Explanatory Statement

Issued by the authority of the Assistant Treasurer

Explanatory Statement

Retirement Savings Accounts Act 1997

Retirement Savings Accounts Regulations (Amendment)

The Retirement Savings Accounts Act 1997 (the Act) and the Retirement Savings Accounts Regulations (the Principal Regulations) implement the 1996-97 Budget initiative to allow banks, building societies, credit unions and life insurance companies to provide superannuation without a trust structure in the form of retirement savings accounts (RSAs). RSAs may be offered from 1 July 1997.

Section 200 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.

Under the Principal Regulations, superannuation benefits in an RSA will generally be required to be 'preserved' in the superannuation system until retirement on or after age 55. However, subject to the terms and conditions of an RSA, early release of a preserved' benefits is permitted under the Principal Regulations in certain restricted circumstances including permanent departure from Australia. It was announced in the 1997-98 Budget that the 'permanent departure from Australia' condition of release would be removed.

The removal of the 'permanent departure from Australia' condition of release is based on a number of reasons, including that there is anecdotal evidence that this condition has been abused by people providing inconclusive or false evidence to superannuation providers of their proposed permanent departure, In addition, removal of this condition will bring Australian arrangements more into line with overseas practice and make it easier for the Government to negotiate reciprocal social security agreements with other countries.

Regulations 4.21 and 4.22 of the Principal Regulations state that a person's preserved benefits and restricted non-preserved benefits in a RSA may be cashed on or after the satisfaction by the person of a condition of release. Under Schedule 2 to the Principal Regulations 'permanent departure from Australia' is a condition of release. Subregulation 4.01(2) of the Principal Regulations defines 'permanent departure from Australia' as a departure by the person from. Australia where the RSA provider is reasonably satisfied that it is for the purpose of permanent residence outside Australia

The Regulations amend the Principal Regulations by:

•

omitting the definition of 'permanent departure from Australia' from subregulation 4.01(2) of the Principal Regulations; and

•

omitting item 104 from Schedule 2 to the Principal Regulations which removes 'permanent departure from Australia' as a condition of release.

Therefore, a person who permanently departs from Australia will only be able to access preserved and restricted non-preserved benefits in an RSA at retirement on or after age 55 or under other conditions of release.

The Regulations will commence on 1 July 1997.

The Office of Regulation and Review have advised that a Regulation Impact Statement is not necessary in respect of the Regulations.