House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)

Chapter 2 Temporary residents' superannuation and unclaimed money

Outline of chapter

4.1 Schedule 2 to this Bill amends various Acts as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government. Schedule 2 also amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) to facilitate the administration of the broader unclaimed money regime. All references are to the S(UMLM) Act unless otherwise stated.

Context of amendments

4.2 The Temporary Residents' Superannuation Legislation Amendment Act 2008 (Temporary Residents Act) amended the S(UMLM) Act and other Acts to provide that the superannuation money of a former temporary resident is included in unclaimed superannuation and is payable to the Commissioner of Taxation (Commissioner).

4.3 Changes to the broader unclaimed money regime make the existing provisions in the S(UMLM) Act more compatible with the new temporary residents' unclaimed superannuation provisions which have been inserted into that Act. The amendments also improve the general administration of the unclaimed money regime.

4.4 Additional consequential amendments are required to other Acts as a result of the temporary residents' unclaimed superannuation regime.

Summary of new law

4.5 The temporary residents' superannuation amendments include changes to legislation governing:

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small superannuation account payments;

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superannuation guarantee shortfall components;

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Government superannuation co-contribution payments; and

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financial transaction reporting.

4.6 The changes to the broader unclaimed money regime include:

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allowing the Commissioner to set the due dates for statements and payments by legislative instrument;

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payments of unclaimed superannuation by the Commissioner;

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making the penalties and general interest charge operate for unclaimed money consistent with broader taxation administration;

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clarifying the law in relation to the taxation components of unclaimed money payments made by the Commissioner;

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other administrative issues, such as refunds and returns and recovery of overpayments; and

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other minor refinements and improvements to the operation of the existing law.

Comparison of key features of new law and current law

Detailed explanation of new law

Unclaimed money

4.7 The simplified outline of the S(UMLM) Act is being amended to reflect the amendments being made to that Act by this Schedule. [Schedule 2, items 1 to 5, section 7]

4.8 A definition of 'former temporary resident' is being inserted into the S(UMLM) Act to simplify various provisions in that Act and as a reference for use of this term in another Act. The meaning is effectively the same as that outlined in paragraphs 20C(1)(b) to (d) of that Act (which are to be repealed). [Schedule 2, items 6, 28 and 29, sections 8 and 20AA and paragraphs 20C(1)(b) to (d)]

4.9 Part 3 of the S(UMLM) Act will now also be separated into Divisions, with Division 1 commencing at section 11. [Schedule 2, item 9]

4.10 A minor technical correction is being made so that references in the S(UMLM) Act correctly refer to a superannuation provider for a fund rather than a superannuation provider in relation to a fund. [Schedule 2, item 10, subsection 13(1)]

Dates for statements and payments of unclaimed money

4.11 Currently Part 3 of the S(UMLM) Act requires a superannuation provider to give a statement and pay unclaimed money in relation to that statement to the Commissioner in relation to the unclaimed money as at the end of each half-year. A half-year ends on 30 June or 31 December. Statements in relation to those half-years are due before 1 November and 1 May respectively. Payments are due and payable when the statement of unclaimed money is given to the Commissioner.

4.12 The definition of 'scheduled statement day' inserted into the S(UMLM) Act by the Temporary Residents Act is being replaced by a new definition so that the term also has the meaning given by section 15A of the S(UMLM) Act in relation to a statement required by Part 3 of that Act. This will help to achieve consistency in the reporting requirements of Part 3 and Part 3A of that Act. [Schedule 2, item 7, section 8]

4.13 A definition of 'unclaimed money day' is being inserted into the S(UMLM) Act and will have the meaning given by section 15A. [Schedule 2, item 8, section 8]

4.14 For the purposes of Part 3 of the S(UMLM) Act, the Commissioner will be able to specify unclaimed money days by legislative instrument. The Commissioner will also be able to specify the scheduled statement day that relates to the unclaimed money day by legislative instrument. [Schedule 2, item 11, section 15A]

4.15 The new regime being implemented by this Schedule as it applies to statements and payments of unclaimed money by superannuation providers to the Commissioner under Part 3 of the S(UMLM) Act, will not apply to half-years that end on 30 June 2009 or earlier half-years. [Schedule 2, subitem 67(2)]

4.16 An unclaimed money day specified by the Commissioner under paragraph 15A(a) of the S(UMLM) Act will have to be a day that occurs on or after 1 July 2009. [Schedule 2, subitem 67(1)]

4.17 Despite the amendments to sections 16, 17 and 18 of the S(UMLM) Act being made by this Bill, those sections, as in force just before the commencement of this Schedule, continue to apply in relation to half-years ending before 1 July 2009. [Schedule 2, subitem 67(2)]

Statement of unclaimed money

4.18 For the purposes of Part 3 of the S(UMLM) Act a superannuation provider will now be required by section 16 to give to the Commissioner, by the end of the scheduled statement day that relates to an unclaimed money day, a statement in relation to all unclaimed money as at the end of the unclaimed money day. [Schedule 2, item 12, subsections 16(1) and (3)]

4.19 A superannuation provider includes the trustee of a regulated superannuation fund or an approved deposit fund and a retirement savings account provider. However this requirement under section 16 of the S(UMLM) Act does not apply to a superannuation provider who is the trustee of a state or territory public sector superannuation scheme as defined in subsection 18(7) of the S(UMLM) Act and who gives a statement and makes a payment to a state or territory authority as provided for in section 18 of that Act.

4.20 The Commissioner may, under the Taxation Administration Act 1953 (TAA 1953), defer the time for the superannuation provider to give the statement of unclaimed money to the Commissioner. If the information is not given when it must be given the TAA 1953 provides for offences and administrative penalties.

4.21 The requirement by a superannuation provider to give a statement under section 16 of the S(UMLM) Act does not apply to a regulated superannuation fund with fewer than five members if there is no unclaimed money at the end of the unclaimed money day in that fund. That is, self-managed superannuation funds and small Australian Prudential Regulation Authority regulated superannuation funds will only be required to give to the Commissioner such a statement if they have unclaimed money at the end of an unclaimed money day. [Schedule 2, item 12, subsections 16(1) and (2A)]

4.22 Where a statement is required by subsection 16(1) of the S(UMLM) Act and there is no unclaimed money for any member (or holder in the case of a retirement savings account provider) at the end of the unclaimed money day the statement must say so. [Schedule 2, item 12, subsection 16(1A)]

4.23 Currently, a superannuation provider that holds no unclaimed money for a person in a reporting period is not required to give to the Commissioner a statement under section 16 of the S(UMLM) Act. This new reporting requirement will give the Commissioner greater certainty about whether a superannuation provider is fulfilling its reporting obligations and allow more effective enforcement of reporting obligations.

4.24 A statement under subsection 16(1) of the S(UMLM) Act will be required to be given in a form approved by the Commissioner. The statement may also cover matters of unclaimed money administration in connection with Part 3 of the S(UMLM) Act, the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 (DASP Act), as well as (in so far as they relate to either the DASP Act or Part 3 of the S(UMLM) Act), Part 3AA of the S(UMLM) Act, (dealing with the unclaimed superannuation money of former temporary residents), the Income Tax Assessment Act 1997 (ITAA 1997), and Chapters 2 and 4 in Schedule 1 to the TAA 1953. The approved form may also require the statement to include certain tax file numbers (TFNs) under subsection 25(1) of the S(UMLM) Act. [Schedule 2, item 12, subsection 16(1)]

4.25 Such reporting may include information that allows the Commissioner to apply the correct taxation treatment to a payment of unclaimed money made in respect of a person under section 17 of the S(UMLM) Act.

4.26 If the statement required to be given by superannuation providers under subsection 16(1) of the S(UMLM) Act includes false or misleading statements the TAA 1953 provides for offences and administrative penalties. The amendments in this Bill will make the penalties for unclaimed superannuation money consistent with broader taxation administration.

4.27 The statement of unclaimed money required to be given by a superannuation provider under subsection 16(1) of the S(UMLM) Act to the Commissioner will (similar to the existing requirement) include information about each payment made to an entitled person between the end of the unclaimed money day and the day on which the superannuation provider gives the statement to the Commissioner. [Schedule 2, item 12, subsection 16(2)]

4.28 The statement of unclaimed money must also now include information about amounts that were unclaimed money at the end of the unclaimed money day, but which ceased to be unclaimed money between the end of that day and the day on which the superannuation provider gives the statement to the Commissioner (other than in situations where the provider made a payment to the Commissioner under subsection 17(1) of the S(UMLM) Act). [Schedule 2, item 12, paragraph 16(2)(b)]

Example 4.1

On 31 December 2009 Lidia's superannuation provider considered that the amount payable to Lidia was unclaimed money as it satisfied all the conditions of subsection 12(1) of the S(UMLM) Act. The amount was due and payable before 1 May 2010. However on 31 March 2010 Lidia made a contribution to her account, resulting in the criterion of paragraph 12(1)(c) no longer being satisfied.

Although the amount payable to Lidia was no longer unclaimed money, Lidia's superannuation provider is still required to include in the statement of unclaimed money information in relation to the amount.

4.29 As a result of the amendments made by this Schedule, some minor technical corrections are made to subsection 16(7) and associated note of the S(UMLM) Act which were inserted by the Temporary Residents Act. [Schedule 2, items 13 and 14, subsection 16(7)]

Errors or omissions

4.30 There is currently no obligation for superannuation providers to correct errors in, or omissions from, the information reported to the Commissioner in an unclaimed money statement (eg, unlike the case with member contributions statements provided under section 390 of the TAA 1953).

4.31 Where a superannuation provider is required to give the Commissioner a statement under section 16 of the S(UMLM) Act and the provider becomes aware of a material error in, or omission from, that statement, the provider must now give the Commissioner the corrected or omitted information in the approved form no later than 30 days after becoming aware of the error or omission. [Schedule 2, item 15, section 16A]

4.32 These provisions will provide greater certainty to the Commissioner that superannuation providers have correctly fulfilled their reporting obligations under the S(UMLM) Act.

4.33 The obligations on superannuation providers under section 16A of the S(UMLM) Act will not apply in relation to statements given to the Commissioner under section 16 of that Act, as were in force just before the commencement of this Schedule. [Schedule 2, item 68]

4.34 A superannuation provider's obligations to correct an error or omission remain even if the Commissioner becomes aware of the error or omission, including where the Commissioner takes action as a result of such a discovery (eg, by refunding under section 18A of the S(UMLM) Act an overpayment made by a superannuation provider).

4.35 The Commissioner may, under section 388-55 in Schedule 1 to the TAA 1953, defer the time for the superannuation provider to give the information. If the information is not given when it must be given, the TAA 1953 provides for offences and administrative penalties. The amendments in this Bill make penalties operate for unclaimed superannuation money consistent with broader taxation administration.

Payment of unclaimed money to the Commissioner

4.36 For the purposes of Part 3 of the S(UMLM) Act a superannuation provider must under subsection 17(1) of that Act pay to the Commissioner the amount worked out under subsection 17(1A) of that Act in relation to each unclaimed money day. The amount that the provider must pay the Commissioner is due and payable at the end of the scheduled statement day for the unclaimed money day. However the requirements of subsection 17(1) of the S(UMLM) Act do not apply to a superannuation provider who is a trustee of a state or territory public sector superannuation scheme as defined in subsection 18(7) of that Act and who gives a statement and makes a payment to a state or territory authority as provided for in section 18 of that Act. Section 18A of the S(UMLM) Act also allows the Commissioner to refund an overpayment by the provider that occurs when making such a payment. [Schedule 2, items 16 and 20, subsections 17(1) and 18(2)]

4.37 The Commissioner may, under section 255-10 in Schedule 1 to the TAA 1953, defer the time at which the amount is due and payable by the superannuation provider. The amount the provider must pay is a tax-related liability for the purposes of the TAA 1953 and as such a general interest charge and administrative penalties are connected with such liabilities. The amendments in this Bill make penalties operate for unclaimed money consistent with broader taxation administration.

4.38 The amount due and payable under subsection 17(1) of the S(UMLM) Act will now be worked out using the formula in subsection 17(1A) of that Act. The formula starts with all unclaimed money as at the end of the unclaimed money day. The formula then subtracts 'former unclaimed money' from the amount due and payable. Former unclaimed money arises from either one of two events that occur between the end of the unclaimed money day and the day on which the superannuation provider gives the statement of unclaimed money to the Commissioner under subsection 16(1). The first of those events is a payment or payments by the superannuation provider to a person who is entitled to the money. The second of those events is unclaimed money that ceases to be unclaimed money (other than because of a payment made by the superannuation provider under subsection 17(1) of the S(UMLM) Act). [Schedule 2, item 16, subsection 17(1A)]

Example 4.2

Continuing from Example 1.1, Lidia's superannuation provider is not required to pay an amount to the Commissioner under subsection 17(1) of the S(UMLM) Act on 1 May 2010 in relation to Lidia, as the unclaimed money in question ceased to be unclaimed money between the end of the unclaimed money day and the day on which the superannuation provider gives the statement of unclaimed money to the Commissioner.

4.39 Subsection 17(1) of the S(UMLM) Act will not require the superannuation provider to pay the Commissioner an amount of unclaimed money that satisfied the conditions outlined in subsection 12(1) of the S(UMLM) Act if the amount relates to a person for whom the Commissioner has given a notice to the provider under section 20C of that Act. This is because such money is payable to the Commissioner under section 20F of the S(UMLM) Act. [Schedule 2, item 16, subsection 17(1B)]

Example 4.3

Nadia was a former temporary resident who last left Australia in 2003. On 31 December 2009 Nadia's superannuation provider considered that the amount payable to Nadia was unclaimed money as it satisfied all the conditions of subsection 12(1) of the S(UMLM) Act. The amount was due and payable on 1 May 2010 under subsection 17(1) of that Act. However on 1 February 2010 the Commissioner gave a notice (former temporary resident notice) to Nadia's superannuation provider under section 20C of the S(UMLM) Act. As a result Nadia's superannuation provider was required to pay an amount to the Commissioner in accordance with section 20F of that Act and no longer required to pay the amount under subsection 17(1) of that Act.

State and territory providers

4.40 At present if the unclaimed money legislation of a state or territory satisfies the requirements of subsections 18(4) and (5) of the S(UMLM) Act the trustee of a state or territory public sector superannuation scheme can report and pay unclaimed money to the relevant state or territory authority rather than provide a statement to, and pay unclaimed money to, the Commissioner. That is, if such a provider complies with the relevant laws in its jurisdiction, it does not have to comply with subsection 16(1) or 17(1) of the S(UMLM) Act.

4.41 In the future a trustee of a state or territory public sector superannuation scheme can continue to report and pay unclaimed money to the relevant state or territory authority in accordance with the existing requirements. It will not be necessary for such a trustee to comply with the new arrangements as provided for by this Schedule in relation to statements and payments to the Commissioner, and the periods that apply to those statements and payments (sections 16 and 17 of the S(UMLM) Act), if the unclaimed money legislation of a state or territory satisfies the requirements of subsections 18(4) and (5) of the S(UMLM) Act as in force just before the commencement of this Schedule and certain conditions are met. [Schedule 2, items 21 and 22, subsections 18(4) and (5)]

4.42 The first condition is that a trustee of a state or territory public sector superannuation scheme gives the relevant state or territory authority a statement that satisfies the requirements of subsection 18(4) of the S(UMLM) Act in relation to the first half-year that ends on or after the unclaimed money day (to be specified by legislative instrument). The second condition is that such a trustee pays the amount worked out under item 3 of subsection 18(4) of that Act to the relevant state or territory authority. [Schedule 2, items 20 and 21, subsections 18(2) and (4)]

4.43 If a trustee of a state or territory public sector scheme fails to comply with the requirements under section 18 of the S(UMLM) Act with the relevant state or territory authority, the trustee will then have to comply with the new arrangements as provided for by this Schedule in relation to all unclaimed money days for which both a statement was not given and a payment was not made to the state or territory authority.

Payment of unclaimed money from the Commissioner

4.44 A reference to a payment made under subsection 17(1) or 17(2) of the S(UMLM) Act includes a payment made under that respective subsection as in force before the commencement of this Schedule. [Schedule 2, item 69]

4.45 The Commissioner will have to pay unclaimed money in respect of a person if a superannuation provider paid unclaimed money to the Commissioner under subsection 17(1) of the S(UMLM) Act in respect of that person and the Commissioner is satisfied that an amount can be paid in respect of that person under subsection 17(2) of that Act. The Commissioner may either be satisfied on receipt of an application in the approved form or by the Commissioner's own initiative. [Schedule 2, item 16, subsection 17(1C)]

4.46 Money for payments under subsection 17(2) of the S(UMLM) Act is appropriated by section 16 of the TAA 1953. There is no need for the former appropriation provision in the S(UMLM) Act. [Schedule 2, item 18]

4.47 If, during the life of a person, the Commissioner can pay unclaimed money in respect of a person because the conditions in subsection 17(1C) of the S(UMLM) Act are satisfied, then the Commissioner must pay the amount to the person unless the person directs the Commissioner to pay the amount to a fund that is a complying superannuation plan. In the case of payments to a fund, the Commissioner can only pay to a single fund. [Schedule 2, item 16, paragraphs 17(2)(a) and (d)]

4.48 If, after the death of the person, the Commissioner can pay unclaimed money in respect of a person because the conditions in subsection 17(1C) of the S(UMLM) Act are satisfied and the Commissioner is satisfied that the superannuation provider, had it not paid the amount to the Commissioner as unclaimed money, would have been required to pay a death benefit amount or amounts to one or more death beneficiaries as a result of the person's death then the Commissioner must pay the amount to that beneficiary or beneficiaries. If the Commissioner cannot be so satisfied, then the Commissioner must pay the amount to the person's legal personal representative. [Schedule 2, item 16, paragraphs 17(2)(b) and (c) and subsection 17(2AA)]

Example 4.4

Andrew provided a binding death nomination to his superannuation provider nominating his wife Thea as a death beneficiary. Unclaimed money in respect of Andrew was paid to the Commissioner by the superannuation provider under subsection 17(1) of the S(UMLM) Act. After Andrew died Thea contacted the Australian Taxation Office to inquire about lost or unclaimed superannuation held for her deceased husband either in a fund or by the Commissioner. The Commissioner was able to be satisfied through documents provided by Thea that Andrew's superannuation provider would have been required to pay Thea a death benefit had it not paid an amount in respect of Andrew to the Commissioner as unclaimed money. As the relevant conditions of paragraph 17(2)(b) of the S(UMLM) Act apply, the Commissioner must make a payment to Thea in accordance with subsection 17(2AA) of that Act.

4.49 A formula is applied to death beneficiary payment cases covered by paragraph 17(2)(b) of the S(UMLM) Act. If there is only one death beneficiary the whole of the unclaimed money is payable to that beneficiary. However where there is more than one death beneficiary the formula acts as a proportioning rule to determine how much of the amount that the Commissioner has available to pay, is payable to each death beneficiary. [Schedule 2, item 16, subsection 17(2AA)]

4.50 As a result of the amendment made by this Schedule, some minor technical corrections are made to subsection 17(2A) of the S(UMLM) Act. Subsection 17(2A) was inserted by the Temporary Residents Act. [Schedule 2, item 17, subsection 17(2A)]

4.51 The S(UMLM) Act will now provide that a superannuation provider is liable to pay a general interest charge on an amount of unclaimed money that is due and payable under subsection 17(1) of that Act that remains unpaid after it is due and payable. These amendments will make the operation of unclaimed money consistent with broader taxation administration. [Schedule 2, item 19, subsection 17A(1)]

4.52 The S(UMLM) Act will now provide that an offence is committed if a person by their conduct breaches a requirement under subsection 17(1) of that Act. These amendments make the former penalty provision in subsection 17(6) of that Act no longer necessary and so subsection 17(6) is repealed. [Schedule 2, items 18 and 19 and subsection 17A(2)]

4.53 Whilst a reference to a payment made under subsection 17(1) of the S(UMLM) Act includes a payment made before the commencement of this Schedule, section 17A as inserted by this Schedule does not apply to such a payment. [Schedule 2, item 69]

4.54 There is a lower likelihood that an amount will be required to be withheld by the Commissioner under Division 12 in Schedule 1 to the TAA 1953 from a payment made under subsection 17(2) of the S(UMLM) Act (eg, for an excess untaxed roll-over amount) than from a payment made under section 20H (ie, for withholding that applies to departing Australia superannuation payments). However, where tax is withheld from a payment under subsection 17(2) of the S(UMLM) Act, such an amount is still taken to have been paid by the Commissioner despite the fact that provisions that are similar to subsections 20H(5) and (6) of the S(UMLM) Act have not been inserted into section 17 by this Bill.

Refunds, overpayments and returns

4.55 The S(UMLM) Act will now provide for a refund of an overpayment made to the Commissioner by a superannuation provider under Part 3 in a similar manner as provided by section 20K for an overpayment made to the Commissioner by a superannuation provider under Part 3A (ie, payment of unclaimed superannuation of former temporary residents). As a result, subsection 17(3) of the S(UMLM) Act is also repealed. [Schedule 2, items 18 and 23, subsection 18A(1)]

4.56 Similar to the conditions in section 20K of the S(UMLM) Act, where an amount is to be refunded by the Commissioner under section 18A, the Commissioner must pay the relevant amount to the superannuation provider which made the underlying overpayment (or, if that superannuation provider no longer exists, to the provider of a successor fund). [Schedule 2, item 23, subsection 18A(2)]

4.57 Money for payments under subsection 18A(2) of the S(UMLM) Act is appropriated by section 16 of the TAA 1953.

4.58 Whilst a reference to a payment made under subsection 17(1) of the S(UMLM) Act includes a payment made before the commencement of this Schedule, section 18A as inserted by this Schedule does not apply to such a payment. [Schedule 2, item 69]

4.59 The S(UMLM) Act will now allow the Commissioner to recover an overpayment that results from a payment made, or purportedly made, under Part 3 in respect of a person in a similar manner as provided for by section 20L for an overpayment made under Part 3A (ie, payment of unclaimed money of former temporary residents). [Schedule 2, item 23, section 18B]

4.60 Before recovering an overpayment the Commissioner must give the debtor a written notice about the proposed recovery and specify the amount to be recovered. Prescribing the details to be covered by the written notice gives the Commissioner flexibility to alter the notice to allow for changing circumstances. [Schedule 2, item 23, paragraph 18B(4)(a)]

4.61 The notice in section 18B of the S(UMLM) Act is not a 'legislative instrument' within the definition in section 5 of the Legislative Instruments Act 2003 because it does not have a legislative character which determines or alters the content of the law; it is merely declaratory of the law and causes the law to be applied. [Schedule 2, item 23, subsection 18B(8)]

4.62 Whilst a reference to a payment made under subsection 17(2) of the S(UMLM) Act includes a payment made before the commencement of this Schedule, section 18B as inserted by this Schedule does not apply to such a payment. [Schedule 2, item 69]

4.63 The S(UMLM) Act will now provide that if a superannuation provider cannot credit a payment made by the Commissioner under subsection 17(2) within a certain period to an account for the benefit of the person, then the superannuation provider must return the payment to the Commissioner [Schedule 2, item 23, section 18C] . This is similar to section 20M of the S(UMLM) Act in relation to payments made by the Commissioner under Part 3A (ie, payment of unclaimed money of former temporary residents).

4.64 Whilst a reference to a payment made under subsection 17(2) of the S(UMLM) Act includes a payment made before the commencement of this Schedule, section 18C as inserted by this Schedule does not apply to such a payment. [Schedule 2, item 69]

4.65 The amount the provider must pay is a tax-related liability for the purposes of the TAA 1953 and the Commissioner can deal with the amount in a way that is consistent with broader taxation administration, including deferring the time that the amount is due and payable and applying a general interest charge and administrative penalties in connection with such liabilities.

Administrative matters

Unclaimed and lost member registers

4.66 A new Part is inserted in the S(UMLM) Act by this Schedule in relation to the register of unclaimed money. [Schedule 2, item 23, Part 3AA]

4.67 The register of unclaimed money will now also contain particulars of amounts paid to the Commissioner under section 20F of the S(UMLM) Act. That is, particulars of unclaimed superannuation of former temporary residents. [Schedule 2, item 26, paragraphs 19(1)(c) and (d)]

4.68 Other minor technical amendments are made to the existing provisions of the S(UMLM) Act. [Schedule 2, items 24 and 25, paragraphs 19(1)(a) and (b)]

4.69 Currently, a superannuation provider who fails to lodge a lost member statement with the Commissioner in accordance with Regulations 5 and 6 of the Superannuation (Unclaimed and Lost Members) Regulations 1999 , is guilty of an offence under subsection 23(5) of the S(UMLM) Act. However, there are existing offence and administrative penalties under the TAA 1953 for failing to lodge an approved form on time (ie, sections 8C and 8E and Division 286 in Schedule 1). The duplicate offence in the S(UMLM) Act is removed by this Schedule. The TAA 1953 also provides for offences if the statement includes false or misleading statements. [Schedule 2, items 33 to 35, subsections 23(1) and (5)]

Information, access and records

4.70 Subsection 25(1) of the S(UMLM) Act currently only allows a statement provided under section 16 to the Commissioner to include the TFN of the fund and the relevant member. This Schedule amends subsection 25(1) to also allow the TFN of the superannuation provider for the fund to be provided to the Commissioner. [Schedule 2, item 36, subsection 25(1)]

4.71 Subsection 26(2) of the S(UMLM) Act currently provides that the trustee of a regulated exempt public sector superannuation scheme may (in certain circumstances) give a state or territory authority the TFNs of the scheme and the scheme's members in the approved form (ie, as per section 388-50 in Schedule 1 to the TAA 1953). This Schedule will now allow the form to be a form approved by a state or territory authority rather than an approved form under the TAA 1953. [Schedule 2, item 37, subsection 26(2)]

4.72 Section 32 of the S(UMLM) Act allows the Commissioner to disclose protected information for the purposes of, or in the performance of duties under, that Act. Section 37 is not relevant and is repealed. [Schedule 2, items 38 and 39]

4.73 Notes are inserted in provisions that apply penalties on a person who prevents access to the Commissioner under section 288-35 in Schedule 1 to the TAA 1953, and, on a person who fails to keep and retain proper records under section 288-25 of Schedule 1 and sections 8L, 8M, 8Q, 8R, 8T and 8V of the TAA 1953. [Schedule 2, items 40 and 41, subsections 46(4) and 48(5)]

Taxation administration

4.74 The TAA 1953 is amended so that a superannuation provider is liable to pay a general interest charge on an amount of unclaimed money that is due and payable under subsections 17(1) and 18C(2) of the S(UMLM) Act and remains unpaid after it is due and payable. This amendment will make the operation of unclaimed money consistent with broader taxation administration. [Schedule 2, item 64, subsection 8AAB(5) of the TAA 1953]

4.75 The TAA 1953 is amended so that withholding tax can be worked out under the regulations for excess untaxed roll-over amounts. This amendment will make the operation of unclaimed money consistent with broader taxation administration. [Schedule 2, item 65, subsection 15-10(2) in Schedule 1 to the TAA 1953]

4.76 The TAA 1953 is amended so that an amount that a superannuation provider must pay under section 17 or 18C of the S(UMLM) Act is a tax-related liability for the purposes of administrative penalties and offences that need to be connected with such liabilities. The amendments in this Bill will make the operation of the penalties and offences for unclaimed money consistent with broader taxation administration. [Schedule 2, item 66, subsection 250-10(2) in Schedule 1 of the TAA 1953]

Temporary residents' superannuation consequential amendments

Former temporary resident definition

4.77 A new definition of 'former temporary resident' is inserted by this Schedule into the S(UMLM) Act. This definition will be used in other provisions in that Act and in the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992).

4.78 A 'former temporary resident' is a person in relation to whom the Commissioner would give a superannuation provider a notice under section 20C of the S(UMLM) Act if the Commissioner was also satisfied that the person has a superannuation interest in the fund. The simplified outline is also amended. [Schedule 2, items 27 to 29, sections 20A and 20AA and paragraphs 20C(1)(b) to (d)]

4.79 The regulations may prescribe a visa for the purposes of subparagraph 20AA(1)(a)(i) of the definition. Prescribing exclusions to the definition of a former temporary resident allows flexibility, for example, to respond to changing circumstances (ie, if a new temporary visa class is created) and to cater appropriately for any specific visa classes. [Schedule 2, items 28 and 70, subsection 20AA(2)]

4.80 The notice in section 20C of the S(UMLM) Act is not a 'legislative instrument' within the definition of section 5 of the Legislative Instruments Act 2003 because it does not have a legislative character which determines or alters the content of the law; it is merely declaratory of the law and causes the law to be applied.

4.81 Minor technical amendments are made to the existing provisions of the S(UMLM) Act. [Schedule 2, items 30 to 32, paragraphs 20L(1)(a) and (b) and subparagraph 20E(1)(b)(iii)]

Small superannuation amounts

4.82 The amendments will provide that where an individual satisfies the Commissioner that they are not a permanent resident or Australian citizen or New Zealand citizen and that they held a temporary visa that has ceased to be in effect and have left Australia, the individual may apply, under the Small Superannuation Accounts Act 1995 (SSAA 1995), for a payment from the Superannuation Holding Account Special Account. [Schedule 2, items 53 to 57, sections 4, 14, 62 and 67A of the SSAA 1995]

4.83 It was necessary to update the SSAA 1995 in this way as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government. This condition is also consistent with the condition which applies to an individual applying for a departing Australia superannuation payment from a superannuation provider.

Superannuation guarantee shortfall amounts

4.84 If an employee was a former temporary resident and the Commissioner has received a superannuation guarantee shortfall component in respect of that person the Commissioner will no longer pay the amount to a superannuation provider of the person or to the person or to the person's legal personal representative, but rather will now treat the amount as if it had been received from a superannuation provider under section 20F of the S(UMLM) Act. [Schedule 2, items 60 to 63, sections 65, 65AA, 65A, 66 and 67 of the SGAA 1992]

4.85 It was necessary to update the SGAA 1992 in this way as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government. This will prevent unnecessary transfers of amounts by the Commissioner to superannuation providers where the amount will most likely have to be paid back to the Commissioner under section 20F of the S(UMLM) Act.

Government superannuation co-contribution payments

4.86 Currently a Government superannuation co-contribution is not payable to a person who holds at any time during an income year an eligible temporary resident visa. The definition of 'eligible temporary resident visa' is being replaced as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government. As a result amendments are necessary to the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (Co-contribution Act).

4.87 A person will no longer be eligible for a Government superannuation co-contribution under the Co-contribution Act if they hold a temporary visa (under the Migration Act 1958 ) at any time during the income year unless at all times when they hold such a visa they are either a New Zealand citizen or the holder of a visa prescribed for the purposes of subsection 20AA(2) of the S(UMLM) Act. [Schedule 2, items 58 and 59, sections 6 and 56 of the Co-contribution Act]

4.88 The amendments to section 6 of the Co-contribution Act made by this Schedule only apply in relation to the 2009-10 and later income years. [Schedule 2, item 71]

Financial transaction reports

4.89 Under the Financial Transaction Reports Act 1988 if a cash dealer does not have certain information about an account, the account is blocked and withdrawals from such an account can give rise to an offence under that Act. However, this does not apply to certain withdrawals made in accordance with the S(UMLM) Act. This Bill replaces references to sections 17 and 18 of the S(UMLM) Act as a result of the payment of temporary residents' unclaimed superannuation to the Australian Government. [Schedule 2, item 42, paragraph 18(4B)(ca) of the Financial Transaction Reports Act 1988]

Income tax amendments

4.90 Schedule 2 amends the ITAA 1997 to address previous inefficiencies in the taxation treatment of payments of unclaimed money made by the Commissioner.

4.91 A lack of certainty previously existed as to whether a payment made by the Commissioner under subsection 17(2) of the S(UMLM) Act was an 'unclaimed money payment' and a 'superannuation benefit' as described in subsection 307-5(1) of the ITAA 1997. Previous wording of subsection 307-5(1) could be interpreted as only referring to payments made under subsection 17(1) of the S(UMLM) Act from a superannuation provider to the Commissioner. In order to remove any doubt in this regard, the reference in subsection 307-5(1) of the ITAA 1997 to section 17 of the S(UMLM) Act has been removed and replaced with a reference to subsection 17(1) or 17(2) of that Act. [Schedule 2, items 46 and 47, subsection 307-5(1) of the ITAA 1997]

Components of unclaimed money payments made by the Commissioner

4.92 Section 307-120 of the ITAA 1997 provides that section 307-142 of the ITAA 1997 calculates the tax free and taxable components of a payment made by the Commissioner under section 20H of the S(UMLM) Act. Section 307-120 of the ITAA 1997 is now amended to advise that section 307-142 of the ITAA 1997 also deals with payments made by the Commissioner under subsection 17(2) of the S(UMLM) Act. [Schedule 2, item 48, paragraph 307-120(2)(e) of the ITAA 1997]

4.93 Section 307-142 of the ITAA 1997 is amended to accommodate payments by the Commissioner under subsection 17(2) of the S(UMLM) Act, and to better address those payments made to the Commissioner under subsection 17(1) of the S(UMLM) Act before 1 July 2007 (when most superannuation payments were dealt with under the Income Tax Assessment Act 1936 (ITAA 1936)).

4.94 The amount of the tax free component of a superannuation benefit paid by the Commissioner under subsection 17(2) or section 20H of the S(UMLM) Act is calculated by determining:

•

the amount (the 'unclaimed amount') or amounts to which the superannuation benefit being paid by the Commissioner is attributable;

•

an amount (the 'claimed equivalent') which represents an amount notionally paid to the person, based on an assumption that the unclaimed amount (or amounts) was (or were) paid to the person instead of being paid to the Commissioner; and

•

the tax free component of that claimed equivalent.

4.95 The tax free component of the superannuation benefit paid under either subsection 17(2) or section 20H of the S(UMLM) Act is equal to the tax free component of the claimed equivalent. [Schedule 2, item 49, subsection 307-142(2) of the ITAA 1997]

4.96 The determination of the claimed equivalent and tax free components are dependant upon whether the underlying payment was made by the superannuation provider to the Commissioner under subsection 17(1) or subsection 20F(1) of the S(UMLM) Act, and if made under subsection 17(1), when that payment was made. [Schedule 2, item 49, column 1 in the table in subsection 307-142(3) of the ITAA 1997]

4.97 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid on or after 1 July 2007 by a superannuation provider to the Commissioner under subsection 17(1) of the S(UMLM) Act, the tax free component of that superannuation benefit is equal to the tax free component of the claimed equivalent. [Schedule 2, item 49, item 1 in the table in subsection 307-142(3) of the ITAA 1997]

Example 4.5

On 6 August 2007, Jenny's superannuation provider paid $5,000 to the Commissioner under subsection 17(1) of the S(UMLM) Act in respect of Jenny. Had the payment been made as a superannuation benefit to Jenny instead, it would have comprised a tax free component of $1,500 and an element taxed in the fund of the taxable component of $3,500. If the Commissioner were to make a payment under subsection 17(2) (or section 20H if applicable) which was attributable to the $5,000 amount, the tax free component of the payment would be $1,500, being equal to the tax free component of the claimed equivalent.

4.98 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid before 1 July 2007 by a superannuation provider to the Commissioner under subsection 17(1) of the S(UMLM) Act, the tax free component of that superannuation benefit is equal to the total of the components, as referred to in subsection 307-225(2) of the ITAA 1997, that form part (or all) of the claimed equivalent. [Schedule 2, item 49, item 2 in the table in subsection 307-142(3) of the ITAA 1997]

Example 4.6

On 15 June 2007, Daniel's superannuation provider paid $10,000 to the Commissioner under subsection 17(1) of the S(UMLM) Act in respect of Daniel. Had the payment been made as an eligible termination payment to Daniel instead, it would have comprised undeducted contributions of $1,000, a pre-July 1983 component of $2,000 and a post-June 1983 component (taxed element) of $7,000. The tax free component of this claimed equivalent is $3,000, being the total of the components referred to in subsection 307-225(2) of the ITAA 1997. If the Commissioner were to make a payment under subsection 17(2) (or section 20H if applicable) which was attributable to that $10,000 amount, the tax free amount of the payment would be $3,000, being equal to the tax free component of the claimed equivalent.

4.99 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid by a superannuation provider to the Commissioner under subsection 20F(1) of the S(UMLM) Act (other than an amount referred to in section 65AA of the SGAA 1992), the tax free component of that superannuation benefit is equal to the tax free component of the claimed equivalent. [Schedule 2, item 49, item 3 in the table in subsection 307-142(3) of the ITAA 1997]

4.100 The amount referred to in section 65AA of the SGAA 1992, which represents a shortfall component received by the Commissioner in relation to a former temporary resident, is excluded from the above calculation as the shortfall component should not contain a tax free component. The taxation treatment of shortfall components which relate to former temporary residents is discussed further in paragraph 2.108 of this chapter.

4.101 The taxable component of the superannuation benefit paid by the Commissioner under either subsection 17(2) or section 20H of the S(UMLM) Act is so much (if any) of the superannuation benefit that is not a tax free component. This includes, but is not limited to, a payment attributable to a shortfall component relating to a former temporary resident (as discussed above), as well as interest paid by the Commissioner under subsection 20H(2A) of the S(UMLM) Act. [Schedule 2, item 49, subsection 307-142(4)]

Elements of the taxable component of unclaimed money payments made by the Commissioner

4.102 The amount of the element taxed in the fund of the taxable component of a superannuation benefit paid by the Commissioner under subsection 17(2) or section 20H of the S(UMLM) Act is calculated by determining:

•

the amount (the 'unclaimed amount') or amounts to which the taxable component of the superannuation benefit being paid by the Commissioner is attributable;

•

an amount (the 'claimed equivalent') which represents the taxable component of an amount notionally paid to the person, based on an assumption that the unclaimed amount (or amounts) was (or were) paid to the person instead of being paid to the Commissioner; and

•

the element taxed in the fund of the taxable component of the claimed equivalent.

4.103 The element taxed in the fund of the taxable component of the superannuation benefit paid under either subsection 17(2) or section 20H of the S(UMLM) Act is equal to the element taxed in the fund of the taxable component of the claimed equivalent. [Schedule 2, item 51, subsection 307-300(2) of the ITAA 1997]

4.104 Similar to calculating the tax free component of the superannuation benefit, the determination of the element taxed in the fund of the taxable component is dependant upon whether the underlying payment was made by the superannuation provider to the Commissioner under subsection 17(1) or section 20F(1) of the S(UMLM) Act, and if made under subsection 17(1), when that payment was made. [Schedule 2, item 51, column 1 in the table in subsection 307-300(3) of the ITAA 1997]

4.105 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid on or after 1 July 2007 by a superannuation provider to the Commissioner under subsection 17(1) of the S(UMLM) Act, the element taxed in the fund of the taxable component of that superannuation benefit is equal to the amount of the element taxed in the fund of the taxable component of the claimed equivalent. [Schedule 2, item 51, item 1 in the table in subsection 307-300(3) of the ITAA 1997]

Example 4.7

Using the facts from Example 2.5, if the Commissioner were to make a payment under subsection 17(2) (or section 20H if applicable) which was attributable to the amount in question, the element taxed in the fund of the taxable component of the superannuation benefit would be $3,500, being equal to the element taxed in the fund of the taxable component of the claimed equivalent.

4.106 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid before 1 July 2007 by a superannuation provider to the Commissioner under subsection 17(1) of the S(UMLM) Act, the element taxed in the fund of the taxable component of that superannuation benefit is equal to the taxed element of the post-June 1983 component of the eligible termination payment (within the meaning of subsection 27A(1) of the ITAA 1936 as in force just before 1 July 2007) that forms part or all of the claimed equivalent. [Schedule 2, item 51, item 2 in the table in subsection 307-300(3) of the ITAA 1997]

Example 4.8

Using the facts from Example 2.6, if the Commissioner were to make a payment under subsection 17(2) (or section 20H if applicable) which was attributable to the amount in question, the element taxed in the fund of the taxable component of the superannuation benefit would be $7,000, being the taxed element of the 'post-June 1983 component' of the eligible termination payment and therefore also being the element taxed in the fund of the taxable component of the claimed equivalent.

4.107 Where the Commissioner pays a superannuation benefit which is attributable to an unclaimed amount paid by a superannuation provider to the Commissioner under subsection 20F(1) of the S(UMLM) Act (other than an amount referred to in section 65AA of the SGAA 1992), the element taxed in the fund of the taxable component of that superannuation benefit is equal to the amount of the element taxed in the fund of the taxable component of the claimed equivalent. [Schedule 2, item 51, item 3 in the table in subsection 307-300(3) of the ITAA 1997]

4.108 Continuing on from the discussion in paragraph 2.100 of this chapter, the amount which represents a shortfall component received by the Commissioner in relation to a former temporary resident is excluded from the above calculation as that shortfall component should not contain an element taxed in the fund of a taxable component. The amount of the superannuation benefit paid by the Commissioner which is attributable to a shortfall amount referred to in section 65AA of the SGAA 1992 should be comprised of an element untaxed in the fund of a taxable component. This reflects its nature as not having been subject to taxation, having never been included in the assessable income of a superannuation provider.

4.109 The element untaxed in the fund of a taxable component of the superannuation benefit paid by the Commissioner under either subsection 17(2) or section 20H of the S(UMLM) Act is so much (if any) of the taxable component that is not the element taxed in the fund. This includes, but is not limited to, a payment attributable to a shortfall component relating to a former temporary resident (as discussed above), as well as interest paid by the Commissioner under subsection 20H(2A) of the S(UMLM) Act (which reflects the nature of interest as having never been taxed). [Schedule 2, item 51, subsection 307-300(4)]

4.110 Subdivision 301-C of the ITAA 1997 deals with the taxation of elements untaxed in the fund of taxable components of superannuation benefits, but only in relation to superannuation benefits paid by superannuation plans. Amendments will be made to Subdivision 301-C of the ITAA 1997 to treat a superannuation lump sum paid by the Commissioner under either subsection 17(2) or section 20H of the S(UMLM) Act as if it were paid from a superannuation plan, thereby ensuring the correct taxation treatment of such payments. [Schedule 2, item 43, section 301-125 of the ITAA 1997]

Untaxed plan cap amount

4.111 An amendment is made to section 306-15 of the ITAA 1997 to clarify that an untaxed plan cap amount as referred to in that section relates to the superannuation plan making the payment, rather than to the superannuation plan receiving the roll-over amount. [Schedule 2, item 44, paragraph 306-15(1)(d) of the ITAA 1997]

4.112 A note is also added to section 306-15 of the ITAA 1997, advising that an untaxed plan cap amount in relation to an unclaimed money payment made by the Commissioner is calculated under subsection 307-350(2B) of the ITAA 1997. [Schedule 2, item 45, subsection 306-15(1) of the ITAA 1997]

4.113 Section 307-350 of the ITAA 1997 is amended to ensure that a person only has one untaxed plan cap amount in relation to amounts paid from the Commissioner under the S(UMLM) Act, regardless of whether more than one amount was received by the Commissioner from superannuation providers in relation to the person. [Schedule 2, item 52, subsection 307-350(2B) of the ITAA 1997]

4.114 Currently under section 307-350 of the ITAA 1997 the 'untaxed plan cap amount' is adjusted to take into account any superannuation member benefit that is received from a superannuation plan which includes an element untaxed in the fund. However, because an unclaimed money payment from the Commissioner in respect of a person under the S(UMLM) Act is not from a superannuation plan, the untaxed plan cap amount for the person has not been subject to variation by payments made by the Commissioner. The amendments in this Bill correct that situation and treat an unclaimed money payment from the Commissioner as if it were a payment from a superannuation plan for the purposes of excess untaxed roll-over taxation. [Schedule 2, item 52, subsection 307-350(2B) of the ITAA 1997]

Disability superannuation benefits

4.115 These provisions also clarify that section 307-145 of the ITAA 1997, relating to disability superannuation benefits, does not apply to an unclaimed money payment. [Schedule 2, item 50, subsection 307-145(1) of the ITAA 1997]

Application and transitional provisions

4.116 Despite the amendments to sections 16, 17 and 18 of the S(UMLM) Act being made by this Schedule those sections, as in force just before the commencement of this Schedule, continue to apply in relation to half-years ending before 1 July 2009. In addition, an unclaimed money day specified by the Commissioner under paragraph 15A(a) of the S(UMLM) Act will have to be a day that occurs on or after 1 July 2009. [Schedule 2, item 67]

4.117 The obligations on superannuation providers under section 16A of the S(UMLM) Act being made by this Schedule will not apply in relation to statements given to the Commissioner under section 16 of the S(UMLM) Act as in force just before the commencement of this Schedule. [Schedule 2, item 68]

4.118 Whilst a reference to a payment made under subsection 17(1) or 17(2) of the S(UMLM) Act includes a payment made before the commencement of this Schedule, sections 17A, 18A, 18B and 18C as inserted by this Schedule do not apply to such payments. [Schedule 2, item 69]

4.119 Savings provisions have been inserted to ensure that where regulations have been made for the purposes of subparagraph 20C(1)(b)(i) and paragraph 20L(4)(a) of the S(UMLM) Act before the commencement of this Schedule, that they have effect as if they had been made for the purposes of subsection 20AA(2) and paragraph 18B(4)(a) of the S(UMLM) Act respectively. These regulations deal with prescribed visa class exemptions from the definition of a 'former temporary resident' and written notices from the Commissioner to debtors respectively. [Schedule 2, item 70]

4.120 The amendments to the Co-contribution Act made by this Schedule only apply in relation to the 2009-10 and later income years. [Schedule 2, item 71]