House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 3 Amendments to the Retirement Savings Accounts Act

3.1 Schedule 2 of the Bill amends the Retirement Savings Accounts Act 1997 (the RSA Act)

3.2 The RSA Act sets out the retirement income and other superannuation standards to be met by RSA providers and provides for the functional supervision of retirement savings accounts (RSAs) by the Insurance and Superannuation Commission. This schedule amends Part 11 of the RSA Act relating to tax file numbers (TFNs) in order to provide for the quotation, provision and use of the TFNs of RSA holders and applicants for the purposes of the surcharge legislation.

3.3 Under the Surcharge Acts, RSA providers will be required to advise the Australian Taxation Office (ATO) of the TFN (where known) of each RSA holder in order for the ATO to match the superannuation contributions to the individuals taxable income and calculate the level of surcharge. Where an RSA holder does not advise his or her TFN to the RSA provider, the RSA provider will be liable to the full 15 per cent surcharge on taxable contributions received in respect of that RSA holder.

3.4 The amendments made by this schedule are therefore designed to avoid individuals being subject to the surcharge (15 per cent of their superannuation contributions) simply because they have not quoted their TFN to the RSA provider. That is, the amendments aim to maximise the usage of TFNs quoted to RSA providers in order to minimise the number of surcharge assessments raised purely due to the non-quotation of an RSA holders TFN.

3.5 However, nothing in these amendments will oblige the RSA holder or person applying to become a holder to quote, or agree to the provision of, his or her TFN.

3.6 The Bill amends the RSA Act to insert reference to the Surcharge Acts. The Surcharge Acts are the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 and the Termination Payments Surcharge (Assessment and Collection) Act 1997 . These amendments will allow for TFNs quoted and used for superannuation purposes from the date of commencement of this schedule to also be quoted and used for surcharge purposes [Items 1 - 18].

3.7 The Bill also inserts a transitional provision into the RSA Act to allow TFNs already quoted for superannuation purposes before the commencement of this schedule to be used for surcharge purposes [Item19].

3.8 The effect of this provision is that where an employee has quoted his or her TFN to the employer for the purposes of the RSA Act before the commencement of this schedule, the employer may pass the TFN on to the RSA provider for the purpose of the Surcharge Acts, provided the employee has the option to stop the employer doing so. The employer must give the employee notice of the intention to inform the RSA provider of the TFN and must give the employee 30 days in which to refuse to allow the employer to pass the TFN on to the RSA provider. Where the employee fails to exercise this option within the 30 day period, he or she will be deemed to have quoted his or her TFN for the purposes of the RSA Act or Surcharge Acts.

3.9 In addition, this provision will also allow an RSA provider who has been quoted the TFN of an RSA holder or person applying to become a holder before the commencement of this schedule to pass to another RSA provider, trustee of a superannuation entity or regulated exempt public sector superannuation scheme or to the Commissioner of Taxation, the TFN of the RSA holder or applicant for the purposes of the Surcharge Acts provided the holder or applicant has the option to stop the RSA provider doing so. Similar notification requirements and time frame in which to object, as explained in the above paragraph, will also apply.