Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)PART 3 - Superannuation Contributions and Termination Payments Taxes Legislation Amendment Bill 1997
Part 3 of the Explanatory Memorandum (Chapters 9 to 18) explains the provisions of the Superannuation Contributions and Termination Payments Taxes Legislation Amendment Bill 1997.
Chapter 9 - Preliminary
9.1 This Bill makes consequential amendments to nine Acts as a result of the introduction of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Bill 1997 and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Bill 1997. The Bill also makes amendments to clarify the operation of the surcharge Acts and to make some technical corrections.
9.2 The Bill is structured in nine schedules, each dealing with amendments to a particular Act.
Summary of the amendments
9.3 The amendments propose to amend:
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- the Income Tax Assessment Act 1936 ;
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- the Income Tax Assessment Act 1997 ;
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- the Superannuation Contributions Tax (Application to the Commonwealth) Act 1997 ;
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- the Superannuation Contributions Tax (Assessment and Collection) Act 1997 ;
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- the Superannuation Contributions Tax (Consequential Amendments) Act 1997 ;
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- the Superannuation Industry (Supervision) Act 1993 ;
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- the Superannuation (Resolution of Complaints) Act 1993 ;
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- the Taxation (Interest on Overpayments and Early Payments) Act 1983 ; and
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- the Termination Payments Tax (Assessment and Collection) Act 1997 .
9.4 The amendments to those Acts are contained in the Schedules to the Bill.
Clause 3]
Title and commencement of the Act
9.5 When the Bill is enacted it will be called the Superannuation Contributions and Termination Payments Taxes Legislation Amendment Act 1997. [Clause 1]
9.6 The amendments contained in Schedules 3, 5 and 9, together with the amendments in Items 1 and 2 and 4 to 45 of Schedule 4, are taken to have commenced on 5 June 1997, immediately after the commencement of the Superannuation Contributions Tax (Application to the Commonwealth) Act 1997 , the Superannuation Contributions Tax (Assessment and Collection) Act 1997, the Superannuation Contributions Tax (Consequential Amendments) Act 1997 and the Termination Payments Tax (Assessment and Collection) Act 1997. All other amendments commence from the day on which the Act receives the Royal Assent. [Clause 2]
Chapter 10 - Amendments to the Income Tax Assessment Act 1936
10.1 Schedule 1 of the Bill amends the Income Tax Assessment Act 1936 (the 1936 Act).
10.2 An 'eligible termination payment' is defined in subsection 27A(1) of the 1936 Act to include, among other things, any payments received from a complying superannuation fund. The definition of 'eligible termination payment' is being amended to exclude an amount received from the commutation of a pension from a constitutionally protected superannuation fund solely to pay a superannuation contributions surcharge (as defined in section 39 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 ). The amendment ensures that such an amount is not included in the assessable income of the member under the 1936 Act. [Item 1]
10.3 Section 202, section 202DH and section 202DJ of the 1936 Act are concerned with the use of tax file numbers. Paragraph 202(l) and section 202DH are amended to insert references to the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 . [Item 2]
10.4 Section 202DJ is redrafted to ensure that, where a person has quoted his or her tax file number (TFN) to a superannuation provider for the purpose of calculating the tax to be deducted from an eligible termination payment (ETP), that TFN will be taken to have also been quoted for the purposes of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 . [Item 3]
10.5 A constitutionally protected superannuation fund has the same meaning as in Part IX of the 1936 Act and in the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997. [Item 4]
10.6 Section 214A of the 1936 Act determines the method for working out interest rates for income tax and surcharge purposes. Paragraph 214A(2)(f) is amended to include a reference to section 19 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997. This amendment will allow the rate of interest calculated under that Act to be determined by section 214A of the 1936 Act. [Item 5]
Chapter 11 - Amendments to the Income Tax Assessment Act 1997
11.1 Schedule 2 of the Bill amends the Income Tax Assessment Act 1997 (the 1997 Act).
11.2 The amendments ensure that the payment of superannuation contributions surcharge under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 or the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 and the payment of termination payments surcharge under the Termination Payments Tax (Assessment and Collection) Act 1997 will not be an allowable deduction under the 1997 Act. [Items 1 and 2]
Chapter 12 - Amendments to the Superannuation Contributions Tax (Application to the Commonwealth) Act
12.1 Schedule 3 of the Bill amends the Superannuation Contributions Tax (Application to the Commonwealth) Act 1997.
12.2 The amendment is of a technical nature to remove any doubt that the Superannuation Contributions Tax (Assessment and Collection) Act 1997 applies to superannuation funds administered by the Commonwealth. [Items 1 and 2]
Chapter 13 - Amendments to the Superannuation Contributions Tax (Assessment and Collection) Act
13.1 Schedule 4 of the Bill amends the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (the Act).
13.2 Section 6 of the Act outlines significant features of the operation of the Act. The seventh dot point in section 6 is amended to clarify that, for an unfunded defined benefits scheme, the surcharge is not payable until the benefits become payable. [Item 1]
13.3 The ninth dot point of section 6 is omitted to reflect changes to the operation of the Act arising from amendments made to the Act by the Parliament. [Item 2]
Liability to surcharge and advance instalments
13.4 Section 7 of the Act outlines the circumstances in which the superannuation contributions surcharge is payable. New subsection 7(4) provides that no surcharge is payable under the Act where the surcharge is payable under the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 . This amendment ensures that there is no possibility of double taxation in the unlikely circumstance where both Acts could apply to a constitutionally protected fund. [Item 3]
Clarification of surchargeable contributions
13.5 Section 8 of the Act determines the amount of a member's surchargeable contributions for a financial year. Subsection 8(1) is amended to insert two paragraphs to clarify the basis of calculation of surchargeable contributions for accumulation schemes and for defined benefits schemes.
13.6 For accumulation schemes surchargeable contributions are based on the amounts actually paid to the superannuation provider.
13.7 For defined benefits schemes surchargeable contributions are based on annual salaries multiplied by the notional surchargeable contributions factor.
[Item 4]
13.8 Subsection 8(2), which determines the amount of surchargeable contributions for a member of a superannuation (accumulated benefits) fund, is being amended so that any allocated surplus amount for a member is included in the member's surchargeable contributions. [Item 5, 6 and 8)]
13.9 An 'allocated surplus amount' is any amount allocated by a superannuation (accumulated benefits) provider for the benefit of a member of a superannuation fund for the financial year that exceeds an amount that, in the opinion of an eligible actuary according to Australian actuarial practice, is reasonable having regard to:
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- the amounts paid by or for the member to the provider; and
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- the fund's investment earnings relating to the member's interest in the fund; and
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- any other relevant matters.
13.10 An allocation would be reasonable if, for example, it represents an ordinary return on the investment. An amount allocated from fund surplus which substantially increased a member's benefit, for example, would be an unreasonable allocation that is an allocated surplus amount.
Item 40 - definition of allocated surplus amount]
13.11 Subsection 8(3) determines the amount of surchargeable contributions for a member of a defined benefits fund based on a notional surchargeable contributions factor. The definition of 'notional surchargeable contributions factor' in section 43 of the Act is being amended to ensure that, if appropriate, a notional surchargeable contributions factor for a member for a particular year can be determined for an unfunded defined benefits scheme and for a funded defined benefits scheme that does not actually receive any contributions in that year because, for example, it is on a contributions holiday. [Item 42]
Statements given by superannuation providers
13.12 Section 13 of the Act requires superannuation providers to give, by the notification date, statements relating to the amount of surchargeable contributions received for each member to the Commissioner. The amount of surchargeable contributions to be reported are those amounts identified in section 8. Section 14 of the Act allows the Commissioner to specify the form in which the statements are given.
Statements by defined benefit providers
13.13 The amendments ensure that the interrelationship between section 8 and section 13 applies appropriately to defined benefit superannuation fund providers. That is, subsection 8(2), paragraph 8(4)(a), subsection 13(1), subsection 13(2) and the definition of 'contributed amounts' in section 43 are being amended to ensure that defined benefit superannuation fund providers, like accumulated benefit superannuation providers, are required to report surchargeable contributions for a member. [Items 5, 6, 7, 8 and 9; Item 41 - new definition of 'contributed amounts']
Other amendments concerning statements to be given by superannuation providers
13.14 To facilitate the administration of the surcharge by enabling the Commissioner to grant an extension of time for the provision of information and to assist in the tracing of members who have been transferred from one superannuation provider to another, section 13 is also being amended to:
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- give the Commissioner a discretion to allow an extension of time to superannuation providers to give section 13 statements [Items 9, 10 and 12] ;
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- allow for regulations to be made to specify the type of information required in section 13 statements [Items 11, 14, 15 and 16] ;
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- require a superannuation provider who has transferred benefits for a member to another superannuation provider to advise the Commissioner of the name and address of that other provider [Item 13] ;
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- require a superannuation provider who has received benefits transferred from another provider to give that other provider a statement setting out any matters required by regulations [Item 16 - new subsection 13(4A)] ;
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- ensure that a superannuation provider who gives a statement to the Commissioner under section 13 is required to advise the member only of the details of surchargeable contributions shown on the statement no later than 12 months after the statement is given. This advice can be included on the annual statement required under the Superannuation Industry (Supervision) Act 1993 and may be given to the member prior to being sent to the Commissioner; [Item 17]
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- ensure that the penalty provisions apply to both natural persons and body corporates and insert notes explaining the operation of the Criminal Code and the Crimes Act 1914 [Item 18] ; and
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- clarify that subsection 13(7) applies in relation to the member for a financial year and ensure that the statement includes the total of allocated surplus amounts for the member. [Items 19 and 20]
13.16 New subsection 14(4A) is being inserted to enable the Commissioner to seek information from a member about the holder of the member's surchargeable contributions. This amendment will facilitate the administration of the surcharge where the member has transferred his or her benefits to another superannuation provider as the member should know where his or her superannuation contributions are held. [Item 22]
Liability for surcharge payable by unfunded defined benefit providers
13.17 Section 16 of the Act provides for the deferment of payment of a surcharge liability for a member of an unfunded defined benefits superannuation fund until the benefit is paid by the fund to the member. However, a member has the option of paying the liability directly once a surcharge liability arises.
13.18 Subsection 16(6) is amended so that, consistent with other superannuation providers, an unfunded defined benefits superannuation provider has a period of one month after the benefit becomes payable for the payment of the surcharge debt rather than having to pay the liability when the benefit is paid. [Item 23]
13.19 Subsection 16(7) is amended to clarify that where a member makes a direct payment of surcharge prior to the benefit becoming payable, that payment will be applied to reduce the whole amount by which the surcharge debt account is in debit. Currently the payment could only be applied to reduce the amount of deferred surcharge debt and not any accumulating interest. [Item 24]
Credit or refund of advance instalment
13.20 Section 17 concerns the application of advance instalment of surcharge payable by superannuation providers. Subsection 17(2) and 17(3) of the Act are amended to ensure that the advance instalment is first used to reduce any surcharge liabilities the provider may have under this Act before an amount is refunded to the provider. [Item 25]
13.21 Section 18 of the Act provides that where a surcharge liability is raised due to the non-quotation of a tax file number (TFN) and the TFN is subsequently quoted or ascertained by the Commissioner, the Commissioner must, if appropriate, amend the assessment and refund any excess surcharge to the holder of the contributions.
13.22 Paragraph 18(1)(b), which allows the Commissioner to amend the assessment only if the provider has actually paid the assessed amount, is being removed. That is, if an assessment is raised due to the non-quotation of a TFN and the TFN is subsequently quoted or ascertained by the Commissioner, the Commissioner will be able to amend the assessment prior to the original assessment being paid. [Item 26]
13.23 Section 19 relates to the amendment of surcharge assessments. Subsection 19(2) outlines some of the matters the Commissioner can take into account when amending an assessment. A technical amendment is made to subsection 19(3) to allow the Commissioner to amend an assessment to take account of any of the matters referred to in subsection 19(2). [Item 27]
13.24 Subsection 19(5), which outlines what the Commissioner must do if an amended assessment is made reducing the surcharge, is redrafted to ensure that:
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- an amount can be credited to the holder of surchargeable contributions even where the total amount previously assessed to be paid has not been paid; and
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- any excess amount is to be applied to reduce any surcharge liability the provider may have under this Act before an amount is refunded to the provider
[Item 28]
Assessments of additional surcharge
13.25 Section 20 provides that where there is a change to factors affecting a surcharge liability and the superannuation provider to whom the original assessment was made is no longer the holder of the surchargeable contributions, a new assessment may be made to the current holder of the contributions.
13.26 An amendment is made to paragraph 20(6)(b) to ensure that the amount of any reduction in the surcharge is first used to reduce any surcharge liabilities the provider may have under this Act before an amount is refunded to the provider. [Item 29]
13.27 Section 25 of the Act applies a late payment penalty where a liability to surcharge, advance instalment or interest is not paid by the due date. To enhance the administration of the Act and make it consistent with other taxing provisions, the late payment penalty will be an interest penalty on the unpaid amount at the rate provided for interest payments by section 214A of the Income Tax Assessment Act 1936 . That rate is based on the 13 week Treasury Bond rate.
13.28 To further bring the arrangements into line with current commercial practice, the late payment penalty is to accrue daily. That is, the late payment interest component will accumulate on all unpaid amounts from the day after the date a payment was due and will apply to all components of an account, including interest components already accrued.
13.29 The amendment will also provide for judgment to be made in respect of the debt and allow the Commissioner to sue for the recovery of any unpaid amounts.
[Item 30]
13.30 Section 32 of the Act imposes secrecy obligations on a person who acquires information on the affairs of another person under the Act.
13.31 Item 31 makes a technical amendment to the notes to subsection 32(2) to provide greater explanation of the application of the Criminal Code and the Crimes Act 1914 .
13.32 Item 32 inserts a note to subsection 32(8) to explain the application of the Criminal Code .
13.33 New section 34A is being inserted into the Act to ensure that the Act does not apply to a person who is a judge of a Territory at the commencement of the Act. [Item 33]
Information to be given to the Commissioner
13.34 Section 35 of the Act concerns the information which must be given to the Commissioner by a superannuation provider who pays an amount of surcharge or advance instalment. Section 35 is revised so that a superannuation provider must give the Commissioner, within a period notified by the Commissioner, a statement setting out such information as is required by the regulations. The amendment also provides for a penalty where such information is not provided. [Item 34]
13.35 The Act is amended to insert a new section 35A which provides for the Commissioner to serve a contravention notice on a provider who has contravened the provisions dealing with the provision of information.
13.36 The penalties currently provided for in the Act are offences punishable on prosecution. To reduce the need for prosecution, and the delays this would entail in the majority of cases, an administrative penalty scheme is considered appropriate for the breaches of the reporting requirements contained in section 13, 14 or 35 of the Act. The penalty is $500 for each week or part of a week in which the reports are not provided to the Commissioner.
Item 34]
13.37 Section 36 of the Act allows the Commissioner to authorise a certain officer or employee to be an authorised officer. A technical amendment is made to section 36 to provide that such authorisation is only applicable to Part 6 of the Act rather than the Act as a whole. [Item 35]
13.38 Section 40 of the Act imposes certain record keeping requirements on superannuation providers for the purposes of the Act. A technical amendment is made to subsection 40(5) to ensure that the penalty provisions apply to both natural persons and body corporates. The amendment also inserts notes explaining the operation of the Criminal Code and the Crimes Act 1914 . [Item 36]
Commissioner may collect money from third parties
13.39 New section 40A is being inserted into the Act to enable the Commissioner to collect funds held for or on behalf of a holder of surchargeable contributions to meet a surcharge liability. [Item 37]
13.40 Section 42 of the Act provides that the Governor-General may make regulations for the purposes of the Act. Section 42 is revised to clarify that the general regulation making power extends to the manner in which statements are to be provided to the Commissioner. The revised section also allows regulations to be made to insert a penalty, not exceeding a fine of 5 penalty units, for offences against the regulations. [Item 38]
13.41 Section 43 of the Act defines a number of terms used in the Act.
13.42 A definition of 'allocated surplus amount' is being inserted into the Act. An 'allocated surplus amount' is any amount allocated by a superannuation (accumulated benefits) provider for the benefit of a member of a superannuation fund for the financial year that exceeds an amount that, in the opinion of an eligible actuary according to Australian actuarial practice, is reasonable having regard to:
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- the amounts paid by or for the member to the provider; and
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- the fund's investment earnings relating to the member's interest in the fund; and
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- any other relevant matters.
Item 40]
13.43 The definition of 'notional surchargeable contributions factor' is being amended to ensure that, if appropriate, a notional surchargeable contributions factor for a member for a particular year can be determined for an unfunded defined benefits scheme and for a funded defined benefits scheme that does not actually receive any contributions in that year because, for example, it is on a contributions holiday. [Item 42]
13.44 Technical amendments are made to the definitions of:
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- 'adjusted taxable income' [Item 39] ;
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- 'contributed amounts' [Item 41] ;
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- 'superannuation contributions surcharge or surcharge' [Item 43] ; and
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- 'unfunded defined benefits superannuation scheme' [Item 45] .
13.45 In addition, the definition of 'surcharge' is removed because it is included in the definition of 'superannuation contributions surcharge or surcharge'. [Item 44]
Chapter 14 - Amendments to the Superannuation Contributions Tax (Consequential Amendments) Act
14.1 Schedule 5 of the Bill amends the Superannuation Contributions Tax (Consequential Amendments) Act 1997 .
14.2 The amendments contained in Schedule 5 of the Bill simply correct cross references in the Act that refer to provisions in the Retirement Savings Accounts Act 1997 . That Act was renumbered in the Parliament and these amendments simply reflect that renumbering. [Items 1 to 18]
Chapter 15 - Amendments to the Superannuation Industry (Supervision) Act
15.1 Schedule 6 of the Bill amends the Superannuation Industry (Supervision) Act 1993 .
15.2 A technical amendment is made to this Act to insert an appropriate reference to the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 in the definition of 'Surcharge Acts' in section 299W. [Item 1]
Chapter 16 - Amendments to the Superannuation (Resolution of Complaints) Act
16.1 Schedule 7 of the Bill amends the Superannuation (Resolution of Complaints) Act 1993 .
16.2 The amendments to this Act are of a technical nature to insert appropriate references to the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 in subsection 3(2) and section 15CA. [Items 1 and 3]
16.3 Subsection 15CA(1) is also revised to remove a reference to 'contributed amounts' which is no longer appropriate. [Item 2]
Chapter 17 - Amendments to the Taxation (Interest on Overpayments and Early Payments) Act
17.1 Schedule 8 of the Bill amends the Taxation (Interest on Overpayments and Early Payments) Act 1983 .
17.2 The Bill inserts new Part IIE into the Act to enable interest to be paid on overpayments resulting from amendments to surcharge assessments made under the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 .
17.3 The amendments provide that where a person has paid the assessed amount of surcharge and as a result of an amendment the surcharge liability is reduced, then interest is payable by the Commissioner of Taxation on the amount of the reduction. The rate of interest is that provided for by section 214A of the Income Tax Assessment Act 1936 . That rate is based on the 13 week Treasury Bond rate.
Item 1]
Chapter 18 - Amendment to the Termination Payments Tax (Assessment and Collection) Act
18.1 Schedule 9 of the Bill amends the Termination Payments Tax (Assessment and Collection) Act 1997 (the Act).
18.2 Section 12 of the Act relates to the amendment of surcharge assessments. Subsection 12(4), which outlines what the Commissioner must do if an amendment assessment is made reducing the surcharge, is redrafted to ensure that:
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- an amount can be credited to the taxpayer even where the total amount previously assessed to be paid has not been paid; and
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- any excess amount is to be applied to reduce any surcharge liability the taxpayer may have under this Act before an amount is refunded to the taxpayer.
Item 1]
18.3 Section 16 of the Act applies a late payment penalty where a liability to surcharge or interest is not paid by the due date. To enhance the administration of the Act and make it consistent with other taxing provisions, the late payment penalty will be an interest penalty on the unpaid amount at the rate provided for interest payments by section 214A of the Income Tax Assessment Act 1936 . That rate is based on the 13 week Treasury Bond rate.
18.4 To further bring the arrangements into line with current commercial practice, the late payment penalty is to accrue daily. That is, the late payment interest component will accumulate on all unpaid amounts from the day after the date a payment was due and will apply to all components of an account, including interest components already accrued.
18.5 The amendment will also provide for judgment to be made in respect of the debt and allow the Commissioner to sue for the recovery of any unpaid amounts.
Item 2]
18.6 Section 23 of the Act imposes secrecy obligations on a person who acquires information on the affairs of another person under the Act.
18.7 Item 3 makes a technical amendment to the notes to subsection 32(2) to provide greater explanation of the application of the Criminal Code and the Crimes Act 1914 .
18.8 Section 24 of the Act allows the Commissioner to authorise a certain officer or employee to be an authorised officer. A technical amendment is made to section 24 to provide that such authorisation is only applicable to Part 6 of the Act rather than the Act as a whole. [Item 4]
18.9 Section 28 of the Act imposes certain record keeping requirements on employers for the purposes of the Act. A technical amendment is made to subsection 28(5) to ensure that the penalty provisions apply to both natural persons and body corporates. The amendment also inserts notes explaining the operation of the Criminal Code and the Crimes Act 1914 . [Item 5]
Commissioner may collect money from third parties
18.10 New section 28A is being inserted into the Act to enable the Commissioner to collect funds held for or on behalf of a holder of surchargeable contributions to meet a surcharge liability. [Item 6]
18.11 Section 31 of the Act defines a number of terms used in the Act. A technical amendment is being made to the definition of 'termination payments surcharge or surcharge' [Item 7] .
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