House of Representatives

Explanatory Memorandum

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

Chapter 5 Expanded superannuation reporting

Outline of chapter

5.1 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 1953 (TAA 1953) to expand the information required to be reported to the Commissioner of Taxation (Commissioner). 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.

Context of amendments

5.2 The purpose of these amendments is to expand the existing reporting obligation for superannuation providers to support a range of superannuation reform measures, including enhanced online reporting services, consolidation of superannuation (within a fund and between funds), and the increased concessional contributions cap for members over 50 whose interests or accounts are valued at less than $500,000 (from 1 July 2014).

5.3 The amendments expand the existing reporting obligation for superannuation providers to all superannuation interests held in respect of an individual, regardless of whether a contribution has been received on their behalf by the superannuation provider within the reporting period. Under the revised reporting obligations superannuation providers may also be required to report information in relation to the value of members' accounts or interests via the approved form.

5.4 Currently, under section 390-5 of the TAA 1953, a superannuation provider must give the Commissioner a statement in relation to contributions (if any) made to the superannuation plan for an individual during the financial year. In order to support a number of the Government's Stronger Super announcements in relation to account consolidation and enhanced online services for individuals and funds, the current superannuation reporting requirement needs to be expanded to include inactive interests, that is, interests that have not received a contribution or rollover within the financial year. This information is also required to support the higher concessional contributions cap measure for individuals aged 50 and over.

Summary of new law

5.5 Schedule 3 amends the operation of Schedule 1 to the TAA 1953 to require superannuation providers to give the Commissioner a statement in relation to all individuals who held an interest in the superannuation plan at any time during the reporting period. Currently, for superannuation plans that are not self-managed superannuation funds (SMSFs), member statements are required only in respect of members who received a contribution during the reporting period.

5.6 These amendments will allow the Australian Taxation Office (ATO) to obtain more comprehensive superannuation information that it can display to individuals and facilitate the consolidation of inactive accounts with a low balance.

Comparison of key features of new law and current law

Detailed explanation of new law

5.7 Currently, subsection 390-5(1) of Schedule 1 to the TAA 1953 imposes an obligation on superannuation providers, other than SMSFs, to lodge a statement in respect of members who have received contributions during the reporting period andeitherthe superannuation interest is held at the end of the period, or the member received a benefit (other than a rollover) during the relevant reporting period. This means, for example, that no statement is presently required in respect of members who have not received any contributions throughout the year or who have received contributions but do not still hold the interest at the end of the reporting period.

5.8 Subsection 390-5(1) of Schedule 1 to the TAA1953 requires trustees of SMSFs to give the Commissioner a statement irrespective of whether a contribution has been received.

5.9 To administer the measures being introduced as part of the Stronger Super reforms, the Commissioner will need information to be reported where an individual was a member of a superannuation plan at any time during the year to ensure that the ATO:

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is able to display to individuals through the enhanced online services, information that is accurate and useful, including being able to remove information with confidence when the Commissioner becomes aware that the superannuation provider ceases to hold an interest or account for that member;

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can properly identify the superannuation interests or accounts that are eligible to be rolled over or transferred under the consolidation measure (between funds) and therefore reduce unnecessary administrative costs for the members, the ATO and funds; and

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can assess whether the total value of an individual's superannuation interest or account is below the $500,000 balance threshold for the higher concessional contributions cap.

5.10 Accordingly, subsection 390-5(1) of Schedule 1 to the TAA 1953 is amended to require a statement to be made where a superannuation interest is held by a member of a fund at any timeduring the period, irrespective of whether contributions were made during the reporting period, and irrespective of whether an interest is still held by the member at the end of the period. [Schedule3 , item 3, subsection 390-5(1)]

5.11 The new approved form for the expanded reporting obligation may require new information to be reported. This may include the nature of a member's interest or accounts in a fund (for example, whether it is in accumulation phase or pension phase), features attaching to the interest or account, such as insurance coverage, balances or values, whether an amount can be rolled into the fund, and the ability of the fund to accept contributions from the Government. The precise details of what is to be reported will be captured in the approved form subject to consultation with industry. To provide certainty, however, paragraph 390-5(9)(b) is expanded to specify that the information required to be reported may include the value of any of a member's superannuation interests or accounts. [Schedule 3, item 5, paragraph 390-5(9)(b)]

5.12 It is anticipated that superannuation providers will be able to continue existing reporting practices in some situations but may be required to alter their current practice for others, and upgrade their systems to comply with this measure. The provisions allow sufficient flexibility to cater for different practices that already occur within industry.

Consequential Amendments

5.13 The headings of Subdivision 390-A and section 390-5 of Schedule 1 to the TAA 1953 are amended to better reflect that the information that is to be reported now relates to the member and their accounts or interests in the fund, rather than focusing on contributions as the driver of the reporting obligation. [Schedule 3, items 1 and 2, Subdivision 390-A and subsection 390-5]

5.14 Subsection 390-5(2) of Schedule 1 to the TAA 1953 ensures that certain amounts that are not actual contributions made to a superannuation provider are reported by deeming them to be contributions for the purposes of the section. These amounts are needed to ensure that the ATO can properly administer the excess contributions tax provisions of the Income Tax Assessment Act 1997 (ITAA 1997).

5.15 The existing subsection 390-5(2) of Schedule 1 to the TAA 1953 refers to amounts that subsection 292-25(3) of the ITAA 1997 treats as concessional contributions for the purposes of the excess contributions tax. To improve readability and clarity of the legislation, subsection 390 -5(2) is repealed and reinserted as subsection 390-5(9A). [Schedule 3, items 3 and 6, subsection 390-5(9)]

5.16 Subsection 390-5(3) clarifies that roll-overs are not to be treated as superannuation benefits for the purposes of the members contributions statement. Under the expanded reporting obligations, this section is no longer required and is therefore repealed. [Schedule 3, item 3]

5.17 To correct a technical error, subsection 390-5(9A) is added to subsection 390-5(9) to add a reference to paragraphs 292-90(4)(a) and (c) of the ITAA 1997 which perform a similar function to 292-25(3) of the ITAA 1997 in relation to non-concessional contributions. [Schedule 3, item 6, subsection 390-5(9)] .

5.18 A consequential amendment is made to the wording of paragraph 390-5(9)(a) to provide clarification in relation to contributions that may be required for inclusion in the member information statement. [Schedule 3, item 4, paragraph 390-5(9)(a)]

5.19 Consequential amendments are made to paragraph 390-5(11)(c) to remove the references to contributions as the reporting obligation is no longer linked to contributions. [Schedule 3, items 7 and 8 paragraph 390-5(11)(c)]

Application

5.20 These amendments apply to reporting periods starting on or after 1 July 2012, that is, the first financial year the amendments are to apply is 2012-13 (for which member information statements are due inOctober 2013). [Schedule 3, item 9]

5.21 The requirement to report additional information to the ATO in relation to inactive accounts with effect from October 2013 was announced on 21 September 2011, following consultation with industry. Accordingly, industry has been aware for some time that the expanded reporting requirements were to apply to reporting periods commencing from 1 July 2012. Moreover, the first report under the revised arrangements is not due until the 2013-14 financial year (that is, on or after 1 July 2013).

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Expanded superannuation reporting

5.22 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

5.23 The purpose of this Schedule is to expand the information required to be reported by superannuation providers to the Commissioner. 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. These amendments will allow the ATO to display more comprehensive superannuation information to individuals and facilitate the consolidation of inactive accounts with a low balance.

Human rights implications

5.24 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

5.25 This Schedule is compatible with human rights as it does not raise any human rights issues.

Minister for Superannuation, the Hon Bill Shorten