Explanatory Statement

Issued by authority of the Minister for Revenue and Assistant Treasurer

EXPLANATORY STATEMENT

Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

The SIS Act is the principal piece of legislation establishing the prudential framework for the regulation of the superannuation industry. Under the SIS Act, the Australian Prudential Regulation Authority (APRA) supervises regulated superannuation funds (other than self-managed superannuation funds (SMSFs), which are regulated by the Australian Taxation Office), approved deposit funds (ADFs) and pooled superannuation trusts (PSTs).

The purpose of the Regulations is to prescribe fees in relation to licences granted under the SIS Act.

The Superannuation Safety Amendment Act 2004 amends the SIS Act from 1 July 2004. Among other things, the SIS Act is amended to provide for the licensing of trustees of APRA-regulated superannuation entities. Under the amended SIS Act, and subject to transitional provisions, it will be an offence for a person to be a trustee, or act as the trustee, of a 'registrable superannuation entity' unless the person holds a registrable superannuation entity licence (called an RSE licence) that enables the person to be the trustee of the registrable superannuation entity. Section 10 of the SIS Act defines a 'registrable superannuation entity' to be an ADF, a PST or a regulated superannuation fund, other than a SMSF.

The primary purpose of licensing superannuation trustees is to ensure that all superannuation trustees are honest and competent and have appropriate risk management arrangements, resources and outsourcing arrangements to look after the interests of members and beneficiaries of superannuation entities. Licensing will be conducted by APRA.

Reflecting the fact that business operations vary in complexity and size, the SIS Act and the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations) provide for different classes of RSE licences to be granted to trustees operating different classes of funds. The Regulations prescribe fees for applying or reapplying for, or applying for the variation of, the classes of RSE licence.

Details of the Regulations are in the Attachment.

The SIS Act does not impose any conditions that need to be met before the power to make the proposed Regulations may be exercised.

Regulations 1 to 3 and Schedule 1 to the Regulations commence on 1 July 2004, to coincide with the commencement of the two-year licensing transition period.

Subsections 4(1) and (2A) of the Acts Interpretation Act 1901, read together, allow the making of regulations between the passing and commencement of legislation upon which they rely for their authority, as long as such regulations do not commence before the legislation.

A Cost Recovery Impact Statement has been prepared in relation to the prescribed fees.

Authority: Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993

Attachment - Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 7)

Regulation 1 - Name of the Regulations

Regulation 1 specifies that the Regulations are the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 7).

Regulation 2 - Commencement

Regulation 2 establishes that regulations 1 to 3 and Schedule 1 commence on 1 July 2004.

Regulation 3 - Amendment of Superannuation Industry (Supervision) Regulations 1994

Regulation 3 establishes that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations), as amended by the Superannuation Industry (Supervision) Amendment Regulations 2004 (No.3).

Schedule 1 - Amendment

Item [1] - Part 3A, After Division 2

Division 3 - Applying for RSE licences

The Superannuation Industry (Supervision) Act 1993 (the SIS Act) and the Principal Regulations establish three different classes of registrable superannuation entity licence (called an RSE licence). The classes of licence are called public offer entity licences (subsection 29B(2) and regulation 3A.01), non-public offer entity licences (subsection 29B(3) and regulation 3A.02) and extended public offer entity licences (subsection 29B(4) and regulation 3A.03).

Item [1] of Schedule 1 inserts a new Division 3 to Part 3A. The new Division 3 contains new regulations 3A.05 and 3A.06.

The purpose of the new regulations 3A.05 and 3A.06 is to prescribe licence application fees, and reduced reapplication fees in certain circumstances, for the classes of RSE licence established under the amended SIS Act. The regulations also prescribe fees for applying for variation of licence class.

Regulation 3A.05

Definitions

The new regulation 3A.05 defines certain terms for the purposes of the new Division 3 of Part 3A. These terms are 'asset', 'asset value', 'extended public offer entity licence' and 'non-public offer entity licence'.

Where the definitions of 'asset' and 'asset value' refer to a 'statement of financial position' of a registrable superannuation entity, this means a statement of financial position required to be prepared under section 112 of the SIS Act.

Where the definition of 'asset value' refers to a 'year of income' of a registrable superannuation entity, 'year of income' is as defined by section 10 of the SIS Act.

Regulation 3A.06

RSE licence application fees

Under paragraph 29C(4)(c) of the SIS Act, an application for an RSE licence must, amongst other things, be accompanied by the application fee (if any) prescribed by regulations made for the purposes of that paragraph. Subsection 29C(5) of the SIS Act provides that regulations made for the purposes of paragraph 29C(4)(c) may prescribe different application fees for applications for different classes of RSE licences.

The new regulation 3A.06 prescribes the following RSE licence application fees:

•

$20,000 for public offer entity licence applications;

•

$20,000 for extended public offer entity licence applications;

•

$5,500 for non-public offer entity licence applications; and

•

$3,500 for non-public offer entity licence applications made by existing trustees of small registrable superannuation entities (that is, the applicant was a trustee of a registrable superannuation entity at the start of the licensing transition period and the asset value of all registrable superannuation entities for which the applicant proposes to become the RSE licensee is less than $5 million).

Consistent with Government cost recovery policy, these licence applications fees are designed to recover APRA's costs of processing applications for the different classes of RSE licences.

Reapplication fees

Paragraph 29C(4)(c) and subsection 29C(5) of the SIS Act, in conjunction with subsections 33(3A) and 33(3B) of the Acts Interpretation Act 1901, operate to allow regulations to prescribe different fees for reapplying for the different classes of RSE licence. The fee for reapplying for a particular class of RSE licence is half the amount of the application fee. The reduced fee only applies if the initial application was refused or withdrawn within the preceding 12 months of the reapplication.

The new regulation 3A.06 prescribes the following reapplication fees:

•

$10,000 for public offer entity licence reapplications;

•

$10,000 for extended public offer entity licence reapplications;

•

$2,750 for non-public offer entity licence reapplications; and

•

$1,750 for non-public offer entity licence reapplications made by existing trustees of small registrable superannuation entities.

The fees for reapplying for a licence reflect the lower costs associated with processing a reapplication, as APRA would already have partially processed an original application and gained some knowledge of the applicant.

Fee for variation of RSE licence class

Under paragraph 29F(2)(c) of the SIS Act, an application for variation of an RSE licence so that it is a different class of RSE licence must, amongst other things, be accompanied by the application fee (if any) prescribed for the type of variation by regulations made for the purposes of that paragraph.

The new regulation 3A.06 prescribes the following fees for applying for variation of RSE licence class:

•

$500 to vary from a public offer entity licence to either an extended public offer entity or non-public offer entity licence;

•

$500 to vary from an extended public offer entity licence to either a public offer entity or non-public offer entity licence;

•

$14,500 to vary from a non-public offer entity licence to either a public offer entity or extended public offer entity licence where the licence holder paid the $5,500 application fee when applying for the initial grant of the non-public offer licence; and

•

$16,500 to vary from a non-public offer entity licence to either a public offer entity or extended public offer entity licence where the licence holder paid the $3,500 application fee when applying for the initial grant of the non-public offer licence.

The variation application fees reflect the lower costs associated with processing variations of licence classes, as APRA will already have conducted significant investigation of the applicant's eligibility when granting the initial licence.