Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

Chapter 2 - Infringement notices

Outline of chapter

2.1 Schedule 1 to this Bill amends the SIS Act to provide APRA with the power to issue infringement notices for certain breaches of the Act. All legislative references in this chapter are to the SIS Act unless otherwise stated.

Context of amendments

2.2 APRA currently has the power to issue infringement notices under the Financial Sector (Collection of Data) Act 2001 (FSCOD Act). The power to issue infringement notices in this context has resulted in substantial improvement in the timeliness of lodgement of returns.

2.3 The Review recommended (recommendation 10.4) that APRA be given an administrative power to impose infringement notices as an alternative to criminal prosecution for selected SIS Act provisions.

2.4 Infringement notices provide regulators with a simple and flexible tool for dealing with non-compliance as an alternative to court action, which can be costly and time consuming for all parties.

Summary of new law

2.5 APRA will be able to issue infringement notices for minor and straight-forward breaches of the Act.

Comparison of key features of new law and current law

Detailed explanation of new law

2.6 This Bill inserts a new Part 22 into the Act to provide APRA with the power to issue infringement notices for certain breaches of the Act. [Schedule 1, item 112, Part 22]

2.7 A person who receives an infringement notice can choose to pay the amount as an alternative to having court proceedings brought against them for contravention of the provision. If the person chooses not to pay the amount, proceedings can be brought against them in relation to the contravention.

2.8 Examples of provisions in the Act to which infringement notices will apply include: not putting contributions into a MySuper product (in cases where the member has not given the trustee a direction in writing that the contribution is to be invested under one or more specified investment options); not notifying as soon as practicable each beneficiary about an acting trustee's appointment; not having rules in place for the appointment of member or independent representatives where required to do so; and not meeting APRA's deadline for receipt of a report relating to an investigation. [Schedule 1, item 112, subsection 223A(1)]

2.9 Provisions in the Act jointly administered by APRA and the Australian Tax Office (ATO) will also be enforceable under this Part, except where the offence relates to an SMSF. These include: certain regulated superannuation funds accepting contributions by an employer-sponsor contrary to the Regulator's written notice to the fund's trustee; and an employer not paying a trustee the amount of the deduction from salary or wages before the end of the 28-day period beginning immediately after the end of the month in which the deduction was made. [Schedule 1, item 112, subsection 223A(2)]

2.10 Further offences may be included by way of regulations, which are disallowable instruments. [Schedule 1, item 112, subsection 223A(3)]

2.11 The Chair of APRA will determine a class of APRA staff members as 'infringement officers'. Infringement officers will have the power to issue infringement notices. The Chair must be satisfied that persons of that class have suitable training or experience to properly exercise the powers of an infringement officer. [Schedule 1, item 112, sections 223B and 223C]

2.12 Certain other powers (in particular, the power in subsection 224C(2) to withdraw an infringement notice) are conferred on 'the relevant chief executive'. This is deemed to be the Chair of APRA. The Chair of APRA may delegate powers and functions to an APRA member or an executive general manager or equivalent. [Schedule 1, item 112, section 223D]

2.13 An infringement notice may be given where an infringement officer has reasonable grounds to believe that a person has contravened an enforceable provision. [Schedule 1, item 112, section 224(1)]

2.14 APRA has a 12-month time limit within which infringement notices must be given. [Schedule 1, item 112, subsection 224(2)]

2.15 An infringement notice must relate to a single contravention of a single offence provision unless four conditions are satisfied. The first is the provision requires something to be done within a particular period or before a particular time. The second is that the person fails (or refuses) to do the required thing within the required time. The third is that the failure or refusal occurs on more than one day and the fourth is that each contravention is constituted by the failure or refusal on one of those days (multiple offences of this kind may arise as a result of the application of section 4K of the Crimes Act 1914 ). [Schedule 1, item 112, subsections 224(3) and (4)]

2.16 The notice must include a range of particulars including a unique identifying number, the day on which it is given, the amount that is payable, the name of the person to whom the notice is given, the name of the infringement officer, a statement that payment of the amount is not an admission of guilt or liability, a statement that the person may choose not to pay the amount and what the consequences are, and how the notice can be withdrawn. [Schedule 1, item 112, subsection 224A(1)]

2.17 The notice must also provide details of the alleged contraventions including: the provision that was allegedly contravened; the maximum penalty a court could impose if the provision were contravened; the time (if known) and day of, and the place of, the alleged contravention; and any other information specified by regulations. [Schedule 1, item 112, subsection 224A(1)]

2.18 If the provision that has allegedly been contravened is an offence provision the amount stated in the infringement notice is one-fifth of the maximum penalty that a court could impose on the person for that contravention. [Schedule 1, item 112, paragraph 224A(2)(a)]

2.19 If civil penalty provisions are included in the provisions subject to fines in the future, by way of regulation, the amount stated in the infringement notice is one-fortieth of the maximum penalty that a court could impose on the person for that contravention. [Schedule 1, item 112, paragraph 224A(2)(b)]

2.20 There is a 28-day limit for paying infringement notices. However, it is possible to apply for an extension of time to pay the amount. [Schedule 1, item 112, paragraph 224A(1)(h) and section 224B]

2.21 An infringement notice may be withdrawn after taking into account a number of factors including written representations seeking the withdrawal and the circumstances of the alleged contravention. Where a notice is withdrawn, notice of the withdrawal must be given to the person. [Schedule 1, item 112, section 224C]

2.22 Infringement notices are designed to provide a fast and effective remedy which is in proportion to the alleged breach. Once an infringement notice is paid, any liability of the person for the offence specified in the notice is taken to be discharged, and the person is not regarded as having been convicted of the offence specified in the notice. [Schedule 1, item 112, section 224D]

2.23 The new law does not require an infringement notice to be given to a person for an alleged contravention of an enforceable provision, nor does it prevent the giving of two or more infringement notices to a person or limit a court's discretion to determine penalty amounts. [Schedule 1, item 112, section 224E]

2.24 The Bill inserts the definition of 'APRA staff member' into subsection 10(1). This is relevant for the purposes of the Chair of APRA's power of delegation under section 223D. [Schedule 1, item 31, subsection 10(1)]

2.25 Section 252B, which previously detailed the regime for contravention notices, is repealed as contravention notices have now been replaced with the infringement notice regime at Part 22. [Schedule 1, item 113, section 252B]

2.26 At section 4, an item titled 'infringement notices' is inserted into the summary of provisions table. [Schedule 1, item 27, section 4]

2.27 The Bill also amends subparagraph 6(1)(a)(x) to update the reference from 'Part 23' to 'Part 22' to reflect APRA has the general administration of the new infringement notice provisions in Part 22. [Schedule 1, item 28, subparagraph 6(1)(a)(x)]

2.28 The Bill also amends sections 56 and 57 of the Act to ensure that a provision in the governing rules of a superannuation entity is void if it would have the effect of indemnifying a trustee or a director out of the assets of the fund in relation to the payment of an infringement notice which is issued under the SIS Act or another Act such as the FSCOD Act. [Schedule 1, item 70, subsections 56(2) and 57(2) and item 71, paragraphs 56(2)(b) and 57(2)(b)]

2.29 One of the reasons the Review recommended providing APRA with the ability to issue infringement notices is to deter uncompliant behaviour. This objective would be undermined if trustees and directors were able to use fund money to pay for the infringement notice.

2.30 Not enabling indemnification in relation to infringement notices is consistent with the existing provisions which exclude indemnity for a monetary penalty under a civil penalty order.

2.31 Changes are also being made to sections 56 and 57 by the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 to prohibit indemnification in the case of penalties, thus contingent amendments have been included in this Bill, and depending on which Bill receives Royal Assent first, either item 70 or item 71 will be included in this Bill. [Schedule 1, item 70, subsections 56(2) and 57(2) or item 71, paragraphs 56(2)(b) and 57(2)(b)]

Application and transitional provisions

2.32 The changes apply to contraventions that occur on or after 1 July 2013. [Schedule 1, item 127]