House of Representatives

Explanatory Memorandum

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

General outline and financial impact

This Bill contains amendments to the SIS Act, SUMLM Act, ITAA 1997 and TAA 1953 to protect individuals' retirement savings from erosion, ultimately increasing Australians' superannuation balances.

Date of effect: 1 July 2019

Proposal announced: This Bill implements the Protecting Your Super Package announced in the 2018-19 Budget.

Financial impact: The measures, including final amendments following consultation on the draft Bill, are estimated to have a gain to the budget of around $850 million in fiscal balance terms and around $1,750 million in underlying cash balance terms over the forward estimates.

Human rights implications: This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 6, paragraphs 6.1 to 6.11.

Compliance cost impact: Medium to high

Summary of regulation impact statement

Regulation impact on business

Impact: The amendments have an estimated annual compliance cost impact of $28.5 million averaged over 10 years.

Main points:

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The current superannuation regulatory framework provides no special protection for the erosion of retirement savings of low balance accounts through fees and premiums for default insurance.

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The scope of the RIS is the impact of excessive fees, inappropriate insurance arrangements and duplication of accounts on individuals. Addressing the root causes of account proliferation is beyond the scope of this RIS.

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Three options were considered and detailed in the RIS.

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Overall, Option 2 was determined as the preferred approach as it provides the greatest benefit to members at the lowest regulatory burden.

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Legislative amendments are required to implement Option 2.