Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Superannuation Contributions Surcharge (Consequential Amendments) Bill
This Bill makes a number of consequential amendments to the Income Tax Assessment Act 1936, the Retirement Savings Accounts Act 1997, the Superannuation Industry (Supervision) Act 1993, the Superannuation (Resolution of Complaints) Act 1993 and the Taxation (Interest on Overpayments and Early Payments) Act 1983. These changes are required to give effect to the 1996-97 Budget announcement, on 20August 1996, of the introduction of a superannuation contributions surcharge for high income earners.
Date of effect: The amendments apply from the day on which the Bill receives the Royal Assent.
Proposal announced: The proposed superannuation contributions surcharge for high income earners was announced by the Treasurer on 20 August 1996 as part of the 1996-97 Budget.
Financial impact: The financial impact of this Bill is considered to be negligible. Full details of the financial impact of the surcharge measures is contained in the Explanatory Memorandum to the Superannuation Contributions Surcharge (Assessment and Collections) Bill 1997.
Compliance cost impact: The compliance costs of this Bill are considered to be negligible. Full details of the compliance costs associated with the surcharge measures are contained in the compliance cost statement in the Explanatory Memorandum to the Superannuation Contributions Surcharge (Assessment and Collections) Bill 1997.
Chapter 1 Preliminary
Overview
1.1 This Bill makes consequential amendments to five Acts as a result of the 1996-97 Budget announcement to introduce a superannuation contributions surcharge for high income earners.
1.2 The Bill is structured in five schedules, each dealing with amendments to a particular Act. This chapter follows the structure of the Bill.
Summary of the amendments
1.3 The amendments propose to amend certain provisions of the Income Tax Assessment Act 1936, the Retirement Savings Accounts Act 1997, the Superannuation Industry (Supervision) Act 1993, the Superannuation (Resolution of Complaints) Act 1993 and the Taxation (Interest on Overpayments and Early Payments) Act 1983. The amendments to those Acts are contained in the Schedules to the Bill. [Clause 3]
Title and Commencement of the Act
1.4 When the Bill is enacted it will be called the Superannuation Contributions Surcharge (Consequential Amendments) Act 1997. [Clause1]
1.5 The amendments outlined in the Bill are to have effect from the date on which the Act receives the Royal Assent. [Clause 2]
Background to the legislation
1.6 As part of the 1996-97 Budget the Treasurer announced the Government's intention to make the superannuation system more equitable for all Australians. To achieve this the Government announced, as one of the superannuation reform measures, the introduction, from 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996, a Superannuation Contributions Surcharge for High Income Earners (the surcharge).
1.7 The surcharge is designed to reduce the extent of tax concessions in the superannuation system and to ensure that the benefits of tax concessions are more appropriately distributed. The result of this overall reduction in tax concessions will be a fairer and more equitable superannuation system.
1.8 The legislation to introduce the surcharge is contained in four Bills, the Superannuation Contributions Surcharge (Assessment and Collection) Bill 1997, the Superannuation Contributions Surcharge Imposition Bill 1997, the Termination Payments Surcharge (Assessment and Collection) Bill 1997 and the Termination Payments Surcharge Imposition Bill 1997.
1.9 As a consequence of the introduction of the superannuation contributions surcharge and the termination payments surcharge it is necessary to amend certain provisions of the Income Tax Assessment Act 1936, the Retirement Savings Accounts Act 1997, the Superannuation Industry (Supervision) Act 1993, the Superannuation (Resolution of Complaints) Act 1993 and the Taxation (Interest on Overpayments and Early Payments) Act 1983.
Chapter 2 Amendments to the Income Tax Assessment Act
2.1 Schedule 1 of the Bill amends the Income Tax Assessment Act 1936 (the Act).
2.2 Section 202 is to be amended to insert references to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997. This amendment provides that the object of the Tax File Number (TFN) provisions is to facilitate the operation of these two Acts. [Item 1]
2.3 Section 202DH is amended to allow TFNs quoted for taxation or superannuation purposes, from the date of effect of the surcharge legislation, to be used for surcharge purposes. [Item 2]
2.4 The Bill inserts a new section into the Act to provide that where a person has quoted their TFN to a superannuation provider (ie; a superannuation fund, scheme or retirement savings account provider) for the purpose of calculating the tax to be deducted from an eligible termination payment (ETP) that TFN will be taken to have been quoted for the purposes of the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997. [Item 3 - new section202DJ of the Act]
2.5 Section 214A is amended to include references to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997. This amendment will allow the rate of interest calculated under those Acts to be determined by section 214A of the Act. [Item 4]
Chapter 3 Amendments to the Retirement Savings Accounts Act
3.1 Schedule 2 of the Bill amends the Retirement Savings Accounts Act 1997 (the RSA Act)
3.2 The RSA Act sets out the retirement income and other superannuation standards to be met by RSA providers and provides for the functional supervision of retirement savings accounts (RSAs) by the Insurance and Superannuation Commission. This schedule amends Part 11 of the RSA Act relating to tax file numbers (TFNs) in order to provide for the quotation, provision and use of the TFNs of RSA holders and applicants for the purposes of the surcharge legislation.
3.3 Under the Surcharge Acts, RSA providers will be required to advise the Australian Taxation Office (ATO) of the TFN (where known) of each RSA holder in order for the ATO to match the superannuation contributions to the individuals taxable income and calculate the level of surcharge. Where an RSA holder does not advise his or her TFN to the RSA provider, the RSA provider will be liable to the full 15 per cent surcharge on taxable contributions received in respect of that RSA holder.
3.4 The amendments made by this schedule are therefore designed to avoid individuals being subject to the surcharge (15 per cent of their superannuation contributions) simply because they have not quoted their TFN to the RSA provider. That is, the amendments aim to maximise the usage of TFNs quoted to RSA providers in order to minimise the number of surcharge assessments raised purely due to the non-quotation of an RSA holders TFN.
3.5 However, nothing in these amendments will oblige the RSA holder or person applying to become a holder to quote, or agree to the provision of, his or her TFN.
3.6 The Bill amends the RSA Act to insert reference to the Surcharge Acts. The Surcharge Acts are the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997. These amendments will allow for TFNs quoted and used for superannuation purposes from the date of commencement of this schedule to also be quoted and used for surcharge purposes [Items 1 - 18].
3.7 The Bill also inserts a transitional provision into the RSA Act to allow TFNs already quoted for superannuation purposes before the commencement of this schedule to be used for surcharge purposes [Item19].
3.8 The effect of this provision is that where an employee has quoted his or her TFN to the employer for the purposes of the RSA Act before the commencement of this schedule, the employer may pass the TFN on to the RSA provider for the purpose of the Surcharge Acts, provided the employee has the option to stop the employer doing so. The employer must give the employee notice of the intention to inform the RSA provider of the TFN and must give the employee 30 days in which to refuse to allow the employer to pass the TFN on to the RSA provider. Where the employee fails to exercise this option within the 30 day period, he or she will be deemed to have quoted his or her TFN for the purposes of the RSA Act or Surcharge Acts.
3.9 In addition, this provision will also allow an RSA provider who has been quoted the TFN of an RSA holder or person applying to become a holder before the commencement of this schedule to pass to another RSA provider, trustee of a superannuation entity or regulated exempt public sector superannuation scheme or to the Commissioner of Taxation, the TFN of the RSA holder or applicant for the purposes of the Surcharge Acts provided the holder or applicant has the option to stop the RSA provider doing so. Similar notification requirements and time frame in which to object, as explained in the above paragraph, will also apply.
Chapter 4 Amendments to the Superannuation Industry (Supervision) Act
4.1 Schedule 4 of the Bill amends the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
4.2 Section 299D of the SIS Act is amended to include a reference to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997. This allows a member to quote their TFN directly to the trustee of the fund or scheme for the purposes of the surcharge. [Item1]
4.3 Section 299E of the SIS Act is amended to include a reference to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997. This amendment enables a trustee of a superannuation fund to request a member's TFN for the purposes of the surcharge. [Item 2]
4.4 The SIS Act regulates, inter alia, the conduct of trustees of superannuation entities to ensure the prudent management of superannuation fund moneys. The schedule makes amendments to allow borrowings where a surcharge assessment or instalment payment cannot readily be met from a superannuation funds assets. The schedule also amends Part 25A of the SIS Act relating to TFNs in order to provide for the quotation, provision and use of the TFNs of beneficiaries and applicants of eligible superannuation entities or regulated exempt public sector superannuation funds for the purposes of the surcharge legislation.
4.5 Amendment is made to section 67 of the SIS Act which provides that the trustee of a regulated superannuation fund must not borrow money or maintain an existing borrowing of money. An additional exception to this general requirement is inserted to allow, subject to conditions, that borrowing be permitted in circumstances where a surcharge assessment or instalment payment cannot be readily met from a superannuation funds assets.
4.6 This exception is subject to the conditions that the trustee would not be able to make the payment apart from borrowing, the period of the borrowing must not exceed 90 days and the total amount borrowed by the trustee must not exceed 10 per cent of the value of the assets of the fund.
4.7 The amendments to the TFN provisions are designed to avoid individuals being subject to the surcharge (15 per cent of their superannuation contributions) simply because they have not quoted their TFN to the trustee of the eligible superannuation entity or regulated exempt public sector superannuation fund. That is, the amendments aim to maximise the usage of TFNs quoted to trustees in order to minimise the number of surcharge assessments raised purely due to the non-quotation of a beneficiarys TFN.
4.8 Nothing in these amendments will oblige the beneficiary or person applying to become a beneficiary to quote, or agree to the provision of, his or her TFN.
4.9 The Bill amends the SIS Act to insert reference to the Surcharge Acts. The Surcharge Acts are the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997. These amendments will allow for TFNs quoted and used for superannuation purposes from the date of commencement of this schedule to also be quoted and used for surcharge purposes [Items 2 - 26] .
4.10 The Bill also inserts a transitional provision into the SIS Act to allow TFNs already quoted for superannuation purposes before the commencement of this schedule to be used for surcharge purposes [Item27].
4.11 The effect of this provision is that where an employee has quoted his or her TFN to the employer for the purposes of the SIS Act before the commencement of this schedule, the employer may pass the TFN on to the trustee for the purpose of the Surcharge Acts, provided the employee has the option to stop the employer doing so. The employer must give the employee notice of the intention to inform the trustee of the TFN and must give the employee 30 days in which to refuse to allow the employer to pass the TFN on to the trustee. Where the employee fails to exercise this option within the 30 day period, he or she will be deemed to have quoted his or her TFN for the purposes of the SIS Act or Surcharge Acts.
4.12 In addition, this provision will also allow a trustee who has been quoted the TFN of a beneficiary or person applying to become a beneficiary before the commencement of this schedule to pass to the trustee of another superannuation entity or regulated exempt public sector superannuation scheme, RSA provider, or to the Commissioner, the TFN of the beneficiary or applicant for the purposes of the Surcharge Acts. However, this is conditional on the beneficiary or applicant not exercising his or her right to stop the trustee from doing so. Similar notification requirements and time frame in which to object, as explained in the above paragraph, will also apply.
Chapter 5 Amendments to the Superannuation (Resolution of Complaints) Act
5.1 Schedule 4 makes amendments to the Superannuation (Resolution of Complaints) Act 1993 (the SRC Act).
5.2 The SRC Act establishes the Superannuation Complaints Tribunal (the Tribunal) to provide a fair, low-cost, informal and quick alternative to the courts for resolution of disputes between members and their superannuation funds. The SRC Act will be amended as set out in this Schedule to enable the Tribunal to deal with complaints about the calculation of superannuation contributions subject to the surcharge.
Item 1 - Subsection 3(2) (definition of complainant)
5.3 This item amends the definition of complainant in subsection 3(2) of the SRCAct to include persons who make a complaint under proposed section 15CA (inserted by item 5).
Item 2 - Subsection 3(2) (definition of complaint)
5.4 This item amends the definition of complaint in subsection 3(2) of the SRCAct to include as complaints those that are made under proposed section 15CA (inserted by item 5).
Item 3 - Subsection 3(2) (definition of review meeting)
5.5 This item amends the definition of review meeting in subsection3(2) of the SRCAct to include decisions of superannuation providers (see item 4 for definition of superannuation provider).
5.6 This items inserts a definition of superannuation provider into subsection3(2) of the SRC Act. The term superannuation provider has the same meaning as in the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997.
5.7 This item inserts after section 15C of the SRC Act a new section 15CA to enable the Tribunal to deal with complaints about statements given to the Commissioner of Taxation by a superannuation provider. Proposed section15CA comprises four subsections.
5.8 Subsection 15CA(1) enables a person, in respect of whom a superannuation provider has given to the Commissioner of Taxation a statement setting out the amount of their surchargeable contributions, to complain to the Tribunal that the decision to set out that amount was unfair or unreasonable.
5.9 Subsection15CA(2) provides that where a person has been given a notice by the superannuation provider setting out the prescribed period within which they must complain to the Tribunal about the decision of the superannuation provider, the person may only complain to the Tribunal within that period. Subsection15CA(3) states that the Tribunal cannot deal with a complaint that has not been made within the prescribed period set out in subsection15CA(2).
5.10 Subsection15CA(4) states that the Tribunal cannot deal with a complaint under this section to the extent that it relates to excluded subject matter.
5.11 Subsection15CA(5) provides that a complaint under this section is to be made by sending a written complaint to the office of the Tribunal.
Item 6 - After subsection 17(2)
5.12 This item amends section 17 of the SRC Act by inserting subsection17(2A). Subsection 17(2A) provides that when the Tribunal receives a complaint under proposed section15CA (inserted by item 5) it must write to the complainant acknowledging receipt of the complaint and to the superannuation provider advising of the complaint and setting out the superannuation providers obligations under section24AA (inserted by item 12).
Item 7 - After subsection 17A(3)
5.13 This item amends section17A of the SRC Act by inserting subsection17A(3A). Subsection17A(3A) prescribes the procedures that must be followed if the Tribunal decides under subsection18(3AA) (inserted by item 10) that a person should be joined as a party to a complaint. Basically, the procedures are that the Tribunal must advise the new party that they are a party to a complaint and also advise of their obligations under section24AA (inserted by item 12) relating to the provision of relevant documents to the Tribunal. The Tribunal must also inform existing parties that a new party exists.
5.14 This item amends paragraph17A(4)(a) to ensure that the Tribunal must inform a party that has applied to be made a party to a complaint under section15CA (inserted by item 5), and has had that application rejected, that the application has been rejected and the reasons why it was rejected.
5.15 This item amends paragraph 17A(4)(c) to reflect amendments to section 18 (by item10) which sets out the parties to a complaint under proposed section15CA (inserted by item 5).
Item 10 - After subsection 18(3)
5.16 This item inserts after subsection 18(3) a new subsection18(3AA) which sets out the parties to a complaint under a section15CA complaint as the complainant, the superannuation provider and any other person who applies to be made a party to the complaint who the Tribunal decides should be a party to the complaint.
Item 11 - After subsection 19(2)
5.17 This item inserts subsection19(2A) into the SRC Act. Subsection19(2A) provides that complainants who have a complaint under proposed section15CA (inserted by item 5) must make reasonable attempts to have their complaint resolved by the superannuation provider. It is intended that reasonable efforts should, at minimum, take the form of telephone enquires or written correspondence with the superannuation provider concerned.
5.18 This item inserts a new section 24AA into the SRC Act. Subsection 24AA(1) provides that where a superannuation provider is notified under section 17 of a section15CA complaint, the superannuation provider must give the Tribunal, within 28 days, a copy of all documents that are considered by the superannuation provider to be relevant to the complaint.
5.19 Subsection24AA(2) provides that the Tribunal may allow the superannuation provider to give to the Tribunal a summary of all documents to be given the Tribunal.
5.20 Subsection24AA(3) provides that a request under subsection24AA(2) must be made within the period allowed for giving the Tribunal copies of documents under subsection24AA(1).
5.21 Subsection24AA(4) provides that where a person has been joined as a party to a complaint under proposed subsection 17A(3A) the Tribunal may require the person to provide copies of documents relevant to the complaint.
5.22 Subsection24AA(5) provides that intentional or reckless failure to comply with this section is an offence.
5.23 This item amends paragraph 24A(6)(a) to ensure it applies to complaints under proposed section15CA. Paragraph24A(6)(a) enables a person who considers that they are affected by a decision that is the subject of a complaint to request that they be joined under section 18 as a party to a complaint.
5.24 This item amends subsection 25(1) to ensure that it is applicable to new section24AA (inserted by item 12). Section 25 sets out the powers of the Tribunal to obtain information and documents.
Item 15 - After subsection 26(1A)
5.25 This item inserts subsection26(1AA) into the SRC Act. Subsection26(1AA) provides that the making of a complaint under section15CA to the Tribunal about a decision of a superannuation provider does not prevent the Commissioner of Taxation from taking any action on the basis of the amount set out in the statement.
Item 16 - After subsection 26(2A)
5.26 This item inserts subsection26(2AA) into the SRC Act. Subsection 26(2AA) allows the Tribunal to make an order preventing the Commissioner of Taxation from taking any action on the basis of the amount set out in the statement given to the Commissioner by the superannuation provider.
5.27 This item amends subsection 26(3) to ensure that it is applicable to subsection26(2AA). Subsection 26(3) provides that the Tribunal may make an order varying or revoking an order in force under subsections 26(2) or (2A) to stay the operation or implementation of a decision to which a complaint relates.
5.28 This item amends subsection 26(4) to ensure that it is applicable to subsection(2AA). Subsection 26(4) sets out the requirements on the Tribunal for making an order under subsection 26(2) or (2A).
5.29 This item amends subsection 26(5) to ensure that it is applicable to subsection26(2AA). Subsection 26(5) provides that an order in force under subsections 26(2) or (2A) is subject to conditions as are specified in the order and sets out the period of effect of the order.
5.30 This item inserts new section 37CA into the SRC Act. Section37CA sets out the Tribunal powers in relation to a section15CA complaint concerning the decision of a superannuation provider. Subsection37CA(1) provides that for the purposes of reviewing the decision that is the subject of a complaint under section15CA, the Tribunal has all the powers, obligations and discretions that are conferred on the superannuation provider. Subsection37CA(2) provides that the Tribunal must make a determination doing one of the things set out in relation to a section15CA complaint. Subsection37CA(5) provides that the Tribunal must affirm a decision referred to in subsection (3) if the decision is fair and reasonable in the circumstances.
Item 21 - After subsection 47(2B)
5.31 This item inserts subsection47(2C) into the SRC Act. Subsection47(2C) provides that where an appeal is brought to the Federal Court from a determination of the Tribunal in relation to a complaint under section15CA, the Court may make such order or orders preventing the Commissioner of Taxation from taking any action in relation to the decision complained against.
5.32 This item amends subsection 47(3) of the SRC Act to ensure that it is applicable to new subsection47(2C) (inserted by item 21). Subsection47(3) enables the Court to make an order varying or revoking an order in force under subsection(2), (2A) or (2B).
5.33 This item amends subsection 47(4) of the SRC Act to ensure that it is applicable to new subsection47(2C) (inserted by item 21). Subsection47(4) states that an order in force under subsection(2), (2A) or(2B) is subject to such conditions as are specified in the order and has effect until the end of the period specified in the order or the giving of a decision on the appeal.
5.34 This item amends subsection 59(1) to reflect new section 24AA inserted by item 12.
5.35 This item amends subsection 59(2) to reflect amendments to section 26 inserted by item 16.
Chapter 6 Amendments to the Taxation (Interest on Overpayments and Early Payments) Act
6.1 Schedule 5 of the Bill makes amendments to the Taxation (Interest on Overpayments and Early Payments) Act 1983.
6.2 The Bill amends the Taxation (Interest on Overpayments and Early Payments) Act to insert a new PartIIC to enable interest to be paid on overpayments resulting from amendments under the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997.
6.3 The amendments provide that where a person has paid the assessed amount of surcharge and as a result of an amendment the surcharge liability is reduced then interest is payable by the Commissioner on the amount of the reduction.
6.4 The amendments also insert a new Part IID to similarly provide for interest to be paid where an amended assessment is made under the Termination Payments Surcharge (Assessment and Collection) Act 1997. [Item 1]