House of Representatives

Explanatory Memorandum
(Incorporating Correction)

(Circulated by the authority of the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

Statement of compatibility with human rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013

1.27 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.28 The Bill increases the maximum levy threshold payable by a trustee of a self managed superannuation fund (SMSF) for a year of income from $200 to $300 from the 2013-14 income year onwards. The actual levy amount for a specific income year is prescribed in the relevant regulations.

1.29 All superannuation funds are subject to a supervisory levy to fund the regulatory costs of ensuring funds comply with the superannuation legislation. Separate levy arrangements apply to SMSFs and other superannuation entities to recover the costs of their regulation by the Australian Taxation Office (ATO) and by the Australian Prudential Regulation Authority (APRA) respectively. The establishment of an SMSF is a choice made by individuals to manage their retirement savings more directly than might be available through other superannuation vehicles.

1.30 Regulation of the SMSF sector by the ATO is compliance based and on a cost-recovery basis. The number of SMSFs has increased rapidly between the years ended 30 June 2008 to 30 June 2012. The number of SMSFs increased from almost 376,000 to over 478,000, representing growth of over 27 per cent. The money collected from the SMSF supervisory levy covers the costs incurred by the ATO (for example, annual compliance activities to ensure trustees comply with rules on contributions, benefit payments and superannuation investments) in regulating this rapidly growing and diverse SMSF sector. The SMSF supervisory levy does not currently fully recover the ATO's costs of regulating the sector. These amendments ensure that the ATO's costs of regulating the SMSF sector are fully recovered.

1.31 The Government announced in the 2012-13 Mid-Year Economic and Fiscal Outlook that the SMSF levy would be levied and collected in the same income year. Collection of the SMSF levy in the financial year in which it is levied is appropriate for a cost-recovery levy. This will also ensure consistency within the superannuation industry as other superannuation funds regulated by APRA pay the superannuation supervisory levy in the same financial year that it is levied.

Human rights implications

1.32 This Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.33 This Bill is compatible with human rights as it does not raise any human rights issues.