Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Actuary's certificates for account based income streams
Schedule 1 to this bill will amend the Income Tax Assessment Act 1936, removing the requirement for superannuation funds to obtain an actuary's certificate in order to qualify for exemption from tax on income derived by assets supporting certain pension liabilities or an exemption of a proportion of income attributable to certain pension liabilities.
The amendments allow for the Income Tax Regulations 1936 to prescribe pensions for this purpose.
Date of effect: The amendments will commence from Royal Assent but will have no application unless and until regulations are made for the purposes of the amendments.
Proposal announced: This measure was announced in the Treasurer's Press Release No. 011 of 25 February 2004 titled A more flexible and adaptable retirement income system.
Financial impact: This measure is not expected to have a significant financial impact.
Compliance cost impact: This measure will reduce compliance costs by removing the requirement for some superannuation funds to obtain an actuary's certificate.
Under 18 superannuation contribution deduction work test
Schedule 1 to this bill will also amend the Income Tax Assessment Act 1997 to provide an additional condition that needs to be satisfied by taxpayers below the age of 18 in order to claim a taxation deduction for personal superannuation contributions.
Date of effect: This measure applies in relation to taxation assessments for the 2004-2005 income year and for subsequent income years.
Proposal announced: This measure was announced in the Treasurer's Press Release No. 011 of 25 February 2004 titled A more flexible and adaptable retirement income system.
Financial impact: This measure is expected to have a negligible budgetary impact. The impact was included in the estimate of the cost of removing the superannuation contribution work test for those people below age 65. The table below presents the expected financial impact of that measure.
| Year |
2004-2005
$ million |
2005-2006
$ million |
2006-2007
$ million |
2007-2008
$ million |
|---|---|---|---|---|
| Revenue impact | +12.8 | -34.5 | -40.1 | -45.9 |
Compliance cost impact: Nil.
Summary of regulation impact statement
Impact: There will be no additional compliance costs placed on the superannuation industry.
Main points:
- •
- Responsibility for monitoring the additional work test for people under the age of 18 claiming a taxation deduction will be with the Australian Taxation Office.
- •
- The removal of the superannuation contribution work test measure involves the removal of all costs associated with monitoring the existing work test. This is achieved by removing the need for the superannuation industry to monitor whether members have worked in the two years prior to making a contribution.
Retirement savings accounts portability time frames
Schedule 1 to this bill also amends the Retirement Savings Accounts Act 1997 to more closely align the portability regime for retirement savings account (RSA) providers with the regime that applies to other superannuation providers. Specifically, the period in which an RSA provider must action a portability request would be reduced from the current time frame of 12 months and aligned with the Superannuation Industry (Supervision) Regulations 1994, which require action as soon as possible after the request and within 90 days.
Date of effect: This measure applies from either 1 July 2004 or 28 days after Royal Assent, which ever is later.
Proposal announced: This measure was announced in the Prime Minister's Press Release of 5 November 2001 titled A Better Superannuation System.
Financial impact: Nil.
Compliance cost impact: Compliance costs for this measure are not expected to be significant as the law currently requires RSA providers to transfer account balances as soon as practicably possible after receiving a request from an account holder.
Simplification of superannuation guarantee earnings bases
Schedule 1 to this bill will also amend the Superannuation Guarantee (Administration) Act 1992 to simplify the earnings base of an employee for superannuation guarantee (SG) purposes. Specifically, the amendments will:
- •
- remove provisions which currently allow earnings bases that existed prior to 21 August 1991 to be used to calculate an employer's SG obligation in respect of an employee;
- •
- remove provisions which currently specify an earnings base for employers to calculate their SG obligation in relation to employee members of the Seafarers' Retirement Fund;
- •
- remove provisions which currently specify an earnings base for employers to calculate their SG obligation in relation to employee members of the Aberfoyle Award Superannuation Fund;
- •
- remove provisions which allow earnings bases specified in industrial awards, superannuation schemes, occupational superannuation arrangements or a law of the Commonwealth, State or Territory to be used for SG purposes; and
- •
- require all employers to calculate their SG liability against an employee's ordinary time earnings.
Date of effect: These amendments apply from 1 July 2010.
Proposal announced: This measure was announced in the Treasurer's Press Release No. 011 of 25 February 2004 titled A more flexible and adaptable retirement income system.
Financial impact: The table below presents the expected financial impact of this measure.
| Year |
2004-2005
$ million |
2005-2006
$ million |
2006-2007
$ million |
2007-2008
$ million |
|---|---|---|---|---|
| Revenue impact | -10 | -15 | -21 | -24 |
Compliance cost impact: These amendments are expected to simplify the SG earnings base provisions and, therefore have a positive impact on compliance costs.
Summary of regulation impact statement
Impact: This measure will impact on those employers who do not currently calculate SG obligations on the basis of ordinary time earnings. The measure will reduce the complexity experienced by employers in determining and calculating the relevant earnings base for an employee.
Employees are also expected to benefit from this measure as it will ensure that all employees receive superannuation contributions based on a minimum of ordinary time earnings.
Main points:
- •
- The complexity in determining the correct earnings base will be removed.
- •
- The inequality in the level of contributions between equivalent employees will be removed.
- •
- A lead in time of six years will allow the changes contained in this measure to be considered by employers and employees in the wage bargaining process.
Cancelling registrable superannuation entity licences
Schedule 1 to this bill also amends section 29G of the Superannuation Industry (Supervision) Act 1993. The amendment addresses an incorrect cross-reference relating to the cancellation of registrable superannuation entity (RSE) licences. Section 29G is inserted into the Superannuation Industry (Supervision) Act 1993 by the Superannuation Safety Amendment Act 2004, and will apply from 1 July 2004.
The Superannuation Safety Amendment Act 2004 currently makes subsection 29G(1) subject to subsection 29G(2), rather than subsection 29G(3) as intended. The proposed amendment will clarify that the Australian Prudential Regulation Authority may not cancel an RSE licence without the Minister's written consent.
Date of effect: This amendment will apply immediately after the commencement of Schedule 1, Part 1 of the Superannuation Safety Amendment Act 2004, on 1 July 2004.
Proposal Announcement: This measure has not previously been announced.
Financial impact: Nil.
Compliance cost impact: Nil.