Explanatory Statement

Issued by authority of the Treasurer

The definition of these life insurance policies was accidentally repealed by the Superannuation Legislation Amendment Regulation 2013 (No. 2)

Subject - Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (SISA) and subsection 200(1) of the Retirement Savings Accounts Act 1997

Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (SISA) and subsection 200(1) of the Retirement Savings Accounts Act 1997 (RSA) provide that the Governor-General may make regulations prescribing matters required or permitted by the relevant Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the relevant Act.

The purpose of the Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (Regulation) is to make a number of amendments to the regulations detailed below.

Verification of self managed superannuation fund and member details

If a member of a regulated superannuation fund asks the trustee to rollover or transfer an amount to a self managed superannuation fund, the trustee is obliged to check the details of that fund using electronic services provided by the Australian Government and the Commissioner of Taxation (Commissioner).

If the details are not confirmed, the trustee must, under the current rules, ask the member for written evidence of the information. In cases of attempted illegal early release of superannuation benefits, the risk that false information will be provided by the member is high.

The regulation replaces the member verification requirement with a requirement to ask the Commissioner to check the information manually.

Timeframes for rollovers and transfers

The standard timeframe for a rollover or transfer of an amount of superannuation by a trustee of a transferring fund is three days from the time the member makes the request. There is an exception to this where the member makes an investment choice.

The exception incorrectly refers to investment choices made by self managed superannuation funds. The Regulation corrects this by substituting a reference to investment choices made by regulated superannuation entities other than self managed superannuation funds.

Removing the requirement of a unique contribution identifier

The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and the Retirement Savings Accounts Regulations 1997 (RSA Regulations) require employers to provide contributions data to superannuation entities. This data includes a unique payment reference number for the contribution.

Some common contribution payment methods, such as BPAY, however, produce a payment reference number that is unique to the payer or fund member, but not the individual contribution.

The Regulation removes the requirement that the payment reference number be unique to the contribution.

Life insurance definition

The SIS Regulations provide options to facilitate the splitting of superannuation interests between a person who holds a superannuation interest and their spouse, upon their separation.

Interests determined by reference to certain life insurance policies are excluded from options for accumulation interests.

The definition of these life insurance policies was accidentally repealed by the Superannuation Legislation Amendment Regulation 2013 (No. 2).

The Regulation re-inserts a definition.

Trans-Tasman portability

The Trans-Tasman Retirement Savings Portability scheme allows individuals who permanently move between Australia and New Zealand to consolidate their retirement savings in their country of residence.

Before an amount can be paid from an Australian superannuation fund to a New Zealand KiwiSaver account, the member must give their Australian fund an Australian statutory declaration that they have permanently migrated to New Zealand. The Regulation amends the SIS Regulations to allow Australian superannuation funds to accept a New Zealand statutory declaration as evidence that the individual has permanently migrated to New Zealand.

Consultation

No direct public consultation was undertaken in relation to the amendments because they are minor and technical in nature. However, the timeframes for rollovers and transfers, removing the requirement of a unique contribution identifier, and life insurance definition amendments were all developed in response to issues raised by members of the public.

Consultation has been undertaken with New Zealand Inland Revenue on the Trans-Tasman portability measure.

The ATO and APRA were consulted in the development of all amendments.

Conditions and commencement

The SISA and the RSA specify no conditions that need to be met before the power to make the Regulation may be exercised.

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

The Regulation commences on the day after registration.

The timeframes for rollovers and transfers amendments and the Trans-Tasman portability amendments apply on and after 1 July 2013.

These amendments do not affect the rights of individuals such that they are disadvantaged and do not impose liabilities on affected individuals before the date of registration for the purposes of the Legislative Instruments Act 2003. The timeframes for rollovers and transfers amendments corrects a cross-referencing error in the provisions so that they work as intended. The Trans-Tasman portability amendments make it easier for individuals and funds to satisfy statutory requirements for making transfers of superannuation to the individual's country of residence.

The other amendments apply from commencement.

Details

Details of the Regulation are set out in the Attachment.

ATTACHMENT

Details of the Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014

Section 1 - Name of Regulation

This section provides that the title of the Regulation is the Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (Regulation).

Section 2 - Commencement

This section provides that the Regulation commences on the day after registration.

Section 3 - Authority

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

Section 4 - Schedule(s)

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

Schedule 1 - Verification of rollovers for SMSFs

Under regulation 6.33 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), a member of a regulated superannuation fund or approved deposit fund (the transferring fund) may receive a written request that their fund transfer or roll over the whole or part of their benefit into a self managed superannuation fund (the receiving fund).

If certain information is not provided as part of the request, the trustee of the transferring fund is not required to roll over or transfer the amount: see paragraph 6.34(1)(e) and subregulation 6.34(2) of the SIS Regulations.

Subregulation 6.33E(2) requires the trustee of the transferring fund to:

(a)
use an electronic service provided by the Australian government to verify the ABN of the receiving fund and that it is a regulated superannuation fund; and
(b)
use an electronic service provided by the Commissioner of Taxation to validate that the member is a member of the receiving fund.

These services are known as the 'Super Fund Lookup' (SFL) and 'Member Validation Service' ('MVS').

If the trustee is unable to verify the details in (a) or validate the membership in (b) within five days, it must ask the member for written evidence to verify the name of the receiving fund, that the fund is a regulated superannuation fund, and that the member is a member of that fund.

The purpose of regulation 6.33E is to prevent the illegal early release (IER) of retirement benefits. Self managed superannuation funds are used by IER schemes to extract superannuation benefits from an individual's superannuation fund.

There is a risk that the member will provide false information in response to a request from the trustee of the transferring fund.

The Regulation replaces the requirement to ask the member for written evidence of the information with a requirement to ask the Commissioner to verify and validate the information in subregulation 6.33E(2).

Schedule 2 - Cross-referencing amendment

Where a trustee of a fund is required to rollover or transfer an amount in accordance with a request, subregulation 6.34A(2) of the SIS Regulations requires a trustee of a fund to make the rollover as soon as practicable, but in any case no later than three days after receiving the rollover request, receiving information sought under specified regulations or the end of any suspension or variation.

Subregulations 6.34A(4) and 6.34A(6) of the SIS Regulations provide exceptions to this where, among other things, a member makes an investment choice under regulation 4.02 of the SIS Regulations.

Prior to 1 July 2013, Regulation 4.02 allowed a beneficiary of a superannuation entity to give a direction to the trustee about investment strategy for their interest in certain circumstances. Basically, the trustee had to give the beneficiary an informed choice of strategies.

Regulation 4.02 was made for the purposes of Subsection 52(4) of the Superannuation Industry Supervision Act 1993 (SISA), which deemed investment strategies that include directions from beneficiaries under the regulations to be in accordance with mandatory covenants inserted into the governing rules of the fund by paragraph 52(2)(f) of the SISA.

When enacted, these mandatory covenant provisions in the SISA applied generally to all superannuation entities, and so, therefore, did Regulation 4.02.

With effect from 1 July 2013, the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 replaced the mandatory covenant provisions with separate provisions for different types of superannuation entities. As a result, consequential amendments were made by the Superannuation Legislation Amendment MySuper Measures) Regulation 2013 that replaced regulation 4.02 of the SIS Regulations with new regulations 4.02, 4.02A and 4.02AA, which largely replicate the content of the previous regulation 4.02 but apply to different types of entities.

The reference to regulation 4.02 in subregulations 6.34A(4) and (6) was not amended. The new regulation 4.02 only applies to self managed superannuation funds.

It was not intended that the replacement of regulation 4.02 with regulations 4.02, 4.02A and 4.02AA should change the entities to which subregulations 6.34A(4) and (6) apply.

The Regulation replaces the references to regulation 4.02 in subregulations 6.34A(4) and (6) with references to both regulations 4.02A and 4.02AA.

Schedule 3 - Unique contribution identifier

Employers typically make contributions to superannuation funds for the benefit of employees under the Superannuation Guarantee (Administration) Act 1992. Contributions are made to either a fund chosen by the employee or a default fund of the employer. The chosen fund of an employee includes a retirement savings account (RSA).

The SIS Regulations put obligations on employers in relation to contributions to regulated superannuation funds. The Retirement Savings Accounts Regulations 1997 (RSA Regulations) imposes mirror obligations for contributions to RSA providers.

The employer must give the employee's name, address, TFN and phone number to the fund or RSA provider in relation to the contribution on the same day the contributions is made: see subregulations 7.07E(2) 7.07(4) of the SIS Regulations and 5.07(2) and (4) of the RSA Regulations.

The employer must assign a payment reference number (PRN) to the contribution and include the PRN with the contribution: see subregulations 7.07E(5) of the SIS Regulations and 5.07(5) of the RSA Regulations.

Significantly, the PRN must be unique to the contribution or a number of contributions made together on the same day by the employer: see regulations 7.07E(6) of the SIS Regulations 5.07(6) of the RSA Regulations. This allows the fund to credit the contribution to the employee's member account.

Some common contribution payment methods, such as BPAY, however, produce a payment reference number that is unique to the payer or fund member, but not the individual contribution.

The Regulation removes the requirement that the PRN be unique to the contribution or a number of contributions made together on the same day by the employer.

Schedule 4 - Definition of traditional life insurance policy

The Family Law Legislation Amendment (Superannuation) Act 2001 provides for superannuation to be split upon marriage breakdown. The SIS Regulations provide options to facilitate the splitting of superannuation interests between a person who holds a superannuation interest and their spouse upon their separation.

Divisions 7A.1A and 7A.2 of the SIS Regulations provide splitting options for certain accumulation interests. However, certain accumulation interests determined by reference to life insurance policies are excluded from the application of those Divisions by subsections 7A.03A(3) and 7A.04(2) of the SIS Regulations.

Subparagraphs 7A.03A(3)(b) and 7A.04(2)(b) of the SIS Regulations refer to an interest determined by reference to a policy of life insurance mentioned in regulation 5.15D (repealed).

Item 8 of the Superannuation Legislation Amendment Regulation 2013 (No. 2) repealed Regulation 5.15D as part of the repeal of the member protection standards.

The Regulation re-inserts a definition.

Schedule 5 - Trans-Tasman Portability - definition of statutory declaration

On 1 July 2013 the Trans-Tasman Retirement Savings Portability scheme came into operation. The scheme allows individuals who migrate between Australia and New Zealand to consolidate their retirement savings in their country of residence. This reduces compliance and administration costs and potentially reduces the fees and charges individuals would incur if they maintained accounts across two countries. The scheme is subject to an Arrangement signed by the two Governments on 16 July 2009.

Under regulation 12A.10 of the SIS Regulations, an amount of superannuation cannot be paid by the trustee of a complying superannuation fund into a KiwiSaver scheme until the trustee is satisfied of certain matters. These include the member having given the trustee a statutory declaration stating that the member has emigrated permanently to New Zealand. The trustee may also require that a statutory declaration verifying other evidence before the amount can be paid.

It is an excessive burden for people who have emigrated to New Zealand to provide what are statutory declarations made under Australian law.

The Regulation amends regulation 12A.10 so that Statutory Declarations made under New Zealand law satisfy the provisions.

Schedule 6 - Transitional arrangements

The Regulation provides that the amendments made by Schedules 2 and 5 apply on and after 1 July 2013

Statement of Compatibility with Human Rights

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

Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014

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

Overview of the Legislative Instrument

The purpose of the Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (Regulation) is to make a number of amendments to the regulations detailed below.

Verification of self managed superannuation fund and member details

If a member of a regulated superannuation fund asks the trustee to rollover or transfer an amount to a self managed superannuation fund, the trustee is obliged to check the details of that fund using electronic services provided by the Australian Government and the Commissioner of Taxation (Commissioner).

If the details are not confirmed, the trustee must, under the current rules, ask the member for written evidence of the information. In cases of attempted illegal early release of superannuation benefits, the risk that false information will be provided by the member is high.

The regulation replaces the member verification requirement with a requirement to ask the Commissioner to check the information manually.

Timeframes for rollovers and transfers

The standard timeframe for a rollover or transfer of an amount of superannuation by a trustee of a transferring fund is 3 days from the time the member makes the request. There is an exception to this where the member makes an investment choice.

The exception wrongly refers to investment choices made by self managed superannuation funds. The Regulation corrects this by substituting a reference to investment choices made by regulated superannuation entities other than self managed superannuation funds.

Removing the requirement of a unique contribution identifier

The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and the Retirement Savings Accounts Regulations 1997 (RSA Regulations) require employers to provide contributions data to superannuation entities. This data includes a unique payment reference number for the contribution.

Some common contribution payment methods, such as BPAY, however, produce a payment reference number that is unique to the payer or fund member, but not the individual contribution.

The Regulation removes the requirement that the payment reference number be unique to the contribution.

Life insurance definition

The SIS Regulations provide options to facilitate the splitting of superannuation interests between a person who holds a superannuation interest and their spouse, upon their separation.

Interests determined by reference to certain life insurance policies are excluded from options for accumulation interests.

The definition of these life insurance policies was accidentally repealed by Superannuation Legislation Amendment Regulation 2013 (No. 2).

The Regulation re-inserts a definition.

Trans-Tasman portability

The Trans-Tasman Retirement Savings Portability scheme allows individuals who permanently move between Australia and New Zealand to consolidate their retirement savings in their country of residence.

Before an amount can be paid from an Australian superannuation fund to a New Zealand KiwiSaver account, the member must give their Australian fund an Australian statutory declaration that they have permanently migrated to New Zealand. The Regulation amends the SIS Regulations to allow Australian superannuation funds to accept a New Zealand statutory declaration as evidence that the individual has permanently migrated to New Zealand.

Human rights implications

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

The amendments are minor and machinery in nature.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.


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