House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan Mp

Chapter 2

Payment of unclaimed superannuation from the Commissioner of Taxation

Outline of chapter

2.1 This chapter outlines the rules in Part 3A of the Superannuation (Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) (inserted by Part 1 of Schedule 1 to the Temporary Residents' Superannuation Legislation Amendment Bill 2008 (main Bill)) which allow departed temporary visa holders to claim back their unclaimed superannuation from the Commissioner of Taxation (Commissioner).

2.2 All references to legislative provisions in this chapter are references to the main Bill unless otherwise stated.

Context of amendments

2.3 Where the Commissioner has received an amount in respect of a person from a superannuation provider under the S(UMLM) Act, the amount can be later claimed back in respect of the person (subject to any withholding tax that may apply).

2.4 A person who used to be the holder of a temporary visa that expired or was cancelled (ie, their visa ceased to be in effect) and has left Australia, is able to withdraw their superannuation from a fund in connection with their departure by requesting a departing Australia superannuation payment (DASP). The superannuation provider for the fund is required to pay the benefits to the person within 28 days of the request (less the relevant amount of DASP withholding tax). The DASP withholding tax recovers some of the superannuation tax concessions provided to the departed temporary visa holder. As explained in Chapter 1, Part 3A of the S(UMLM) Act requires the superannuation provider to pay the departed temporary visa holder's superannuation to the Commissioner in certain circumstances.

2.5 Part 3A of the S(UMLM) Act also requires the Commissioner to pay back the unclaimed superannuation it has received from a provider in respect of a person (subject to any withholding tax that may apply).

Summary of new law

Payments from the Commissioner

2.6 Generally, if the Commissioner has received an amount under the S(UMLM) Act for a person and the person was a departed temporary visa holder, then those amounts can be claimed back (subject to any withholding tax that may apply).

2.7 The Commissioner must pay an amount in respect of a person under Part 3A of the S(UMLM) Act if the Commissioner is satisfied that all of the following conditions have been met:

•

the Commissioner has received an amount from a superannuation provider in respect of the person under the S(UMLM) Act;

•

the person was identified in a notice under section 20C of the S(UMLM) Act, or was previously a holder of a temporary visa (apart from a visa prescribed in the Superannuation (Unclaimed Money and Lost Members) Regulations 1999 (Regulations)) that ceased to be in effect at least six months earlier and they had left Australia at least six months earlier after starting to be the holder of the visa; and

•

the amounts received under the S(UMLM) Act in respect of the person exceed the total of any amount that has already been paid by the Commissioner in respect of the person under the S(UMLM) Act.

2.8 Where the Commissioner is satisfied that an amount is payable in respect of a person, the Commissioner can pay the amount to the person, to the person's legal personal representative (if the person has died), or to a single fund (if the person so directs and if the Commissioner is satisfied they are an Australian citizen, New Zealand citizen or the holder of a permanent visa or a visa prescribed by the Regulations).

2.9 The excess paid by the Commissioner is generally a DASP and the DASP tax is withheld by the Commissioner at the time of payment.

Recovering and returning payments made by the Commissioner

2.10 The Commissioner can recover the amount that was paid under Part 3A of the S(UMLM) Act in respect of a person if it exceeds the amount that should have been paid in respect to that person under that Part.

2.11 The whole or part of the overpayment can be recovered from the person ('debtor') to whom the payment was made. That 'debtor' may include the departed temporary visa holder, their legal personal representative, a beneficiary, the superannuation provider of the fund the overpayment was made to or another fund which received a transfer of the amount. The Commissioner must give a notice of recovery to the debtor.

2.12 A provider that receives a payment from the Commissioner under Part 3A of the S(UMLM) Act in respect of a person and has not credited the amount into an account for that person within 28 days of the Commissioner's payment, is liable to return the payment to the Commissioner.

Detailed explanation of new law

Payment by the Commissioner

2.13 The Commissioner is required to pay an amount in respect of a person if satisfied, on application in the approved form or on the initiative of the Commissioner (refer to paragraph 2.14), that both of the following preconditions have been met:

•

the person has [ Schedule 1, item 16, paragraph 20H(1 )( a )]:

-

been identified in a notice under section 20C of the S(UMLM) Act; or

-

held a temporary visa (except a visa prescribed in the Regulations) and at least a continuous period of six months has passed since both the visa ceased to be in effect and the person left Australia (after starting to hold the visa); and

•

the sum of the amounts received by the Commissioner in respect of the person under the S(UMLM) Act, exceeds the sum of the amounts paid by the Commissioner in respect of the person under the S(UMLM) Act [ Schedule 1, item 16, paragraph 20H(1 )( b )].

Preconditions for making a payment

Upon application or on the Commissioner's own initiative

2.14 An application for payment in respect of a person can be made by the person or on behalf of the person (for instance, by the person's legal personal representative where the person has died). While the application should be made in the approved form, it can also be made in a form that contains the necessary information to enable the Commissioner to determine if there is an amount payable in respect of the person and where the payment is to be made. [ Schedule 1, item 16, subsection 20H(1 )]

2.15 Alternatively, if the Commissioner is satisfied there is enough information to determine an amount is payable in respect of a person, and where that payment is to be made, the payment can be made on the Commissioner's own initiative without an application in the approved form being made. [ Schedule 1, item 16, subsection 20H(1 )]

The person has been identified in a section 20C notice or was a departed temporary visa holder

2.16 For a payment to be made by the Commissioner under Part 3A of the S(UMLM) Act in respect of a person, the person must [ Schedule 1, item 16, paragraph 20H(1 )( a )]:

•

be identified in a notice under section 20C of the S(UMLM) Act; or

•

have held a temporary visa (except a visa prescribed in the Regulations) and at least a continuous period of six months has passed since both the visa ceased to be in effect and the person left Australia after starting to hold the visa.

The inclusion of the second dot point ensures that DASP tax may be applied to any unclaimed superannuation of a person who is a departed temporary visa holder even if they have not been identified in a notice under section 20C of the S(UMLM) Act. [ Schedule 1, item 16, subparagraph 20H(1 )( a )( ii )]

2.17 The Regulations could prescribe certain classes of temporary visa holders who would then be able to claim back their unclaimed superannuation under section 17 of the S(UMLM) Act rather than under Part 3A as a DASP [ Schedule 1, item 16, subparagraph 20H(1 )( a )( ii )]. A person who has superannuation paid to the Commissioner under section 17 of the S(UMLM) Act and who is not able to claim it back under Part 3A (because they do not fall under one of the dot points in paragraph 2.16), can claim back their money under section 17 of the S(UMLM) Act.

There is an excess amount for the person

2.18 The Commissioner is only required to make a payment in respect of a person if there is an excess amount worked out under section 20H of the S(UMLM) Act. There is an excess amount if the total amount paid to the Commissioner for the person exceeds the total amount paid by the Commissioner in respect of the person. [ Schedule 1, item 16, paragraph 20H(1 )( b )]

2.19 The excess amount is worked out by first calculating the total amount received by the Commissioner under the S(UMLM) Act in respect of the person [ Schedule 1, item 16, paragraph 20H(1 )( b )]. This total amount could have been paid to the Commissioner under:

•

section 17 of the S(UMLM) Act, before, on or after the commencement of Part 3A of the S(UMLM) Act;

•

Part 3A of the S(UMLM) Act; or

•

both section 17 and Part 3A of the S(UMLM) Act.

2.20 The total amount paid to the Commissioner under the S(UMLM) Act in respect of the person, must then be reduced by the total amount paid by the Commissioner in respect of the person under the S(UMLM) Act [ Schedule 1, item 16, paragraph 20H(1 )( b )]. These amounts could have been paid by the Commissioner in respect of the person under:

•

section 17 of the S(UMLM) Act, before, on or after the commencement of Part 3A of the S(UMLM) Act;

•

Part 3A of the S(UMLM) Act (as a payment and/or as a refund for overpayment); or

•

both section 17 and Part 3A of the S(UMLM) Act.

The excess amount (if any) is payable by the Commissioner in respect of the person.

2.21 The Commissioner must take account of payments made by the Commissioner under the S(UMLM) Act in respect of the person (the departed temporary visa holder), including a payment made to a claimant (such as the person's legal personal representative or a beneficiary), when determining whether there is an excess amount payable in respect of the person.

Subject to any withholding tax

2.22 A payment from the Commissioner in respect of a person under section 20H of the S(UMLM) Act is generally a DASP (refer to paragraph 3.34). The DASP tax is withheld by the Commissioner from the excess amount at the time of payment [ Schedule 1, item 16, subsection 20H(6 )]. If applicable, the excess untaxed roll-over amount tax is withheld by the Commissioner from the excess amount at the time of payment to a fund (refer to paragraph 3.48) [ Schedule 1, item 16, subsection 20H(6 )]. The amount withheld from the payment is taken to have been paid by the Commissioner [ Schedule 1, item 16, subsection 20H(5 )].

Interaction with section 17 of the Superannuation ( Unclaimed Money and Lost Members ) Act 1999

2.23 An amount of unclaimed money which the Commissioner has paid under Part 3A of the S(UMLM) Act, or has taken into account in determining whether an amount is payable under Part 3A in respect of a person, cannot be paid under section 17 of the S(UMLM) Act in respect of that person. [ Schedule 1, item 16, subsection 17(2A )]

2.24 That is, where the Commissioner is required to make a payment under Part 3A in respect of a person, then the Commissioner must make that payment under Part 3A and not under section 17. The requirement for the Commissioner to make a payment under Part 3A overrides the requirement for the Commissioner to make a payment under section 17 in respect to that person.

Example 2.1

Catherine has not been identified in a notice under section 20C of the S(UMLM) Act from the Commissioner but her superannuation has been paid to the Commissioner by her fund as unclaimed money under subsection 12(1) of the S(UMLM) Act. Catherine had previously entered into Australia on a temporary visa and departed Australia after her visa had expired for more than six months. Catherine has applied to claim back her unclaimed superannuation from the Commissioner (assume that no previous application has been made on her behalf). The Commissioner is required to pay the unclaimed superannuation for Catherine under Part 3A of the S(UMLM) Act. The payment is a DASP and the Commissioner is required to withhold the DASP tax from the payment.

Destination of the payment

2.25 Where an excess amount is payable by the Commissioner in respect of a person, the Commissioner must pay the excess (as a single lump sum payment) to one of the following:

•

the person;

•

the person's legal personal representative if the person has died; or

•

to a single fund that is a complying superannuation plan, if the person so directs and the person is an Australian or New Zealand citizen or the holder of a permanent visa or visa prescribed in the Regulations.

[ Schedule 1, item 16, subsection 20H(2 )]

2.26 However, if the person has died and the Commissioner is satisfied that a superannuation provider would have been required to pay the person's superannuation to their death beneficiaries (had the amount not been paid by the provider to the Commissioner under the S(UMLM) Act), then the Commissioner must pay the amount to the death beneficiaries if the Commissioner has the necessary information to make the payment. [ Schedule 1, item 16, subsection 20H(3 )]

2.27 The amount payable by the Commissioner to each death beneficiary is equal to the amount the Commissioner is satisfied that a provider would have been required to pay each death beneficiary if the benefits had remained in the fund. If this amount is more than the excess amount payable in respect of the deceased person (as worked out under section 20H of the S(UMLM) Act - refer to paragraph 2.18), then the amount payable by the Commissioner to each death beneficiary is to be worked out according to the following formulae [ Schedule 1, item 16, subsection 20H(4 )]:

Excess amount × [Amount payable from provider to the death beneficiary / Total amount payable from provider to all death beneficiaries]


Example 2.2

Unclaimed money has been paid by a provider to the Commissioner in respect of Mika under subsection 12(1) of the S(UMLM) Act. Assume Mika has died before the Commissioner is required to make a payment in respect of him under Part 3A of the S(UMLM) Act. The Commissioner must pay the amount to Mika's nominated death beneficiaries (if the Commissioner has this information) or to Mika's legal personal representative (if no beneficiary has been nominated or the Commissioner does not have information about the nominated beneficiaries). The amount payable to a nominated death beneficiary is worked out according to the formula in paragraph 2.27, whilst the amount payable to the legal personal representative is the excess amount.

2.28 A person who is dissatisfied with a decision of the Commissioner relating to a payment made under section 20H of the S(UMLM) Act, including the amount paid by the Commissioner and/or the destination of the payment, can object to the decision under Part IVC of the Taxation Administration Act 1953 (TAA 1953) [ Schedule 1, item 16, section 20P ]. A 'person' includes the person to whom the amount belongs, the person's legal personal representative or a beneficiary.

2.29 Money is appropriated under section 16 of the TAA 1953 for the Commissioner to make payments under Part 3A of the S(UMLM) Act.

Recovery of overpayments by the Commissioner

2.30 The Commissioner is able to recover a payment made in respect of a person under Part 3A of the S(UMLM) Act which exceeds the amount that should have been paid in respect of the person under that Part [ Schedule 1, item 16, subsection 20L(1 )]. The Commissioner is also able to recover the payment if no amount should have been paid in respect of the person under Part 3A.

Example 2.3

Assume the Commissioner made a payment in respect of Jay under Part 3A of the S(UMLM) Act, of $20,000 (after the DASP tax is withheld). However, the actual amount payable in respect of Jay is in fact $15,000 (after the DASP tax is withheld). The Commissioner can recover the excess amount of $5,000.

Assume the Commissioner made a payment in respect of Catherine under Part 3A of the S(UMLM) Act, of $20,000 (after the DASP tax is withheld). However, no amount was in fact payable in respect of Catherine under Part 3A. The Commissioner can recover the entire amount of $20,000.

2.31 The Commissioner can recover the overpayment from any 'debtor'. A debtor is defined as:

•

a person (this includes the person the payment is made in respect of, their legal personal representative or their beneficiary);

•

the superannuation provider of the fund the payment was directed to by the person; and/or

•

the superannuation provider which the whole or part of the payment was transferred to by another provider.

[ Schedule 1, item 16, subsection 20L(3 )]

2.32 Before recovering the overpayment the Commissioner must give the debtor a written notice about the proposed recovery and specify the amount to be recovered [ Schedule 1, item 16, paragraph 20L(4 )( a )]. The Commissioner must allow at least 28 days after the notice is given before taking action to recover the overpayment [ Schedule 1, item 16, paragraph 20L(4 )( b )].

2.33 The notice is not a legislative instrument within the definition of section 5 of the Legislative Instruments Act 2003 because it does not have a legislative character which determines or alters the content of the law; it is merely declaratory of the law and causes the law to be applied. [ Schedule 1, item 16, subsection 20L(8 )]

2.34 The Commissioner is able to revoke a notice about a proposed recovery. [ Schedule 1, item 16, subsection 20L(6 )]

2.35 The Commissioner can only recover the whole or part of an overpayment from a provider if the provider still holds an amount attributable to the overpayment at the time the notice was given to them. [ Schedule 1, item 16, subsection 20L(5 )]

2.36 An amount that is sought to be recovered by the Commissioner from the debtor is a debt due to the Commonwealth [ Schedule 1, item 16, subsection 20L(2 )]. The Commissioner may commence debt recovery action against a debtor or debtors.

2.37 While the total amount which the Commissioner can seek to recover from different debtors can be more than the actual amount of the overpayment, the total amount that is actually recovered by the Commissioner cannot be more than the actual amount of the overpayment [ Schedule 1, item 16, subsection 20L(7 )]. Further, the amount which is actually recovered cannot be more than the amount specified in the notice of recovery [ Schedule 1, item 16, paragraph 20L(4 )( c )].

Return of payments by superannuation providers

2.38 If the Commissioner makes a payment in respect of a person on the direction of the person to a fund, and the superannuation provider of that fund has not credited the payment to an account within 28 days after the payment was made, then the provider must return that payment to the Commissioner. [ Schedule 1, item 16, subsections 20M(1 ) and ( 2 )]

2.39 The provider is liable to repay the payment to the Commonwealth by the end of 28 days after the day the Commissioner had made the payment to the provider. [ Schedule 1, item 16 . subsection 20M(2 )]

2.40 When repaying the payment, the provider must provide certain information relating to the payment, in the approved form, to the Commissioner [ Schedule 1, item 16, subsection 20M(3 )]. For instance, the information can relate to the tax components of the payment. The provider commits an offence and could be subject to administrative penalties under the TAA 1953 if it fails to do so.

2.41 A superannuation provider that does not repay the whole amount of the payment to the Commissioner by the end of the 28th day after the Commissioner has made the payment to the provider, is liable to pay a general interest charge on the unpaid amount. [ Schedule 1, item 16, subsection 20M(4 )]

Application and transitional provisions

2.42 Payments from the Commissioner, the recovery of overpayments by the Commissioner and the return of payments to the Commissioner under Part 3A of the S(UMLM) Act, all apply from the commencement of Schedule 1 to the main Bill.