House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

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

This bill will provide for contributions to be made by the Government towards the superannuation of low income earners and outlines:

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how the Government will determine the persons in respect of whom a Government co-contribution is payable and the amount of the Government co-contribution;

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the method of payment of the Government co-contribution and where adjustments may be necessary for underpayments and overpayments;

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information gathering by the Commissioner and between superannuation providers and members; and

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powers of the Commissioner and other general administrative arrangements, including the review of decisions.

Superannuation (Government Co-contribution for Low Income Earners) (Consequential Amendments) Bill 2003

This bill will amend various Acts. These amendments are as a consequence of the Government Co-contribution Bill.

These amendments relate to the:

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eligibility for Government co-contributions;

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taxation treatment of Government co-contributions;

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co-contribution arrangements for certain Defence personnel and Commonwealth employees;

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review of certain decisions about the administration of the Government co-contributions;

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use of the SHAR for Government co-contributions in some circumstances; and

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interest that may be levied on late repayments of Government co-contribution overpayments.

Date of effect: The measure generally applies in relation to contributions made to complying superannuation funds and RSAs on or after 1 July 2002.

Proposal announced: The measure was foreshadowed in the Government's policy statement A Better Superannuation System on 5 November 2001, and clarified in the Minister for Revenue and Assistant Treasurer's Press Release No. 43 of 14 May 2002.

Financial impact: The measure is expected to result in a budgetary cost of $115 million in 2003-2004, $125 million in 2004-2005 and $115 million in 2005-2006.

Compliance cost impact: No estimates are available. Superannuation providers affected by this bill will be expected to change their systems to provide additional data to the ATO to enable the Government co-contributions to be determined without imposing additional burdens on the contributors.

Summary of regulation impact statement

Regulation impact on business

Impact: The administrative arrangements chosen are the most appropriate for administering the measure. Although the arrangements impose some initial additional costs on the superannuation industry, these costs are lower than under the alternative arrangements considered. The arrangements chosen enable the co-contributions to be determined and paid without imposing additional burdens on the contributors themselves or their employers.

Main points:

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Affected superannuation providers will be expected to change their systems to provide additional data to the ATO to enable the Government co-contributions to be determined.

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This initial additional cost is not expected to be large as the ATO will use, as far as possible, existing reporting mechanisms. The ongoing costs of these changes are not expected to be significant.

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Some additional costs are also expected to enable existing reporting mechanisms between funds and their members to be used for notification purposes.

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Some funds and providers may also need to change their rules to enable the co-contributions to be accepted on behalf of their members.