Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)CHAPTER 10 - Superannuation - miscellaneous amendments
Overview
10.1 The amendments contained in Schedules 5, 6 and 7 of the Bill consist of a number of miscellaneous amendments to superannuation law administered by the Insurance and Superannuation Commissioner (the Commissioner). The amendments comprise:
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- allowing the Commissioner (or his delegates) to undertake statistical surveys of the superannuation industry and allowing superannuation standards officers to provide information (such as statistical information derived from the surveys) to the Australian Bureau of Statistics for statistical purposes (part 1)
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- ensuring that the trustee or an investment manager of a less than 5 member regulated superannuation fund is not precluded from taking advantage of the exception to the rule prohibiting acquisition of members assets simply because the members business is established in a company form and not in the form of a sole trader or partnership (part 2)
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- allowing the financial backing requirements imposed on approved trustees and on custodians to be met by having an approved guarantee and net tangible assets which together sum to at least the prescribed amount (this has previously been provided for by a Temporary Modification Declaration made by the Commissioner) (part 3)
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- allowing for the Superannuation Industry (Supervision) Regulations to provide some flexibility in determining the date by which an application for a pre 1 July 1988 funding credit must be made (part 4)
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- changing the method of collection of the superannuation supervisory levy and making some other largely consequential amendments, including changes to the manner in which the late payment penalty for the levy is calculated (part 5).
Part 1 - Conducting statistical surveys of the superannuation industry and provision of information to the Australian Bureau of Statistics
Summary of the amendments
10.2 The purpose of these amendments is:
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- to give the Commissioner (or his delegates) the ability to conduct surveys to collect superannuation statistics and to require trustees of superannuation entities to comply with any requests for statistical information;
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- to allow superannuation standards officers (such as Insurance and Superannuation Commission staff) to provide to the Australian Bureau of Statistics protected information or documents, or information sourced from such information (such as aggregate statistical data derived from the survey), where that information or those documents are being provided for statistical purposes. This will allow the Australian Bureau of Statistics to make use of the information when compiling, for example, the National Accounts.
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- to allow the Commissioner to charge fees for statistical publications.
10.3 The amendments apply from the date of Royal Assent.
Background to the legislation
10.4 Section 348 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) provides the Commissioner with the power to publish statistical information, but the information must not be published in a way that would identify and disclose information about a superannuation entity or identify a person to whom a payment has been made.
10.5 There is, however, no specific provision in the SIS Act which would allow the Commissioner to conduct surveys to collect superannuation statistics and to require trustees of superannuation entities to complete any survey questionnaires sent to them.
10.6 Section 346 of the SIS Act details the secrecy provisions that apply with respect to information or documents which have been given, produced or obtained under, or for the purposes of, the SIS Act. This information and these documents are known as protected information and protected documents.
10.7 Protected information and protected documents can not normally be disclosed, either directly or indirectly, to a person unless the disclosure is specifically allowed for in section 346. Subsection 346(6) currently provides that protected information or protected documents can be provided to various Commonwealth bodies, such as the Australian Securities Commission and the Superannuation Complaints Tribunal. Protected information and protected documents would include information and documents collected under statistical surveys which are to be carried out pursuant to the new survey power given to the Commissioner under these amendments. There is, however, currently no allowance for statistical information obtained under the SIS Act, or aggregated statistical data sourced from surveys, to be provided to the Australian Bureau of Statistics for statistical purposes.
Explanation of the amendments
How will the Commissioner collect statistical information?
10.8 Item 5 of Schedule 6 inserts a new section 347A into the SIS Act.
10.9 New subsection 347A(1) provides that the Commissioner may collect such statistical information about superannuation entities as the Commissioner considers appropriate.
10.10 New subsection 347A(2) provides that for the purposes of collecting statistical information the Commissioner may approve one or more survey forms.
10.11 New subsections 347A(4), (5) and (6) provide that the Commissioner may by written notice sent to the trustee of a superannuation entity determine that the trustee is a participant in the Insurance and Superannuation Commissions statistics program. The trustee is then obliged to complete and return any survey forms sent to the trustee.
Who will be requested to provide statistical information
10.12 New subsection 347A(4) provides the Commissioner with the power to determine that the trustee of any superannuation entity is to be a participant in the statistics program. If the Commissioner wishes to include a trustee of a superannuation entity in the statistics program the Commissioner is required to issue a written notice to the trustee advising the trustee that they are to be a participant in the statistics program.
10.13 The notice will not only inform the trustee that they are in the program but will also advise the trustee of their obligations as a participant.
What are the trustees obligations as a participant in the statistics program
10.14 If a trustee has been advised by written notice from the Commissioner that they are a participant in the statistics program then the trustee is required to complete, in accordance with instructions, any survey forms sent to them and return the completed forms (by the time specified in the instructions) to the authorised recipient (who will be specified in the instructions). [New subsections 347A(3), (4), (5) and (8)]
What if a trustee does not comply with these obligations?
10.15 If a trustee, intentionally or recklessly, fails to comply with the trustees obligations then they are guilty of an offence punishable on conviction by a fine not exceeding 50 penalty units ($5,000 for an individual, $25,000 for a body corporate). [New subsection 347A(6)]
Is a trustee obliged to complete and return a survey form if it is sent to them at the same time as a notice saying they are in the statistical program?
10.16 Yes, refer to new subsection 347A(7) .
Will there be instructions in the survey form?
10.17 Survey forms approved by the Commissioner are required to contain instructions about certain matters. These instructions relate to how to complete the form and who to return the form to. The instructions will also state the time by which the trustee must return the completed form. All survey forms must relate to one or more particular periods of time. [New subsections 347A(3) and (8)]
How long will a trustee have to complete a form?
10.18 The instructions contained in a form must not require the form to be returned to the authorised recipient earlier than 28 days after the end of the survey period to which the particular form relates. If there is more than one survey period covered by one form then the instructions contained in the form must not require the form to be returned to the authorised recipient earlier than 28 days after the end of the most recent survey period. [New subsection 347A(8)]
10.19 Example: A survey form for the period 1 January to 31 March may be sent to a trustee who is a participant in the statistics program. The instructions contained in the survey form will not require the form to be returned to the authorised recipient earlier than 28 April.
Can the time for returning a survey form be extended?
10.20 The Commissioner has the ability to extend the period for returning a completed survey form. The Commissioner may exercise this power on a specific basis for a particular trustee or more generally for all trustees. [New subsections 347A(9) and (10)]
10.21 The Commissioner is unlikely to use this power unless there are good reasons why a survey form could not be returned within the required time.
10.22 Where the Commissioner makes a decision to extend, or not extend, the period for returning a completed survey form under new subsection 347A(9) that decision will be a reviewable decision, as the decision relates to a particular case. A decision of the Commissioner under subsection 347A(10) is not reviewable as such decisions apply generally to all trustees. [Item 1 of Schedule 6 - amendment to definition of reviewable decision in section 10]
Can the Commissioner delegate his statistical collection powers?
10.23 The Commissioner can delegate any or all of his powers under the new section 347A and can delegate those powers to any person. [New subsection 347A(11)]
10.24 This would enable the Commissioner to contract out the task of collecting the statistical information if, for commercial cost reasons, the Commissioner considered the task could be more effectively and efficiently undertaken outside the Commission.
If the Commissioner contracts out the statistical collection program would the information provided still be subject to secrecy provisions?
10.25 The definition of superannuation standards officer in section 10 of the SIS Act is to be amended to ensure that any person who, as a result of being a delegate of the Commissioner under section 347A, comes into contact with protected information or documents (such as statistical survey information collected from superannuation entities) will become a superannuation standards officer. Accordingly, such persons will be subject to identical secrecy provisions as those applying to the Commissioners staff. [Item 2 of Schedule 6]
Can the Commissioner charge a fee for statistical publications?
10.26 The Commissioner has the ability, under new subsection 348(3) to charge a fee for statistical publications. [Item 6 of Schedule 6]
Why has subsection 348(2) been amended?
10.27 Paragraph 348(2)(b) of the SIS Act is amended so that the Commissioner may not publish statistical information in a manner that would enable the identification of a person. Previously the restriction was that the publication must not identify a person to whom a payment had been made. The amendment ensures that a person should not be identified irrespective of whether the person is one to whom a payment has been made. [Item 6 of Schedule 6]
Can protected information or documents be provided to the Australian Bureau of Statistics?
10.28 A new paragraph 346(6)(da) is inserted into the SIS Act to allow superannuation standards officers to provide to the Australian Bureau of Statistics protected information or documents, or information sourced from such information (such as aggregate statistical data derived from the survey), where that information or those documents are being provided for purposes in connection with statistics. [Item 3 of Schedule 6]
10.29 This will allow the Australian Bureau of Statistics to make use of the information when compiling, for example, the National Accounts.
10.30 If the Australian Statistician or a member of the Statisticians staff are provided with information or documents under new paragraph 346(6)(da) then they would become superannuation standards officers and subject to the same secrecy provisions in respect of that information or document as Insurance and Superannuation Commission staff. New subsections 346(9A) and (9B) make it clear that becoming a superannuation standards officer does not prevent the Australian Statistician from publishing statistics (such as total contributions made to superannuation funds in the National Accounts) derived from information or documents provided under paragraph 346(6)(da) or the charging of fees for such publications. [Item 4 of Schedule 6]
Does the new s347A affect existing provisions in the SIS Act?
10.31 No. Other provisions, such as the power for the Commissioner to seek information under subsection 254(2) are not affected. This is made clear by new subsection 347A(12), which also makes it clear that section 347A does not affect anything in the Census and Statistics Act 1905 . [New subsection 347A(12)]
Part 2 - Acquisition of member's assets used in the member's company business
Summary of the amendment
10.32 The purpose of this amendment is to ensure that the trustee or investment manager of a less than five member regulated superannuation fund is not precluded from taking advantage of the exception to the rule prohibiting acquisition of members assets simply because the members business is established in a company form and not in the form of a sole trader or partnership.
10.33 The amendment applies from the date of Royal Assent.
Background to the legislation
10.34 Section 66 of the SIS Act places restrictions on the acquisition, by the trustee or investment manager of a regulated superannuation fund, of assets from members of the fund or from relatives of such members.
10.35 Subsection 66(1) places a blanket restriction on the acquisition of such assets. However, subsection 66(2) provides that, in certain circumstances, such assets may be acquired. Among other things, the restrictions involve a requirement that the fund must be an excluded superannuation fund (ie: a fund with fewer than 5 members) and that the asset acquired must be exempt business real property of the member or relative, or a listed security.
10.36 If the asset of the member or relative is not a listed security then it can only be acquired if it is exempt business real property of the member or relative. For an asset to be considered exempt business real property it must first be business real property and both these terms are defined in subsection 66(5) of the SIS Act.
10.37 For an asset to be business real property of the member or relative it must be a freehold or leasehold interest in real property and be used wholly and exclusively in a business carried on by the member or relative .
10.38 The effect of the definition of business real property is that the business of the member or relative must be established in the form of a sole trader or partnership. If the asset is used in a business carried on by a body corporate then, despite the fact that the member or relative may control the body corporate (and the body corporates business is, therefore, effectively the members or relatives business) the asset will not meet the test of being used wholly and exclusively in the members or relatives business. This is because the asset is actually being used in the body corporates business, not the members business (even though the member may control the company).
10.39 Therefore, if the member operates a business, but does so through an interposed company, and a freehold or leasehold interest in real property of the member is used in that business, the trustee or investment manager cannot take advantage of the exception in subsection 66(2) and the asset cannot therefore be acquired by the trustee or investment manager.
Explanation of the amendment
What amendments have been made to section 66?
10.40 Section 66 of the SIS Act is amended by adding two new definitions, and two notes, to subsection 66(5) and by inserting three new subsections. [Items 7, 8 and 9 of Schedule 6]
What is the purpose of new subsection 66(6)?
10.41 The new subsection 66(6) provides a test for determining whether a business carried on by a body corporate is controlled by a person and therefore should be considered the persons business for the purposes of section 66.
10.42 If the test is passed then the person, not the body corporate, is considered to be carrying on the body corporates business, when applying the definitions of business real property and exempt business real property in subsection 66(5). [Item 9 of Schedule 6]
When will a person be considered to be controlling a body corporate and therefore carrying on the business of the body corporate?
10.43 The control test in subsection 66(6) provides that, if the aggregate of the direct control interests of the person and the direct control interests of close associates of the person is greater than 50% then the person will be considered to be carrying on the business of the body corporate. [Item 9 of Schedule 6 - new subsection 66(6)]
What is a direct control interest?
10.44 In determining whether a person is taken to carry on the business of a body corporate, new subsection 66(6) provides that the direct control interests of the person and of any close associates must exceed 50%.
10.45 Direct control interest is defined in new subsection 66(8). The direct control interest of a person in a body corporate is the percentage of the maximum number of votes that might be cast at a general meeting of the body corporate that are controlled by the person.
10.46 Example: If the maximum number of votes to be cast at a general meeting of a body corporate is 50 and a person controls 20 of those votes then that person has a direct control interest of 40% (being the percentage represented by 20/50). [Item 9 of Schedule 6 - new subsection 66(8)]
Who is a close associate of a person?
10.47 A close associate of a person is defined in new subsection 66(7) and consists of:
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- the spouse or a child of the person;
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- a body corporate where 100% of the votes that might be cast at a general meeting of the body corporate are controlled by either the person, spouse or a child or children of the person, or any combination of such people;
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- the trustee of a trust where the only people capable of benefiting from the trust are the person, spouse or a child or children of the person, or any combination of such people. [Item 9 of Schedule 6 - new subsection 66(7)]
10.48 Mr Smith is a member of a less than 5 member regulated superannuation fund. Mr Smith owns some real property which is used wholly and exclusively in the business carried on by Company AAA (Company AAA is in the business of manufacturing paint tins). Mr Smith also controls 75% of the maximum number of votes that might be cast at a general meeting of Company AAA.
10.49 Prior to this amendment, the trustee of the fund would not be able to acquire the real property from Mr Smith. This is because the property is not business real property as defined in subsection 66(5) and accordingly cannot be exempt business real property and therefore cannot be acquired by the fund trustee. It is not business real property as it is not used wholly and exclusively in Mr Smiths business, rather it is used in Company AAAs business.
10.50 As a result of new subsection 66(6) , Mr Smith ( not Company AAA ) would now be considered to carry on the business of manufacturing paint tins, that is, Mr Smith ( rather than Company AAA )is taken to carry on the business of Company AAA. The effect of this is that Mr Smiths real property, which is used wholly and exclusively in the business carried on by Company AAA, is now considered to be used wholly and exclusively in Mr Smiths business. Accordingly, the real property is now business real property and, provided it is also taken to be exempt business real property, the fund trustee could acquire the property from Mr Smith. Provided, of course, that paragraphs (b) and (c) of subsection 66(2) are also complied with.
10.51 Whether it would be taken to be exempt business real property would depend on whether it is Mr Smiths only business. If it is his only business then it would be exempt business real property. If Mr Smith carries on, or is taken to carry on, more than one business, the property will only be exempt business real property if it is used in whichever of those businesses is Mr Smiths principal business.
10.52 The first example assumed that Mr Smith directly controlled more than 50% of the votes in Company AAA. The business of Company AAA would also be considered to be Mr Smiths business if Mr Smith, together with his close associates, controlled more than 50% of the votes in Company AAA, or if Mr Smiths close associates on their own controlled more than 50% of the votes in Company AAA.
10.53 For example, if Mr Smith controlled 30% of the votes in Company AAA, his wife controlled another 30% and his two sons controlled the remaining 40% then Mr Smith would still be considered to be carrying on the business of Company AAA. Any real property of Mr Smiths which is used in Company AAAs business would therefore once again be considered business real property of Mr Smith.
10.54 If Mr Smith, his wife and two sons were the sole beneficiaries of a trust and the trustee of the trust controlled more than 50% of the votes in Company AAA then Mr Smith would be considered to be carrying on the business of Company AAA. Any real property of Mr Smiths which is used in Company AAAs business would therefore once again be considered business real property of Mr Smith.
Do the amendments affect the restriction that, if a person (being a member of the fund or a member's relative) has more than one business, business real property can only be acquired from the person's principal business?
10.55 No. It should be noted that if a person is considered under the amendments to be carrying on the business of a body corporate then the business of the body corporate will now be considered to be the persons business. A person who operates two businesses - one as a sole trader and one through a company structure - will now be carrying on two businesses for the purposes of the definition of exempt business real property and the fund trustee or investment manager will be restricted to acquiring business real property from whichever of those businesses is the persons principal business.
Part 3 - Financial backing requirements for approved trustees and custodians
Summary of the amendment
10.56 The purpose of this amendment is to allow the financial backing requirements imposed on approved trustees and on custodians to be met by having an approved guarantee and net tangible assets which together sum to at least the prescribed amount (this has previously been provided for by a Temporary Modification Declaration made by the Commissioner)
10.57 The amendment applies from the date of Royal Assent.
Background to the legislation
10.58 Prior to the issuing of Temporary Modification Declaration No. 3 (TMD3) by the Acting Commissioner (TMD3 is discussed further at paragraphs 10.62 to 10.64) it was not possible to be an approved trustee without (along with meeting certain other conditions) applying to the Commissioner for approval and having:
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- net tangible assets of $5 million or more; or
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- the benefit of an approved guarantee of $5 million or more, being a guarantee in respect of the applicants duties as trustee of each relevant entity of which the trustee is, or is proposing to become, the trustee; or
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- agreed to comply with the written requirements given to them by the Commissioner before being approved, being requirements relating to the custody of assets of a relevant entity or relevant entities of which the applicant is or becomes the trustee.
10.59 The above requirements are provided for in section 26 of the SIS Act and in regulation 3.03 of the SIS Regulations.
10.60 Prior to the issuing of Temporary Modification Declaration No. 3 (TMD3) by the Acting Commissioner (TMD3 is discussed further at paragraphs 10.62 to 10.64), subsection 123(1) provided that it was not possible for a person to be a custodian of a superannuation entity (other than an excluded fund) without (along with meeting certain other conditions):
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- the person having net tangible assets of $5 million or more; or
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- the trustee of the entity being entitled to the benefit, in respect of the due performance of the persons duties as custodian of the entity, of an approved guarantee of $5 million or more.
10.61 The above requirements are provided for in subsection 123(1) of the SIS Act and in regulation 13.19 of the SIS Regulations.
Temporary Modification Declaration No. 3
10.62 On 24 June 1994 the Acting Commissioner made, pursuant to Part 29 of the SIS Act, Temporary Modification Declaration No. 3 (TMD3). The effect of TMD3 was to modify the requirements outlined in paragraph 10.58 above for approving trustees, and in paragraph 10.60 for being a custodian. The modification provided that an applicant could be an approved trustee, or a person could be a custodian, if (along with meeting other existing conditions) the combined value of their net tangible assets and the amount of an approved guarantee was $5 million or more. Rather than having to have net tangible assets of $5 million or an approved guarantee of $5 million.
10.63 TMD3 also made some consequential amendments to sections 28 and 29 of the SIS Act so that if an applicant had been approved as trustee on the basis of having a combination of net tangible assets and an approved guarantee to the value of at least $5 million then, if they at a later date stopped meeting this criterion, the trustee must tell the Commissioner (and the Commissioner could revoke the approval).
10.64 TMD3 ceases to have effect on 30 June 1996, as is required by subsection 333(2) of the SIS Act.
Explanation of the amendment
Is it possible to be an approved trustee by having a combination of net tangible assets and an approved guarantee which together have a value of at least $5 million?
10.65 Yes, new subparagraph 26(1)(b)(iia) , when read in conjunction with new subsection 26(1A) and amended SIS Regulation 3.03, means that an applicant for approved trustee status can be approved if they (in addition to meeting certain other conditions) have:
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- an approved guarantee (being a guarantee in respect of the applicants duties as trustee of each relevant entity of which the applicant is, or is proposing to become, the trustee); and
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- the sum of the amount of that guarantee plus the applicants net tangible assets is at least $5 million. [Items 10 and 11 of Schedule 6 and item 1 of Schedule 7]
If an applicant becomes an approved trustee, on the basis of the combined value of their net tangible assets and the amount of an approved guarantee being at least $5 million, can the approval later be revoked if the combined value falls below $5 million?
10.66 Yes. Subsection 28(1) provides the Commissioner with the power to revoke an approval. Subsection 28(2) does not limit subsection 28(1) but is amended to provide that one of the circumstances in which approval may be revoked is where the combined value of an approved guarantee and net tangible assets falls below $5 million. [Item 12 of Schedule 6 - new paragraph 28(2)(da)]
What must an approved trustee do if the combined value of an approved guarantee and net tangible assets falls below $5 million?
10.67 New paragraph 29(2)(ca) provides that if this occurs the trustee must notify the Commissioner as soon as practicable, and in any event within 30 days. [Item 13 of Schedule 6]
Is it possible to be the custodian of a superannuation entity (other than an excluded fund) by having a combination of net tangible assets and approved guarantee to a value of at least $5 million?
10.68 Yes. Section 123 is amended by inserting a new subparagraph 123(1)(b)(iii) and a new subsection 123(1A) . The effect is that amended subsection 123(1), when read in conjunction with amended SIS Regulation 13.19, now provides that a person may be a custodian of a superannuation entity (other than an excluded fund) if:
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- the person is a body corporate; and
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- the trustee of the entity is entitled to a benefit, in respect of the due performance of the body corporates duties as custodian of the entity, of an approved guarantee; and
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- the sum of the amount of the approved guarantee and the net tangible assets of the body corporate is at least $5 million. [Items 14, 15 and 16 of Schedule 6 and item 2 of Schedule 7]
What will happen to Temporary Modification Declaration No. 3
10.69 The amendments to the financial backing requirements for approved trustees and custodians discussed in paragraphs 10.65 to 10.68 have been previously provided for by Temporary Modification Declaration No. 3 (TMD3).
10.70 The effect of these amendments is that TMD3 is no longer necessary and accordingly it has been effectively terminated by item 17 of Schedule 6 .
Does the amending of SIS Regulations 3.03 and 3.19 in this Bill restrict the power to amend those regulations in the future?
10.71 No. [Item 3 of Schedule 7]
Part 4 - Pre 1 July 1988 funding credits
Summary of the amendment
10.72 The purpose of this amendment is to allow for the Superannuation Industry (Supervision) Regulations to provide some flexibility in determining the date by which an application for a pre 1 July 1988 funding credit must be made.
10.73 The amendment applies from the date of Royal Assent.
Background to the legislation
10.74 Subsection 342(1) of the SIS Act provides that the trustee of a fund may apply for a pre 1 July 1988 funding credit. Subsection 342(3) sets down certain requirements that must be met when applying for a pre 1 July 1988 funding credit. One of these requirements, in paragraph 342(3)(b), is that the application must be made on or before the prescribed day.
10.75 Regulation 12.08 of the SIS Regulations currently provides that the prescribed day is 31 March 1995. The wording of paragraph 342(3)(b) is such that the day prescribed in the Regulations must be a specific day, such as 31 March 1995. It could not, for example, be 31 March 1995 or a day that the Commissioner determines should be the day in relation to a particular fund. As a result there is no ability for the Commissioner to extend the day on a case by case basis where such an extension may be warranted because of particular circumstances.
Explanation of the amendment
When must an application for a pre 1 July 1988 funding credit be made?
10.76 Paragraph 342(3)(b) of the SIS Act is amended to allow the SIS Regulations to provide more flexibility in determining the date by which applications must be made. [Item 18 of Schedule 6]
10.77 SIS regulation 12.08 currently provides that the day by which applications must be made is currently 31 March 1995. he Government is proposing to amend SIS regulation 12.08 so that the day will be 31 March 1995 or a day that the Commissioner determines should be the day in relation to a particular fund. It is not envisaged that the Commissioner would use such a discretionary power to extend the date for an application unless it was clearly justified in the particular circumstances.
Part 5 - Collection of the superannuation supervisory levy
Summary of the amendments
10.78 The purpose of these amendments are:
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- to change the method of collection of the superannuation supervisory levy so that the levy is payable by the date specified in a written notice sent to the trustee of a superannuation entity by the Commissioner, rather than being payable at the time of lodging an annual return;
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- to change the manner in which the late payment penalty for the levy is calculated so that a penalty will start accruing the day after payment is due and additional penalties will arise, if the levy remains unpaid, after the end of each elapsed month (counted from the day after payment was due);
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- to provide the Commissioner with the power to remit the basic levy.
10.79 The amendments apply in relation to levy payable on annual returns lodged for the 1994-95 and later years of income.
Background to the legislation
10.80 The Superannuation Supervisory Levy Act 1991 , in conjunction with Part IIIAA of the Superannuation Entities (Taxation) Act 1987 (SET Act), currently imposes a levy on superannuation entities who lodge an annual return under section 36 of the SIS Act.
10.81 The levy is currently due and payable at the time of lodgment of the annual return - refer section 15DB of the SET Act.
10.82 If the levy is not paid when it is due and payable (ie: on lodgment of the annual return) then a late payment penalty may arise.
10.83 The late payment penalty is calculated under section 15DC of the SET Act. Under the current arrangements, the penalty will arise if payment of the levy is not made by the beginning of the first month of the calendar year following the date payment was due. The penalty is calculated on a monthly basis and in advance (that is, on the first day of the month).
10.84 Example: Under the current arrangements, if the levy was payable on 15 March, but not paid by 1 April, then a late payment penalty would arise from 1 April and would be in respect of the month of April. A further penalty will arise if the levy is not payable by the beginning of the next following month in the calendar year (ie: a further penalty would arise from 1 May and would be in respect of the month of May). If payment of the levy was made in mid May then a penalty would be payable for April and May.
10.85 The formula for calculating the late payment penalty is set down in subsection 15DC(2).
10.86 There are a number of other administrative provisions in Part IIIAA of the SET Act. One of them (section 15DF) allows the Commissioner to remit the whole or part of a late lodgment amount or a late payment penalty. The late lodgment amount is actually part of the levy and is calculated, as is the basic levy itself, under the Superannuation Supervisory Levy Act 1991 . The Commissioner does not, however, currently have the power to remit the basic levy itself, which must be remitted through the Audit Act 1901 .
Explanation of the amendments
When will the superannuation supervisory levy be payable?
10.87 The superannuation supervisory levy will no longer be payable on the date of lodgment of an annual return, but rather on a day specified in a written notice sent to the trustee of a superannuation entity by the Commissioner. [Item 2 of Schedule 5 - amendment to section 15DB of the Superannuation Entities (Taxation) Act 1987 (the SET Act)]
How long will the trustee have to pay the levy once the notice is given?
10.88 The trustee will be required to pay the levy by the day specified in the notice. However, that day must be at least 21 days after the day the notice is given to the trustee. [Item 2 of Schedule 5 - amendment to section 15DB of SET Act]
What happens if the trustee does not pay the levy on time?
10.89 The trustee will become liable to pay a late payment penalty. [Item 3 of Schedule 5 - section 15DC of the SET Act]
Has the method of calculating the late payment penalty changed?
10.90 Yes, the late payment penalty will now start accruing from the day after the levy payment was due and will be calculated on the basis of each elapsed calendar month (as defined in the Acts Interpretation Act 1901 ) from the day after payment was due. [Items 3 and 4 of Schedule 5 - section 15DC of the SET Act]
10.91 Example: If a written notice was sent under section 15DB requesting payment by 15 March and payment was not made by that date then a late payment penalty would arise from 16 March, and would be in respect of the month of 16 March to 15 April. If payment was not made by 16 April then a further late payment penalty would be payable in respect of the month of 16 April to 15 May.
10.92 If payment of the levy is made within 15 days of the due date the late payment penalty will not arise. [Item 3 of Schedule 5 - section 15DC of the SET Act]
10.93 In addition, paragraph 15DC(2)(a) has been amended with the effect of deleting existing 15DC(2)(a)(ii) which was superfluous. [Item 5 of Schedule 5]
Why are subsections 15DC(3) and (4) amended?
10.94 The amendments to these subsections are purely technical and consequential on the changes to subsection 15DC(1). [Items 6 and 7 of Schedule 5]
Can the Commissioner now remit payment of the whole levy?
10.95 Yes, paragraph 15DF(a) is amended so that the Commissioner can now remit the whole or part of the levy (previously the Commissioner could only remit that part of the levy which represented the late lodgment amount). [Item 8 of Schedule 5]
10.96 The definition of late lodgment amount is no longer needed as a result of the amendment to paragraph 15DF(a) and is deleted. [Item 1 of Schedule 5]
Do the amendments apply for levy payable in respect of all annual returns lodged under the SIS Act or the SET Act (previously the Occupational Superannuation Standards Act 1987)?
10.97 The amendments made by Schedule 5 apply in relation to levy payable on lodgment of an annual return under the SIS Act for the 1994/95 or later years of income. The amendments therefore apply even if such a return is lodged before Schedule 5 commences. The amendments do not apply to returns lodged for earlier years of income under the SET Act. [Item 9 of Schedule 5]
If a 1994/95 annual return is lodged prior to commencement of Schedule 5 is it possible to incur two late payment penalties in respect of the same lodgment?
10.98 Item 10 of Schedule 5 provides that if such a return is lodged before commencement then any liability to pay a late payment penalty under the SET Act (as it existed prior to the amendments made by this Bill) and which has arisen prior to commencement is remitted. If an amount has been paid in respect of that liability the Commissioner is required to refund that amount.
10.99 While such a liability is remitted, this does not prevent a late payment penalty arising, in respect of non payment of levy for that return, if payment is not made by the time required by a written notice sent to the trustee under the amended section 15DB. [Item 10 of Schedule 5]
10.100 Example: A trustee lodges an annual return for the 1994/95 year of income on 31 March 1995, but does not pay the levy on lodgment. Accordingly, a late payment penalty would arise under section 15DC of the SET Act (as it exists prior to the amendments made by this Bill taking effect). The liability to pay that late payment penalty is remitted by item 10 of Schedule 3. The Commissioner issues a written notice to the trustee on 1 July 1995 (assuming that is after the commencement of Schedule 3) requesting payment of the levy by 31 July 1995. If the levy is not paid by that date then a late payment penalty can arise under section 15DC of the SET Act (as amended by this Bill).