Senate

Supplementary Explanatory Memorandum

(Circulated by authority of Senator the Hon Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy)

Chapter 1 - Amendment to the Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020

Outline of chapter

1.1 This chapter explains the Senate amendments to the Bill.

Summary of new law

1.2 Senate amendment 1 provides that schedule 2 to the Bill will commence on the seventh day after this Act receives the Royal Assent.

1.3 Senate amendments 2 to 15 delay the operation of the amendments in schedule 1 to the Bill to provide trustees of eligible rollover funds additional time to exit the market.

1.4 Senate amendment 16 provides that a superannuation provider may pay to the Commissioner any amount it holds on behalf of a member, former member or non-member spouse if it reasonably believes paying the amount to the Commissioner is in the best interests of the member, former member or non-member spouse.

1.5 Senate amendment 16 also provides for reunification by the Commissioner of those amounts with the member, former member or non-member spouse's active superannuation account, or to the person directly where that person has reached the eligibility age or the amount is less than $200.

Comparison of key features of new law and current law

Detailed explanation of new law

Eligible rollover funds

1.6 The Bill amends the SUMLM Act to prevent superannuation providers making an application to a trustee of an eligible rollover fund to rollover new amounts to the fund from the later of 1 May 2020 or 7 days after Royal Assent. Senate amendments 2 and 3 delays this and provides that Superannuation providers will not be able to make an application to a trustee of an eligible rollover fund to rollover amounts to the fund on or after the later of 1 May 2021 or 7 days after Royal Assent.

1.7 The Bill also amends the SUMLM Act to require the balance of all accounts less than $6,000 held by eligible rollover funds on 1 June 2020 be transferred to the Commissioner by 30 June 2020 and the balance of all remaining accounts held by eligible rollover funds be transferred to the Commissioner by 30 June 2021.

1.8 Senate amendments 4 to 15 amends the above dates and provides that the balance of all accounts less than $6,000 held by eligible rollover funds on 1 June 2021 must be transferred to the Commissioner by 30 June 2021 and the balance of all remaining accounts held by eligible rollover funds must be transferred to the Commissioner by 31 January 2022.

Payment of other amounts to the Commissioner

1.9 Senate amendment 16 creates a new category of payments by superannuation providers to the Commissioner and creates a corresponding obligation for the Commissioner to reunite the payment with the member, former member or non-member spouse, or pay the amount directly to the person where the person has reached the eligibility age or the amount is less than $200.

1.10 Such payments are voluntary in nature but the superannuation provider may only pay an amount to the Commissioner if the superannuation provider reasonably believes that paying the amount to the Commissioner would be in the best interests of the member, former member or non-member spouse.

1.11 There is likely to be a range of factors that a superannuation provider will need to consider when forming a view about whether transferring an amount to the Commissioner would be in the person's best interests.

1.12 It is also likely that these factors, whilst they will vary depending on the status of the person (i.e. member, former member or non-member spouse), may include (but are not limited to) such things as:

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the history of contributions, rollover, drawdowns or other activity of the member, former member or non-member spouse;

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whether there are any insurance premiums being deducted from the account;

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the superannuation provider's history of contact with the member, former member or non-member spouse;

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whether previous attempts to contact the member, former member or non-member spouse have resulted in a member-initiated change to their superannuation arrangements.

Example 1.1

The Smith superannuation fund has held an amount on behalf of Georgie the past 2 years. The amount relates to a remediation payment the fund received on behalf of Georgie after she exited the fund.

At the last unclaimed money day, the amount did not meet the criteria in the SUMLM Act of unclaimed money and the amount is not held in an inactive low-balance or lost member account.

The Smith superannuation fund has not had any contact from Georgie since she exited the fund and mail sent to Georgie 6 months ago was returned to sender.

Given the amount is not held in an account and the trustee has previously been unable to contact Georgie, it would be reasonable for the trustee of the Smith superannuation fund to decide it was in the best interests of Georgie to transfer the amount held to the Commissioner without trying to make further contact with Georgie.

Example 1.2

The Poppy superannuation fund holds an account on behalf of Henri. The balance of the account is $9,000. The last contribution to the account was 18 months ago. Life and Total and Permanent Disability insurance premiums are being deducted from the account.

Given insurance is being deducted from the account, it would likely not be reasonable for the trustee of the Poppy superannuation fund to decide it would be in the best interests of Henri to transfer the balance of the account to the Commissioner.

Example 1.3

The Lola Superannuation Fund holds an amount on behalf of Samantha who has reached preservation age and is in the process of drawing down on an account based pension.

As Samantha is in the process of drawing down on a pension - regardless of the frequency of drawdowns, or whether the member is generally contactable - it would likely not be in her best interests for the Lola superannuation fund to voluntarily elect to transfer the amount held to the Commissioner.

Example 1.4

The Terrence superannuation fund holds a number of amounts on behalf of persons who are no longer eligible to be members of that fund because the Terrence superannuation fund limits membership to current employees of a particular entity. The Terrence superannuation fund has not received any payment or transfer instructions, and the former members are no longer contactable.

At the last unclaimed money day, the amounts did not meet the criteria in the SUMLM Act of unclaimed money and the amounts are not held in an inactive low-balance or lost member account.

It would be reasonable for the Terrence superannuation fund to elect to voluntarily pay the amount to the Commissioner under the voluntary payment category.

1.13 At the time the superannuation provider pays an amount to the Commissioner, the superannuation provider must give the Commissioner a statement in the approved form. This requirement is consistent with the existing statement requirements in the SUMLM Act and the information required by the statement may include information necessary to determine the tax free and taxable components of the amount paid to the Commissioner.

1.14 Amounts can be paid to the Commissioner at any time provided at the time the payment is made, the amount is not covered by one of the compulsory obligations in the SUMLM Act to pay that amount to the Commissioner.

Example 1.5

On 31 December 2020, which is an unclaimed money day, the Hinton superannuation fund holds an amount on behalf of Gavin. The account balance is less than $6,000 and satisfies the definition of an inactive low-balance account and is therefore due and payable to the Commissioner by the next statement day (30 April 2021).

Because Gavin's account is due and payable to the Commissioner under the inactive low-balance account provisions, the Hinton Superannuation fund cannot elect to voluntarily pay the amount to the Commissioner under the voluntary payment category.

1.15 A superannuation provider who becomes aware of a material error or omission in any information in a statement must give the corrected or omitted information to the Commissioner in the approved form and no later than 30 days after the superannuation provider becomes aware of the error or omission.

Paying out amounts paid to the Commissioner by superannuation providers

1.16 Amounts that have been paid to the Commissioner by superannuation providers must be paid by the Commissioner:

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to a superannuation fund if directed by the member; or

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to the person's beneficiaries, if the person has died and the Commissioner is satisfied that the original fund would have paid the amount to the beneficiaries; or

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to the person, if the person has reached eligibility age, the amount is less than $200 or the person has a terminal medical condition within the meaning of the Income Tax Assessment Act 1997; or

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to the person's active superannuation account.

1.17 When the Commissioner makes a payment, the Commissioner must also pay an amount of interest, worked out in accordance with the regulations.

1.18 If an amount was overpaid by the Commissioner, the Commissioner is able to recover that amount from the superannuation provider or the person to whom the overpayment was made.

1.19 If a superannuation provider receives an amount in respect of a person but is unable to credit an account held by that person within 28 days, the superannuation provider must return the amount to the Commissioner.

1.20 Giving the Commissioner the ability to proactively reunite an amount with a person's active superannuation account is consistent with other parts of the SUMLM Act. Part 4B, inserted by the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 gives the Commissioner the ability to transfer amounts received in respect of a person into a single active account held by a superannuation provider in respect of the person without needing to be directed by the person.