Explanatory Statement

Issued by authority of the Minister for Superannuation

Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 3)

Subject - Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993

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

The SIS Act provides for the prudent management of superannuation entities. The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) are the core regulations considered essential to the operation of the SIS Act.

The purpose of the proposed Regulations is to make certain administrative decisions by the Australian Prudential Regulation Authority (APRA) with respect to APRA regulated funds and by the Commissioner of Taxation with respect to self managed superannuation funds subject to merits review by the Administrative Appeals Tribunal. Merits review aims to ensure that all persons affected by a decision receive fair treatment. It also improves the transparency of administrative decisions and, where regulators are seen to make consistent, well-formulated decisions, should engender greater public confidence in the regulatory framework.

The Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008, which was enacted on 26 May 2008, provided for the expansion of merits review to certain decisions by APRA and the Commissioner of Taxation. As a consequence of that amendment, and as foreshadowed in the Review of Prudential Decisions Discussion Paper in May 2007, changes are required to the SIS Regulations to ensure that appropriate administrative decisions made by APRA and the Commissioner of Taxation under the SIS Regulations are subject to merits review.

The proposed Regulations commence the day after they are registered on the Federal Register of Legislative Instruments. Details of the Regulations are set out in the Attachment .

The SIS Act specifies no conditions that need to be met before the power to make the Regulations may be exercised. The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Consultation on proposals affecting SIS Regulations initially occurred through a proposals paper, Streamlining Prudential Regulation: Response to 'Rethinking Regulation', released on 4 December 2006. Further consultation took place through a subsequent consultation paper, Review of Prudential Decisions, released on 31 May 2007. APRA and the ATO were subsequently consulted on the amendments to the SIS Regulations.

ATTACHMENT

Details of the Superannuation Industry ( Supervision ) Amendment Regulations 2009 ( No . 3 )

Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 3)

Regulation 2 provides that these Regulations are taken to have commenced on the day after they are registered.

Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994.

Schedule 1 Amendments

Item 1 removes the definition of reviewable decision under regulation 1.03 and replaces it with a new definition. The Regulator with respect to regulation 1.03 is the relevant Regulator that has the responsibility for administering the Regulations, being APRA or the Commissioner of Taxation.

The decisions that are subject to merits review under the current definition are renumbered and included in the new definition as follows:

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Current paragraph (a) is new paragraph (e) - A decision of the Regulator to not determine the form of consent under subregulation 4.12(2), paragraph 6.27B(b) and 7A.16(8)(b);

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Current paragraph (bb) is new paragraph (p) - A decision of the Regulator to specify a day on or before which an application is to be made under regulation 12.08;

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Current paragraph (c) is new paragraph (q) - A decision of APRA refusing to approve an application to transfer to a PJFC (which is an amount specified in a notice by APRA under subsection 342 (2) of the Act) under subregulation 12.12 (2) and 12.13(2);

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This paragraph has been reworded to clarify that a decision of APRA to refuse to approve the application is reviewable.

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Current paragraph (d) is new paragraph (r) - A decision of APRA to revoke an approval of an application to transfer to a PJFC under regulation 12.14; and

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Current paragraph (e) is new paragraph (t) - A decision of the Regulator to confirm or vary a reviewable decision under regulation 13.25.

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This paragraph has been reworded to remove 'revoke' as revoking an unfavourable decision would be to the individuals benefit.

Item 1 expands the application of merits review under the SIS Regulations to:

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A decision of APRA refusing to approve a sum payable as a benefit under paragraph 1.05(2)(c) - new paragraph (a);

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A decision of the Regulator to refuse to approve a sum payable as a benefit under paragraph 1.06(2)(c) - new paragraph (b);

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A decision of the Regulator to refuse to approve the factors for converting pensions under subregulation 1.08(2) - new paragraph (c);

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A decision of APRA to refuse to approve an arrangement in relation to the management and control of a regulated superannuation fund under paragraph 4.08A(2)(e) - new paragraph (d);

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A decision of APRA to refuse to suspend or vary an obligation of a trustee's obligation to roll over or transfer amounts under subregulation 6.37(6) - new paragraph (f);

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A decision of the Regulator refusing to allow a longer period for rolling over or transferring the non member spouse's interest under subparagraph 7A.03J(2)(a)(ii) - new paragraph (g);

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A decision of the Regulator refusing to allow a longer period to pay a lump sum under paragraphs 7A.03K(2)(b) and 7A.13(7)(b) - new paragraph (h);

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A decision of the Regulator refusing to allow a longer period for rolling over or transferring transferable benefits under subparagraph 7A.12(4)(a)(ii) - new paragraph (i);

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A decision of the Regulator refusing to allow a longer period to allocate, rollover or transfer a non member spouse entitlements under paragraph 7A.16(3)(b) - new paragraph (j);

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A decision of the Regulator to give a direction to the trustee to obtain a new or replacement funding and solvency certificate if it is in the prudential interest of the fund and in the best interest of members of the fund under subregulation 9.09(1A) - new paragraph (k);

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A decision of the Regulator refusing to approve an actuary's recommendation for a defined benefit fund under subregulation 9.24(2) - new paragraph (l);

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A decision of the Regulator refusing to approve an actuary's recommendation for an accumulation fund under subregulation 9.44(2) - new paragraph (m);

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A decision of the Regulator refusing to approve a proposed element of an actuarial basis for calculation of value A of accrued benefits of a superannuation fund under subregulations 12.05(5) and (6) - new paragraph (n);

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A decision of the Regulator refusing to approve a proposed element of an actuarial basis for calculation of value B of accrued benefits of a superannuation fund under subregulation 12.06(5) - new paragraph (o); and

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A decision of the Regulator refusing to consent to an alteration of accrued benefits under subparagraphs 13.16(2)(a)(ii) and d(ii) - new paragraph (s).