House of Representatives

Explanatory Memorandum

Circulated by the authority of the Treasurer, the Hon Wayne Swan MP

Chapter 8 - Administration and other issues

Outline of chapter

8.1 Schedule 4 of the First Home Saver Accounts (Consequential Amendments) Bill 2008 (FHSA (Consequential Amendments) Bill 2008) amends:

•

the Social Security Act 1991 and the Veterans' Entitlements Act 1986 so that First Home Saver Accounts (FHSAs) are not taken into account for the income and assets tests that apply to various Commonwealth benefits;

•

the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 so that Act applies to the provision of FHSAs regardless of the type of entity providing the account; and

•

various other Commonwealth Acts to make changes consequential upon the introduction of FHSAs.

8.2 Parts 5 and 6 of the First Home Saver Accounts Bill 2008 (FHSA Bill 2008) and Schedule 1 to the FHSA (Consequential Amendments) Bill 2008 establish administrative arrangements for FHSAs including:

•

who administers various provisions;

•

providing information to the Commissioner of Taxation (Commissioner);

•

rights of review of decisions;

•

enforcement powers; and

•

tax file numbers and secrecy rules to protect the confidentiality of information provided.

Context

Significant amendments to other Commonwealth Acts

8.3 As is usual with the introduction of a significant new measure, the enactment of the FHSA legislation necessitates consequential amendment to other Commonwealth legislation to ensure that the new legislation interacts with existing legislation as the Government intends. In this case, significant amendments are required to:

•

the Social Security Act 1991 and the Veterans' Entitlements Act 1986 ; and

•

the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 .

Working out social security and veterans' entitlements

8.4 Currently, in working out a person's eligibility for social security income support payments and veterans' entitlements, a person's income and assets are assessed. The Government intends that FHSAs are not to be taken into account in working out entitlements.

Anti - Money Laundering and Counter Terrorism Financing Act 2006

8.5 The Government proposes that FHSA providers be required to comply with the requirements in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 , including identifying customers when opening an FHSA. This is to ensure consistency of regulation across similar financial products which are already captured under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 .

8.6 For authorised deposit-taking institutions (ADIs) and life insurance companies the requirements will be the same as those currently applying to other products they provide. However, public offer superannuation licensees are not currently required to comply with the initial customer identification obligations (subsection 39(6) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 ).

Administration

8.7 Administrative arrangements are necessary to allow for the effective operation and administration of FHSAs. Where possible, the arrangements are designed to align with the operational obligations that are currently imposed on entities that are eligible to provide FHSAs. For example, the tax file number (TFN) quotation arrangements that apply to FHSAs reflect the arrangements of the superannuation system.

8.8 In addition, where possible, these arrangements have been designed to mirror the existing administrative arrangements for similar laws (eg, superannuation and taxation laws). For example, the use of the general interest charge and approved forms.

8.9 Regulatory responsibility for administering the FHSA legislation is divided along functional lines between the Commissioner, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). This division of responsibility is consistent with the Regulators' respective current responsibilities.

Summary of new law

Important amendments to other Commonwealth Acts

Income and assets test for benefits

8.10 The income and assets tests under the Social Security Act 1991 and Veterans' Entitlements Act 1986 are amended to ensure that FHSAs are not taken into account in working out entitlements under those Acts.

8.11 This has been achieved by amending the definitions of:

•

'return on a person's investments';

•

'financial investment';

•

'investment'; and

•

'designated private trust'.

Anti - Money Laundering and Counter - Terrorism Financing Act 2006

8.12 FHSA providers are required to comply with the requirements in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 , including identifying customers when opening an FHSA, regardless of the type of entity providing the FHSA.

Administration

Responsibility for administering the new law

8.13 The general administration of the FHSA Bill 2008 is divided between the Commissioner, APRA and ASIC.

8.14 The Commissioner is responsible for the provisions about individual transactions (opening accounts, contributions into accounts and payments from accounts) and Government contributions. The Commissioner also has administration of the relevant taxation law (including the FHSA misuse tax).

8.15 APRA is responsible for the prudential regulation of FHSAs. In particular, APRA is responsible for authorising Registrable Superannuation Entity (RSE) licensees (trustees) as FHSA providers, and is responsible for the prudential regulation of trustee providers and FHSA trusts under Division 2, Part 7 of the FHSA Bill 2008. Division 2 of Part 7 of the FHSA Bill 2008 applies relevant provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act) to FHSA providers that are trustees and FHSA trusts, subject to any provisions of the SIS Act that is administered by ASIC.

8.16 ASIC is responsible for the administration of provisions of the SIS Act as they apply in Division 2 of Part 7 of the FHSA Bill 2008. These provisions apply to FHSA providers that are trustees and FHSA trusts, and establish when trustees may offer, issue and redeem an interest in an FHSA trust, the circumstances in which trustees may pay commission and brokerage, and requirements in relation to members' or beneficiaries' reports.

Information and access to premises

8.17 The FHSA (Consequential Amendments) Bill 2008 contains information gathering and access powers for the Commissioner in relation to administration of the Government contribution. For FHSA matters contained in the income tax law (eg, the FHSA misuse tax in the Income Tax Assessment Act 1997 (ITAA 1997)) the Commissioner can rely on the normal information gathering and access powers under the income tax law.

8.18 The FHSA (Consequential Amendments) Bill 2008 also contains reporting obligations for FHSA providers, requiring them to provide the Commissioner with certain information relating to FHSAs they provide. All FHSA providers are required to report data to APRA in accordance with the Financial Sector (Collection of Data) Act 2001 (discussed in more detail in Chapter 5).

Rights of review of decisions

8.19 Decisions of the Commissioner in relation to Government contributions are subject to merits-based review by an officer of the Australian Taxation Office (ATO).

8.20 APRA's decisions relating to the authorisation of trustees as FHSA providers, and decisions to make, vary or revoke prudential standards that apply to specific trustees, are subject to merits review by the Administrative Appeals Tribunal.

Secrecy and Tax File Numbers

8.21 The FHSA Bill 2008 contains secrecy provisions, to protect the confidentiality of information received by the Regulators in relation to an individual's FHSA received by the regulators. These provisions have been modelled on the secrecy arrangements that currently apply to the superannuation co-contribution for low income earners. As such, to facilitate the effective administration of the FHSA Bill 2008 and other related legislation, specific disclosure of protected information are permitted. For example, disclosing information necessary to perform duties under the Bill.

•

The privacy obligations of FHSA providers are regulated by the Privacy Act 1988

8.22 The FHSA Bill 2008 also contains provisions that require an individual to quote their TFN in order to open, be issued with or hold an FHSA. This is explained in Chapter 1. These arrangements are necessary to ensure that only one account is opened per individual, and to assist the Commissioner in paying the Government contribution. To ensure that this TFN information is used appropriately, this Bill contains provisions which regulate the quotation, use and storage of TFNs. These are modelled on the arrangements which currently apply to superannuation.

Detailed explanation

Income and assets test for benefits

8.23 The income and assets tests under the Social Security Act 1991 and Veterans' Entitlements Act 1986 are amended to ensure that FHSAs are not taken into account in working out entitlements under those Acts.

Social Security Act 1991

8.24 The value of an individual's FHSA is not taken into account when calculating the value of a person's assets as the funds are not readily accessible to the individual. This is because the funds in an FHSA must be used to purchase a first home or contributed to superannuation. [ Schedule 3, item 35, FHSA (Consequential Amendments) Bill 2008; paragraph 1118(1)(fa) of the Social Security Act 1991 ]

8.25 The definition of 'investment' has been amended to define an investment in an FHSA as having benefits in an FHSA, regardless of whether the benefits are attributable to amounts contributed by the FHSA holder. [ Schedule 3, items 30, and 33, FHSA (Consequential Amendments) Bill 2008; paragraph 9(1)(c) and subsection 9(9B) of the Social Security Act 1991 ]

8.26 An investment in an FHSA has also been excluded from the definition of 'financial investment', 'managed investments' and 'designated private trust'. [ Schedule 3, items 29, 32 and 36, FHSA (Consequential Amendments) Bill 2008; subsection 9(1), paragraphs 9(1C)(cb) and 1207P(1)(d) of the Social Security Act 1991 ]

8.27 For the purposes of the Youth Allowance Rate Calculator at the end of section 1067G of the Social Security Act 1991 , 'trust' does not include an FHSA. [ Schedule 3, item 34, FHSA (Consequential Amendments) Bill 2008; paragraph 10B(2)(ca) of the Social Security Act 1991 ]

8.28 A return on an individual's investment in an FHSA has been excluded from the definition of 'income'. 'Return' in relation to an FHSA, means any increase in the value of the FHSA. [ Schedule 3, items 28 and 31, FHSA (Consequential Amendments) Bill 2008; paragraphs 8(8)(ba) and 9(1)(c) of the Social Security Act 1991 ]

Veterans' Entitlements Act 1986

8.29 The value of a person's FHSA is not taken into account when calculating the value of a person's assets. The definition of 'investment' has been amended to define an investment in an FHSA as having benefits in an FHSA, regardless of whether the benefits are attributable to amounts contributed by the account holder. [ Schedule 3, items 41, 44 and 45, FHSA (Consequential Amendments) Bill 2008; subsections 5J(1)(c) and 5J(6B) and paragraph 52(1)(faa) of the Veterans' Entitlements Act 1986 ]

8.30 An investment in an FHSA has also been excluded from the definition of financial investment, managed investments and designated private trust. [ Schedule 3, items 40, 43 and 46, FHSA (Consequential Amendments) Bill 2008; subsection 5J(1), paragraphs 5J(1C)(cb) and 52ZZB(1)(d) of the Veterans' Entitlements Act 1986 ]

8.31 A return on a person's investment in an FHSA has been excluded from the definition of 'income'. 'Return' in relation to an FHSA, means any increase in the value of the FHSA. [ Schedule 3, items 39 and 42, FHSA (Consequential Amendments) Bill 2008; paragraphs 5H(8)(ia) and 5J(1)(aa)) of the Veterans' Entitlements Act 1986 ]

Anti-Money Laundering and Counter-Terrorism Financing Act 2006

8.32 FHSA providers are required to comply with the requirements in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 , including identifying customers when opening an FHSA. This is to ensure consistency of regulation across similar financial products, such as deposit accounts, life insurance policies and superannuation accounts, which are already captured under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 . [ Schedule 3 to the FHSA (Consequential Amendments) Bill 2008, items 1 to 4 ]

8.33 The amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 ensure that the acceptance of contributions to the FHSA and the cashing out of an interest in an FHSA (either to purchase a home, to transfer the balance to another FHSA provider or to transfer the balance into superannuation) (to the FHSA holder) are captured as a 'designated service'. Providers of a 'designated service' are a reporting entity under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and must, amongst other things, carry out procedures to verify a customer's identity before providing a designated service to a customer. [ Schedule 3 to the FHSA (Consequential Amendments) Bill 2008; items 1 to 4, sections 5 and 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2008 ]

8.34 Upfront customer identification requirements for FHSAs are different to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 obligations that trustees of superannuation funds are currently required to comply with relation to superannuation products. This reflects the higher money laundering and terrorist financing risk associated with the shorter term of FHSAs and their use for real estate purchases.

Administration

Responsibility for administering the new law

8.35 An FHSA is a financial product, offered by certain prudentially regulated financial institutions, which provides incentives to save through the taxation system. As a result, like superannuation, the general administration of the FHSA Bill 2008 is divided between the Commissioner, APRA and ASIC. [ Section 3 ]

8.36 Depending on which institution administers the particular provision being applied, the Regulator of the Bill will vary. [ Section 18 ]

The Commissioner of Taxation

8.37 The Commissioner has the general administration of most of the regulatory activities for FHSAs including: the eligibility rules for opening, issuing and holding an FHSA; rules relating to contributions to an FHSA; administration and payment of the Government contribution; the taxation of earnings; payment rules; the FHSA misuse tax; and TFNs. The Commissioner has the general administration of:

•

Part 3, which relates to eligibility, contribution and payment rules;

•

Part 4, which relates to Government contributions;

•

Part 5, which relates to the administration of the FHSA system, except where it relates to the review of certain APRA decisions under Subdivision B of Division 4; and

•

Part 6, which relates to enforcement activities.

[ Subsection 3(1) ]

Australian Prudential Regulation Authority

8.38 APRA has administration of provisions about establishing and enforcing prudential standards and practices for FHSA providers. These provisions are designed to operate alongside APRA's current regulatory activity of potential FHSA providers (public offer superannuation fund trustees, ADIs, life insurance companies and friendly societies). APRA has general administration of:

•

Part 7, which relates to the prudential regulation of FHSA providers, except where ASIC has general administration; and

•

Subdivision B of Division 4 of Part 5, which relates to the review of certain APRA decisions.

[ Subsection 3(2) ]

Australian Securities and Investment Commission

8.39 ASIC has general administration of provisions which relate to ensuring that consumer protection arrangements apply for the benefit of FHSA holders and potential FHSA holders. These provisions are designed to operate parallel to ASIC's current licensing, conduct, advice and disclosure regulation under the Corporations Act.

8.40 To ensure consistency with the SIS Act the main Bill provides ASIC with the general administration of the same provisions it has general administration of in the SIS Act as they apply to FHSA providers. ASIC has general administration of:

•

section 101 (duty to establish arrangements for dealing with inquiries or complaints) and section 103 (duty to keep minutes and records); and

•

Part 19 (public offer entities: provisions relating to superannuation interests).

[ Subsection 3(3) ]

Powers and duties of the Regulators

8.41 In order to allow the Regulators to administer the provisions for which they are responsible, they are provided with powers and duties for the purposes of provisions they respectively administer [ subsection 3(4) ].

•

Where a function is performed under the FHSA Bill 2008 it also refers to a duty being performed. [ Section 18 ].

Reporting by providers

8.42 For FHSAs they provide, FHSA providers are required to report certain information to the Commissioner. This includes:

•

personal contributions made to FHSAs during the period;

•

payments made from FHSAs during the period;

•

the balances of FHSAs during the period; and

•

the opening and closing of FHSAs during the period.

[ Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008; subsection 391-5(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) ]

8.43 This does not apply in relation to FHSAs that have been transferred to another FHSA provider during the specified period. [ Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008; subsection 391-5(2) of Schedule 1 to the TAA 1953 ]

8.44 Unless the Commissioner determines otherwise, the specified period is a financial year. The Commissioner is able to specify different periods for different information. [ Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008; subsections 391-5(3) and (4) of Schedule 1 to the TAA 1953 ]

8.45 The statement must be in the form approved by the Commissioner, and must be given to the Commissioner on or before the date determined by the Commissioner. [ Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008; subsections 391-5(5) to (9) of Schedule 1 to the TAA 1953 ]

8.46 The approved form may require the statement to contain the TFN of the provider, the FHSA holder, and if the FHSA is a trust, that trust. This does not limit the information which the approved form may require the statement to provide. [ Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008; subsections 391-5(10) and (11) of Schedule 1 to the TAA 1953 ]

Information gathering and access powers

Information gathering

8.47 The FHSA Bill 2008 contains information gathering and access powers for the Commissioner in relation to his administration of the Government contribution. For FHSA matters contained in the income tax law (eg, the FHSA misuse tax in the ITAA 1997) the Commissioner can rely on his standard information gathering and access powers under the income tax law.

8.48 The information gathering and access powers in the FHSA Bill 2008 for the Commissioner are broadly the same as in the Superannuation (Government Co-Contribution for Low Income Earners) Act 2003 .

8.49 APRA and ASIC will be able to rely on their existing information gathering powers under the existing Acts.

From the FHSA holder

8.50 The Commissioner may require a person or their legal personal representative, through a written notice, to give the Commissioner information to enable the Commissioner to determine:

•

whether a Government contribution is payable;

•

the amount of any Government contribution;

•

where the Government contribution should be paid in respect of the FHSA holder;

•

whether an overpayment amount is recoverable under section 50 in respect of the person;

•

the amount overpaid; and

•

any other matters prescribed by the regulations.

[ Paragraphs 77(1)(a) to (d) ]

8.51 Notices can be given at any time, however, they must specify the period (not less than 21 days after the notice is given) in which compliance with the notice is required. [ Subsections 77(1) and (3) ]

8.52 Failure to comply with such a notice (in relation to overpayments) is an offence with a penalty of 30 penalty units. [ Subsection 77(2) ]

From the FHSA provider

8.53 The Commissioner has the same powers and obligations when seeking information from an FHSA provider relating to an FHSA holder as they do from an FHSA holder. [ Section 78 ]

8.54 Failure to comply with any such notice is an offence with a penalty of 30 penalty units. [ Subsection 78(2) ]

Self-incrimination

8.55 A person is not excused from providing a statement to the Commissioner (as required by sections 77 and 78) on the grounds that the statement might tend to incriminate the person, or make them liable to a penalty. [ Subsection 79(1) ]

8.56 However, if the person is an individual, neither the statement or anything obtained as a direct result of the statement, is admissible against the individual in any criminal proceedings, other than against:

•

section 77 or 78 of the FHSA Bill 2008; or

•

section 137.1 or 137.2 of the Criminal Code Act 1995 that relates to this Bill.

[ Subsection 79(2) ]

Access to premises

General

8.57 The Commissioner requires powers for authorised persons to be able to enter the premises of persons. These powers may be used to ensure that an FHSA provider (or other person) has reported the correct information and where it may be necessary to inspect documents which might otherwise not be available for inspection if access powers were not available.

8.58 The issues that the Commissioner may be seeking to resolve through the use of these access powers may be in relation to more than one person's Government contribution and as such there may be a significant revenue risk involved.

8.59 The Commissioner may only appoint ATO employees to be authorised persons for the purposes of the access to premises provisions in sections 81 to 85. [ Section 80 ]

8.60 An authorised person may, with the consent of the occupier, or in accordance with a warrant issued under section 87, enter the premises. [ Paragraphs 81(1)(a) and (b) ]

8.61 They must enter the premises only for the purposes of determining:

•

whether a Government contribution is payable;

•

the amount of any Government contribution;

•

whether an overpayment amount is recoverable under section 3-50 in respect of the person;

•

the amount overpaid; and

•

whether a person has contravened a provision of this Bill.

[ Paragraphs 81(1)(c) and (d) ]

8.62 If an authorised person enters any premises they may search the premises for, inspect, examine, take extracts from, and make copies of, any examinable documents. [ Subsection 81(2) ]

8.63 In all cases, authorised officers must only enter premises if they have shown their identity cards if requested and given the occupier a written statement of the occupiers' rights and obligations. If, after an authorised person has entered the premises, they fail to produce their identity card when requested by the occupier to do so, they are unable to exercise their powers under Division 2 of the main Bill. [ Subsections 82(1) and (2) ]

Obligations of authorised person - entry by consent

8.64 An authorised person is only able to enter premises with the consent of the occupier (under paragraph 81(1)(a)) if they have informed the occupier that the occupier is entitled to refuse consent and that the authorised person must leave if asked to do so. If the occupier does request the authorised person to leave, the authorised person must do so. [ Section 83 ]

Obligations of authorised person - entry under warrant

8.65 An authorised person is only able to enter premises under a warrant (under paragraph 81(1)(b)) if they have:

•

announced that they are authorised to enter the premises; and

•

given any person on the premises an opportunity to allow entry to the premises.

[ Subsection 84(1) ]

8.66 However, an authorised person is not required enter the premises where they believe on reasonable grounds that immediate entry to the premises is required to ensure the effective execution of the warrant is not frustrated. [ Subsection 84(2) ]

8.67 If the occupier, or any person who appears to represent the occupier, is present when the warrant is being executed, an authorised person must identify themselves and make a copy of the warrant available to the occupier. The warrant need not include the signature of the authorising magistrate. [ Subsections 84(3) to (5) ]

8.68 A person must not obstruct or hinder an authorised person in the exercise of the authorised person's power under section 81, and the authorised person exercises that power in accordance with a warrant issued under section 44. Doing so is an offence with a penalty of 30 penalty units. [ Section 85 ]

8.69 If an authorised person enters any premises under section 41 in accordance with a warrant issued under section 87, the occupier or person in charge must, if requested to do so by the authorised person, provide reasonable assistance to the authorised person in the exercise of his or her powers. Failure to do so is an offence with a penalty of 30 penalty units. [ Section 86 ]

Issue of warrants

8.70 Warrants are only able to be issued in relation to the premises of an FHSA provider. Magistrates are only able to issue warrants, on application by an authorised person, if they are reasonably satisfied based on information on oath or affirmation that there are reasonable grounds for believing there are examinable documents on particular premises of an FHSA provider. The magistrate must also be satisfied the warrant is reasonably required for the purposes of ascertaining:

•

whether a Government contribution is payable;

•

the amount of any Government contribution;

•

whether an overpayment amount is recoverable under section 3-120 in respect of the person;

•

the amount overpaid; and

•

whether a person has contravened a provision of this Bill.

[ Paragraphs 87(1)(a) and (b) ]

8.71 These warrants may authorise an authorised person to enter particular premises with such assistance as is necessary and reasonable, and during the hours that the warrant specifies. However, these warrants do not authorise for the use of force, unlike the corresponding power in the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 . [ Paragraphs 87(1)(c) and (d) ]

8.72 The warrant must specify the purpose of the warrant, the powers exercisable under subsection 81(2) and the day on which the warrant ceases to have effect. [ Subsection 87(2) ]

8.73 The function of issuing a warrant is conferred on a magistrate in their personal capacity, rather than as a court or member of a court. The magistrate does not need to accept the conferral of this function. [ Subsection 87(3) ]

8.74 The Commissioner may cause an identity card to be issued to an authorised person. This card must contain a recent photograph of the authorised person and be in a form approved by the Commissioner. A person who ceases to be an authorised person and does not immediately return the card to the Commissioner commits an offence with a penalty of one penalty unit. [ Section 88 ]

Secrecy

8.75 Secrecy provisions have been inserted into the FHSA Bill 2008 to protect the confidentiality of an individual's information in relation to their FHSA. These provisions are modelled on arrangements that currently apply to superannuation and impose strict obligations on tax officers who receive FHSA information.

8.76 In relation to an individual's FHSA it is an offence for particular people to communicate information to others unless it is for the purposes of, or in performing duties under the FHSA Bill 2008, regulations made under the main Bill or a taxation law. This protection applies even if communicating information to a Minister or in a court. [ Section 70 ]

Tax file numbers

8.77 Under section 19 an FHSA provider is not able to open or issue an FHSA unless the person has quoted their TFN. This is necessary as the quotation of TFNs is vital to the integrity of FHSAs to:

•

ensure that only one account is opened per person;

•

facilitate the payment of the Government contribution; and

•

allow the balance of an FHSA to be contributed to superannuation.

8.78 The use of TFN information is restricted by the Privacy Act 1988 and the Privacy Commissioner's Tax File Number Guidelines issued under section 17 of the Privacy Act 1988 .

8.79 In line with these requirements, provisions have been inserted into the FHSA Bill 2008 which are designed to restrict the use of a person's TFN information and ensure compliance with the Privacy Act 1988 and the Privacy Commissioner's Tax File Number Guidelines issued under section 17 of the Privacy Act 1988 . They have been modelled on the TFN arrangements that currently apply for superannuation. They apply to the Commissioner, FHSA providers and persons applying to open or be issued with an FHSA.

Obligation to quote a tax file number

8.80 An individual may quote their TFN if they inform another person of the number in the approved form. [ Paragraph 56(a) ]

8.81 To open or be issued with an FHSA an individual must quote their TFN in relation to the main Bill and the 'Superannuation Acts' as defined in section 18.

•

The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) require an individual to quote their TFN to allow them to make a post-tax contribution. An individual must quote their TFN in relation to the Superannuation Acts, in addition to the FHSA Bill 2008, to ensure that a superannuation provider is able to accept post-tax contributions from an FHSA.

8.82 To assist in the process of opening and issuing FHSAs, the approved form to be completed by an individual may request they quote their TFN [ subsection 68(3) ].

•

An individual is not required to quote their TFN, and if they choose not to, they have not committed an offence under section 137.1 of the Criminal Code Act 1995 [ sections 59 and 69 ].

•

However if they choose not to quote their TFN they will not be able to hold an FHSA.

Request of a TFN

8.83 If an FHSA provider inadvertently opens or issues an FHSA where a TFN has not been quoted the FHSA provider must request the TFN in the approved form within 28 days of becoming aware of this fact [ subsections 58(1) and (2) ].

•

The FHSA provider may request a person's TFN at any time [ section 57 ].

Example 8.1

On 15 July 2010 Kristen opened an FHSA with ABC Bank. On 18 November 2010, ABC Bank identified that Kristen had not supplied a TFN. ABC Bank must request Kristen to quote her TFN within 28 days.

Deemed quotation of a TFN

8.84 A person does not have to quote their TFN personally. They may be deemed to have quoted their TFN in connection with the operation or future operation of the FHSA Bill 2008 and the Superannuation Acts if:

•

the Commissioner gives notice of a person's TFN. This may occur where the Commissioner assesses a TFN quoted to either be cancelled, withdrawn or wrong and the Commissioner is satisfied that the person has a TFN [ section 66 ];

•

an FHSA provider transfers a holder's FHSA to a second FHSA provider and informs it of the person's TFN in the approved form;

•

an FHSA provider contributes an amount in a person's FHSA to a superannuation provider and informs it of the person's TFN in the approved form:

-

however, where an FHSA provider contributes an FHSA balance to a complying superannuation plan that is not in the name of the FHSA holder, the provider is not required to provide the FHSA holder's TFN to that superannuation provider; and

•

after the commencement of the main Bill the person quotes their TFN under a provision of: the TAA 1953, the Income Tax Assessment Act 1936 (ITAA 1936), the ITAA 1997 or the Superannuation Acts:

-

if the quotation is made before the commencement of this Bill, the FHSA provider must request that person to quote a TFN in relation to this Bill and the Superannuation Acts. This is to ensure that when a person quotes their TFN they are aware that they are quoting it for the purposes of administering FHSAs.

[ Sections 62 to 65 ]

Incorrect quotation of a tax file number

8.85 An FHSA provider may record a TFN which when reported to the Commissioner is assessed to be cancelled, withdrawn or wrong.

8.86 If the Commissioner is satisfied that the FHSA holder has a TFN, the Commissioner may provide the person's TFN to the FHSA provider. [ Section 66 ]

8.87 If the Commissioner is not satisfied that the FHSA holder has a TFN, the Commissioner may provide a notice to the FHSA provider and the FHSA holder stating that they are not satisfied that the FHSA holder has a TFN and that the FHSA provider will be:

•

unable pay any amounts to the FHSA under section 26;

•

unable to pay any amount from the FHSA under section 31; and

•

required to close the FHSA and contribute the balance to a complying superannuation plan under section 22.

[ Section 67 ]

Provider's obligations to retain and destroy an individual's tax file number

8.88 An FHSA provider is also required to record and retain the TFN of an FHSA holder (and an FHSA applicant who becomes an FHSA holder). It must destroy the TFN as soon as reasonably practicable after:

•

the FHSA holder ceases to hold an FHSA; or

•

the FHSA provider no longer requires the TFN:

-

an FHSA provider must record and retain a TFN that has been quoted or taken to have been quoted by an applicant and destroy it as soon as reasonably practicable after the application ceases; and

-

this obligation does not apply if a TFN has been quoted for another purpose and it is still required for that purpose.

[ Section 60 ]

Provider's obligations when using a tax file number to locate amounts

8.89 To protect the privacy of an individual's TFN information FHSA providers are only permitted to use a TFN to identify amounts it holds in an FHSA for a person, if it first uses other information to locate the amounts. It may then use the TFN where the other information is insufficient or to confirm the identification of that FHSA resulting from the use of that other information. [ Subsection 60(6) ]

Provider's obligations when transferring FHSA savings

8.90 If a person chooses to transfer their FHSA to another FHSA provider, the other FHSA provider requires the person's TFN to open or issue them an FHSA. In addition, if an FHSA provider is required to contribute the FHSA to superannuation, the complying superannuation plan will require the person's TFN to be able to accept it as a post-tax contribution.

8.91 To assist with the administration of these provisions, where an FHSA is transferred to another FHSA provider or contributed to superannuation the FHSA provider must quote the FHSA holder's TFN in the approved form [ section 61 ].

•

This obligation only applies to where an FHSA provider transfers or contributes the FHSA for the benefit of the FHSA holder (ie, if the FHSA is contributed for the benefit of another individual, for example, under a family law obligation, the FHSA provider is not required to quote a TFN).

Example 8.2

Jack and Jill are filing for divorce. Under the Family Law Act 1975 Jill is entitled to half of Jack's assets, including his FHSA balance. Jack's FHSA provider, the Australian Bank, receives a request from Jack to contribute half of his FHSA balance to Jill's superannuation plan. When the Australian Bank makes this contribution, it is not required to provide Jack's TFN to Jill's superannuation plan.

Offence

8.92 If the FHSA provider fails to comply with its TFN obligations there are alternative offences depending on the level of culpability of the FHSA provider. These offences and the applicable penalties are essentially the same as those in the SIS Act.

8.93 Where the relevant fault element in the Criminal Code Act 1995 is proven, the FHSA provider is liable and a penalty of up to 100 penalty units applies. This penalty reflects the serious nature of breaches of a person's privacy. [ Subsections 58(4) and 60(8), and 61(4) ]

8.94 Where an offence of strict liability (requiring no fault element) is proven the FHSA provider is liable for a penalty of up to 50 penalty units. [ Subsections 58(5), 60(9), and 61(5) ]

Provision of tax file numbers in forms etc .

8.95 To assist with the administration of FHSAs, certain forms to be submitted to the Regulator may require an FHSA provider's TFN. These are:

•

the approved form to apply for authorisation as an FHSA provider which must be submitted to APRA under section 89; and

•

a financial return form which must also be submitted to APRA under section 13 of the Financial Sector (Collection of Data) Act 2001 .

[ Section 68 ]

Facilitation of the administration

8.96 Section 202 of the ITAA 1936 creates a system of TFNs to assist with the administration of various pieces of legislation including the SIS Act.

8.97 This system of TFNs will also be used to facilitate the administration of individual's TFNs in Division 2 of Part 5 of the main Bill. It will also be used to facilitate the administration of FHSA providers in relation to the main Bill. [ FHSA (Consequential Amendments) Bill 2008, Schedule 1, item 6, subsection 202(ka) ]

Other administrative matters

External territories

8.98 The FHSA Bill 2008 applies to all external territories. It is intended that people living in Norfolk Island, Christmas Island and Cocos (Keeling) Islands be eligible to open an FHSA to acquire a first home in the territory in which they live. Where they do this, the associated legislation (eg, about taxation treatment) is intended to apply in the same way it does for residents of mainland Australia. [ Section 5 ]

Commissioner's annual report

8.99 As is usual for Acts administered by the Commissioner, the Commissioner is required to prepare an annual report. The report is about the working of those parts of the Bill for which the Commissioner has general administration. It is envisaged that the Commissioner will include the report in his annual report about the various taxation laws the Commissioner administers. [ Section 126 ]

8.100 APRA and ASIC will also include information about their administration of FHSAs in their annual reports under existing obligations in the APRA and ASIC Acts.

Approved form

8.101 For provisions of the Bill administered by the Commissioner, the standard approved form provisions (in section 388-50 of Schedule 1 to the TAA 1953) for taxation laws apply. Although these provisions empower the Commissioner to require the use of a particular form in the sense of a standard document he makes available (eg, an annual income tax return), it is expected that under most provisions requiring an approved form the Commissioner would not require this. Rather, he would stipulate the particular information that must be provided and leave the design of the document (if one is required) to the entity providing the required information.

8.102 The application of the approved form provisions also means that where an approved form is not given on time, the generic administrative penalties for failing to notify on time (in Division 286 of Schedule 1 to the TAA 1953) apply. [ Section 55 ]

Decisions about Government contributions to be in writing

8.103 A decision by the Commissioner about Government contributions must be recorded in writing, but this can include electronic recording. Computer programs may be used to make these decisions, which are taken to be decisions of the Commissioner. [ Part 4, Division 1, sections 53 and 54 ]

Miscellaneous matters

Application of the main Bill not to be excluded or modified

8.104 The operation of the main Bill can not be excluded or modified by the terms and conditions of the FHSA including any provisions that seek to substitute provisions of other law for all or any of the provisions of that Bill. [ Section 4 ]

Civil liability of an FHSA holder

8.105 An FHSA provider is not subject to any civil liability where it performs an action required under the FHSA legislation. This provision is included to avoid doubt. [ Section 127 ]

Bankruptcy

8.106 If an FHSA holder becomes bankrupt, the FHSA legislation does not prevent the FHSA holder paying to the trustee in bankruptcy an amount out of the FHSA to be property divisible among the FHSA holder's creditors. See Chapter 2 for a more detailed discussion of these issues. [ Section 128 ]

Constitutional savings provisions

8.107 The main Bill includes provisions (as a matter of caution) to prevent any contravention of the Constitution that could result from:

•

the acquisition of property on unjust terms; or

•

the main Bill applying to State insurance not extending beyond the State in question [ sections 129 and 130 ].

Regulations

8.108 The main Bill includes a standard power permitting the Governor-General to make regulations. [ Section 131 ]

Application and transitional

8.109 The amendments formally commence on the day after the date of Royal Assent to the Bills. [ Section 2 of the FHSA Bill 2008; section 2 of the FHSA (Consequential Amendments) Bill 2008; section 2 of the Income Tax (FHSA Misuse Tax) Bill 2008 ]

8.110 However, their practical effect is in relation to FHSAs, which can only be opened on or after 1 October 2008 (or a later dater specified by regulation). [ Section 8 of the FHSA Bill 2008 ]