Explanatory Statement

Issued by authority of the Minister for Financial Services, Superannuation and Corporate Law

Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 5)

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 Regulations is to finalise QSuper's move to Commonwealth Regulation. QSuper is an exempt public sector superannuation scheme (EPSSS) for Queensland public sector employees comprising a fully funded accumulation scheme and an unfunded defined benefit scheme. An EPSSS is a public sector superannuation scheme which is exempt from the SIS Act. QSuper is currently regulated by the Queensland Government (Queensland) under the Heads of Government Agreement on EPSSS.

On 9 July 2009, the Australian Prudential Regulation Authority issued the Board of QSuper with a Registrable Superannuation Entity Licence which allows QSuper to be subject to Commonwealth Regulation. Commonwealth Regulation of QSuper is considered appropriate because the regulation of financial entities is not a considered to be a key function of Queensland.

To ensure that QSuper does not breach the funding and solvency requirements for defined benefit funds, an amendment is required to exempt QSuper as the scheme includes unfunded defined benefit liabilities. An amendment is also required to permit Queensland to continue to recover the employer sponsored component of a superannuation benefit where an officer is convicted of a prescribed offence. In addition, amendments are required to remove QSuper from the list of EPSSS.

Details of the proposed Regulations are set out in the Attachment.

The proposed Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

The SIS Act specifies no conditions that needed 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.

The Australian Prudential Regulation Authority, the Australian Securities and Investment Commission and QSuper were consulted on these amendments to the SIS Regulations.

ATTACHMENT

Details of the Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 5)

Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 5).

Regulation 2 provides that these Regulations commence on the day after they are registered.

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

Schedule 1 Amendments

Item 1 - Subparagraph 9.05(a)(iii)

Item 1 is a technical amendment which allows item 2 to be inserted on the following line.

Item 2 - After subparagraph 9.05(a)(iii)

Item 2 exempts QSuper from the funding and solvency requirements for defined benefit funds under regulation 9.05 of the SIS Regulations. The solvency requirements ensure that payments from defined benefit funds are met. QSuper was previously exempt from these requirements by virtue of its status as an exempt public sector superannuation scheme. However, this exemption no longer applies to QSuper as it is regulated by the Commonwealth (the Cmw).

Amendments were made to the Superannuation (State Public Sector) Act 1990 (Qld) in December 2008 so that the Queensland Government guarantees the payment of the employer component of all defined benefit payments. As the guarantee ensures that the payments of defined benefit funds will be met, it is appropriate to exempt QSuper from the funding and solvency requirements for defined benefit funds.

Item 3 - After subregulation 13.13(3)

Item 3 exempts QSuper from regulation 13.13 of the SIS Regulations which prohibits APRA regulated superannuation funds from recognising, or in any way encouraging or sanctioning, a charge over, or in relation to a member's benefits. This will maintain QSuper's ability to recover the whole or part of the employer sponsored component of a superannuation benefit where an officer is convicted of a prescribed offence under the Public Officers Superannuation Benefits Recovery Act 1988 (Qld). This is consistent with the treatment of the Cmw which has obtained an exemption for similar recovery legislation including superannuation orders under the Crimes (Superannuation Benefits) Act 1989.

Item 4 - Schedule 1AA, Parts 2 and 3, Queensland

Item 4 removes QSuper from the list of exempt public sector superannuation schemes in Schedule 1AA to the SIS Regulations, allowing it to become an Australian Prudential Regulation Authority regulated entity. This amendment makes it clear that QSuper is regulated by the Cmw.