House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon Michael Sukkar MP)

General outline and financial impact

Superannuation - employees with multiple employers

Schedule 1 to the Bill amends the SGAA 1992 to allow individuals to avoid unintentionally breaching their concessional contributions cap when they receive superannuation contributions from multiple employers. Instead of receiving contributions into superannuation, an employee may apply to the Commissioner to opt out of the superannuation guarantee regime in respect of an employer and negotiate with the employer to receive additional cash or non-cash remuneration.

The amendments achieve this outcome by allowing certain employees with multiple employers to apply to the Commissioner for an 'employer shortfall exemption certificate', which prevents their employer from having a superannuation guarantee shortfall if they do not make superannuation contributions for a period.

Date of effect: 1 July 2018.

Proposal announced: This Schedule implements the measure 'Superannuation - preventing inadvertent concessional cap breaches by certain employees' from the 2018-19 Budget.

Financial impact: The measure is estimated to result in a gain to revenue of $2 million over the forward estimates period:

- nil

.. not zero but rounded to zero

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 4.

Compliance cost impact: This Schedule has the following estimated compliance costs:

•

Total one-off implementation cost of $147,213 for individuals relating to learning and education about the changes;

•

Total ongoing total compliance costs following implementation of $5,981 for those individuals who choose to take up the exemption; and

•

Total ongoing compliance costs following implementation for business of $121,404 in relation to record-keeping, systems and procedure for individuals who take up the superannuation guarantee exemption).

Non-arm's length income of superannuation entities

Schedule 2 to the Bill ensures that the non-arm's length income rules for superannuation entities apply in situations where a superannuation entity incurs non arm's length expenses in gaining or producing the income.

Date of effect: 1 July 2018.

Proposal announced: 2017-18 Budget.

Financial impact: The measure is estimated to result in a gain to revenue of $30 million over the forward estimates period, reflecting the additional tax paid by non-arm's length lenders on interest income earned on loans:

- Nil

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 4.

Compliance cost impact: Estimated one-off compliance cost of $2.8 million. No ongoing compliance cost impact following implementation.

Limited recourse borrowing arrangements

Schedule 3 to the Bill amends the total superannuation balance rules to ensure that, in certain circumstances involving limited recourse borrowing arrangements, the total value of a superannuation fund's assets is taken into account in working out individual members' total superannuation balances.

Date of effect: 1 July 2018.

Proposal announced: This measure was originally announced in the 2017-18 Budget. Following consultation, the scope of the measure as announced was reduced.

Financial impact: The measure is estimated to result in a gain to revenue of $1 million over the forward estimates period:

- Nil

.. not zero but rounded to zero

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 4.

Compliance cost impact: Estimated one-off compliance cost of $1 million. No ongoing compliance cost impact following implementation.