Explanatory Statement

Issued by authority of the Assistant Treasurer

Superannuation (Government Co-contribution for Low Income Earners) Act 2003

Corporations Act 2001

Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013

Section 55 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (Co-contribution Act) and section 1364 of the Corporations Act 2001 (Corporations Act) provide that the Governor-General may make regulations prescribing matters required or permitted by the relevant Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the relevant Act.

The Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 amended the Co-contribution Act to ensure that the low income superannuation contribution (LISC) operates effectively and according to its policy intent. The Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013 (the Regulation) makes consequential technical amendments to the Superannuation (Government Co-contribution for Low Income Earners) Regulations 2004 (the principal regulations) and the Corporations Regulations 2001.

The increase in the tax-free threshold from $6,000 to $18,200 for the 2012-13 income year has resulted in additional low income earners no longer being required to lodge an income tax return. As a result, the Commissioner of Taxation may not receive income tax return information to assess eligibility for the LISC for these individuals. The Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 amended the Co-contribution Act to ensure that eligible individuals who have not lodged an income tax return are entitled to the LISC.

The Regulation updates the method for determining where the Commissioner will pay the LISC for eligible individuals, and the date by which the payment must be made. The Regulation also specifies information the Commissioner must report to the Minister for presentation to Parliament and makes consequential amendments to the Corporations Regulations 2001 to require superannuation funds to separately report the amount of the government co-contribution and LISC in their periodic statements.

The Regulation commences on the day after registration and transitional provisions apply to some amendments. However, the rights of an individual in relation to the LISC as at the date of registration of the Regulation are not affected so as to disadvantage an individual because no payments of the LISC for the 2012-13 income year were payable before this date.

Details of the amendments are set out in the Attachment. The Co-contribution Act and the Corporations Act specify no conditions that need to be satisfied before the power to make the Regulation may be exercised.

The Regulation was not released for public consultation as the amendments are minor and mechanical in nature. However, targeted consultation was undertaken with a number of superannuation funds.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013 updates the method for determining where low income superannuation contribution (or LISC) payments are directed, and the date by which the payment must be made as a result of amendments made by the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013. It also specifies information the Commissioner must report to the Minister for presentation to Parliament and makes consequential amendments to the Corporations Regulations 2001 to require superannuation funds to separately report the amount of the government co-contribution and LISC in their periodic statements.

The amendments made by the Regulation are minor and mechanical in nature.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

ATTACHMENT

Details of the Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013

Section 1 - Name of regulation

This section provides that the title of the Regulation is the Superannuation and Corporations Legislation Amendment (Low Income Superannuation Contribution) Regulation 2013 (the Regulation).

Section 2 - Commencement

This section provides that the Regulation will commence on the day after it is registered.

Section 3 - Authority

This section provides that the Regulation is made under the Corporations Act 2001 and the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (the Co-contribution Act).

Section 4 - Schedule

This section provides that each instrument that is specified in the Schedule to the Regulation is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.

Schedule 1 - Amendments relating to superannuation legislation

Application of the Superannuation (Government Co-contribution for Low Income Earners) Regulations 2004 (the principal regulations) to the low income superannuation contribution (LISC)

Subsection 12B(1) of the Co-contribution Act provides that a law of the Commonwealth applies in relation to a LISC in the same way it applies in relation to a government co-contribution. The effect of this provision is that when the principal regulations are applied in relation to the LISC, all references to 'government co-contribution' are replaced with 'LISC'. However, the references are not interchangeable in determining the application of the law in relation to each individual payment and the relevant references below in this explanatory statement to government co-contribution or LISC should be read in this way. The exceptions to subsection 12B(1) are listed in subsection 12B(2) of the Co-contribution Act.

Determining where a government co-contribution (or LISC) is to be paid

The method the Commissioner must follow to determine where an amount of government co-contribution (or the LISC where that is the relevant enquiry) is to be paid is set out in the table in subregulation 5(1) of the principal regulations.

Item 4 of the table in subregulation 5(1) specifies that where a person has one or more eligible accounts, but has not nominated an eligible account to the Commissioner for the purpose of receiving a government co-contribution (or LISC), the government co-contribution (or LISC) is to be paid in accordance with paragraphs (a) to (e). An eligible account is defined in regulation 3 of the principal regulations as an account held by the member with a complying superannuation fund or a retirement savings account which meets certain conditions.

Paragraph (a) of item 4 of the table provides that if one of the eligible accounts has received a government co-contribution in the current financial year, the Commissioner is required to direct the government co-contribution to that account. Likewise, if one of the eligible accounts has received a LISC payment in the current financial year, the Commissioner is required to direct a payment of the LISC to that account. A previous payment of the government co-contribution does not affect the destination of the LISC payment nor does a LISC payment affect where the government co-contribution is paid under paragraph (a).

Item 2 of Schedule 1 to the Regulation amends the destination rules in paragraph (b) of item 4 in the table in subregulation 5(1) to provide that if paragraph (a) does not apply, the payment may be directed according to paragraph (b) as follows:

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(i) in the case of the government co-contribution: the eligible account to which the person has made the greatest amount of eligible personal superannuation contributions; or

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(ii) in the case of the LISC: the eligible account with the greatest amount of concessional contributions (within the meaning of the Income Tax Assessment Act 1997);

in the most recent financial year for which the Commissioner has received a statement in respect of the member under section 390-5 in Schedule 1 to the Taxation Administration Act 1953.

Example

Maria has two eligible accounts in LakeSuper and RiverSuper funds, and is entitled to both a government co-contribution and a LISC in relation to the 2014-15 income year.

Maria has nominated her LakeSuper account to the Commissioner for the purpose of receiving a government co-contribution. The government co-contribution is paid into that account pursuant to the item 3 of the table in subregulation 5(1).

For the purposes of the LISC, Maria has not nominated either her LakeSuper or RiverSuper account, and neither account has received a LISC payment in the current financial year. Of Maria's two eligible accounts, Maria's RiverSuper account is the account with the greatest amount of concessional contributions, so the Commissioner pays the LISC to this account (in accordance with subparagraph (b)(ii) of item 4 in the table in subregulation 5(1)).

The application of each of the paragraphs in item 4 of the table in subregulation 5(1) is subject to the operation of subregulation 5(3) (items 1 and 3 of Schedule 1 to the Regulation). Subregulation 5(3) provides that a paragraph of the table in subregulation 5(1) does not apply to a payment if the Commissioner is reasonably satisfied that the eligible account mentioned in that paragraph will not or cannot accept the payment.

Subregulation 5(3) is intended to enable the Commissioner to determine the eligible account to which the payment should most appropriately be made in the circumstances. An example may be where, on application of paragraph (a) in item 4, an eligible account is identified however it has been closed since a government co-contribution (or LISC) was received, the Commissioner will be able to apply a later paragraph in item 4 of the table in subregulation 5(1). A further example may be where a government co-contribution (or LISC) is not accepted and returned to the Commissioner after being paid under subparagraph 5(1)(b)(i) or (ii), the Commissioner may then pay the government co-contribution (or LISC) to another account in accordance with the paragraph (c) or another of the criteria in the table in subregulation 5(1). The alternative subparagraph (b)(i) or (ii) should not be applied.

Payment date

Regulation 7 of the principal regulations specifies the payment date in relation to the Government co-contribution (or LISC). Item 4 of Schedule 1 to the Regulation amends this provision to provide that the payment date for an amount is the day 60 days after the Commissioner is able to be satisfied that a determination must be made.

Currently, the payment date that applies to both the government co-contribution and the LISC is the day 60 days after the Commissioner has received all the information, required by the Act or requested by the Commissioner under the Act, necessary to make a determination.

The amendments made by the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 ensure that eligibility to the LISC will be able to be determined where an individual does not lodge an income tax return (for example, because their income is below the tax-free threshold and they are not required to lodge a return), and an estimation of an individual's adjusted taxation income is required. As the existing requirement that the payment date is 60 days after the Commissioner has received 'all the information, required by the Act' would be indeterminate under the estimation criteria of eligibility, the Regulation amends the payment date to 'the day 60 days after the Commissioner is able to be satisfied that a determination must be made', which is suitable to both the characteristics of the government co-contribution and the LISC.

Reports to the Minister for presentation to Parliament

Section 12G of the Co-contribution Act provides that the Commissioner must provide reports to the Minister, quarterly and at the end of each financial year, for presentation to the Parliament. Item 5 in Schedule 1 to the Regulation inserts regulation 21B into the principal regulations, which specifies that the following information is to be included in the reports:

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Quarterly reports:

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the number of beneficiaries of a LISC contribution during the quarter;

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the total amount of LISC made during the quarter by the Commissioner; and

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the total amount of LISC contributions recovered during the quarter as overpaid amounts under section 24 of the Co-contribution Act.

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Annual reports:

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the number of beneficiaries of a LISC made under subsection 12C(1) of the Co-contribution Act during the financial year;

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the number of beneficiaries of a LISC made under subsection 12C(2) of the Co-contribution Act during the financial year;

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the total number of beneficiaries of a LISC during the financial year;

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the number of beneficiaries with an adjusted taxable income, or estimated adjusted taxable income for the income year that corresponds to the financial year in $1,000 increments up to $37,000;

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the amount of LISC payments made under subsection 12C(1) of the Co-contribution Act during the financial year;

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the amount of LISC payments made under subsection 12C(2) of the Co-contribution Act during the financial year;

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the total amount of LISC payments made during the financial year by the Commissioner; and

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the total amount of LISC payments recovered during the financial year as overpaid amounts under section 24 of the Co-contribution Act.

Information provided by the Commissioner

Part 1 of Schedule 2 to the principal regulations prescribes information the Commissioner must give when a government co-contribution (or LISC) is paid, under section 18(1) of the Co-contribution Act. Item 7 inserts 'or concessional contributions (whichever is relevant to the payment)' into item 103 to ensure that in relation to the LISC, the Commissioner must give information on the amount of concessional contributions. In relation to the government co-contribution, the Commissioner must give information on the amount of eligible personal superannuation contributions.

Transitional provisions (item 6 of Schedule 1)

Application

The amendments made by items 1 to 5 and 7 of Schedule 1 apply in relation to the 2012-13 income year and later income years (regulation 30).

Nominated accounts for the 2012-13 income year

For the payment of a LISC for the 2012-13 income year that is made in the financial year starting on 1 July 2013, the nomination of an eligible account for the purpose of receiving a government co-contribution is also taken to be the nomination of an eligible account for the purposes of receiving the low income superannuation contribution (regulation 31).

Schedule 2 - Amendments relating to corporations legislation

Consequential amendment

Subregulation 7.9.20(1) of the Corporations Regulations 2001 prescribes specific requirements for periodic statements provided by superannuation funds for members. Item 1 of Schedule 2 to the Regulation inserts a consequential amendment that requires superannuation funds to separately state the amount of government co-contribution and LISC received by members.