House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)

Chapter 4 Fund reporting

Outline of chapter

4.1 Schedule 4 amends the law to allow the Commissioner to provide superannuation providers with a grace period for correcting false or misleading statements in relation to member information statements without giving rise to penalties.

4.2 Schedule 4 removes the requirement for employers to report superannuation guarantee contributions paid to superannuation providers under the Single Touch Payroll reporting rules.

4.3 Schedule 4 reintroduces a previous measure to remove the requirement for superannuation funds to lodge bi-annual statements for lost members.

4.4 All legislative references in this Chapter are to the TAA unless otherwise stated.

Context of amendments

4.5 The Superannuation Guarantee Cross-Agency Working Group was established in December 2016 to report on the operation, administration and extent of non-compliance in the superannuation guarantee system in Australia.

4.6 In March 2017, the Superannuation Guarantee Cross-Agency Working Group released its final report, which contained its final recommendations on options to improve superannuation guarantee compliance.

4.7 The amendments relating to grace periods and employer reporting of superannuation guarantee contributions relate to measures announced as part of the Government's package of reforms to strengthen compliance with superannuation guarantee obligations by employers. These amendments relate to recommendation 2 contained in the Superannuation Guarantee Cross-Agency Working Group's report.

4.8 While not part of the superannuation guarantee package of reforms, the amendments relating to bi-annual statements for lost members also streamline fund reporting. The amendments are being reintroduced following the lapse of the Treasury Legislation Amendment (Repeal Day 2015) Bill 2016.

APRA-regulated superannuation fund reporting

4.9 Recommendation 1 in the Superannuation Guarantee Cross Agency Working Group's final report recommended more frequent and detailed superannuation fund reporting. This recommendation operates in conjunction with the expansion of Single Touch Payroll reporting to all employers. However, reporting of superannuation guarantee contributions paid into employee superannuation accounts moves to superannuation funds and away from employers. These changes strengthen both the Commissioner's capacity to monitor compliance and identify non-compliance when it occurs, as well as to improve strategies to prevent non-compliance.

4.10 As part of this measure, the frequency of the APRA regulated superannuation fund reporting increases to an 'event-based' reporting, replacing the current annual member contribution statement. These changes are being enforced through the Commissioner's existing powers to require reporting from superannuation providers under section 390-5 in Schedule 1.

4.11 The measure does not apply to self-managed super funds.

Statements for lost members

4.12 A measure to remove the requirement for superannuation providers to provide bi-annual lost member statements to the Commissioner was previously introduced to Parliament as part of the lapsed Treasury Legislation Amendment (Repeal Day 2015) Bill 2016. The amendments for that measure were contained in Parts 2 and 3 in Schedule 2 to the Bill.

4.13 This measure is being reintroduced as part of the superannuation and taxation integrity package.

4.14 Superannuation funds are required to lodge a bi-annual lost members statement with the Commissioner, identifying all superannuation balances of lost members. This statement provides information to the Commissioner to display on a register of lost members. The Commissioner also collects member information through the annual member information statement, some of which is duplicated in the lost member statement.

Summary of new law

4.15 Schedule 4 amends the law to allow the Commissioner to provide superannuation providers with a grace period for correcting false or misleading statements in relation to member contribution statements without giving rise to penalties.

4.16 Schedule 4 removes the requirement for employers to report superannuation guarantee contributions paid to superannuation providers under the Single Touch Payroll reporting rules.

4.17 Schedule 4 amends the SUMLMA to remove the requirement for superannuation providers to lodge, twice yearly, a lost members statement with the Commissioner in its current form. These changes remove an additional reporting burden for funds, reducing compliance costs.

4.18 Information for the purposes of the register of lost members will be collected using the Commissioner's existing administrative powers under the TAA (although the amendments introduce a minor change to those powers to clarify their scope).

Comparison of key features of new law and current law

Detailed explanation of new law

Ongoing grace period for correcting errors for superannuation providers

4.19 These amendments allow the Commissioner to provide superannuation providers with an ongoing grace period for correcting false or misleading statements in relation to member information statements without giving rise to penalties. [Schedule 4, item 5, section 390-7 in Schedule 1]

4.20 There are a number of offences which gives rise to criminal penalties in relation to making false or misleading statements. An entity commits an offence if they provide a statement to the Commissioner where:

•

the statement is false or misleading in a material particular (subsection 8K(1A));

•

the statement contains an omission which makes the statement false or misleading in a material particular (subsection 8K(1B));

•

the entity recklessly provides a statement that is false or misleading or omits information which makes the statement false or misleading (subsection 8N(1)).

4.21 An entity is also liable to an administrative penalty for making a statement to the Commissioner that is false or misleading whether because of things in it or omitted from it (subsection 284-75(1) in Schedule 1).

4.22 Under the amendments, where a superannuation provider makes a further statement to the Commissioner to correct the original statement which is in the approved form and within a grace period (if one has been provided), a superannuation provider will not be subject to administrative penalties or offences relating to providing false or misleading statements. [Schedule 4, items 1, 2 and 4, subsections 8K(2B), 8N(3) and 284-75(9) in Schedule 1]

4.23 This grace period is designed to allow superannuation providers to conduct assurance processes of information and payments received from employers which is then reported to the Commissioner. The amendments provide superannuation providers with opportunities to correct the statement within specified time periods without being liable to penalties or offences relating to providing false or misleading statements. It is designed to provide a balance between superannuation providers increasing their reporting on time and reporting accurate information. After the grace period has expired, any false or misleading statement made to the Commissioner may be subject to penalties. The Commissioner may remit these penalties under existing powers.

4.24 The Commissioner can determine, by legislative instrument, the timeframe for superannuation providers to correct errors and specify different timeframes which may apply to different classes of entities. [Schedule 4, item 5, subsection 390-7(5) in Schedule 1]

4.25 The Commissioner can provide, by notice, a different period for an individual superannuation provider. This allows, for example the Commissioner to reduce an entity's grace period if it appears that the particular entity is misusing the grace period. The Commissioner's decision to provide a different period for an individual superannuation provider is a reviewable decision. [Schedule 4, item 5, subsections 390-7(2) to (4) in Schedule 1]

4.26 Under subsection 390-115(1) in Schedule 1, if a superannuation provider becomes aware of a material change or omission in any information given to the Commissioner (which includes in a statement given under section 390-5 in Schedule 1), it must inform the Commissioner of the change or omission in the approved form no later than 30 days after it becomes aware of the change or omission.

4.27 These amendments do not change the existing obligation under subsection 390-115(1) in Schedule 1. The obligation to inform the Commissioner of material changes or omissions continues to apply to superannuation providers and operates concurrently with the new amendment in section 390-7 in Schedule 1 which allows superannuation providers to take advantage of the grace period to correct statements before false and misleading penalties apply.

Employer reporting of superannuation contributions

4.28 The amendment removes the requirement in Division 389 in Schedule 1 for employers to report to the Commissioner contributions paid to superannuation funds by the employer as part of Single Touch Payroll. [Schedule 4, item 6, item 3 to the table in subsection 389-5(1) in Schedule 1]

4.29 This change is the result of increased APRA-regulated superannuation fund reporting which provide the Commissioner with superannuation contributions paid by employers for each employee member account. The Commissioner will receive this information under events-based reporting from 1 July 2018. Therefore the current requirement for employers to separately report information under item 3 in subsection 389-5(1) in Schedule 1 is no longer required.

Application and transitional provisions

4.30 The removal of the requirement for employers to report superannuation guarantee contributions applies to contributions paid on or after 1 July 2018. [Schedule 4, item 7]

Statements for lost members

4.31 Part 4 of the SUMLMA requires the Commissioner to keep a register of lost members containing information for the purpose of reuniting individuals with their lost superannuation money. Superannuation providers must give the Commissioner a twice yearly statement containing information relating to lost members for the purpose of the register. These requirements are in addition to the bi-annual reporting and payment requirements for certain unclaimed lost member accounts in Part 4A of the SUMLMA.

4.32 Superannuation providers are also required to give the Commissioner a member information statement, in the approved form under section 390-5 of Schedule 1. Subsections 390-5(5) and 390-5(6) of Schedule 1 enable the Commissioner to specify, by legislative instrument, the period covered by the statement and the day on which the statement must be given to the Commissioner. Currently, a member information statement is required for each individual who held a superannuation interest in a superannuation plan for a financial year and is due on 31 October each year. With the frequency of the APRA regulated superannuation fund reporting increasing, the current annual member contribution statement will be replaced with an events-based reporting regime. These changes are being enforced through the Commissioner's existing powers to require reporting from superannuation providers under section 390-5 in Schedule 1. This will enable the Commissioner to determine the frequency of reporting required, and can specify a different reporting due date for different information.

4.33 The proposed amendments will repeal requirements under Part 4 of the SUMLMA for the provision of information about lost superannuation members to the Commissioner for the purposes of the register of lost members. The Commissioner will continue to be required to keep a register of lost members under Part 4 of the SUMLMA and will be permitted to give information contained in the register to State and Territory authorities. Information for the purposes of the register of lost members will be collected using the Commissioner's existing power to require reporting from superannuation providers under section 390-5 in Schedule 1. This will allow the Commissioner to set the frequency and form in which lost member information is to be reported (which may be different to the frequency of reporting required for other events). [Schedule 4, Part 2, items 10 to 15, section 7, Part 4, subsections 24HA(1), 25(3) and 26(3), section 27, paragraph 29(1)(b) and subsection 44(1) of the SUMLMA]

4.34 The amendments will also repeal the meaning of a lost member in Part 4 of the SUMLMA, and incorporate this meaning within the definition of lost member in section 8 of the SUMLMA. A lost member continues to be a lost RSA holder within the meaning of the RSA Regs or a lost member within the meaning of the SIS Regs. [Schedule 4, Part 2, item 9, section 8 of the SUMLMA]

4.35 The related regulations to the SUMLMA will also be repealed as a result of these amendments.

Application and transitional provisions

4.36 The repeal of requirements under Part 4 of the SUMLMA for the provision of information about lost superannuation members to the Commissioner for the purposes of the register of lost members does not apply to information that is required to be given to the Commissioner under the lost member bi-annual statements for a half year ending before 1 January 2018. [Schedule 4, item 16)]

4.37 In practical terms, this means that the final bi-annual statement superannuation providers are required to lodge under the existing law are statements due on 30 April 2018 for the period 1 July 2017 to 31 December 2017. From 1 January 2018, superannuation providers no longer need to lodge the bi-annual statement. However, they are still required to report information about lost members as required by the Commissioner under section 390-5 in Schedule 1.

4.38 The transitional provision ensures that the lost member register which, before the commencement of this item, was kept for the purpose of the lost member register required under Part 4 of the SUMLMA is preserved. From the commencement of this Part, the lost member register is treated as being kept under the new requirement under the SUMLMA, as amended by Part 3 of Schedule 4. [Schedule 4, item 17)]

Consequential amendments

4.39 Schedule 4 makes consequential amendments to repeal headings and add an additional note to clarify when a superannuation provider will be able to rely on the grace period. [Schedule 4, items 3 and 5, subsections 284-75(8), and 390-7 (1) notes 1 and 2 in Schedule 1]

4.40 Schedule 4 also makes a consequential amendment to allow the Commissioner to request information from superannuation providers relating to the SUMLMA under the existing section 390-5 in Schedule 1. [Schedule 4, item 18]