Explanatory Statement

Issued by the authority of the Assistant Treasurer

Explanatory Statement

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Amendment Regulations 1999 (No. 4)

The Superannuation Industry (Supervision) Act 1993 (the Act) and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provide for the prudential management of certain superannuation funds, approved deposit funds, and pooled superannuation trusts and for their supervision by the Australian Prudential Regulation Authority (APRA), Australian Securities and Investment Commission (AS IC) and Australian Taxation Office (ATO).

Section 353 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

The regulations make a number of consequential amendments to the Principal Regulations to give effect to the measures contained in the Superannuation Legislation Amendment Act (No. 3) 1999 (the Amendment Act). The Amendment Act reflects the Government's response to the Financial System Inquiry concerning the organisational framework for the regulation of small superannuation funds. The Amendment Act amends the Act to establish a new category of small superannuation fund with fewer than 5 members to be called a self managed superannuation fund. It also provides for the transfer of the regulation of self managed superannuation funds from APRA to the ATO with effect from Royal Assent.

The regulations specifically amend the Principal Regulations:

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to clarify the information required to be provided by public offer superannuation funds to prospective members and employer-sponsors reflecting the requirement under the Act that self managed superannuation funds cannot be public offer superannuation funds.

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to clarify that the period within which the trustee of a superannuation fund must acquire, in accordance with subsection 113 (1) of the Act, an audit report in respect of the 1999-00 fund income year and later years is 9 months in the case of a self managed superannuation fund, 4 months in the case of a public offer superannuation fund and 6 months in the case of any other superannuation fund.

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to clarify that the period within which the trustee of a superannuation fund other than a self managed superannuation fund must lodge, in accordance with subsection 36(1) of the Act, an annual return in respect of the 1999-00 fund income year and later years is 4 months in the case of a public offer superannuation fund and 4 or 6 months in the case of any other superannuation fund.

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to specify certain information that trustees of self managed superannuation funds that are wound up and trustees of superannuation funds that switch to or from being a self managed superannuation fund must provide to the Commissioner of Taxation.

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to specify the manner in which a contravention notice may be served on the trustee of a superannuation fund in accordance with section 252B of the Act. Section 252A of the Act permits APRA or the ATO to serve a notice requesting superannuation funds to provide information as to whether they are a self managed superannuation fund and, hence, subject to ATO regulation.

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to provide that all annual returns and supervisory levy amounts in respect of the 1998-99 and earlier income years lodged by superannuation funds before 1 July 2000 must be lodged with APRA as a transitional arrangement.

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to provide the ATO with a supervisory role under certain preserved provisions of the Occupational Superannuation Standards Act 1987 in respect of self managed superannuation funds as a transitional arrangement.

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to provide, in accordance with subsection 19(4) of the Act, that the Commissioner of Taxation will accept election forms for all superannuation funds from 1 November 1999.

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to provide, in accordance with subsection 254(1A) of the Act, that the Commissioner of Taxation will accept prescribed information for all superannuation funds from 1 November 1999.

The regulations also make a number of minor and formal amendments to the Principal Regulations, replacing current references to excluded funds with self managed superannuation fund and certain current references to APRA with the term 'Regulator', reflecting the new definition of a self managed superannuation fund in the Act and the transfer of the responsibility for the regulation of self managed superannuation funds to the ATO. These amendments clarify the regulatory and reporting requirements applicable to self managed superannuation funds under the Act and the Principal Regulations.

The regulations are described in detail in the attachment.

Regulations 1, 2, 3, and 4 and Schedule 1 commence on gazettal.

Schedule 2 commences on 1 November 1999 and Schedule 3 commences on 1 July 2000.

Superannuation Industry (Supervision) Amendment Regulations 1999 (No. 4)

Regulation 1 - Name of Regulations

The amending regulations are the Superannuation Industry (Supervision) Amendment Regulations 1999 (No. 4).

Regulation 2

Regulations 1, 2, 3 and 4 and Schedule 1 commence on gazettal.

Schedule 2 commences on 1 November 1999, and Schedule 3 commences on 1 July 2000.

Regulation 3

The regulations amend the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations).

Regulation 4 - Transitional

This regulation provides that the amendments to paragraphs 8.03(a) and (b) of the Principal Regulations by Schedule 1 of these amending regulations apply only in respect of the 1999-00 or a later income year.

AMENDMENTS

SCHEDULE 1 Amendments commencing on gazettal

PART 1 Major amendments

Item 1

Consistent with the introduction of the new term, self managed superannuation fund, in the Act, this item removes the definition of 'excluded superannuation fund' from the Principal Regulations.

Items 2, 3 and 4

These items amend the Principal Regulations by specifying the information which public offer superannuation funds and certain approved deposit funds must provide to prospective members. These items rename the required information, specified in subregulations 2.10(2) and (3) of the Principal Regulations, the basic information and the additional information respectively.

Under these regulations, all public offer superannuation funds other than capital guaranteed funds must offer prospective members both the basic information and the additional information. Capital guaranteed funds, in contrast, have the choice of providing prospective members both the basic and additional information, or the information specified in subregulation 2.10(3A) of the Principal Regulations.

Items 5, 6 and 7

These items amend the Principal Regulations by specifying the information which public offer superannuation funds must provide to prospective standard employer sponsors. These items rename the required information, specified in subregulations 2.11(2) and (3) of the Principal Regulations, the basic information and the additional information respectively.

Under these regulations, all public offer superannuation funds other than capital guaranteed funds must offer prospective standard employer sponsors both the basic information and the additional information. Capital guaranteed funds, in contrast, have the choice of providing prospective standard employer sponsors both the basic and additional information, or the information specified in subregulation 2.11(3A) of the Principal Regulations.

Item 8

This item replaces the reference to an excluded fund in the Principal Regulations with a reference to a self managed superannuation fund. The effect of this item is to exempt self managed superannuation funds from the requirement under subsection 112(1) of the Act to prepare a statement of cashflows.

Items 9 and 17

Consistent with the introduction of the new definition of a self managed superannuation fund in the Act, items 9 and 17 remove the references to an excluded fund in paragraphs 8.03 (a) and (b) of the Principal Regulations.

These regulations specify the period within which the trustee of a superannuation fund must acquire, in accordance with subsection 113 (1) of the Act, an audit report in respect of the 1999-00 or a later income year. In the case of a self managed superannuation fund, the period is 9 months after the end of the income year. In the case of a public offer superannuation fund, the period is 4 months after the end of the income year and for all other superannuation funds, the period is 6 months after the end of the income year.

Items 10, 11 and 12

Items 10, 11 and 12 specify the period within which the trustee of a superannuation fund other than a self managed superannuation fund must lodge, in accordance with subsection 36(1) of the Act, an annual return in respect of the 1999-00 or a later income year. This is specified as 4 months after the end of the income year in the case of a public offer superannuation fund and 4 or 6 months after the end of the income year in the case of all other superannuation funds. The amendments made by items 10 and 12 make it clear that Regulation 11. 02 of the Principal Regulations does not apply to a self managed superannuation fund.

Item 13

This item inserts new regulation 11.02A in the Principal Regulations to specify the manner in which a contravention notice may be served on the trustee of a superannuation fund in accordance with section 252B of the Act.

Items 14 and 17

Items 14 and 17 replace the references to excluded funds in Regulation 11.04 of the Principal Regulations with references to self managed superannuation funds, consistent with the new definition of a self managed superannuation fund contained in the Act. The effect of these items is to amend the Principal Regulations to clarify that, for the purpose of subsection 254(1) of the Act, the prescribed information in relation to the trustee of a regulated superannuation fund includes information concerning whether the fund is a self managed superannuation fund.

Item 15

Item 15 inserts new Regulation 11.07A in the Principal Regulations to specify certain information that trustees of self managed superannuation funds that cease to exist and trustees of superannuation funds that switch to or from being a self managed superannuation fund must provide to the Commissioner of Taxation within 21 days of the trustee first having knowledge of the change in fund status.

Item 16

Item 16 inserts new Regulation 13.10A in the Principal Regulations to specify the transitional arrangements in respect of the administration of certain preserved provisions of the Occupational Superannuation Standards Act 1987 (OSSA) as they may apply to self managed superannuation funds.

The transitional arrangements provide that where a preserved OSSA provision provides that a thing or action must be done or imposes an obligation in relation to a self managed superannuation fund, the thing, action or obligation may be done or carried out by the Commissioner of Taxation. The arrangements also provide that where a preserved OSSA provision grants an immunity or privilege in relation to a self managed superannuation fund, the immunity or privilege is taken to be that of the Commissioner of Taxation.

Item 15 inserts new Regulation 13.10B in the Principal Regulations as a transitional arrangement. The effect of this regulation is to require that all annual returns in respect of the 1998-99 and earlier income years lodged by superannuation funds prior to 1 July 2000 must be lodged with APRA.

Item 15 inserts new Regulation 13.10C in the Principal Regulations as a transitional arrangement. The effect of this regulation is to require that all supervisory levy amounts and penalty amounts remitted by superannuation funds prior to 1 July 2000 must be remitted to APRA.

Item 15 inserts new Regulation 13.10D in the Principal Regulations as a transitional arrangement. This regulation provides that a self managed superannuation fund that is required to submit an annual return or amount in respect of the 1999-00 year of income to the Commissioner of Taxation, will be deemed to have fulfilled the requirements of the Act if such a return or amount is submitted to APRA prior to 1 July 2000.

PART 2 Minor and Formal amendments

Regulation 17 - Minor and formal amendments

Item 17 makes a number of minor and formal amendments to the Principal Regulations to replace certain current references to excluded funds with references to self managed superannuation funds and to replace certain current references to APRA with references to the Regulator. The amendments reflect the new definition of a self managed superannuation fund contained in the Act and the transfer of the responsibility for the regulation of self managed superannuation funds from APRA to the ATO.

SCHEDULE 2 Amendments commencing on 1 November 1999

Item 1

This item amends the Principal Regulations to provide that, in accordance with subsection 19(4) of the Act, the Commissioner of Taxation will accept election forms for all superannuation funds from 1 November 1999.

Item 2

This item amends the Principal Regulation to provide that, in accordance with subsection 254(1) of the Act, the Commissioner of Taxation will accept prescribed information in respect of all superannuation funds, approved deposit funds and pooled superannuation trusts from 1 November 1999.

SCHEDULE 3 Amendments commencing on 1 July 2000

Item 1 - Minor and formal amendments

This item amends the Principal Regulations to replace current references to APRA with the Regulator reflecting the transfer of the responsibility for regulating self managed superannuation funds to the ATO.