Explanatory Statement

Issued by the Authority of the Minister for Revenue and Assistant Treasurer

Retirement Savings Account Act 1997

Subsection 200(1) of the Retirement Savings Account Act 1997 (the Act) provides 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 purpose of the proposed Regulations is to amend the Retirement Savings Accounts Regulations 1997 to allow temporary residents to access their superannuation upon permanent departure from Australia.

The proposed regulations will:

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insert a new condition of release into the Regulations to allow temporary residents to access their superannuation upon permanent departure from Australia;

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specify two processes for the release of superannuation depending upon the value of the member's withdrawal benefit; and

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identify the eligible visa classes for release of benefits.

EXPLANATION OF PROVISIONS

Regulation 1 - Name of Regulations

This clause is a formal provision specifying the mode of citation of the regulations.

Regulation 2 - Commencement

The regulations will commence on 1 July 2002.

Regulation 3 - Amendment of the Retirement Savings Accounts Regulations 1997

This clause provides that the Retirement Savings Accounts Regulations 1997 (the RSA Regulations) are amended as set out in Schedule 1.

SCHEDULE 1 - AMENDMENTS

Item 1 defines eligible temporary residents and notes that visas no longer issued by the Department of Immigration and Multicultural and Indigenous Affairs may also be eligible.

Item 2 describes the mandatory cashing of benefits in Retirement Savings Accounts (RSAs).

In RSAs, cashing must occur upon receipt of a request from a member provided that the member provides appropriate verification of their eligible temporary resident and departure status.

A simplified verification process is available for members with withdrawal benefits less than $5000, while for larger balances members must obtain verification from the Department of Immigration, Multicultural and Indigenous Affairs. The simplified verification processes for low balance individuals are consistent with the Government's policy that small balances should not be diminished by the payment of fees and charges.

Benefits must be cashed as a single lump sum. This will allow simplified calculation of tax benefits and ensures that funds will not have to maintain small balances for members seeking access to benefits under this measure. Allowance is made for contributions or transfers or rollovers received after the cashing of benefits. Payments in these circumstances will not require a subsequent member application.

For completed applications received prior to 1 November 2002, a three-month period is provided in which payments must be made by the RSA provider. After that time, payments must be made within 28 days. The intention is to provide a phasing-in period for providers while ensuring that members receive their benefits within a reasonable time period.

Item 3 omits the nil cashing restriction of having departed from Australia prior to 1 July 1998 to take up permanent residence outside Australia where the written request for release was made prior to 1 July 1998. The item substitutes a condition of release of benefits for a temporary resident permanently departing Australia. Provision is also made for cashing restrictions in that the benefit must be at least the amount of the member's withdrawal benefit, be cashed as a single lump sum with the exception of contributions or rollovers or transfers received after the benefits are cashed.

Item 4 specifies the list of eligible visa classes. The intent of this item is to provide access to superannuation benefits under this measure for departing temporary residents who do not reserve the option of retiring in Australia and accessing the Age Pension. As such, it excludes Australian citizens, permanent residents and New Zealanders. Schedule 1A includes visa classes which are no longer issued by the Department of Immigration and Multicultural and Indigenous Affairs.