House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Merging superannuation funds

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 and Tax Laws Amendment (2009 Measures No. 6) Act 2010 to reinstate the temporary loss relief for merging superannuation funds with some modifications.

Date of effect : This measure is available for mergers that occur on or after 1 October 2011 and before 2 July 2017.

Proposal announced : This measure was announced in the Minister for Financial Services and Superannuation's Media Releases No. 020 of 24 April 2012 and No. 046 of 3 August 2012.

Financial impact : This measure has the following revenue implications:

Human rights implications :This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.51 to 1.54.

Compliance cost impact : This measure is expected to have a low overall compliance cost impact, comprised of a low implementation impact and a low decrease in ongoing compliance costs.

Self-Managed Superannuation Fund Auditor Registration

Superannuation Auditor Registration Imposition Bill 2012

On 16 December 2010, the then Assistant Treasurer and Minister for Financial Services and Superannuation (Minister) announced the Stronger Super reforms.

Stronger Super represents the Government's response to the review into the governance, efficiency, structure and operation of Australia's superannuation system, the Super System Review (Review).

To provide input on the design and implementation of the Stronger Super reforms, the Government undertook extensive consultation with industry, employer and consumer groups. The Government announced its decisions on the key design aspects of the Stronger Super reforms in the Minister's Media Release No. 131 of 21 September 2011.

Schedule 2 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012 implement the Government's reforms relating to auditors of self-managed superannuation funds (SMSFs) as part of Stronger Super. Schedule 2 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012 introduce a registration regime for SMSF auditors. Auditors will be required to meet initial and ongoing requirements relating to their qualifications, competency and independence.

Schedule 2 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012provide for the Australian Securities and Investments Commission (ASIC), as the registration body for SMSF auditors, to be responsible for setting competency standards and taking enforcement action against auditors who have not met their on-going obligations under Schedule 1 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012 also provide powers to the Australian Taxation Office to monitor auditor's compliance with relevant standards and refer any non-compliant auditors to ASIC for enforcement action consideration.

SMSF auditor registration is intended to ensure that auditors of SMSFs have a minimum standard of competency and knowledge of relevant laws and are able to detect and report contraventions by SMSF trustees.

Date of effect : 31 January 2013.

Proposal announced : The Minister announced the Stronger Super reforms in the Minister's Media Release No. 024 of 16 December 2010. The Minister announced the Government's decisions on key design aspects of the Stronger Super reforms in the Minister's Media Release No. 131 of 21 September 2011. In the 2012-13 Budget, further details on auditor registration were announced. The Minister announced further details including transitional arrangements that will be in place for existing SMSF auditors in the Minister's Media Release No. 036 of 23 June 2012.

Financial impact : The 2011-12 and 2012-13 Budgets announced a total of $29.7 million in funding over five years from 2011-12 to 2015-16 for the implementation of self-managed superannuation fund auditor registration. It was also announced that ASIC would collect $0.9 million from 2011-12 to 2015-16 in fees associated with auditor registration.

Human rights implications : Schedule 2 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012 do not raise any human rights issue. See Statement of Compatibility with Human Rights -Chapter 2, paragraphs 2.174 to 2.177 and Chapter 3 paragraphs 3.13 to 2.16.

Compliance cost impact : Schedule 2 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012and the Superannuation Auditor Registration Imposition Bill 2012 will impose compliance costs on auditors who apply and become registered with ASIC. Fees for applying for registration, undertaking a competency exam and submitting an annual statement will be imposed on these auditors. Approved SMSF auditors will also be liable for additional fees if they do not submit their annual statements on time or fail to notify ASIC of certain matters on time.

Summary of regulation impact statement

Impact : A regulation impact statement for SMSF auditor registration has been assessed as adequate by the Office of Best Practice Regulation.

Main points :

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SMSF auditor registration seeks to ensure that SMSF auditors have a minimum level of competency to perform SMSF audits, and can be relied upon to detect and report contraventions of the superannuation legislation; and

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Implementation of this measure involves a trade-off between creating a level-playing field for SMSF auditor and minimising the compliance burden on highly competent auditors.

Expanded superannuation reporting

Schedule 3 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 amends Subdivision 390-A of Schedule 1 to the Taxation Administration Act 1953to expand the information required to be reported to the Commissioner of Taxation. Under the revised reporting obligations, superannuation providers will be required to provide statements for all members who held an interest in the superannuation plan at any time during a reporting period, not just those for whom contributions are received.

Date of effect : This measure will apply with effect from 1 July 2012, that is, the first financial year the amendments are to apply is the 2012-13 financial year for which the first member statements are due by October 2013.

Proposal announced : This measure was announced by the Minister for Financial Services and Superannuation in Media Release No. 131 of 21 September 2011 as part of the Government's Stronger Super package of reforms.

Financial impact : Unquantifiable but likely to be small.

Human Rights implications : Schedule 3does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.22 to 5.25.

Compliance cost impact : Low.

Summary of regulation impact statement

Regulation impact on business

Impact : Schedule 3 expands the current reporting requirements for superannuation providers to require statements to be provided to the Commissioner for all superannuation interests not just those for which contributions are received.

A regulation impact statement has been finalised for the implementation of the Stronger Super reforms and can be found at http://ris.finance.gov.au/2011/10/17/stronger-super-reforms-%e2%80%93-regulation-impact-statement-and-prime-minister%e2%80%99s-exemption-%e2%80%93-treasury/. The relevant chapter of the regulation impact statement is Chapter 3 of the SuperStream Section.

Improving efficiency and data quality in the superannuation system

Schedule 4 of the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 amends the Superannuation Industry (Supervision) Act 1993 and the Retirement Savings Accounts Act 1997 to improve the information quality in the superannuation system and ensure fully effective e-commerce in superannuation.

Date of effect : The day after this Bill receives Royal Assent.

Proposal announced : This measure was announced in the then Assistant Treasurer and Minister for Financial Services and Superannuation's Media Release No. 131 of 21 September 2011.

Financial impact : Nil

Human rights implications : This Schedule raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 6, paragraphs 6.101 to 6.119.

Compliance cost impact : Nil

Summary of regulation impact statement

Regulation impact on business

Impact : A Regulation Impact Statement (RIS) has been finalised for the implementation of the Stronger Super reforms and can be found on the Office of Best Practice Regulation's website. The relevant section of the Stronger Super RIS covered in this Bill is the chapter on SuperStream.

Main points :

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Superannuation data and payment regulations and standards were legislated in Superannuation Legislation Amendment (Stronger Super) Bill 2012 to mandate e-commerce in the superannuation industry.

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These amendments facilitate the implementation and use of services to be provided by the Commissioner of Taxation. These services will result in a more efficient superannuation industry.

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Rollovers and contributions will be processed in a more timely manner, and employee and member information will be more accurate resulting in less rework, reduced duplicate, lost and unclaimed superannuation accounts.

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The services to be provided include:

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a data base containing accurate information about superannuation entities to ensure fully effective e-commerce; and

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a validation service that employers and trustees will be able to use to validate employee and member information provided to them.