Senate

Supplementary Explanatory Memorandum

Circulated by the authority of the Treasurer, the Hon Wayne Swan MP

Glossary

The following abbreviations and acronyms are used throughout this supplementary explanatory memorandum.

General outline and financial impact

Temporary residents' unclaimed superannuation interest

The Temporary Residents' Superannuation Legislation Amendment Bill 2008 (the Bill) will implement key aspects of the Government's measure to require superannuation funds to pay the unclaimed superannuation of departed temporary residents to the Australian Taxation Office (ATO).

The Bill does not provide for any interest to be paid to any previously departed temporary resident that later claims an unclaimed superannuation amount from the ATO.

These amendments make changes to Schedule 1 to the Bill to enable interest to be paid to certain previously departed temporary residents who are Australian citizens or permanent visa holders.

Proposal announced : These amendments have not previously been announced.

Financial impact : These amendments are expected to result in a cost to Budget of $7.5 million over the forward estimates up to and including 2011-12.

Compliance cost impact : Nil.

Chapter 1 Temporary residents' unclaimed superannuation interest

Amendments 1 and 2 - guide material

1.1 The guide in the Bill will be amended to outline that amounts that can be payable by the Commissioner of Taxation (Commissioner) under the temporary residents' superannuation measure can include interest in certain cases.

Amendments 3, 4 and 5 - interest payable in certain circumstances

1.2 In accordance with proposed section 20H the Commissioner will be able to make a payment in respect of a person for whom an amount has been paid to the Commissioner under section 17 or 20F.

1.3 Proposed subsection 20H(2A) will mean that the Commissioner is required to make a payment of interest under section 20H if any interest is payable and if the Commissioner is satisfied that the person is an Australian citizen or holds a permanent visa, and, either left Australia after 30 June 2007 or held a temporary visa after 30 June 2007.

1.4 Proposed subsection 20H(2B) will mean that the Commissioner will work out the amount of interest (if any) that is payable in accordance with the regulations.

1.5 The amount of interest will be calculated only on amounts that have been paid by superannuation funds under the temporary resident superannuation measure under proposed subsection 20F(1). Interest will not be payable on amounts received by the Commissioner under section 17.

1.6 The amount of interest will be calculated at a rate equal to the annual yield on Treasury bonds with a 10 year term or another rate prescribed by the regulations. The regulations may provide for various matters relevant to working out the interest. For example, working out the periods for which particular rates apply to particular amounts, which would then affect, among other things, the compounding of interest.

1.7 Proposed subsection 20H(2C) will mean that the regulations may prescribe different rates for different periods over which the interest accrues. The regulations will also be able to prescribe a nil rate once a person turns 65 years old. This is the age at which other non-temporary resident unclaimed superannuation monies are transferred by funds to the ATO. This will not limit the ways in which the regulations may work out the interest under proposed subsection 20H(2B).

Amendments 6 and 7 - taxation of interest

1.8 These amendments will mean that any interest that is payable under proposed subsection 20H(2A) will form part of the taxable component for superannuation benefit taxation purposes and within that component form part of the element untaxed in the fund.