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.

The Regulations are necessary as a consequence of the enactment of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCTAC Act) and related Acts which implement the 1996-97 Budget initiative to introduce a superannuation contributions surcharge (the surcharge) for high income earners, payable on their superannuation contributions.

The Regulations amend the Principal Regulations to:

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require the disclosure of particular information to RSA holders in relation to the superannuation surcharge (regulations 3 to 6);

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set out the order for deducting surcharge amounts from the different categories of RSA holders' benefits (regulation 8); and

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provide that an RSA provider may refund to an RSA holder costs charged against the RSA holders' benefits (regulation 8).

The Regulations are described in detail in the attachment.

The Regulations will commence on gazettal.

Regulation 1 - Amendment

Regulation 1 provides that the Retirement Savings Accounts Regulations (the Principal Regulations) are amended as set out in these Regulations.

Regulation 2 - Regulation 1.03 (Interpretation)

Regulation 2 amends subregulation 1.03(1) of the Principal Regulations by inserting definitions of two expressions for the purposes of the Principal Regulations. In particular, definitions of 'advance instalment of surcharge' and 'superannuation contributions surcharge' are inserted. These expressions are defined by reference to the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (the SCTAC Act) and the Superannuation Contributions Tax imposition Act 1997 respectively.

Regulation 2 also inserts a note following the definition of 'costs' in subregulation 1.03(1) which gives examples of 'taxation costs' as the contributions tax and the superannuation contributions surcharge.

Regulation 3 - Regulation 2.15 (Information to be given where applicable)

Regulation 3 inserts a new paragraph 2.15(1)(o) into regulation 2.15 of the Principal Regulations. Regulation 2.15 prescribes certain information that an RSA provider must give to each RSA holder in respect of a reporting period. However, these items only need to be disclosed where applicable and do not need to be disclosed if a nil amount would have to be disclosed.

New paragraph 2.15(1)(o) prescribes additional information an RSA provider must give to each RSA holder in relation to the superannuation contributions surcharge as far as it is applicable. The requirements in new paragraph 2.15(1)(o) are intended to ensure that RSA holders are aware of the effect on their superannuation benefits of the imposition of a surcharge liability on their RSA provider.

Where an RSA provider reduces an RSA holder's benefits, in connection with payment of a superannuation contributions surcharge or an advance instalment of surcharge, the RSA provider must disclose to the RSA holder the amount/s deducted for each reporting period.

In addition, if there is a difference between the amount deducted by the RSA provider from the RSA holder's benefits and the amount of surcharge liability assessed by the Australian Taxation Office under the SCTAC Act in respect of the person's superannuation contributions, the RSA provider is required to explain why there is a difference. For example, part of the surcharge liability in respect of a person's superannuation contributions could be paid from another source including by the person's employer.

Regulation 4 - Regulation 2.17 (Exception - RSA holders subject to compulsory protection of small amounts)

Regulation 4 inserts new paragraph 2.17(1)(h). Regulation 2.17 provides that an RSA provider need only give limited information, as specified in subregulation 2.17(1), to 'protected RSA holders' (generally RSA holders whose benefits are less than $ 1,000 and to whom the RSA-protection standards in Division 3.3 of the Principal Regulations apply). New paragraph 2.17(1)(h) provides that an RSA provider must provide information, where applicable, specified in new paragraph 2.15(1)(o) (inserted by regulation 3 above) to protected RSA holders.

Regulation 5 - Regulation 2.41 (Information to be given where applicable)

Regulation 5 amends regulation 2.41 of the Principal Regulations. Regulation 2.41 prescribes certain information that needs to be disclosed to a person who ceases, otherwise than by death, to be an RSA holder. Regulation 5 inserts paragraphs 2.41 (1)(k) and (1) to provide that an RSA holder must disclose to such a person, details of amounts deducted in connection with a payment of a superannuation contributions surcharge or an advance instalment of surcharge and, if there is a difference between the amount deducted and the amount assessed by the ATO, an explanation of why there is a difference. This is to ensure that a person who ceases to be an RSA holder is provided with information they would have received concerning the surcharge if they remained an RSA holder for a full reporting period under new paragraph 2.15(1)(o) inserted by regulation 3 above.

Regulation 6 - Regulation 2.44 (Exception - RSA holders subject to compulsory protection of small amounts)

Regulation 6 amends regulation 2.44 of the Principal Regulations. Regulation 2.44 provides that if a protected RSA holder (generally RSA holders whose benefits are less than $1,000 and to whom the RSA holder protection standards in Division 3.3 of the Principal Regulations apply) ceases to be a RSA holder, the RSA provider need only provide certain information as specified in the regulation to the RSA holder. Regulation 6 provides that the RSA provider must also provide details of any amount deducted from the RSA in connection with payment of a superannuation contributions surcharge or an advance instalment of surcharge and, if there is a difference between the amount deducted and the amount assessed by the ATO, an explanation of why there is a difference.

Regulation 7 - Regulation 3.01 (Interpretation)

Regulation 7 provides that the note following the definition of 'administration costs' in subregulation 3.01(1) which gives an example of 'taxation costs' is replaced. The new note includes a reference to the superannuation contributions surcharge as an example of 'taxation costs'.

Regulation 8 - New regulations 3.06A and 3.06B

Regulation 8 inserts new regulations 3.06A and 3.06B.

New regulation 3.06A prescribes the priority for deducting surcharge amounts from RSA holders' benefits. The surcharge should be paid first with preserved benefits, then restricted non-preserved benefits and then finally, unrestricted non-preserved benefits. This ensures that the amount subject to the least restrictive preservation conditions are the last used to meet a surcharge liability.

New regulation 3.06B provides that an RSA provider may refund to a RSA holder costs charged against the RSA holder's benefits.