Explanatory Memorandum
(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)This Memorandum takes account of amendments made by the House of Representatives to the Bill as introduced.Chapter 15 SUPERANNUATION GUARANTEE SHORTFALLS
Overview
15.1 The amendments will allow a superannuation guarantee shortfall component to be paid to a complying ADF [Clause 145] .
Summary of amendments
15.2 Purpose of amendments: The proposed amendment will allow a superannuation guarantee shortfall component to be paid into a complying approved deposit fund (ADF) and ensure that any shortfall component received by a complying ADF is a taxable contribution.
15.3 The purpose of the amendment is to increase the number of funds that can accept the shortfall component, particularly if that shortfall component consists of a small amount.
15.4 Date of Effect : Date of Royal Assent [Clauses 38 and 149] .
Background to the legislation
15.5 An employer is liable to pay the superannuation guarantee charge (SGC) which is imposed on the employer's superannuation guarantee shortfall in a year. The charge is imposed by the Superannuation Guarantee Charge Act 1992 . The amount of SGC payable is equal to the amount of the employer's superannuation guarantee shortfall in the year.
15.6 The superannuation guarantee shortfall component is defined in section 64 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) to be, generally speaking, the SGC imposed on an employer less any administration component and any penalties (other than late payment penalty that relates to the individual superannuation guarantee shortfall).
15.7 Subsection 65(1) of the SGAA specifies that, subject to some limited exceptions, the Commissioner of Taxation can deal with any superannuation guarantee shortfall component by either:
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- paying the amount of the component to a complying superannuation fund nominated by the employee, in accordance with the regulations, for the benefit of the employee; or
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- making arrangements in accordance with the regulations so that the amount of the component may be paid to a complying superannuation fund for the benefit of the employee.
15.8 In practice, the Commissioner sends a voucher equal to the superannuation guarantee shortfall component to each employee for whom an employer has paid the SGC. The voucher is only payable into an account of the employee held with a complying superannuation fund.
15.9 Many of these vouchers are expected to be for small amounts. Some superannuation funds are not willing or able to accept small amounts. Therefore, to ensure wider acceptance of the vouchers (i.e., superannuation guarantee shortfall components), the Government has decided to allow them to be paid into a complying ADF.
Explanation of proposed amendments
Superannuation Guarantee Administration Act 1992
15.10 It is proposed to insert a definition of approved deposit fund in subsection 6(1) of the SGAA by reference to the definition of approved deposit fund (ADF) in subsection 3(1) of the Occupational Superannuation Standards Act 1987 (OSSA) . [Clause 146; section 6]
15.11 A complying approved deposit fund will be an ADF that is a complying ADF for income tax purposes (that is, a complying ADF within the meaning of Part IX of the Income Tax Assessment Act 1936). Essentially, a complying ADF is a fund which has received a notice from the Insurance Superannuation Commissioner (ISC) under section 14 or section 15 of OSSA stating that the ISC is satisfied that the fund satisfies or should be treated as having satisfied the ADF conditions. [Clause 147; new section 7A]
15.12 The proposed amendments to section 65 of the SGAA will allow the Commissioner to deal with the shortfall component by paying it, or making arrangements for it to be paid, to a complying ADF in addition to a complying superannuation fund. The ADF will be deemed to be a complying ADF if at the time the payment is made it satisfies the ADF conditions under the OSSA. [ Clause 148; paragraph 65(1)(a) and new subsections 65(3) and (4)]
15.13 Clauses 150, 151 and 152 make consequential amendments to reflect the proposed replacement of OSSA with the Superannuation Industry Supervision Act 1993 . These clauses will commence on the date of commencement of Part 3 of the SIS Bill, or the day after this Bill receives the Royal Assent, whichever is the later [Subclause 2(4)] .
Income Tax Assessment Act 1936
15.14 It is proposed to amend subsection 274(1) of the Income Tax Assessment Act 1936 to ensure that a superannuation guarantee shortfall component paid to a complying ADF will be a taxable contribution in the hands of the ADF. [ Clauses 36 and 37; new paragraph 274 (1)(d)]