In addition, it would mean that the Government could not meet its Budget promise that public offer superannuation funds would be allowed to offer products broadly equivalent to RSAs.

In addition, by not allowing public offer superannuation funds to offer 'RSA lookalike' products, this would result in higher disclosure costs than may otherwise be the case, as these funds would have to continue to comply with the more stringent disclosure rules that currently apply.

Without amendments to the contribution standards, persons could not generally make superannuation contributions past age 65. Not only would this deny persons the opportunity to build up superannuation savings so as to better provide for their retirement, it would also mean that an important Budget announcement had not been fulfilled.

BENEFITS

This option would not require superannuation providers to incur costs by making minor changes to their administration systems. However, these costs would be relatively insignificant as superannuation providers already have administration systems in place to comply with the requirements of the RSA Act.

This option may have the advantage of marginally reducing costs involved with system changes for superannuation providers, but this would be far outweighed by the denying of people to accumulate and maintain superannuation benefits in a product of their choice, both before and after age 65. The option also means that the Government would have failed to implement 1996-97 Budget measures by the announced deadlines.

3 Information campaign for regulated superannuation funds

COSTS

The costs of such an information campaign would have to borne by the Government. More fundamentally, however, this information campaign would be of little use as regulated superannuation funds, without amendments to the SIS Regulations, would not be permitted to offer 'RSA look-alike' products (in the case of public offer superannuation funds), would not be permitted to allow the transfer and rollover of benefits to and from RSAs, and would not be able to accept superannuation contributions from people over age 65 who are gainfully employed. In these areas, the costs are much the same as those outlined above for Option 2.

BENEFITS

This option would not require superannuation providers to incur costs by making minor changes to their administration systems. However, these costs would be relatively insignificant as superannuation providers already have administration systems in place to comply with the requirements of the RSA Act.

Like option 2, this option may have the advantage of marginally reducing costs involved with system changes for superannuation providers, but this would be far outweighed by the denying of people to accumulate and maintain superannuation benefits in a product of their choice, both before and after age 65. The option also means that the Government would have failed to implement 1996-97 Budget measures by the announced deadlines.

E Recommendation

Given the importance that the proposed RSA legislation and the ability to contribute past age 65 has for the Government's retirement incomes policy, Option 1 is the preferred option. Any possible benefit to superannuation providers of Options 2 and 3, will be outweighed by the costs in terms of restrictions on choice of superannuation product, competitive distortion and in the inability to make superannuation contributions past the age of 65 years.

F Other issues

Consultation

A wide ranging consultative process was undertaken in the drafting of the Regulations with the relevant industry organisations representing the interests of the affected stakeholders. The consultation involved the release of two discussion papers (the first on 20 August 1996 by the Treasurer and the second in September 1996 by the ISC under the authority of the former Assistant Treasurer); inviting comments on the drafting instructions of the Regulations; inviting comments on drafts of the Regulations; and a meeting with stakeholders in Canberra on the draft Regulations in March 1997. The organisations consulted were the:

Association of Superannuation Funds of Australia;
Australian Association of Permanent Building Societies;
Australian Bankers Association;
Australian Consumers' Association;
Credit Union Services Corporation (Australia) Limited;
Investment Funds Association of Australia Limited;
Life, Investment and Superannuation Association of Australia;
National Credit Union Association; and
representatives of Philips Fox Solicitors.

The Treasury, Reserve Bank and the Australian Financial Institutions Commission were also consulted.

There is a general acceptance by these organisations of the requirements prescribed by the regulations, and the need for such amendments.

Review

In accordance with the Commonwealth Government's policy of a five year sunset clause for new regulations the proposed legislation will be formally reviewed in five years. However, given that RSAs are a new product, the Regulations will be under constant review by the ISC for their appropriateness to RSA providers, their responsiveness to trends and developments in the emerging RSA market and to ensure that they remain consistent with the Government's retirement incomes policy.

Impact on competition

It is expected that Option 1 will not impact on the competitiveness of superannuation products with RSAs. Nor will it give such products an unfair competitive advantage over RSAs. Options 2 and 3 may result in RSAs gaining a substantial unfair competitive advantage over other superannuation products.


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