House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services Minister for Women Minister Assisting the Prime Minister for the Public Service the Hon Kelly O'Dwyer MP)

Chapter 4 - Transfer of early release function

Outline of chapter

4.1 Schedule 4 to the Bill transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner (Australian Taxation Office).

Context of amendments

4.2 Superannuation benefits are generally required to be 'preserved' in the superannuation system until retirement on or after preservation age (between 55 and 60, depending on year of birth).

4.3 One of the ways in which superannuation benefits may be released before preservation age is where early access is justified on compassionate grounds. Benefits may be released on compassionate grounds only in limited circumstances. These are listed in the SIS Regs.

4.4 The Department of Human Services currently administers the early release of superannuation benefits on compassionate grounds. However, the Department of Human Services does not administer any other program within the superannuation system and the program is not aligned with its core service delivery arrangements.

4.5 The Australian Taxation Office administers several of the programs relating to the release of superannuation benefits. It is responsible for most individuals' interactions with the superannuation system and has an ongoing relationship with the superannuation industry.

4.6 The transfer of the regulator role to the Australian Taxation Office is intended to build on this existing relationship and to streamline the processes for the early release of superannuation benefits for both individuals and superannuation funds.

Operation of existing law

Administrative responsibilities

Superannuation funds

4.7 The framework for general administration of the SIS Act is set out in section 6 of that Act, which provides that APRA has general administration of certain provisions, unless they are otherwise conferred on ASIC, the Commissioner or the Chief Executive Medicare.

4.8 The agency that administers a provision is the regulator of that provision for the purposes of the SIS Act and the SIS Regs. The Regulator therefore means APRA, ASIC, the Commissioner or the Chief Executive Medicare in certain circumstances (section 10 of the SIS Act).

4.9 Currently, the Chief Executive Medicare is the regulator for early release of superannuation benefits on compassionate grounds (paragraph 6(1)(ba) of the SIS Act) who has the responsibility of determining in writing when a person qualifies for early release of superannuation benefits on compassionate grounds.

Retirement Savings Accounts

4.10 Paragraph 3(1)(b) of the RSA Act similarly provides APRA has general administration of that Act, to the extent it is not conferred on another regulator. Paragraph 3(1)(ba) provides the Chief Executive Medicare is the Regulator for the purposes of determining the amount of benefits in an RSA that may be released early on compassionate grounds.

Early release of superannuation benefits on compassionate grounds

4.11 Superannuation benefits are generally required to be 'preserved' in the superannuation system until retirement on or after preservation age (between 55 and 60, depending on year of birth). Subject to the governing rules of the fund, early release of 'preserved' benefits is permitted in certain restricted circumstances.

4.12 For example, amounts may be released to people from their superannuation account on compassionate grounds.

4.13 Currently, the regulator for determining the amount and grounds for release of limited retirement savings on compassionate grounds is the Chief Executive Medicare within the Department of Human Services (paragraph 6(1)(ba) of the SIS Act; paragraph 3(1)(ba) of the RSA Act.

4.14 The detailed rules for the early release of superannuation benefits are set out in the SIS Regs and the RSA Regs (collectively, the Regulations). It is expected that Regulations will be made to accompany the measure that will improve the efficiency and integrity of the release of superannuation benefits on compassionate grounds. These changes will be subject to public consultation.

Summary of new law

4.15 Schedule 4 to the Bill transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner (Australian Taxation Office).

4.16 This means that people will need to apply to the Commissioner rather than to the Chief Executive Medicare for release of superannuation benefits on compassionate grounds and the Commissioner will be responsible for making determinations about early release of superannuation benefits on compassionate grounds.

Comparison of key features of new law and current law

Detailed explanation of new law

4.17 Schedule 4 to the Bill transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner (Australian Taxation Office).

4.18 This means that people will need to apply to the Commissioner rather than to the Department of Human Services for release of superannuation benefits on compassionate grounds and the Commissioner will be responsible for making determinations about early release of superannuation on compassionate grounds.

4.19 The regulator role for early release of superannuation on compassionate grounds is removed from the Chief Executive Medicare. [Schedule 4, items 1 and 2, paragraphs 3(1)(b) and (ba) of the RSA Act; items 11, 12 and 13; subparagraph 6(1)(b)(i), paragraph 6(1)(ba) and paragraph 6(1)(f)(ia) of the SIS Act]

4.20 The functions being transferred to the Commissioner will be grouped together in the law so that they are clearly separate from APRA's functions. [Schedule 4, items 3 and 4, paragraph 3(1)(g) and the note to subsection 3(1) of the RSA Act; items 14 and 15; subparagraph 6(1)(g)(iii) and the note to subsection 6(1) of the SIS Act 1993;]

4.21 The Chief Executive Medicare will no longer have any functions under the SIS Act or the RSA Act. Accordingly, the definitions of Chief Executive Medicare in those Acts are no longer required. [Schedule 4, items 5 and 6, section 16; item 10, section 198 of the RSA Act; items 16, 17 and 18, subsection 10(1); item 22, section 351 of the SIS Act]

4.22 The Chief Executive Medicare was not permitted to intervene in any proceedings under the SIS Act or the RSA Act. As the Commissioner is able to intervene in proceedings under the Acts, the exclusion of the Chief Executive Medicare from intervening is repealed. [Schedule 4, item 7, subsection 168(4) of the RSA Act; item 19, subsection 320(4) of the SIS Act]

4.23 The Chief Executive Medicare was not permitted to grant exemptions from, and make modifications of, provisions of the Acts and the regulations. As the Commissioner is not excluded from having those powers, the provisions are no longer needed. [Schedule 4, items 8 and 9, section 173 of the RSA Act; items 20 and 21, section 327 of the SIS Act]

Application and transitional provisions

4.24 The amendments to the SIS Act and RSA Act commence from the earlier of the date fixed by proclamation or six months and one day after the Act receives Royal Assent. [Commencement information item 2; item 2 in the table in Commencement information in subitem 2(1); Schedule 4, item 23]

4.25 Applications for the early release of superannuation benefits on compassionate grounds made on or after the commencement of this Schedule must be made to the Commissioner (Australian Taxation Office).

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

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

Transfer of early release function

4.26 This Schedule 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

4.27 Schedule 4 to the Bill transfers the regulator role for early release of superannuation on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner of Taxation (Australian Taxation Office). It is expected that Regulations will be made to accompany the measure that will improve the efficiency and integrity of the release of superannuation benefits on compassionate grounds.

Human rights implications

4.28 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

4.29 This Schedule is compatible with human rights as it does not raise any human rights issues.