House of Representatives

Explanatory Memorandum

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

Chapter 4 Amendments to the Superannuation Industry (Supervision) Act

4.1 Schedule 4 of the Bill amends the Superannuation Industry (Supervision) Act 1993 (the SIS Act).

4.2 Section 299D of the SIS Act is amended to include a reference to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 . This allows a member to quote their TFN directly to the trustee of the fund or scheme for the purposes of the surcharge. [Item1]

4.3 Section 299E of the SIS Act is amended to include a reference to the Superannuation Contributions Surcharge (Assessment and Collection) Act 1997 . This amendment enables a trustee of a superannuation fund to request a member's TFN for the purposes of the surcharge. [Item 2]

4.4 The SIS Act regulates, inter alia, the conduct of trustees of superannuation entities to ensure the prudent management of superannuation fund moneys. The schedule makes amendments to allow borrowings where a surcharge assessment or instalment payment cannot readily be met from a superannuation funds assets. The schedule also amends Part 25A of the SIS Act relating to TFNs in order to provide for the quotation, provision and use of the TFNs of beneficiaries and applicants of eligible superannuation entities or regulated exempt public sector superannuation funds for the purposes of the surcharge legislation.

4.5 Amendment is made to section 67 of the SIS Act which provides that the trustee of a regulated superannuation fund must not borrow money or maintain an existing borrowing of money. An additional exception to this general requirement is inserted to allow, subject to conditions, that borrowing be permitted in circumstances where a surcharge assessment or instalment payment cannot be readily met from a superannuation funds assets.

4.6 This exception is subject to the conditions that the trustee would not be able to make the payment apart from borrowing, the period of the borrowing must not exceed 90 days and the total amount borrowed by the trustee must not exceed 10 per cent of the value of the assets of the fund.

4.7 The amendments to the TFN provisions are 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 trustee of the eligible superannuation entity or regulated exempt public sector superannuation fund. That is, the amendments aim to maximise the usage of TFNs quoted to trustees in order to minimise the number of surcharge assessments raised purely due to the non-quotation of a beneficiarys TFN.

4.8 Nothing in these amendments will oblige the beneficiary or person applying to become a beneficiary to quote, or agree to the provision of, his or her TFN.

4.9 The Bill amends the SIS 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 2 - 26] .

4.10 The Bill also inserts a transitional provision into the SIS Act to allow TFNs already quoted for superannuation purposes before the commencement of this schedule to be used for surcharge purposes [Item27].

4.11 The effect of this provision is that where an employee has quoted his or her TFN to the employer for the purposes of the SIS Act before the commencement of this schedule, the employer may pass the TFN on to the trustee 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 trustee 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 trustee. 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 SIS Act or Surcharge Acts.

4.12 In addition, this provision will also allow a trustee who has been quoted the TFN of a beneficiary or person applying to become a beneficiary before the commencement of this schedule to pass to the trustee of another superannuation entity or regulated exempt public sector superannuation scheme, RSA provider, or to the Commissioner, the TFN of the beneficiary or applicant for the purposes of the Surcharge Acts. However, this is conditional on the beneficiary or applicant not exercising his or her right to stop the trustee from doing so. Similar notification requirements and time frame in which to object, as explained in the above paragraph, will also apply.