SENATE

Explanatory Memorandum

TO THE BILL AS INTRODUCED (Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)

CHAPTER 7 - Superannuation guarantee charge - notional earnings base

Overview

7.1 Part 1 of Schedule 3 of the Bill amends the Superannuation Guarantee (Administration) Act 1992 (SGAA) to extend the use of pre 21 August 1991 employee earnings bases if employers restructure their superannuation funds. Currently employers can only use such a base if they contribute:

•

to the same fund; and

•

under the same law, award, arrangement or scheme;

as for an employee for whom they were contributing immediately before 21 August 1991.

7.2 The Bill allows pre 21 August 1991 earnings bases to be kept by an employer if the employer contributes under the same law, award, arrangement or scheme to:

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a new fund under the same earnings base as the original fund if employees transfer between the funds and receive substantially the same or improved rights to benefits;

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an existing fund in relation to an employee of a former employer who transfers to the fund from a former employer's fund because of a business acquisition, if the base was used in the former employer's fund; or

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a former employer's fund for employees who transfer to the new employer because of a business acquisition.

Summary of the amendments

Purpose of the amendments

7.3 This measure will give effect to one of the changes announced by the Treasurer in his 28 June 1994 Statement on Superannuation Policy. The measure will ensure that the SGAA earnings base regime does not inhibit sensible and desirable restructuring of superannuation funds. Without these amendments employers would generally have to contribute under the standard earnings base of ordinary time earnings if restructuring, although an established pre 21 August 1991 earnings base could properly continue to be used without the restructure.

Date of effect

7.4 The amendments will affect the calculation of the superannuation guarantee charge on and from 1 July 1995, where qualifying restructures occur on or after 3.55pm ACT legal time on 28 June 1994 (the time the Treasurer announced the measure in Parliament). Therefore employers reorganising funds after the announcement need not lose an existing employee earnings base for contributions made for contribution periods on or after 1 July 1995. [Item 10]

7.5 Employers that restructured after the Treasurer's Statement but before 1 July 1995 will have changed to the ordinary time earnings base from the time of the restructure. On 1 July 1995 these employers will be able to revert to the pre 21 August 1991 earnings base to which they had previously contributed.

7.6 The measure only affects an employer's contributions from 1 July 1995 so that contributions already made by employers during the 1994-95 year and contributions due for that year will not be reduced.

Background to the legislation

Purpose of notional earnings bases

7.7 The minimum level of superannuation support required by employers under the SGAA is worked out as a percentage (the charge percentage) of the employee's notional earnings base (NEB) for a contribution period.

How are earnings bases currently worked out?

7.8 An employee's NEB under the SGAA is generally the higher of:

•

ordinary time earnings (OTE) (section 14); or

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the measure of earnings of the employee used in an award, law, occupational superannuation arrangement or superannuation scheme under which the employer's superannuation obligation is determined (section 13 or 14).

However, employers who were using a lower measure under an existing obligation immediately before 21 August 1991, when the SGAA regime was announced, may be able to continue to use that base under section 13. This helps to avoid the administrative costs of changes to established arrangements.

Section 13

7.9 An employee's NEB is currently determined under section 13 of the SGAA if:

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the employer was contributing to a superannuation fund for the benefit of an employee, perhaps another employee, immediately before 21 August 1991 (pre-21 August earnings base) under an arrangement, award, law or scheme;

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the employer contributes under the same scheme for the current employee for whom the NEB is being determined; and

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the contributions are made to the same fund as for the pre 21 August 1991 employee.

7.10 An employee's NEB under section 13 is, in general, the earnings of the employee by reference to which contributions are calculated under the award, arrangement, law or scheme.

7.11 An employer can only continue with a base less than OTE if that base was in use immediately before 21 August 1991. So a base by reference to which the employer ceased to calculate contributions before 21 August 1991 can not be resumed later.

Section 14

7.12 An employee's NEB is determined under section 14 of the SGAA if an employer first contributed to a fund after 20 August 1991. Generally the NEB in these circumstances is OTE. However, if the employer is contributing to a fund under an award, arrangement, law or scheme, the employee's NEB is:

•

if the earnings base is equal to or greater than OTE - the earnings of the member on which the employer's superannuation contributions for the member are based; or

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if the earnings base is less than OTE and is specified by the law (operative immediately before 21 August 1991) or under the industrial award under which the employer contributes - the earnings base on which the contributions are based.

Why are the amendments necessary?

7.13 Employers can now keep using the earnings base they were using immediately before 21 August 1991. They can use it for new employees, if those employees become members of the same fund and are contributed for according to the same earnings base. Employers keep the same earnings measure even if the employees who were members immediately before 21 August 1991 are no longer employed, or are no longer fund members.

7.14 However, if the employer is different or the fund is different, the former earnings measure can't continue to be used. The employer must apply section 14, to continuing employees and to new employees, and so must change the superannuation arrangements that apply.

7.15 In some circumstances this can inhibit sensible restructuring of superannuation arrangements. For instance, an employer might wish to consolidate existing superannuation funds, or move all employees to a new fund with standardised administration arrangements - these changes might significantly reduce costs of administration of the funds. Yet any such change would result in an increase of the earnings base by which the employer's contributions are assessed, for existing employees to whom the base applied, and for new employees to whom the former base would have applied had the employer made no change.

7.16 Another example is found when a business is sold. Currently the employees who transfer to the new employer may be the subject of contributions based on an established earnings base; the new employer must change to a new base for those employees, even if they are employed in the same business and on the same terms as before. Keeping their existing superannuation arrangements could significantly reduce costs of administering the change of employers. Of course, the new employer has no basis for applying the old base to new employees - any new employees of that employer would not have had their employer contributions calculated by reference to the old base. Any change to the law should avoid discouraging the sale of businesses - but no change should provide for the sale of earnings bases that the new employer could not otherwise have used for new employees.

7.17 The amendments are necessary to ensure that the cost of changes to an established earnings base need not inhibit restructuring of superannuation funds, and need not restrict the sale of a business. Where an established earnings base is maintained, employees will not go to the higher earnings base under section 14; but their earnings base will be no worse than before, and the restructure of superannuation arrangements may well reduce administrative costs of the fund, with consequent benefits for employees as well as employers.

7.18 The amendments enable the relationship between an employer and/or the superannuation fund to be broken upon a restructure, but still allow an established earnings base to continue to be used, if particular conditions are met. Without the amendments employers contributing to restructured funds would need to contribute under a section 14 NEB.

7.19 Restructures which would provide administrative savings should not be prevented by the need to change an established earnings base. However, the amendments only apply if there is such continuity in using an established earnings base that administrative convenience outweighs the general move to OTE as a standard minimum base for contributions. So, if the employer changes, the established NEB must have been used by a predecessor employer of the employee; and if the base wasn't used in the same fund, it must have been used in a predecessor fund for the employer who used it.

Explanation of the amendments

Desirable restructures

7.20 Some of the types of restructures that the amendments will apply to include situations in which:

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an employer amalgamates existing superannuation funds that the employer contributes to or transfers members to a new fund such as a master trust to obtain administrative cost savings compared to the existing structure;

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an employer acquires another business with an existing fund and seeks to close the acquired fund and transfer the members to the employer's fund in order to achieve lower administrative costs by having only one remaining fund; or

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an employer acquires another business with an existing fund and because of the unique benefit design of the fund seeks to keep that fund open rather than incurring the cost of redefining benefit scales for the members of that fund.

7.21 An employer who seeks to acquire a lower earnings base should not benefit from these measures. An employer who rationalises existing superannuation arrangements should not be disadvantaged by losing an established earnings base. An employer to whom employees transfer when the business in which they work is acquired should not have to change their established earnings base. But an employer without such links to an established earnings base should not be able to acquire the use of that base. Otherwise the general rule in section 14 could be avoided, without cause.

How the provision applies

7.22 Existing subsection 13(1) is replaced by new subsections 13(1) and (1A) [item 1] . These provisions build on the previous rule, that applied if the employer had contributed to the same fund, under the same earnings base, under the same award, arrangement, law or scheme for any employee immediately before 21 August 1991. New subsection 13(1B) provides a diagram of the simplest case in which new subsection 13(1) applies.

7.23 New subsection 13(1) establishes if an employer of an employee (the current employee ) is entitled to have a NEB determined under section 13.

7.24 For new subsection 13(1) to apply the following must exist:

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the current employee must be a member of a superannuation fund ( current fund ie. the fund that contributions under the NEB will be made to);

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the employee's employer ( current employer ) must contribute to the current fund for the current employee for a contribution period;

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the contributions must be made under an applicable authority; and

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new subsection 13(1A) applies.

7.25 The new subsection 13(1A) rule asks whether the current employer, or a predecessor employer of that employee, was contributing under the same earnings base and the same award, arrangement, law or scheme immediately before 21 August 1991. The employer who was contributing in this way may have done so to the same fund, or to a predecessor fund in relation to that employer.

7.26 Subsection 13(5) is amended to include a definition of applicable authority as:

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an industrial award;

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a law of the Commonwealth, a State or a Territory;

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an occupational superannuation arrangement; or

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an applicable superannuation scheme.

7.27 Employers may contribute to superannuation funds for the benefit of employees according to one or more of these authorities. However they can only use an existing earnings base if the authority under which the base was established immediately before 21 August 1991 is still the authority under which they contribute.

7.28 New subsection 13(1A) applies if the current employer or a predecessor employer (refer paragraphs 7.59 to 7.69) of the current employee was contributing under an applicable authority immediately before 21 August 1991 to:

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the current fund; or

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a predecessor fund (refer paragraphs 7.35 to 7.40) of the employer who was contributing immediately before 21 August 1991;

according to the same applicable authority, for the current employee or for another employee.

7.29 New subsection 13(1A) applies by reference to conditions satisfied by:

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the current employer; or

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the predecessor employer of the current employee;

in relation to:

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the current employee; or

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an employee other than the current employee.

7.30 These conditions may be satisfied in the same fund (the current fund), or in a predecessor fund.

7.31 The employer who was contributing immediately before 21 August 1991 according to the established NEB may be a predecessor employer. If that established earnings base is to be used by the current employer, the other employer must be a predecessor employer at the time the established NEB is to be used, not just some earlier or later time.

7.32 The fund to which an employer was contributing immediately before 21 August 1991 according to the established NEB may be a predecessor fund of that employer. If that established earnings base is to be used by the current employer, the fund must be a predecessor fund at the time the established NEB is to be used by the current employer, not just some earlier or later time.

7.33 A fund that has become a predecessor fund of another fund does not stop being a predecessor fund just because it ceases to exist. So, for instance, if the benefits of all employees in a fund are transferred to another fund so as to make the original fund a predecessor fund of the other fund, the original fund could be wound up without changing its status. In the same way, a predecessor employer does not stop being so just because it ceases to exist.

7.34 The term 'was contributing' refers to situations in which an employer:

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contributed in respect of a contribution period for an employee in a fund; or

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had a liability to contribute for a contribution period, even if no contribution was made and so the superannuation guarantee charge became payable.

What is a predecessor fund?

7.35 New subsections 13(4D) & (4E) & (4F) define a predecessor fund [item 4] . The meaning of the term is similar to the definition of a successor fund in the Superannuation Industry (Supervision) Regulations. A successor fund is defined by regulation under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993 in subregulation1.03(1) of the SISR.

7.36 Under subregulation 6.29 of the SISR a member's benefit can not be transferred from a fund without the member's consent unless the transfer is to a successor fund. The transfer of member benefits from a fund to a successor fund must meet the following conditions (subregulation 1.03(1)):

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after the transfer the successor fund confers on the member equivalent rights to the rights that the member had under the original fund concerning the benefits; and

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before the transfer, the trustee of the fund had agreed with the trustee of the original fund that the fund would confer on the member equivalent rights.

7.37 Under section 13, an employer can use an earnings base established by them in relation to one employee for other employees covered by the same applicable authority. So new subsection 13(4E) applies the test for a successor fund in relation to the employer, not each individual employee.

7.38 New subsection 13(4D) provides that, where new subsection 13(4E) or (4F) apply, then a fund (the test fund ) is a predecessor fund of another fund ( primary fund ) in relation to an employer if the test fund is a predecessor fund of the primary fund in relation to an employer (current or predecessor employer) at a particular time ( test time ).

7.39 New subsection 13(4E) enables a connection between two funds to qualify a fund as a predecessor fund of the other if, some time on or after 3.55pm legal time in the ACT on 28 June 1994 and before the connection needs to be found:

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at least part of one or more members' benefits of an employee of the employer are transferred by the test fund to the primary fund;

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the primary fund provides substantially the same or improved rights to benefits to the test fund for all employees who have had benefits transferred in this way;

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the trustees of each fund agree in writing before the transfer that such rights to benefits will be provided.

7.40 Therefore a primary fund that does not provide substantially the same or improved rights to benefits for each employee, immediately after that employee's benefits are transferred to it, will not meet the test, and the previous fund will not be a predecessor fund. Rights to benefits must be of the same value overall to be substantially the same, but there could be some respects in which rights to benefits are reduced, if these are balanced or outweighed by other rights to benefits which are increased.

What is the effect of having a predecessor fund relationship?

7.41 If the predecessor fund relationship exists an employer can use a section 13 NEB from the predecessor fund in calculating contributions for members of the primary fund. The employer can make contributions under that NEB in the primary fund for contribution periods (or part periods) while the former fund is a predecessor fund. Such contributions can be made for:

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members with benefits transferred from the predecessor fund, employed by the employer;

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new members of the primary fund who join later, employed by the employer.

7.42 This treatment extends to all those employees for whom contributions are made under the same applicable authority - the same award, arrangement, law or scheme. A diagram illustrating the operation of a typical successor fund transfer is contained in new subsection 13(1C) .

Example 1

7.43 In this example fund X becomes a predecessor fund to fund Y in relation to employer A when member B transfers to fund Y and satisfies the conditions in new subsection 13(4E) .

7.44 New subsection 13(4F) enables every fund in a chain of funds to have a predecessor fund relationship if the test in new subsection 13(4E) is met successively for each pair of funds in the chain (commencing from the pair in the chain directly linked to the original fund in the chain with the section 13 NEB).

7.45 Under new subsection 13(4F) the number of funds in the chain can be unlimited. It is not necessary that the same member transfer through each fund in a chain for the first fund in the chain to be a predecessor fund of the last fund in the chain. The simplest situation in which new subsection 13(4F) applies is shown in a diagram in new subsection 13(4G) .

7.46 A later pair of funds in a chain of funds may first gain a predecessor fund (PF) relationship before an earlier pair in the chain. The chain of funds can still satisfy new subsection 13(4F) , if the later pair has a member transfer between them after the earlier pair's PF relationship was created, resulting in new subsection 13(4E) continuing to be satisfied. In that case, the funds have gained a predecessor fund relationship by a transfer of member benefits after the previous predecessor fund relationship was in place, even though there had already been a benefit transfer.

7.47 The end of an earlier fund in a chain of funds does not extinguish the predecessor fund relationship. Accordingly a predecessor fund relationship may continue even if all earlier funds in the chain have been terminated.

Example 2

7.48 Fund A (section 13 NEB) becomes a predecessor fund to fund B (section 14 NEB) in relation to employer X when employee G transfers to fund B as new subsection 13(4E) is satisfied. A member of fund B, employee H transfers to fund C (section 14 NEB).

7.49 The effect of new subsection 13(4F) is that fund A becomes a predecessor fund of fund C in relation to employer X if new subsection 13(4E) applies to the transfers by G and H. Employer X may contribute to all fund C's future members from 1 July 1995 on a NEB under section 13 (if all other conditions are met).

7.50 Employer X may also contribute to all members transferred from funds A and B to fund C on a section 13 NEB, if new subsections 13(4E) and (4F) apply to all transfers. Members of funds B and C, for whom contributions were already made under a section 14 base cannot have that base reduced. Subsection 14(3) ensures that these members will continue to have a section 14 NEB.

7.51 Had G transferred to fund B before 3.55pm on 28 June 1994, the time of the Treasurer's announcement, then the transfer would not have resulted in fund A becoming a predecessor fund of fund C.

What happens if a transfer of a member fails to bring a predecessor fund relationship into existence?

7.52 If a transfer of a member's benefits is on such terms that the original fund is not, or is no longer, a predecessor fund then:

•

from the time failure of the test occurs, the employer irrevocably loses for the primary fund, for contribution periods (or part periods) on or after that time, the ability to contribute for members of the fund under a NEB under section 13.

7.53 This will happen if the rights of any member in respect of their transferred benefits are neither substantially the same as nor better than before, immediately after the transfer.

7.54 In theory, an original (test) fund could also fail to be a predecessor only because no written agreement about rights to transferred benefits preceded the transfer. In practice, this is unlikely, as the requirement for written agreement of the trustees is drawn from the definition of a successor fund in the Superannuation Supervision (Supervision) Regulations (Reg 1.03(1)).

Example 3

7.55 Employer X contributes to fund A which has a section 13 NEB for all its members. X establishes a new fund B on 1 July 1996 and transfers a member of fund A, employee C to fund B on this date. The requirements of new subsection 13(4E) are met in respect of the transfer. Therefore for contribution periods on or after 1 July 1996, X can contribute to fund B for employee C and any new member of fund B, or members that transfer from fund A, according to section 13.

7.56 On 1 July 1997 all employee D's member benefits are transferred from fund A to fund B. D receives reduced rights in respect of these benefits in fund B compared to fund A. Accordingly new subsection 13(4E) is not satisfied in respect of this transfer. Therefore employer X must contribute for all members of fund B (including C) for all contribution periods on or after 1 July 1997 under a NEB under section 14.

7.57 There is no limit on the number of funds that can be a predecessor fund to a fund. [New subsection 13 (4D) & (4E) & (4F)]

Example 4

7.58 Employer A contributed to fund B for its employees under an established section 13 NEB. Members of the fund can transfer to new funds C, D, and E that A contributes to and the existing earnings base will apply to each new fund provided B is a predecessor fund of the new fund.

What is a predecessor employer?

7.59 New subsections 13(4A), (4B) and (4C) define a predecessor employer [item 4] . An employer must be a predecessor employer of the current employee.

7.60 The definition of a predecessor employer is relevant if an employer/fund relationship ceases because of a change of employer rather than a change of fund. In these circumstances, the former employer's earnings base can only be used by the current employer for certain employees, if the former employer is a predecessor employer of the current employer.

7.61 New subsection 13(4A) provides that if new subsections 13(4B) or (4C) apply then an employer (the test employer) is a predecessor employer of another employer (the primary employer) at a particular time (the test time). Whether an employer is a predecessor employer of a particular employee has to be determined at a particular time in applying subsection 13(1A), which determines whether an employer can use an established NEB or must go to the higher base provided under section 14 in making contributions for a period.

7.62 New subsection 13(4B) qualifies an employer as a predecessor employer of another employer's employee if, some time after 3.55pm legal time in the ACT on 28 June 1994 (the time the Treasurer announced these measures), and before the connection needs to be found:

•

the test employer transferred a business or undertaking, or an asset of a business or undertaking, to the primary employer for market value consideration;

•

the employee was employed in that business or undertaking immediately before the transfer; and

•

immediately after the transfer, the employee was employed by the primary employer at least principally in the transferred business or undertaking, or at least principally in using the asset transferred in the undertaking of the new employer.

7.63 In other words, the business or an asset of the business of a predecessor employer must be transferred for market value consideration, and an employee must be transferred because of the transfer of the business or asset. If a business or business asset is transferred at other than market value, the first employer is not a predecessor employer of an employee who is transferred. The two employers may be related, but must give and receive full market value. If an employee who is transferred to a new employer is not transferred because a business or business asset is transferred, the first employer is not a predecessor employer of the employee. In both of those cases, the loss of an established NEB under section 13 would not be a fetter on the sale of the asset or the business; and so there is no benefit for sensible commercial restructures or business acquisitions from preserving the former application of section 13.

7.64 New subsection 13(4C) enables the first employer in a chain of employers to be a predecessor employer in relation to the last employer's employee, provided each employer in the chain is the predecessor of the next according to the test in new subsection 13(4B) . The number of employers in the chain is not limited. But the same employee must transfer between each of the employers in the chain, though the business or business asset transferred might be different (example 6 illustrates this; refer paragraph 7.74).

7.65 A predecessor employer of a particular employee of a current employer is a predecessor employer from the time the test is first met. Even if the employer ceases to exist - for example, is a company that is later wound up - it is still a predecessor employer and can still be a link in the chain of predecessor employers.

7.66 If a predecessor employer (PE) relationship exists the primary employer can only contribute under section 13 for the employee that transferred from the test employer that resulted in the PE relationship being created. This ensures that employers can not acquire a business with a section 13 NEB with the purpose of transferring that base to their existing business structure.

7.67 This is unlike the predecessor fund relationship, which allows the original employer to contribute to the primary fund for any employee in the fund under a section 13 NEB, other than an employee in the primary fund prior to the fund first becoming a predecessor fund.

7.68 The more restrictive use of a section 13 NEB upon the creation of a PE relationship compared to that applying if a predecessor fund relationship is created is achieved by the operation of new subsection 13(1A) . [Item 1]

7.69 The subsection only allows a current employer to contribute under a section 13 NEB held by a predecessor employer, if the PE relationship was created in relation to the current employee. No other employee will meet this test. A predecessor fund relationship, however, does not have to exist for a current employee; it can exist for any employee of the employer.

Example 5

7.70 Employer A contributes to fund B under a NEB under section 14. A takes over employer C's business. C was contributing to fund D for its employees under a section 13 NEB. A decides to transfer C's former employees to its fund B. This would allow fund D to be closed. A is entitled to contribute to C's former employees in B under a section 13 NEB. However no existing or new employees in fund B (or any fund to which B is a predecessor fund) are entitled to have contributions made under that section 13 NEB.

7.71 Therefore once all former employees of C leave fund B, the fund will not have any members subject to a section 13 NEB.

7.72 Like predecessor funds, a chain of predecessor employers can exist with the first (test) employer being a predecessor employer to the last (primary) employer in the chain.

7.73 It is not necessary for predecessor funds to have the same employee transfer through each fund in the chain. However for a predecessor relationship to exist for a chain of employers under new subsection 13(4C) the same employee must be employed consecutively by each employer in the chain.

Example 6

7.74 Employer A becomes a predecessor employer to employer B (section 14 NEB) when employer B acquires A's business on 1 August 1994 and employee G transfers to employer B. On 1 July 1995 if employer C acquires B's business and employee G transfers to employer C, new subsection 13(4B) applies to make employer B a predecessor employer of employer C [item 4] . New subsection 14(4C) then applies so that employer A becomes a predecessor employer of employer C.

Interaction of predecessor employers and predecessor funds

7.75 New subsection 13(1A) enables an employer to contribute under a section 13 NEB for an employee of a predecessor employer in the employer's existing fund, if the predecessor employer made contributions in a predecessor fund to the employee under the section 13 NEB.

Example 7

7.76 Employer A contributes to fund C for its employees under a section 14 NEB. A acquires the business owned by employer B. Employer B has been contributing to fund D for its employees with a NEB under section 13. Employer A becomes the employer of employer B's former employees and transfers all the members of fund D to fund C.

7.77 Currently employer A would not be entitled to contribute to fund C for employer B's former employees using a NEB under section 13. New subsection 13(1A) will allow employer A to use this base for B's former employees if the predecessor fund and predecessor employer tests are met.

7.78 It is not necessary that all members of fund D transfer to C for the measure to apply.

Will a NEB under section 13 be kept if an employer restructures more than once?

7.79 There is no limit on the number of times funds can restructure and have the measure apply; that is:

•

an employee transferring from a predecessor fund to another fund which is a predecessor fund of a later fund;

•

an employee changing from one employer (predecessor employer) to a second employer who is a predecessor employer in relation to a third employer;

•

an employee changing funds several times and to new employers who meet the predecessor employer test; and

•

a combination of the above.

Record keeping

7.80 Section 79 of the SGAA provides that an employer must keep records for the purposes of the Act. Employers will need to keep records to show that new subsection 13(1) applies.

Consequential amendments

7.81 New subsection 13(5) is introduced to provide a single definition for the types of authorities under which an employer may contribute in a fund for the purposes of section 13 [item 6] . This is designed to improve the readability and clarity of section 13.

7.82 Paragraph (a) of the definition of reference earnings in subsection 13(2), subsections 13(2) and (4) and subsection 13(5) are amended as a result of the addition of new subsection 13(1) . [Items 2, 3 & 5]

7.83 New subsection 14(1A) is necessary because of the amendment of paragraph 14(1A), (ab) and (b) [item 9] . It provides that if either section 13 or section 13A apply, then section 14 does not apply.

7.84 Subsection 14(1) is amendedbecause of the addition of new subsection 14(1A). [Item 7]

7.85 Paragraphs 14(1)(a), (ab) and (b) are amended to remove the reference to contributing to an employee prior to 21 August 1991 [item 8] . The paragraphs currently contain this reference to ensure that section 14 does not apply if section 13 would apply. The same effect is achieved by new subsection 14(1A). The amendments are designed to improved the clarity of section 14.