Senate

Supplementary Explanatory Memorandum

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

Chapter 1 - Choice of superannuation funds

Overview

1.1 The requests for amendments give effect to the Government's announcement (Assistant Treasurer's Press Release No. AT/015 of 8 April 1998) to defer the choice of superannuation fund measures contained in Schedule 5 to the Bill.

1.2 The requests for amendments defer the commencement of the choice of superannuation fund measures, as they relate to new employees, until 1 July 1999. To avoid having to pay any increase in the superannuation guarantee charge, employers are required to provide superannuation support in compliance with the choice of fund requirements:

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from 1 July 1999 - for all employees who commence employment on or after this date (ie, new employees); and

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From 1 July 2000 - for all employees who were employed by the employer immediately before 1 July 1999 and who continue to be employed by the employer (ie, existing employees).

1.3 Consequential requests for amendments are made to the commencement provision [clause 2] of the Bill to defer the amendments to the Retirement Savings Accounts Act 1997 (RSA Act) and the Superannuation Industry (Supervision) Act 1993 (SIS Act) where relevant.

Background

1.4 The deferral of the choice of superannuation fund measures became necessary as it was evident that the Government was unable to secure the passage of the legislation in the Autumn 1998 sitting of the Parliament.

Explanation of the amendments

1.5 Requests 1 and 2 request amendments to the commencement provision [clause 2] of the Bill. This provides that items 33 to 36, 41, 42, 51, 52, 53, 54, 58, 60 to 62 and 64 of Schedule 5 will commence on 1 July 1999. These items request amendments to the various provisions of the RSA Act and the SIS Act. This ensures that the commencement date of these provisions are consistent with the start date for the choice of superannuation fund measures.

1.6 Requests 3 to 6 substitute "1999" for references to "1998" in items item 25 and 34 . The effect is to defer the application of the choice of fund measures to new employees until 1 July 1999. The choice of fund measures will continue to apply to existing employees (ie employees employed by an employer immediately before 1 July 1999 and who continue to be so employed) from 1 July 2000.

1.7 Request 7 inserts item 52A into Schedule 5 of the Bill to repeal the heading to Subdivision A of Division 3 of Part 19 of the SIS Act. This heading will no longer be necessary given the request made by item 52B as inserted by Request 8 . Subdivision A of Division 3 of Part 19 relates to information to be given to persons before they become a beneficiary of a fund. These provisions will be repealed from 1 July 1999 and replace with the provisions inserted into Part 14 of the SIS Act by item 42 of the Bill. This is consistent with the Government's policy of requiring employees to be provided with a Key Features Statement before making a decision of which fund best meets their needs.

1.8 Request 8 inserts item 52B into Schedule 5 of the Bill to repeal Subdivision B of Division 3 of Part 19 of the SIS Act. The requirements of Subdivision B of Division 3 of Part 19 have been moved to Part 18 of the SIS Act [item 50] . These provisions will commence from Royal Assent to ensure that in the lead up to choice, employers and employees are provided protection from trustees making false and misleading statements to entice employers and employees to either include their product on the menu of four funds, or choose their product once choice of fund has been implemented.

1.9 Request 9 amends item 65 of the Bill to clarify when the application provision applies to various items.

Consequential effects to the amendments to the Explanatory Memorandum to the Bill

1.10 As a result of these amendments the following references to 1 July 1998 in the Explanatory Memorandum should be read as references to 1 July 1999.

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General Outline - date of effect - first and second dot points;

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Paragraph 5.7 - date of effect - first and second dot points;

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Paragraph 5.36;

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Subparagraphs 5.42(vi) and (vii);

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Paragraphs 5.82 to 5.85; and

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Paragraph 5.134 - third dot point