Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
SENATE
RETIREMENT
SAVINGS ACCOUNTS (CONSEQUENTIAL AMENDMENTS)
BILL 1997
EXPLANATORY
MEMORANDUM
(Circulated by authority of the
Assistant Treasurer, Senator the Hon Rod Kemp)
80794 Cat. No.
96 7248 6 ISBN 0644 498315
THIS MEMORANDUM TAKES ACCOUNT
OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED
RETIREMENT SAVINGS ACCOUNTS (CONSEQUENTIAL AMENDMENTS)
BILL 1997
GENERAL OUTLINE
This Bill, together with
the Retirement Savings Accounts Bill 1997 and the Retirement Savings Accounts
Supervisory Levy Bill 1996 implements the 1996-97 Budget initiative to allow
banks, building societies, credit unions and life insurance companies to provide
superannuation without a trust structure in the form of retirement savings
accounts (RSAs). RSAs are effectively another superannuation product, and as
such, this package of Bills makes regulation of RSAs consistent with the
regulation of other superannuation products, where applicable.
This Bill
makes a number of consequential amendments to the Superannuation Entities
(Taxation) Act 1987, the Superannuation (Resolution of Complaints) Act
1993, the Bankruptcy Act 1966, the Superannuation Industry
(Supervision) Act 1993, the Insurance and Superannuation Commissioner Act
1987, the Superannuation (Productivity Benefit) Act 1988, the
Superannuation Act 1976, the Parliamentary Contributory Superannuation
Act 1948, the Banking Act 1959, the Insurance Contracts Act
1984, the Insurance Act 1973, the Life Insurance Act 1995, the
Income Tax Assessment Act 1936, the Superannuation Guarantee Charge
Act 1992, the Superannuation Guarantee (Administration) Act 1992, the
Small Superannuation Accounts Act 1995, the Fringe Benefits Tax
Assessment Act 1986 and the Income Tax Rates Act 1986.
The
amendments made by this Bill will create a similar environment for RSAs to that
currently applying to existing superannuation products, such as superannuation
funds and approved deposit funds, by:
• putting in place an
equivalent taxation regime for RSAs to that currently applying to other
superannuation products;
• allowing employers to make Superannuation
Guarantee contributions to an RSA;
• allowing the Superannuation
Complaints Tribunal to deal with complaints concerning RSAs;
• allowing RSAs to be used as a rollover vehicle for preserved
superannuation benefits; and
• providing for a mechanism for the
calculation and collection of the RSA supervisory levy.
These
amendments are to commence at the same time as the Retirement Savings
Accounts Act 1997.
FINANCIAL IMPACT STATEMENT
The
financial impact of this Bill is negligible.
EXPLANATORY NOTES ON THE
RETIREMENT SAVINGS ACCOUNTS (CONSEQUENTIAL AMENDMENTS) BILL
1997
Overview
1. This Bill makes consequential
amendments to eighteen Acts as a result of the 1996-97 Budget initiative to
allow banks, building societies, credit unions and life insurance companies to
provide superannuation without a trust structure in the form of retirement
savings accounts (RSAs).
2. The Bill is structured in eighteen schedules,
each dealing with amendments to a particular Act.
Clause 1 - Short
title
3. This clause provides the mode of citation of the
Act.
Clause 2 - Commencement
4. This clause provides that
this Act comes into operation on the same day as the Retirement Savings
Accounts Act 1997 commences.
Clause 3 -
Schedule(s)
5. This clause provides that each Act specified in a
Schedule to this Act is amended or repealed as set out in the Schedule.
Schedule 1 of the
Bill
Amendment of the Superannuation
Entities (Taxation) Act 1987
Outline
6. The Superannuation Entities (Taxation) Act
1987 (SETA) sets out requirements for the calculation and collection of a
levy on the superannuation industry. The levy is imposed to recover the costs
of supervision of the superannuation industry by the Insurance and
Superannuation Commission (ISC). This schedule amends SETA to provide for the
equivalent collection and calculation requirements in respect of the supervisory
levy that is imposed on RSA providers through the Retirement Savings Accounts
Levy Act 1997.
Item 1 - The Title
7. This item amends
the long title of SETA to include a reference to RSAs.
Item 2 -
Subsection 3(1) (definition of reviewable decision)
8. This
item amends the definition of reviewable decision in subsection 3(1) to
include a decision of the Commissioner to remit a levy or late payment
penalty. [refer section 13B in Item 3]
Item 3 -
Subsection 3(1)
9. This inserts a definition of RSA provider
for the purposes of SETA, which has the same meaning as in the Retirement
Savings Accounts Act 1997.
Item 4 - Subsection
3(1)
10. This item inserts a definition of year of income in
relation to an RSA provider.
Item 5 - After Part
III
11. This item inserts Part IIIAAA into SETA. An RSA provider
that lodges an annual return under the Retirement Savings Accounts Act
1997, is liable to pay a levy to cover the cost of supervising RSAs by the
ISC. This Part sets out the requirements for the collection of that levy. This
Part is equivalent to Part IIIAA of SETA which prescribes similar requirements
for the superannuation supervisory levy. [Section
11]
12. This levy is referred to as the retirement savings
accounts supervisory levy and is imposed by the Retirement Savings Accounts
Levy Act 1997. The Part also provides for the calculation of the late
payment penalty. This penalty is incurred if an RSA provider fails to pay the
levy in the time provide by section 11. [Section 12]
Item 6 - Subsection 16(1)
13. This item inserts a
reference to RSA providers into subsection 16(1) to allow RSA providers, which
have been affected by a reviewable decision, 21 days to request a review of the
decision by the Commissioner. Where the RSA provider is dissatisfied with this
review they are eligible to take it to the Administrative Appeals
Tribunal.
Item 7 - Subsection 16(1)
14. This item inserts a
reference to RSA providers into subsection 16(1) to allow RSA providers, which
have been affected by a reviewable decision, 21 days to request a review of the
decision by the Commissioner. Where the RSA provider is dissatisfied with this
review they are eligible to take it to the Administrative Appeals
Tribunal.
Item 8 - Subsection 17(1)
15. This item inserts a
reference to RSA provider into paragraph 17(1). This amendment has the effect
of requiring the Commissioner to notify the RSA provider that they may apply to
the Administrative Appeals Tribunal if dissatisfied with the outcome of the
review.
Item 9 - Paragraph 17(1)(a)
16. This item inserts a
reference to RSA provider into paragraph 17(1)(a). This amendment has the
effect of requiring the Commissioner to notify the RSA provider that they may
apply to the Administrative Appeals Tribunal if dissatisfied with the outcome of
the review.
Item 10 - Paragraph 17(1)(b)
17. This item
inserts a reference to RSA provider into paragraph 17(1)(b). This amendment has
the effect of requiring the Commissioner to notify the RSA provider that they
may apply to the Administrative Appeals Tribunal if dissatisfied with the
outcome of the review.
Item 11 - Subsection 17(2)
18. This
item inserts a reference to RSA provider into subsection 17(2). This amendment
has the effect of requiring the Commissioner to notify the RSA provider that
they may apply to the Administrative Appeals Tribunal if dissatisfied with the
outcome of the review.
Item 12 - Subsection 17(2)
19. This
item inserts a reference to RSA provider into subsection 17(2). This amendment
has the effect of requiring the Commissioner to notify the RSA provider that
they may apply to the Administrative Appeals Tribunal if dissatisfied with the
outcome of the review.
Item 13 - After paragraph
22(2)(b)
20. This item includes in the definition of levy, for the
purposes of section 22, a reference to the levy imposed by the Retirement
Savings Accounts Levy Act 1997.
Schedule 2 of the
Bill
Amendment of the Superannuation
(Resolution of Complaints) Act 1993
Outline
21. The Superannuation (Resolution of
Complaints) Act 1993 (the SRC Act) establishes the
Superannuation Complaints Tribunal to provide a fair, low-cost, informal and
quick alternative to the courts for resolution of disputes between members and
their superannuation funds. To ensure consistency in the treatment of
complaints relating to all superannuation products the SRC Act will be amended
as set out in this Schedule to enable the SCT to deal with RSA
complaints.
22. The Bill will make the following amendments to the SRC
Act:
• enable the Tribunal to review and make determinations in
respect of RSA providers’ conduct in relation to the opening of RSAs;
• enable the Tribunal to review and make determinations in respect of
decisions of RSA providers in relation to particular RSA
holders;
• enable the Tribunal to review and make determinations in
respect of insurers’ conduct in relation to the sale of insurance benefits
under a contract of insurance where the premiums are paid from an
RSA;
• enable the Tribunal to review and make determinations in respect
of decisions of insurers under a contract of insurance where the premiums are
paid from an RSA;
• enable the Tribunal to provide appropriate remedies
(eg, varying a decision, cancellation or variation of the terms of an RSA or
insurance policy and repayment of moneys with interest) where it determines that
the conduct or decision of the RSA provider or insurer is unfair or
unreasonable;
• allow the Tribunal to review decisions as to whether
and to what extent a person is totally and permanently disabled that are made by
certain persons other than an RSA provider or insurer;
• exclude
disability complaints where more than one year has elapsed since the decision to
which the complaint relates, or where a person fails to lodge a claim for a
disability benefit with the RSA provider or insurer within one year of
permanently ceasing employment due to disability;
• where a complaint
has been made in relation to a death benefit payment, require other persons who
have an interest in the outcome of a complaint to be notified and given the
opportunity to become a party to the complaint; and
• enable the
Tribunal to be constituted by any three Tribunal members.
Item 1 -
The Title
23. This item extends the title of the SRC Act to
reflect the extension of the Superannuation Complaints Tribunal’s
jurisdiction under the SRC Act to deal with certain complaints about the conduct
of RSA providers and insurers under sections 15E and 15H of the SRC
Act.
Item 2 - At the end of the Title
24. This item extends
the title of the SRC Act to reflect the extension of the Superannuation
Complaints Tribunal’s jurisdiction under the SRC Act to deal with certain
complaints about the decisions of RSA providers and insurers under sections15F
and 15J of the SRC Act.
Item 3 - Subsection 3(2) (definition of
complainant)
25. This item amends the definition of
complainant in subsection 3(2) of the SRC Act to include persons who make
a complaint under proposed sections 15E, 15F, 15H and 15J (inserted by item
20).
Item 4 - Subsection 3(2) (definition of
complaint)
26. This item amends the definition of
complaint in subsection 3(2) of the SRC Act to include as complaints
those that are made under proposed sections 15E, 15F, 15H and 15J (inserted by
item 20).
Item 5 - Subsection 3(2) (at the end of the definition of
death benefit)
27. This item amends the definition of death
benefit in subsection 3(2) of the SRC Act to include a benefit payable by an
RSA provider in respect of the holder of an RSA or a benefit paid by an insurer
under a contract of insurance where the premiums are paid from an RSA that is
payable on or after the death of the holder. The benefit must be provided in
accordance with subsection 15(3) or paragraph 15(4)(c) of the Retirement
Savings Accounts Act 1997 (RSA Act) which requires that the benefit must be
paid to the holder’s legal personal representative, to any or all of the
holder’s dependants or to both.
Item 6 - Subsection 3(2)
(definition of disability benefit)
28. This item omits the
definition of ‘disability benefit’ in subsection 3(2) of the SRC Act
and substitutes a new definition of ‘disability benefit’ which
provides that a disability benefit is:
• a benefit provided by the
trustee of a regulated superannuation fund in the event of a partially or
totally disabling physical or mental condition that is provided in accordance
with subparagraph 62(1)(b)(ii) of the Superannuation Industry
(Supervision) Act 1993 (SIS Act) or
• a benefit payable by
an RSA provider in the event of a partially or totally disabling physical or
mental condition that is provided in accordance with paragraph 15(4)(b) of
the RSA Act; or
• a benefit payable by an insurer under a contract of
insurance where the premiums are paid from an RSA in the event of a partially or
totally disabling physical or mental condition that is provided in accordance
with paragraph 15(4)(b) of the RSA Act.
Item 7 - Subsection 3(2)
(definition of excluded complaint)
29. This item amends the
definition of ‘excluded complaint’ in subsection 3(2) of the SRC Act
to enable regulations to be made specifying an RSA provider to which the SRC Act
does not apply.
Item 8 - Subsection 3(2) (definition of
insurer)
30. This item inserts a new paragraph into the
definition of ‘insurer’ in subsection 3(2) of the SRC Act to extend
the definition to apply in relation to a complaint made under section 15E,
15F, 15H or 15J.
Item 9 - Subsection 3(2)
31. This item
inserts a definition of ‘holder’ into subsection 3(2) of the SRC
Act. The term ‘holder’ has the same meaning as in the RSA
Act.
Item 10 - Subsection 3(2)
32. This item inserts a
definition of ‘RSA’ into subsection 3(2) of the SRC Act. The term
‘RSA’ has the same meaning as in the RSA Act.
Item 11 -
Subsection 3(2)
33. This item inserts a definition of ‘RSA
provider’ into subsection 3(2) of the SRC Act. The term ‘RSA
provider’ has the same meaning as in the RSA Act.
Item 12 -
After paragraph 3(3)(b)
34. This item inserts a new paragraph into
subsection 3(3) of the SRC Act to extend the definition of ‘representative
of an insurer’ to apply in relation to a contract of insurance where the
premiums are paid from an RSA.
Item 13 - Paragraph
3(3)(c)
35. This item ensures that the definition of
‘representative of an insurer’ is consistent with the amendment to
paragraph 3(3)(b) at item 12 to extend the definition of ‘representative
of an insurer’ to apply in relation to a contract of insurance where the
premiums are paid from an RSA.
Item 14 - After subsection
3(3)
36. This item inserts a definition of ‘representative of
an RSA provider’ after subsection 3(3) of the SRC Act. The
definition covers agents, employees or officers of the RSA provider, or
associate of the RSA provider, who engage in conduct in relation to an
RSA.
Item 15 - Section 4
37. This item amends section 4 of
the SRC Act to include decisions of RSA providers. Section 4 explains the
meaning of decision of a trustee, an insurer or another decision-maker for the
purposes of the SRC Act. Subsection 4(1) provides that a decision by those
persons includes a failure to make a decision. Subsection 4(2) provides
that a decision includes conduct in relation to making a
decision.
Item 16 - Section 4
38. This item amends section
4 of the SRC Act to include decisions of RSA providers. Section 4 explains the
meaning of decision of a trustee, an insurer or another decision-maker for the
purposes of the SRC Act. Subsection 4(1) provides that a decision by those
persons includes a failure to make a decision. Subsection 4(2) provides
that a decision includes conduct in relation to making a
decision.
Item 17 - After paragraph 8(2)(b)
39. This item amends subsection 8(2) of the SRC Act. Subsection 8(2) of
the SRC Act sets out persons who may be disqualified from being appointed as
Tribunal Chairperson or Deputy Chairperson. This item inserts paragraphs
8(2)(c) and (d) to provide that a person who is a director or employee of an RSA
provider or an insurer is not eligible to be appointed as Tribunal Chairperson
or Deputy Chairperson.
Item 17A - Subsection 9(1)
40. This
item amends section 9 of the SRC Act so that any three members of the SCT
can constitute a panel, as directed by the Chairperson. This will remove the
requirement for the Chairperson or Deputy Chairperson to be present and preside
at all review meetings.
41. The amendment is intended to enable the SCT
to hold a greater number of reviews. This will assist the SCT in dealing with
the increased number of complaints expected to be received as a result of the
expansion of the SCT’s jurisdiction to also include complaints concerning
RSAs.
Item 17B - After subsection 9(3A)
42. This item
amends section 9 of the SRC Act. The amendment provides that where, by virtue
of the amendment made by item 17A, the Tribunal is constituted by any
three Tribunal members other than the Chairperson or Deputy Chairperson, one of
these Tribunal members would be nominated by the Chairperson to preside at the
meeting.
Item 18 - After paragraph 10(1)(b)
43. This item
amends subsection 10(1) of the SRC Act. Subsection 10(1) requires the
disclosure of financial interests by the Tribunal Chairperson and Deputy
Chairperson. This item requires the disclosure of all direct or indirect
financial interests that he or she has or acquires in an RSA, RSA provider or
insurer.
Item 19 - Subsection 13(2)
44. This item amends subsection 13(2) of the SRC Act to ensure that the Tribunal must make reasonably available to holders of RSAs and annuity policyholders a memorandum setting out the procedural matters specified in paragraphs 13(1)(a), (b) and (c) of the SRC Act including how complaints may be made to the Tribunal.
Item 20 - After section 15D
45. This item inserts after section 15D of the SRC Act new sections 15E,
15F, 15G, 15H, 15J and 15K.
46. Section 15E comprises four
subsections.
47. Subsection 15E(1) enables a person who is a holder of an
RSA to complain to the Tribunal that the conduct of the RSA provider or a
representative of the RSA provider in relation to the opening of the RSA was
unfair or unreasonable. The Tribunal may also join an insurer or any other
person as a party to a complaint under this section and review any conduct of
the person joined that may be relevant to the complaint.
48. Subsection
15E(2) provides that a complaint under this section is to be made by sending a
written complaint to the office of the Tribunal.
49. Subsection 15E(3)
sets out factors that the Tribunal must take into account, and
subsection 15E(4) sets out the factors that the Tribunal may take into
account, in assessing whether the conduct of the RSA provider was fair and
reasonable.
50. Section 15F has ten subsections.
51. Subsection
15F(1) enables a person to complain to the Tribunal that a decision of an RSA
provider in relation to a particular RSA holder is or was unfair or
unreasonable. The Tribunal may also join an insurer or any other person as a
party to a complaint under this section and review any decision of the person
joined that may be relevant to the complaint.
52. Subsections 15F(2) and
(3) set out notification procedures which can be used by RSA providers proposing
to pay death benefits under an RSA to protect themselves from the risk of
‘double payment’ of the death benefit. The provisions are intended
to enable RSA providers to become aware of potential complainants in respect of
a proposed distribution of a death benefit, and withhold payment of the death
benefit until after the complaint has been dealt with by the
Tribunal.
53. Subsection 15F(4) provides that the Tribunal cannot deal
with a complaint under this section if the decision relates to the management of
an RSA provider, RSA provider’s business or an RSA provider’s
investments. This is intended to exclude complaints about the overall
investment strategy or fee structures applied by the RSA provider to a broad
class of RSAs.
54. Subsection 15F(5) provides that the Tribunal can only
deal with complaints about RSA provider decisions relating to the payment of
disability benefits if the complaint is made within one year of the RSA
provider’s decision.
55. Subsection 15F(6) ensures that persons can
only access the Tribunal with disability complaints if the original claim for
disability benefits to which the complaint relates was lodged with the RSA
provider within one year of the permanent cessation of employment due to
disability. The reference to permanent cessation of employment is intended to
ensure that time will not begin to run against persons who are on extended sick
leave and, or, in receipt of some kind of salary continuance benefit and who
retain a right to resume employment until they have permanently ceased
employment.
56. Subsection 15F(7) ensures that the decision of the RSA
provider referred to in subsections 15F(5) and (6) is the original decision
which rejected the claim, either in whole or in part, and not a subsequent
reconsideration of that decision under the internal review mechanisms
established by the RSA provider as required by section 47 of the RSA Act.
(Enabling the 12 month time period to run under subsection (5) or (6) from the
date of a decision on reconsideration of the original decision would defeat the
object of the time limit).
57. Subsection 15F(8) provides that for the
purposes of subsection (7) if a complaint is made about an original decision of
an RSA provider under arrangements made under section 47 of RSA Act, and
the original decision is confirmed, varied or another decision was substituted
for the original decision, the confirmed, varied or substituted decision is
taken to have been made at the time the original decision was
made.
58. Subsection 15F(9) provides that a complaint under this section
is to be made by sending a written complaint to the office of the
Tribunal.
59. Subsection 15F(10) sets out the factors that the Tribunal
must have regard to in determining whether the decision of the RSA provider is
or was unfair or unreasonable.
60. Section 15G sets out who may make a
section 15F complaint.
61. Subsection 15G(1) sets out the circumstances
in which a person has an interest in the payment of a death benefit under an RSA
for the purposes of making a complaint under section 15F to the Tribunal.
Subsection 15G(2) provides that persons do not have an interest in the payment
of such a death benefit if they have not objected to any notice provided by the
RSA provider under paragraph (a) or otherwise fall within the requirements of
paragraphs (b) to (d).
62. Section 15H comprises four
subsections.
63. Subsection 15H(1) enables a person who is a holder of an
RSA to complain to the Tribunal that the conduct of an insurer or a
representative of an insurer in relation to the sale of insurance benefits in
relation to a contract of insurance where the premiums are paid from an RSA was
unfair or unreasonable. The Tribunal may also join an RSA provider or any other
person as a party to a complaint under this section and review any conduct of
the person joined that may be relevant to the complaint.
64. Subsection
15H(2) provides that a complaint under this section is to be made by sending a
written complaint to the office of the Tribunal.
65. Subsection 15H(3)
sets out factors that the Tribunal must take into account, and
subsection 15H(4) sets out the factors that the Tribunal may take into
account, in assessing whether the conduct of the insurer was fair and
reasonable.
66. Section 15J has ten subsections.
67. Subsection
15J(1) enables a person to complain to the Tribunal that a decision of an
insurer under a contract of insurance where the premiums are paid from an RSA is
or was unfair or unreasonable. The Tribunal may also join an RSA provider or
any other person as a party to a complaint under this section and review any
decision of the person joined that may be relevant to the
complaint.
68. Subsections 15J(2) and (3) set out notification procedures
which can be used by insurers proposing to pay death benefits under a contract
of insurance to protect themselves from the risk of ‘double payment’
of the death benefit. The provisions are intended to enable insurers to become
aware of potential complainants in respect of a proposed distribution of a death
benefit, and withhold payment of the death benefit until after the complaint has
been dealt with by the Tribunal.
69. Subsection 15J(4) provides that the
Tribunal cannot deal with a complaint under this section if the decision relates
to the management of an insurer, an insurer’s business or an
insurer’s investments. This is intended to exclude complaints about the
overall investment strategy or fee structures applied by the insurer to a broad
class of policies.
70. Subsection 15J(5) provides that the Tribunal can
only deal with complaints about insurer decisions relating to the payment of
disability benefits if the complaint is made within one year of the
insurer’s decision.
71. Subsection 15J(6) ensures that persons can
only access the Tribunal with disability complaints if the original claim for
disability benefits to which the complaint relates was lodged with the insurer
within one year of the permanent cessation of employment due to
disability. The reference to permanent cessation of employment is intended to
ensure that time will not begin to run against persons who are on extended sick
leave and, or, in receipt of some kind of salary continuance benefit and who
retain a right to resume employment until they have permanently ceased
employment.
72. Subsection 15J(7) ensures that the decision of the
insurer referred to in subsections 15J(5) and (6) is the original decision
which rejected the claim, either in whole or in part, and not a subsequent
reconsideration of that decision under any internal review mechanisms
established by the insurer. (Enabling the 12 month time period to run under
subsection (5) or (6) from the date of a decision on reconsideration of the
original decision would defeat the object of the time
limit).
73. Subsection 15J(8) provides that for the purposes of
subsection (7) if a complaint is made about an original decision of an insurer
under arrangements made for dealing with complaints, and the original decision
is confirmed, varied or another decision was substituted for the original
decision, the confirmed, varied or substituted decision is taken to be have been
made at the time the original decision was made.
74. Subsection 15J(9)
provides that a complaint under this section is to be made by sending a written
complaint to the office of the Tribunal.
75. Subsection 15J(10) sets out
the factors that the Tribunal must have regard to in determining whether the
decision of the insurer is or was unfair or unreasonable.
76. Section 15K
sets out who may make a section 15J complaint.
77. Subsection 15K(1)
sets out the circumstances in which a person has an interest in the payment of a
death benefit in relation to a contract of insurance entered into in connection
with an RSA for the purposes of making a complaint under section 15J to the
Tribunal. Subsection 15K(2) provides that persons do not have an interest in
the payment of such a death benefit if they have not objected to any notice
provided by the insurer under paragraph (a) or otherwise fall within the
requirements of paragraphs (b) to (d).
Item 21 - At the end of section
17
78. This item amends section 17 of the SRC Act by inserting
subsections 17(3) and 17(4). Subsection 17(3) provides that when the
Tribunal receives a complaint under proposed sections 15E and 15F (inserted by
item 20) it must write to the complainant acknowledging the complaint and to the
RSA provider advising of the complaint and setting out the RSA provider’s
obligations under section 24 relating to the provision of relevant documents to
the Tribunal.
79. Subsection 17(4) provides that when the Tribunal
receives a complaint under proposed sections 15H and 15J (inserted by item 20)
it must write to the complainant acknowledging the complaint and to the insurer
advising of the complaint and setting out the insurer’s obligations under
section 24 relating to the provision of relevant documents to the
Tribunal.
Item 22 - Paragraph 17A(3)(a)
80. This item
amends section 17A of the SRC Act so that it applies in relation to complaints
made under proposed sections 15E, 15F, 15H and 15J (inserted by item 20).
Subsection 17A(3) prescribes the procedures that must be followed if the
Tribunal decides under section 18 (as amended by item 26) that a person should
be joined as a party to a complaint. Basically, the procedures are that the
Tribunal must advise the new party that they are a party to a complaint and also
advise of their obligations under section 24 relating to the provision of
relevant documents to the Tribunal. The Tribunal must also inform existing
parties that a new party exists.
Item 23 - Paragraph
17A(3)(b)
81. This item amends paragraph 17A(3)(b) to reflect
amendments to section 18 (by item 26) which sets out the parties to a complaint
under proposed sections 15E, 15F, 15H and 15J (inserted by item
20).
Item 24 - Paragraph 17A(4)(a)
82. This item amends
paragraph 17A(4)(a) to ensure that the Tribunal must inform a party that
has applied to be made a party to a complaint under 15E, 15F, 15H or 15J
(inserted by item 20), and has had that application rejected, that the
application has been rejected and the reasons why it was
rejected.
Item 25 - Paragraph 17A(4)(c)
83. This item
amends paragraph 17A(4)(c) to reflect amendments to section 18 (by item 26)
which sets out the parties to a complaint under proposed sections 15E, 15F, 15H
and 15J (inserted by item 20).
Item 26 - After subsection
18(3)
84. This item amends section 18 of the SRC Act to set out the
parties to a section 15E, 15F, 15H and 15J complaint.
85. Paragraph
18(3A)(c) enables the Tribunal to join an insurer to a complaint against an RSA
provider in relation to a death or disability benefit under a contract of
insurance relating to an RSA. Paragraph 18(3A)(d) enables the Tribunal to
join a person other than an RSA provider or insurer who has responsibility for
determining the existence of total and permanent disablement.
Paragraph 18(3A)(e) enables the Tribunal to join any other person who
applies to be made a party to the complaint.
86. Paragraph 18(3B)(c)
enables the Tribunal to join an RSA provider as a party to a complaint in
relation to a death or disability benefit under a contract of insurance relating
to an RSA. Paragraph 18(3B)(d) enables the Tribunal to join a person other
than an RSA provider or insurer who has responsibility for determining the
existence of total and permanent disablement. Paragraph 18(3B)(e) enables
the Tribunal to join any other person who applies to be a party to the
complaint.
Item 27 - At the end of section 19
87. This item
inserts subsections 19(3) and (4) into the SRC Act. Subsection 19(3)
provides that the Tribunal cannot deal with a complaint under section 15E or 15F
that has not previously been made to the appropriate person under arrangements
for dealing with such complaints under section 47 of the RSA Act and that the
complaint was not settled to the complainant’s satisfaction within 90
days. Subsection 19(4) provides that complainants who have a complaint under
section 15H or 15J (inserted by item 20) must make reasonable attempts to have
their complaint resolved by the insurer. It is intended that reasonable efforts
should, at minimum, take the form of telephone enquires or written
correspondence with the insurer concerned.
Item 28 - Paragraph
22(3)(a)
88. This item amends paragraph 22(3)(a) of the SRC Act.
Paragraph 22(3)(a) of the SRC Act provides that the Tribunal can treat a
complaint as withdrawn (other than one in relation to decisions of trustees as
to total and permanent disablement) if it has been more than 12 months since the
decision complained of was taken or the conduct complained of was undertaken.
This item amends paragraph 22(3)(a) to ensure that a decision of an RSA
provider, insurer or other decision-maker in relation to total and permanent
disablement is also excluded from the operation of this paragraph.
89. Complaints relating to RSA providers, insurers or other
decision-makers’ decisions about total and permanent disablement are
exempt from paragraph 22(3)(a) because of the time limits covering such
complaints in subsections 15F(5) to (8) and subsections 15J(5) to (8) (item 20
refers).
Item 29 - Subsection 24(1)
90. This item amends
subsection 24(1) of the SRC Act to ensure that where an RSA provider has
been notified under section 17 of a section 15E or 15F complaint, the RSA
provider must lodge a copy or summary of any relevant material documents
relating to the complaint with the Tribunal. The RSA provider has 28 days or
such longer period as the Tribunal allows.
Item 30 - Subsection
24(1)
91. This item amends subsection 24(1) to ensure that it applies
to complaints against an RSA provider or insurer made under proposed sections
15E, 15F, 15H or 15J (inserted by item 20).
Item 31 - Subsections
24(2) and (3)
92. This item repeals subsections 24(2) and (3) of the
SRC Act and substitutes new subsections 24(2) and
(3).
93. Subsection 24(2) provides that where a ‘relevant
person’ (as determined under subsection 24(3)) is notified under
section 17A that the person has been joined under section 18 as a
party to a complaint, the person must lodge a copy or summary of any relevant
material documents relating to the complaint with the Tribunal within 28 days or
such longer period as the Tribunal allows.
94. Subsection 24(3) sets
out the persons who are relevant persons in relation to complaints under
sections 14,14A, 15E, 15F, 15H and 15J.
Items 32 - Subsection
24(4)
95. This item amends subsection 24(4) of the SRC Act to
provide that the Tribunal may allow an RSA provider to lodge a summary of the
documents to be given to the Tribunal under subsections 24(1) or
(2).
Item 33 - Subsection 24(4)
96. This item amends
subsection 24(4) of the SRC Act to provide that the Tribunal may allow an
RSA provider to lodge a summary of the documents to be given to the Tribunal
under subsections 24(1) or (2).
Item 34 - Paragraph
24(6)(c)
97. This item amends paragraph 24(6)(c) of the SRC Act
to ensure that in relation to a complaint under proposed sections 15E, 15F,
15H or 15J where a person has been joined under section 17A(3) as a party
to a complaint the Tribunal may require the person to provide copies of
documents relevant to the complaint.
Item 35 - Subsection
24(7)
98. This item provides that the penalty provision applies to an
RSA provider who intentionally or recklessly fails to comply with the
section 24 requirements relating to the provision of relevant documents to
the Tribunal.
Item 36 - After subsection 24A(2)
99. This
item inserts subsections 24(2A) and (2B) into the SRC Act.
Subsections 24(2A) and (2B) establish procedures in relation to a complaint
under proposed sections 15F and 15J aimed at ensuring that all persons with
an interest in the outcome of a particular complaint relating to the payment of
a death benefit are informed of the complaint and given the opportunity to
become a party to the complaint. This will enable the Tribunal to consider the
interests of all such parties in making any decisions.
Item 37 -
Subsections 24A(3) and (4)
100. This item amends subsections 24A(3)
and (4) of the SRC Act to apply to proposed subsections 24(2A) and (2B)
(see item 36). Subsection 24A(3) sets out the details that must be
included in a notice to persons who may have an interest in the outcome of a
particular complaint relating to the payment of a death benefit.
Subsection 24A(4) requires trustees and insurers to inform the Tribunal of
persons to whom a notice has been given.
Item 38 - Subsection
24A(4)
101. This item amends subsection 24A(4) to ensure that if
an RSA provider is required to give a person notice relating to a complaint, the
RSA provider must give the Tribunal details of the persons given such a
notice.
Item 39 - Paragraph 24A(6)(a)
102. This item amends
paragraph 24A(6)(a) to ensure it applies to complaints under proposed sections
15F and 15J. Paragraph 24A(6)(a) enables a person who considers that they
are affected by a decision that is the subject of a complaint under section 14,
14A or 15B to request that they be joined under section 18 as a party to a
complaint.
Item 40 - Paragraph 24A(6)(b)
103. This item
amends paragraph 24A(6)(b) to ensure it applies to complaints under proposed
sections 15E and 15H. Paragraph 24A(6)(b) enables a person who considers
that they are affected by conduct that is the subject of a complaint under
section 15A to request that they be joined under section 18 as a party to a
complaint.
Item 41 - After subsection 26(1A)
104. This item
inserts subsections 26(1B) and (1C) into the SRC Act.
Subsection 26(1B) provides that the making of a complaint under
section 15F to the Tribunal concerning a decision of an RSA provider does
not affect the operation of the decision or prevent the taking of action to
implement the decision. Subsection 26(1C) covers complaints under section 15J
about decisions of insurers under a contract of insurance entered in connection
with an RSA.
Item 42 - After subsection 26(2A)
105. This
item inserts subsections 26(2B) and (2C) into the SRC Act. Subsection
26(2B) allows the Tribunal to make such order or orders staying or otherwise
affecting the operation or implementation of the whole or part of the decision
of the RSA provider to which the complaint relates. Subsection 26(2C)
applies to a decision of an insurer under a contract of insurance entered in
connection with an RSA.
Item 43 - Subsection
26(3)
106. This item amends subsection 26(3) to ensure that it is
applicable to subsections 26(2B) and (2C). Subsection 26(3) provides that
the Tribunal may make an order varying or revoking an order in force under
subsections 26(2) or (2A) to stay the operation or implementation of a decision
to which a complaint relates or is relevant to the subject matter of the
complaint.
Item 44 - Subsection 26(4)
107. This item amends
subsection 26(4) to ensure that it is applicable to subsections (2B) and (2C).
Subsection 26(4) sets out the requirements on the Tribunal for making an order
under subsections 26(2) or (2A).
Item 45 - Subsection
26(5)
108. This item amends subsection 26(5) to ensure that it is
applicable to subsections 26(2B) and (2C). Subsection 26(5) provides that
an order in force under subsection 26(2) and (2A) is subject to conditions as
are specified in the order and sets out the period of effect of the
order.
Item 46 - Paragraph 36(b)
109. This item omits
paragraph 36(b) of the SRC Act and substitutes a new paragraph as a result of
the fact that complaints can be made to the Tribunal other than in relation to a
superannuation fund, for example, RSAs. Therefore, in reviewing a decision or
conduct, the Tribunal only has to have regard to the interests of all the
members of the fund where the complaint relates to a fund.
Item 47 -
Subsection 37C(3)
110. This item amends subsection 37C(3) by
inserting a comma between ‘insurer’ and
‘that’.
Item 48 - Subsection
37C(5)(b)(ii)
111. This item amends subparagraph 37C(5)(b)(ii)
by inserting a comma between ‘be’ and
‘or’.
Item 49 - After 37C
112. This item
inserts new sections 37D, 37E, 37F and 37G.
113. Section 37D sets out the
Tribunal powers in relation to a section 15E complaint concerning the conduct of
an RSA provider in opening an RSA. Subsection 37D(3) provides that the
Tribunal must make a determination either doing any or all of the things set out
in relation to a section 15E complaint. Subsection 37D(4) states that the
Tribunal must not take action under paragraph (3)(a) if the conduct is fair
and reasonable in the circumstances. If an insurer has been joined as a party
to a complaint under section 15E, subsection 37D(5) provides that Tribunal
must make a determination either doing any or all of the things set
out.
114. Section 37E sets out the Tribunal’s powers in
respect of a section 15F complaint concerning the decision of an RSA provider.
Subsection 37E(3) provides that the Tribunal must make a determination doing one
of the things set out in relation to a section 15F complaint. Subsection 37E(6)
provides that the Tribunal must affirm a decision referred to in subsection (3)
if the decision is fair and reasonable in the circumstances.
115. Section
37F sets out the Tribunal powers in respect of a section 15H complaint
concerning the conduct of an insurer in relation to the entry into a contract of
insurance in connection with an RSA. Subsection 37F(3) provides that the
Tribunal must make a determination either doing any or all of the things set out
in relation to a section 15H complaint about an insurer. Subsection 37F(4)
provides that the Tribunal must not take action under paragraph 3(a) if the
conduct of the insurer was fair and reasonable. If an RSA provider has been
joined as a party to a complaint under section 15H, subsection 37F(5)
provides that the Tribunal must make a determination either doing any or all of
the things set out.
116. Section 37G sets out the Tribunal powers
in respect of section 15J complaint concerning a decision of an insurer under a
contract of insurance entered in connection with an RSA. Subsection 37G(3)
provides that the Tribunal must make a determination doing one of the things set
out in relation to a section 15J complaint. Subsection 37G(5) provides that the
Tribunal must affirm a decision referred to in subsection 37G(3) if the decision
is fair and reasonable.
Item 50 - Subsection
41(3)
117. This item amends subsection 41(3) of the SRC Act to ensure
that a decision of an RSA provider as varied by the Tribunal, or a decision made
by the Tribunal in substitution for a such decision is taken to be a decision of
the RSA provider.
Item 51 - After subsection
44(2)
118. This item inserts subsections 44(2A) and (2B) into
the SRC Act. Subsection 44(2A) allows the Tribunal to direct an RSA
provider to notify certain parties of a Tribunal’s determination.
Subsection 44(2B) allows the Tribunal to direct an insurer to notify
certain parties of a Tribunal’s determination.
Item 52 -
Subsection 44(3)
119. This item provides that the penalty provision
applies to an RSA provider who intentionally or recklessly fails to comply with
section 44.
Item 53 - Paragraph 47(2A)(b)
120. This
item amends paragraph 47(2A)(b) to ensure that it applies to a determination
made as a result of a complaint under proposed sections 15E and 15H.
Paragraph 47(2A)(b) provides that where an appeal is brought to the Federal
Court from a determination of the Tribunal the Court may make such order or
orders staying or otherwise affecting the operation or implementation of the
determination.
Item 54 - Subsection 47(2A)
121. This item
amends a typographical error.
Item 55 - Paragraph
47(2B)(b)
122. This item amends paragraph 47(2B)(b) to ensure that it
applies to a determination made as a result of a complaint under proposed
sections 15F and 15J. Paragraph 47(2B)(b) provides that if an appeal is
brought to the Federal Court from a determination of the Tribunal the Court may
make such order or orders staying or otherwise affecting the operation or
implementation of the determination.
Item 56 - Paragraph
47(2B)(d)
123. This item amends paragraph 47(2B)(d) so that is
applies to a decision of an RSA provider.
Item 57 - After paragraph
53(2)(c)
124. This item amends paragraph 53(2)(c) to provide that the
appointment of the Tribunal Chairperson or Deputy Chairperson must be terminated
by the Governor-General if the Chair or Deputy becomes a director or employee of
an RSA provider or an insurer.
Item 58 - Subsection
59(1)
125. This item amends subsection 59(1) to reflect the
amendments to section 18 inserted by item 26.
Item 59 - Paragraph
59(2)(a)
126. This item amends paragraph 59(2)(a) to reflect the
amendments to section 26 inserted by item 42.
Item 60 - After section
64
127. This item inserts a new section into the SRC Act to provide for the notification to the Insurance and Superannuation Commissioner of any breach in the terms and conditions relating to an annuity policy, life policy or an RSA of which a member of the Tribunal may become aware.
Schedule 3 of the
Bill
Amendment of the Bankruptcy Act
1966
Outline
128. The Bankruptcy Act 1966 (the Bankruptcy
Act) sets out the treatment of superannuation moneys in the event of the
bankruptcy of a person, or the death of a bankrupt. Generally, any money that
the bankrupt has in superannuation up to the pension RBL is not available to
creditors. This schedule amends the Bankruptcy Act to ensure money held in RSAs
is treated in a similar fashion to money held in a superannuation fund.
Note: The pension RBL is prescribed by section 140ZD of the Income Tax
Assessment Act 1936
Item 1 - Subsection 5(1)
129. This
inserts a definition of provider for the purposes of the Bankruptcy Act,
which has the same meaning as in the Retirement Savings Accounts Act
1997.
Item 2 - Subsection 5(1)
130. This inserts a
definition of RSA for the purposes of the Bankruptcy Act, which has the
same meaning as in the Retirement Savings Accounts Act
1997.
Item 3 - Subsection 5(1)
131. This inserts a
definition of RSA holder for the purpose of the Bankruptcy Act, which has
the same meaning as in the Retirement Savings Accounts Act
1997.
Item 4 - At the end of paragraph
116(2)(d)
132. This item inserts subparagraphs (v) and (vi) which
refer to money held in an RSA and payments from an RSA which are not pensions or
annuities. Amongst other things, paragraph 116(2)(d) provides that interests in
certain super funds are not available to creditors. This amendment applies the
same treatment to RSAs as applies to superannuation funds.
Item 5 -
After subsection 116(8)
133. This item inserts subsection 116(8A)
into the Bankruptcy Act. This subsection allows the regulations to provide for
the RSA provider to provide a written evidentiary certificate as evidence of the
amount of money a bankrupt holds in an RSA. The certificate will be prima facie
evidence of the amount held by the bankrupt in the RSA.
Item 6 -
Section 139L (definition of income)
134. This item inserts
subparagraph 139L(a)(ia), to include as income of the bankrupt an annuity or
pension paid from an RSA.
Item 7 - After sub-subparagraph
249(6)(a)(ii)(B)
135. This item inserts a new sub-subparagraph into
the Bankruptcy Act that provides that where the administration of the estate of
a deceased person commenced before the death of the person, the divisible
property does not include so much of the proceeds of RSAs that would not have
been divisible among the creditors if the person had not died, the sequestration
order had been made before death and the amount concerned had been paid
immediately before the person’s death.
Item 8 - After
sub-subparagraph 249(7)(a)(ii)(B)
136. This item inserts a new
sub-subparagraph into the Bankruptcy Act that provides that where the
administration of the estate of a deceased person commenced at the time of the
death of the person, the divisible property does not include so much of the
proceeds of RSAs that would not have been divisible among the creditors if the
person had not died, the sequestration order had been made before death and the
amount concerned had been paid immediately before the person’s
death.
Item 9 - After sub-subparagraph
249(8)(a)(ii)(B)
137. This item inserts a new sub-subparagraph into
the Bankruptcy Act that provides that where the administration of the estate of
a deceased person commenced after the death of the person, the divisible
property does not include so much of the proceeds of RSAs that would not have
been divisible among the creditors if the person had not died, the sequestration
order had been made before death and the amount concerned had been paid
immediately before the person’s death.
Item 10 - After section
302A
138. This item inserts section 302AB into the Bankruptcy Act.
This section acts to void any provision in the terms and conditions of an RSA
where the effect of the term or condition is to cancel, forfeit, reduce or
qualify the amount a person has in an RSA or to allow another person to exercise
a discretion relating to the amount, if the RSA holder has become bankrupt,
commits an act of bankruptcy or executes a deed of assignment or arrangement
under the Bankruptcy Act.
Schedule 4 of the
Bill
Amendment of the Superannuation
Industry (Supervision) Act 1993
Outline
139. The Superannuation Industry (Supervision)
Act 1993 (SIS) regulates, inter alia, the conduct of trustees of
superannuation entities to ensure the prudent management of superannuation fund
moneys. The schedule amends SIS to allow for trustees of approved deposit funds
to pay money to an RSA, place requirements on eligible rollover funds accepting
money from an RSA, and to allow trustees of eligible superannuation entities or
regulated exempt public sector schemes, to transfer tax file numbers to an RSA
provider where a beneficiary transfers money to an RSA.
Item 1 -
Subsection 10(1)
140. This item inserts a definition of RSA
into SIS, which has the same meaning as in the Retirement Savings Accounts
Act 1997.
Item 2 - Subsection 10(1)
141. This item
inserts a definition of RSA provider into SIS, which has the same meaning
as in the Retirement Savings Accounts Act 1997.
Item 3 -
Paragraph 15(1)(b)
142. This item amends paragraph 15(1)(b) of SIS to
treat money paid to an RSA, from an approved deposit fund, on a
beneficiary’s behalf as being paid to the beneficiary. This is to clarify
the meaning of ‘paid to a beneficiary’ for the purposes of paragraph
(c) of the definition of ‘approved purposes’ in section 10 and for
the purposes of section 53 of SIS.
Item 4 - After paragraph
153(1)(c)
143. This item inserts paragraph 153(1)(ca). This
paragraph prescribes that the trustee of an eligible rollover fund must not
issue a superannuation interest pursuant to an application made under Part 9 of
the Retirement Savings Accounts Act 1997, except under an eligible
application. This does not apply if the RSA provider has previously made such
an application.
Item 5 - At the end of subsection
157(4)
144. This item exempts the provision of information required
by section 157 to an applicant, where the application is made under Part 9 of
the Retirement Savings Accounts Act 1997.
Item 6 -
Subsection 157A(1)
145. This item inserts a reference to Part 9 of
the Retirement Savings Accounts Act 1997. This section applies to
applications made to rollover money to an eligible rollover fund. This
amendment is to ensure that where an RSA provider uses an eligible rollover
fund, then the trustee of the eligible rollover fund must provide to the RSA
provider certain information.
Item 7 - Subsection
157A(1)
146. This item amends the reference to ‘that
Part’ in subsection 157A(1), to ‘those Parts’, because of the
amendment made by item 6.
Item 8 - Subsection
157A(1)
147. This item amends the definition of
‘applicant’ for the purposes of section 157A to include an RSA
provider. This section applies to applications made to rollover money to an
eligible rollover fund. This amendment is to ensure that where an RSA provider
uses an eligible rollover fund, then the trustee of the eligible rollover fund
must provide to the RSA provider certain information. It also amends the
heading to section 157A to include a reference to Part 9 of the Retirement
Savings Accounts 1997.
Item 9 - At the end of subsection
157A(1)
148. This item amends the definition of
‘applicant’ for the purposes of section 157A to include a reference
to section 87 of the Retirement Savings Accounts Act 1997. This section
applies to applications made to rollover money to an eligible rollover fund.
This amendment is to ensure that where an RSA provider uses an eligible rollover
fund, then the trustee of the eligible rollover fund must provide to the RSA
provider certain information.
Item 10 - At the end of subsection
248(1)
149. This item inserts a reference to section 87 of the
Retirement Savings Accounts Act 1997 into subsection 248(1). This
section outlines the process for the claiming of benefits in an eligible
rollover fund. The amendment is to ensure that the benefits transferred from an
RSA are treated in the same way as if the money was transferred from another
fund.
Item 11 - Subsection 299M(2)
150. This item amends
subsection 299M(2) to allow the trustee of an eligible superannuation entity to
transfer a person’s tax file number to an RSA provider, where the person
transfers money to an RSA offered by that provider. The item also amends the
heading to section 299M and subsection 299M(2) to include a reference to
RSAs.
Note: Eligible superannuation entity is defined by section 299W to
mean a regulated superannuation fund or approved deposit fund.
Item 12 -
Subsection 299M(2)
151. This item amends subsection 299M(2) to allow
the trustee of an eligible superannuation entity to transfer a person’s
tax file number to an RSA provider, where the person transfers money to an RSA
offered by that provider.
Note: Eligible superannuation entity is
defined by section 299W to mean a regulated superannuation fund or approved
deposit fund.
Item 13 - Subsection 299M(3)
152. This item
amends subsection 299M(3) to enable a member of an eligible superannuation
entity to prevent the trustee of an eligible superannuation entity from
transferring the tax file number to an RSA provider where the person has
requested the trustee not to do so.
Note: Eligible superannuation entity
is defined by section 299W to mean a regulated superannuation fund or approved
deposit fund.
Item 14 - Subsection 299M(3)
153. This item
amends subsection 299M(3) to enable a member of an eligible superannuation
entity to prevent the trustee of an eligible superannuation entity from
transferring the tax file number to an RSA provider where the person has
requested the trustee not to do so.
Note: Eligible superannuation entity
is defined by section 299W to mean a regulated superannuation fund or approved
deposit fund.
Item 15 - Subsection 299N(2)
154. This item
amends subsection 299N(2) to allow the trustee of a regulated exempt public
sector superannuation scheme to transfer a person’s tax file number to an
RSA provider, where the person transfers money to an RSA offered by that
provider. The item also amends the heading to section 299N and subsection
299N(2) to include a reference to RSAs.
Note: Regulated exempt public
sector superannuation scheme is defined by section 299W.
Item 16 -
Subsection 299N(2)
155. This item amends subsection 299N(2) to allow
the trustee of a regulated exempt public sector superannuation scheme to
transfer a person’s tax file number to an RSA provider, where the person
transfers money to an RSA offered by that provider.
Note: Regulated
exempt public sector superannuation scheme is defined by section
299W.
Item 17 - Subsection 299N(3)
156. This item amends
subsection 299N(3) to enable a member of a regulated exempt public sector
superannuation scheme to prevent the trustee of a regulated exempt public sector
superannuation scheme from transferring the tax file number to an RSA provider
where the person has requested the trustee not to do so.
Note: Regulated
exempt public sector superannuation scheme is defined by section
299W.
Item 18 - Subsection 299N(3)
157. This item amends
subsection 299N(3) to enable a member of a regulated exempt public sector
superannuation scheme to prevent the trustee of a regulated exempt public sector
superannuation scheme from transferring the tax file number to an RSA provider
where the person has requested the trustee not to do so.
Note: Regulated
exempt public sector superannuation scheme is defined by section
299W.
Item 19 - Paragraph 299N(4)(a)
158. This item inserts
a reference to an RSA provider into paragraph 299N(4)(a). Subsection 299N(4)
places a penalty on the trustee of a regulated exempt public sector
superannuation scheme, that breaches the requirement of subsection 299N(3) not
to transfer a person’s tax file number.
Note: Regulated exempt
public sector superannuation scheme is defined by section 299W.
Item
20 - Paragraph 299N(4)(b)
159. This item inserts a reference to an
RSA provider into paragraph 299N(4)(b). Subsection 299N(4) places a penalty on
the trustee of a regulated exempt public sector superannuation scheme, that
breaches the requirement of subsection 299N(3) not to transfer a person’s
tax file number.
Note: Regulated exempt public sector superannuation
scheme is defined by section 299W.
Item 21 - Subsection
299R(1)
160. This item amends subsection 299R(1) to deem a person as
having provided their tax file number to an RSA provider where the trustee of an
eligible superannuation entity transfers benefits and the tax file number of
that person to the RSA provider. This item also amends the heading to section
299R to refer to RSA providers.
Note: Eligible superannuation entity is
defined by section 299W to mean a regulated superannuation fund or approved
deposit fund.
Item 22 - Paragraphs 299R(1)(a)
161. This
item amends paragraphs 299R(1)(a) to deem a person as having provided their tax
file number to an RSA provider where the trustee of an eligible superannuation
entity transfers benefits and the tax file number of that person to the RSA
provider.
Note: Eligible superannuation entity is defined by section
299W to mean a regulated superannuation fund or approved deposit
fund.
Item 23 - Paragraph 299R(1)(a)
162. This item inserts
a reference to the Retirement Savings Accounts Act 1997 into paragraph
299R(1)(a). This amendment provides that when the trustee of an eligible
superannuation entity transfers a person’s tax file number to an RSA
provider, then that person is deemed to have given their tax file number to the
RSA provider for the purposes of the Retirement Savings Accounts Act
1997.
Note: Eligible superannuation entity is defined by section
299W to mean a regulated superannuation fund or approved deposit
fund.
Item 24 - Paragraph 299R(1)(b)
163. This item amends
paragraphs 299R(1)(b) to deem a person as having provided their tax file number
to an RSA provider where the trustee of an eligible superannuation entity
transfers benefits and the tax file number of that person to the RSA
provider.
Note: Eligible superannuation entity is defined by section
299W to mean a regulated superannuation fund or approved deposit
fund.
Item 25 - Subsection 299R(2)
164. This item amends
subsection 299R(2) to deem a person as having provided their tax file number to
an RSA provider where the trustee of an exempt public sector superannuation
scheme transfers benefits and the tax file number of that person to the RSA
provider.
Note: Exempt public sector superannuation scheme is defined
section 299W.
Item 26 - Paragraphs 299R(2)(a)
165. This
item amends paragraphs 299R(2)(a) to deem a person as having provided their tax
file number to an RSA provider where the trustee of an exempt public sector
superannuation scheme transfers benefits and the tax file number of that person
to the RSA provider.
Note: Exempt public sector superannuation scheme is
defined section 299W.
Item 27 - Paragraph
299R(2)(a)
166. This item inserts a reference to the Retirement
Savings Accounts Act 1997 into paragraph 299R(2)(a). This amendment
provides that when the trustee of a regulated exempt public sector
superannuation scheme transfers a person’s tax file number to an RSA
provider, then that person is deemed to have given their tax file number to the
RSA provider for the purposes of the Retirement Savings Accounts Act
1997.
Note: Regulated exempt public sector superannuation scheme is
defined by section 299W.
Item 28 - Paragraph
299R(2)(b)
167. This item amends paragraphs 299R(2)(b) to deem a
person as having provided their tax file number to an RSA provider where the
trustee of an exempt public sector superannuation scheme transfers benefits and
the tax file number of that person to the RSA provider.
Note: Exempt
public sector superannuation scheme is defined section 299W.
Schedule 5 of the
Bill
Amendment of the Insurance and
Superannuation Commissioner Act 1987
Outline
168. The Insurance and Superannuation
Commissioner Act 1987 (the ISC Act) establishes the office of Insurance and
Superannuation Commissioner (the Commissioner). The ISC Act prescribes the
functions, entitlements, and duties of the Commissioner. The schedule amends
the ISC Act to require the Commissioner to disclose any direct or indirect
interests in an RSA or RSA provider.
Item 1 - Section
3
169. This item inserts a definition of RSA for the purposes
of the ISC Act, which has the same meaning as in the Retirement Savings
Accounts Act 1997.
Item 2 - Section 3
170. This item
inserts a definition of RSA provider for the purposes of the ISC Act,
which has the same meaning as in the Retirement Savings Accounts Act
1997.
Item 3 - After paragraph 4(3)(c)
171. This item
inserts paragraph 4(3)(d) into the ISC Act. This paragraph excludes from
appointment to the position of Commissioner anyone who is a director or employee
of an RSA provider, or body corporate that is related to an RSA provider. This
is to ensure the independence of the Commissioner.
Item 4 - After
paragraph 8(aa)
172. This item inserts paragraph 8(ab). This
paragraph requires the Commissioner to inform the Minister of all direct or
indirect interests he or she has in an RSA or an RSA provider.
Item 5
- Subparagraph 11(2)(c)(i)
173. This item inserts a cross reference
to paragraph 4(3)(d) (inserted by Item 3). This amendment allows for the
Governor-General to terminate the appointment of the Commissioner if he or she
becomes a director or employee of an RSA provider, or body corporate that is
related to an RSA provider.
Schedule 6 of the
Bill
Amendment of the Superannuation
(Productivity Benefit) Act 1988
Outline
174. The Superannuation (Productivity Benefit)
Act 1988 (the Productivity Benefit Act) makes provision for superannuation
benefits for certain persons who are generally employed by the Commonwealth.
The schedule amends the Productivity Benefit Act by allowing preserved money to
be paid to an RSA.
Item 1 - Subsection 3(1)
175. This item
inserts a definition of RSA for the purposes of the Productivity Benefit
Act, which has the same meaning as in the Retirement Savings Accounts Act
1997.
Item 2 - At the end of subparagraph
6(7)(a)(i)
176. This item inserts an ‘or’ at the end of
subparagraph 6(7)(a)(i).
Item 3 - After subparagraph
6(7)(a)(ii)
177. This item inserts subparagraph 6(7)(a)(iia) into the
Productivity Benefit Act. This subparagraph allows for an interim benefit that
is required to be preserved to be paid into an RSA. Currently, preserved money
can be paid to a superannuation fund, approved deposit fund or deferred annuity
nominated by a person.
Item 4 - Paragraph 6(7)(b)
178. This
item includes a reference to RSAs in paragraph 6(7)(b). This allows for a
person’s employer to nominate an RSA into which a benefit will be paid
where the person has not nominated a superannuation fund, approved deposit fund,
or RSA within 2 months of the benefit becoming payable.
Schedule 7 of the
Bill
Amendment of the Superannuation Act
1976
Outline
179. The Superannuation Act 1976 (the
Superannuation Act) governs the operation of the Commonwealth Superannuation
Scheme. The schedule amends the Superannuation Act by allowing preserved money
to be transferred to an RSA.
Item 1 - At the end of section
3B
180. This item inserts subsection 3B(2) into the Superannuation
Act. Subsection 3B(2) deems an RSA to be a preservation fund for the purposes
of the Superannuation Act. This allows for preserved money to be transferred to
an RSA. Currently, preserved money can be paid to a fund that preserves money
in accordance with the standards prescribed by the Superannuation Industry
(Supervision) Act 1993.
Schedule 8 of the
Bill
Amendment of the Parliamentary
Contributory Superannuation Act 1948
Outline
181. The Parliamentary Contributory
Superannuation Act 1948 (the Parliamentary Superannuation Act) makes
provision for contributory superannuation for persons who have served as Members
of the Parliament. The schedule amends the Parliamentary Superannuation Act by
allowing preserved benefits to be paid to an RSA nominated by a
person.
Item 1 - After paragraph 26B(4)(b)
182. This item
inserts paragraph 26B(4)(ba) into the Parliamentary Superannuation Act. This
paragraph allows for preserved benefits to be paid into an RSA nominated by the
person. Currently, preserved money can be paid to a regulated superannuation
fund, an approved deposit fund or a deferred annuity, nominated by the person.
This item also amends the subsection heading to include a reference to
RSAs.
Item 2 - Subsection 26B(6)
183. This item inserts a
definition of RSA into subsection 26B(6) for the purpose of section 26B,
which has the same meaning as in the Retirement Savings Accounts Act
1997.
Schedule 9 of the
Bill
Amendment of the Banking Act
1959
Outline
184. The Banking Act 1959 (the Banking Act)
regulates the conduct of banking in Australia. One of these requirements
relates to the treatment of unclaimed monies. The schedule amends the unclaimed
money provision in the Banking Act to exempt money held in RSAs.
Item
1 - Subsection 69(3)
185. This item amends subsection 69(3) to exempt
money held in RSAs by banks from the unclaimed money provisions in the Banking
Act. Currently, the unclaimed money provision in the Banking Act deems money to
be unclaimed if the account has been inactive for 7 years. This is inconsistent
with the unclaimed money provisions which apply to superannuation products. As
RSAs are another kind of superannuation product then similar provisions should
apply. The unclaimed money provisions for RSAs are prescribed in Part 8 of the
Retirement Savings Accounts Act 1997. The unclaimed money provisions for
RSAs will be administered by the Australian Taxation Office or by a relevant
State or Territory authority.
Schedule 10 of the
Bill
Amendment of the Insurance Contracts
Act 1984
Outline
186. The Insurance Contracts Act 1984 (the
Contracts Act) prescribes certain requirements for contracts of insurance.
These include certain provisions to be included in such contracts, and the
conduct of insurers in relation to such contracts. The schedule amends the
Contracts Act to:
• provide for an RSA holder to recover a benefit
from a life insurance company, if they are named under a ‘group’
life insurance contract; and
• exempt contracts of life insurance which
are RSAs, from the cooling off provision of the Contracts Act.
Item 1
- Subsection 11(1)
187. This item inserts a definition of
holder for the purposes of the Contracts Act, which has the same meaning
as in the Retirement Savings Accounts Act 1997.
Item 2 -
Subsection 11(1)
188. This item inserts a definition of RSA
for the purposes of the Contracts Act, which has the same meaning as in the
Retirement Savings Accounts Act 1997.
Item 3 - Subsection
11(1)
189. This item inserts a definition of RSA provider for
the purposes of the Contracts Act, which has the same meaning as in the
Retirement Savings Accounts Act 1997.
Item 4 - Subsection
26(3)
190. This item repeals subsection 26(3) and substitutes a new
subsection 26(3). The new subsection 26(3) extends section 26 to include a
person who is an RSA holder or applying to become an RSA holder. Section 26
provides that certain statements are not to be taken a
misinterpretation.
Item 5 - After section 32
191. This item
inserts section 32A into the Contracts Act. This item extends the provisions of
Division 3 of the Contracts Act (Remedies for Non-Disclosure and
Misrepresentation) to an RSA holder. The section applies to an RSA holder who
has insurance cover under a ‘group’ insurance policy and provides
for them to be treated as if the insurance cover was in fact individual
insurance cover.
Item 6 - After section 48
192. This item
inserts section 48AA into the Contracts Act. Section 48AA relates to a
situation where an RSA provider takes out a contract of life insurance for the
benefit of RSA holders. This is commonly referred to as ‘group
insurance’. This section provides an RSA holder, who is specified in the
contract, the right to recover a benefit from the insurer in accordance with the
contract even though they are not a party to that contract.
193. The RSA
holder has the same obligations to the insurer as if he or she was the insured
and may discharge the insured’s obligations in relation to the payment of
a benefit. The insurer has the defences to an action under this section as he
or she would have in an action by the insured.
Item 7 - Subsection
64(1)
194. This item amends section 64 of the Contracts Act to exempt
RSAs from the cooling off provision provided by that Act.
Schedule 11 of the
Bill
Amendment of the Insurance Act
1973
195. The Bill amends to the Insurance Act 1973 (the Insurance
Act) to require general insurance companies to comply with determinations
of the Tribunal made under new complaints sections inserted into the
Superannuation (Resolution of Complaints) Act 1993 (the SRC Act) by this
Bill. In particular, under sections 15H and 15J of the SRC Act, inserted by
item 20 of Schedule 2 of this Bill, a complaint may be made against a general
insurer about the sale of insurance benefits under a contract of insurance where
the premiums are paid from an RSA and also about a decision of a general insurer
under a contract of insurance where the premiums are paid from an RSA. In
addition, a general insurer may be joined to a complaint against a RSA provider
under proposed sections 15E or 15F. The Commissioner may apply to the Federal
Court for an injunction under section 129D of the Insurance Act in the event of
non-compliance with such a determination.
Item 1 - Subsection
3(1)
196. This item inserts a definition of RSA for the
purposes of the Insurance Act, which has the same meaning as in the
Retirement Savings Accounts Act 1997.
Item 2 - After subsection
129C(1)
197. This item inserts a new subsection 129C(1A) into the
Insurance Act. Subsection 129C(1A) has been inserted as a consequence of
amendments to the SRC Act which enable the conduct and decisions of bodies
corporate authorised to carry on insurance business under the Insurance Act
(‘general insurance companies’) relating to contracts of
insurance, where the premiums are paid from an RSA, to be subject to review by
the Superannuation Complaints Tribunal (the ‘Tribunal’) and for the
Tribunal to impose certain remedies in respect of such general insurer conduct
and decisions.
198. Subsection 129C(1A) requires general insurance
companies who are a party to a complaint under proposed sections 15H or 15J of
the SRC Act, to comply with a determination of the Tribunal made in respect of
that company. In addition, subsection 129C(1A) requires general insurers
who have been joined as a party to a complaint under proposed sections 15E or
15F to comply with a determination of the Tribunal made in respect of that
company.
199. If a general insurer contravenes section 129C, then
the Insurance and Superannuation Commissioner can apply to the Federal Court
under section 129D of the Insurance Act for an injunction. Section 129D
of the Act effectively empowers the Federal Court to grant an injunction either
restraining the general insurer from contravening section 129C or requiring the
general insurer to do a particular act.
Schedule 12 of the
Bill
Amendment of the Life Insurance Act
1995
Outline
200. The Bill amends the Life Insurance Act 1995
(the Life Insurance Act) to require life offices to comply with
determinations of the Superannuation Complaints Tribunal (the Tribunal) made
under new complaints sections inserted into the Superannuation (Resolution of
Complaints) Act 1993 (the SRC Act) by this Bill. In particular,
under sections 15H and 15J of the SRC Act, inserted by item 20 of Schedule 5 of
this Bill, a complaint may be made against a life insurer about the sale of
insurance benefits under a contract of insurance, where the premiums are paid
from an RSA, and about a decision of a life insurer under a contract of
insurance where the premiums are paid from an RSA. In addition, a life insurer
may be joined to a complaint against a RSA provider under proposed sections 15E
or 15F. The Commissioner may apply to the Federal Court for an injunction under
section 235 of the Life Insurance Act, in the event of non-compliance
with such a determination. The schedule also amends the unclaimed money
provision in the Life Insurance Act to exempt money held in RSAs.
Item
1 - Subsection 151A(1)
201. This item amends subsection 151A(1)
of the Life Insurance Act by inserting paragraphs (d) and (e). Paragraph
151(1)(d) has been inserted as a consequence of amendments to the SRC Act which
enable the conduct and decisions of life companies relating to contracts of
insurance, where the premiums are paid from an RSA, to be subject to review by
the Tribunal and for the Tribunal to issue certain remedies in respect of such
life insurer conduct and decisions.
202. Paragraph 151A(1)(d) requires
life companies who have been joined as a party to a complaint under section 15E
or 15F to comply with any determination of the Tribunal made in respect of that
company. Paragraph 151A(1)(e) requires life companies who are a party to a
complaint under proposed sections 15H or 15J of the SRC Act, to comply with a
determination of the Tribunal made in respect of that company.
203. If
a life company contravenes section 151A, then the Insurance and Superannuation
Commissioner can apply to the Federal Court under section 235 of the Life
Insurance Act for an injunction. Section 235 of the Act effectively empowers
the Federal Court to grant an injunction either restraining the life company
from contravening section 151A or requiring the life company to do a particular
act.
Item 2 - Subsection 216(1)
204. This item amends
subsection 216(1) of the Life Insurance Act to exempt money held in RSAs that
are life insurance policies from the unclaimed money provisions in that Act.
Currently, the unclaimed money provision in the Life Insurance Act, administered
by the Insurance and Superannuation Commission, deems moneys under life policies
to be unclaimed if the benefits under the policy have not been claimed 7 years
after the maturity of the policy. This is inconsistent with the unclaimed money
provisions which apply to superannuation products. As RSAs are another kind of
superannuation product then similar provisions should apply. The unclaimed
money provision for RSAs are prescribed in Part 8 of the Retirement Savings
Accounts Act 1997. The unclaimed money provisions for RSAs will be
administered by the Australian Taxation Office or by a relevant State or
Territory authority.
Schedules 13 - 18 of the
Bill
Outline
205. Schedule 13 of the Bill makes amendments
to the Income Tax Assessment Act 1936 to implement appropriate
income tax treatment in relation to Retirement Savings Accounts (RSAs) (see
paragraphs 216 to 354).
206. Schedule 14 of the Bill
makes an amendment to the Superannuation Guarantee Charge Act 1992 to
recognise RSAs (see paragraph 355).
207. Schedule 15 makes
amendments to the Superannuation Guarantee (Administration) Act 1992 to
recognise RSAs for Superannuation Guarantee purposes (see paragraphs 356
to 361).
208. Schedule 16 makes amendments to the Small
Superannuation Accounts Act 1995 to allow amounts to be transferred
from the Superannuation Holding Accounts Reserve to RSAs (see
paragraphs 362 and 363).
209. Schedule 17 makes an
amendment to the Fringe Benefits Tax Assessment Act 1986 to ensure
that employer contributions to RSAs are not fringe benefits (see
paragraph 364).
210. Schedule 18 makes amendments to the
Income Tax Rates Act 1986 to apply appropriate rates of tax in relation
to RSAs (see paragraphs 365 to 368).
Purpose of the
amendments
211. To ensure that income derived in relation to RSAs is
taxed in broadly the same way as complying superannuation funds and that
contributions to, and benefits from, RSAs are treated in the same way as
contributions to, and benefits from, complying superannuation
funds.
212. The amendments also ensure that RSAs are treated in the same
way as complying superannuation funds for Superannuation Guarantee
purposes.
Date of effect
213. The amendments will operate
from 1 July 1997 when RSAs come into existence.
Background
to the legislation
214. The Government announced in the Budget that
it has decided to allow banks, building societies, credit unions and life
insurance companies to provide superannuation directly without the need for a
separate trust structure. The new superannuation products are called
RSAs.
215. The RSA business of RSA providers is to be taxed in broadly
the same way as a complying superannuation fund. Differences in the tax
treatment of the RSA business and complying superannuation funds are caused by
the relatively simple nature of RSAs and arise because RSA business is part of
the total business of an RSA provider whereas a complying superannuation fund is
a separate taxable entity.
Explanation of the
amendments
Schedule 13 - Amendments to the Income Tax
Assessment Act
216. Schedule 13 of the Bill makes amendments to the
Income Tax Assessment Act (ITAA) to appropriately recognise RSAs. The
Explanatory Memorandum explains the changes to the ITAA as
follows:
• Definitions (paragraphs 217 and
218);
• RSAs operated by financial institutions
(paragraphs 219 to 250);
• Life assurance companies
(paragraphs 251 to 305);
• Taxable contributions
(paragraphs 306 to 311);
• Concessions for contributions to
RSAs (paragraphs 312 to 327);
• Payments from RSAs
(paragraphs 328 to 337);
• Reasonable benefit limits
(paragraphs 338 and 339);
• Dividend imputation
(paragraphs 340 to 348);
• Capital gains (paragraph 349);
and
• Tax file numbers (paragraphs 350 to
354).
Definitions
217. Definitions of RSA, RSA
provider, provider, hold and holder are being inserted
into subsection 6(1) [Items 1 to 5]. Each of the
terms have the same meaning as in the Retirement Savings Accounts
Act 1997.
218. An RSA, or retirement savings account, is defined
in section 8 of the Retirement Savings Accounts Bill to mean an account or
policy that meets specified conditions and is provided by an RSA institution.
Section 9 provides that a person holds an RSA, and is the holder of an RSA,
if the account or policy is opened in the person's name. Section 12
specifies that an RSA provider is a person who is the provider of one or more
RSAs. A person provides an RSA, and is the provider of an RSA, if the person
accepts deposits to an RSA or issues RSA policies
(section 10).
RSAs operated by financial
institutions
219. The Bill amends Part IX of the ITAA, which
deals with the taxation of superannuation business and related business, to
specify the taxation treatment of an RSA provider that is a financial
institution (that is, a bank, building society or credit
union).
220. Item 125 inserts new
Division 7A into Part IX to outline the taxation treatment of
an RSA provider that is not a life assurance company. New Division
7A contains new sections 299A
to 299G.
221. Broadly the amendments identify the taxable
income of the RSA provider recognising:
• specific amounts which
are exempt from tax;
• specific amounts which are included in
assessable income; and
• specific deductions that are available to
an RSA provider.
222. The amendments also work out the RSA amount of
taxable income. The RSA amount of taxable income cannot be reduced by tax losses
made by the financial institution on it's ordinary business.
223. Once
the taxable income of the RSA provider is established (including income from all
other business activity), it is divided into an RSA component (which is taxed at
a rate of 15%) and a standard component (which is taxed at a rate of
36%).
224. Chart 1 illustrates the operation of new
Division 7A of Part IX.
Taxable income of an RSA provider
225. New
section 299A provides that new Division 7A of
Part IX sets out how to calculate the taxable income of an RSA provider that is
a financial institution.
Exempt income
226. New section 299G exempts an RSA provider that is a financial institution from tax on any amounts that, but for the operation of new subsection 299C(3), would have been taken into account under new paragraph 299C(2)(b) in calculating the RSA component of taxable income. New paragraph 299C(2)(b) applies to work out the RSA amount which is allocated to the RSA component of taxable income under new subsection 299D(2).
227. New subsection 299C(3) excludes from the RSA amount of taxable income interest or any other amounts credited by an RSA provider to an RSA that is paying out a current pension. The amount which is excluded from the RSA amount, and which is exempt from tax under new section 299G, is worked out under new subsections 299C(4) and (5).
228. If an RSA is paying out a pension in respect of the whole of the year of income that the RSA was in existence, then the whole amount credited to the RSA will be exempt from tax. [New subsection 299C(4)]
229. If an RSA is paying out a pension for only part of the year of income that the RSA was in existence, then the amount that is exempt from tax is the amount calculated using the formula:
[New
subsection 299C(5)]
230. In this regard, the number of days
in the part of the year in respect of which the pension was paid is the number
of days in the period from the first day of the period to which the pension
relates until either the end of the year of income or the day on which the RSA
ceased to exist, whichever is earlier.
Example
231. Assume that Nicholas holds an RSA provided by Megabank for
the whole of a year of income. He commences to receive a pension from the RSA
with effect from 1 February 1998 but does not receive the first
pension payment until 20 June 1998. $6 000 interest was credited
to Nicholas's RSA on 31 December 1997. An additional $8 000
interest was credited on 30 June 1998. New section 299G
will apply to exempt Megabank from tax on the following
amount:
232. The remaining amount of
interest credited (that is, $8 247) will be included in Megabank's
assessable income under the ordinary provisions of the income tax law and
allocated to the RSA component of taxable income under new
subsection 299D(2).
Assessable
income
233. New section 299B provides that the
taxable income, and consequently the assessable income, of an RSA provider that
is a financial institution will specifically include all taxable contributions
(see paragraphs 306 to 311) made during the year of income to RSAs provided
by the RSA provider. Investment income derived by RSA providers is included in
the RSA provider's assessable income under the ordinary provisions of the income
tax law.
234. In addition, the assessable income of an RSA provider will
specifically include any rebate or refund of a life assurance premium received
by an RSA provider that has been allowed as a deduction under new
subsection 299E(1). [New
section 299F]
Allowable
deductions
235. New section 299E contains some
specific provisions relating to deductions available to RSA
providers:
• new subsection 299E(1) allows a
specific deduction for premiums paid for an insurance policy that wholly
provides death and disability benefits under RSAs provided by the RSA
provider;
• new subsection 299E(2) ensures that
an RSA provider is not entitled to a deduction for amounts withdrawn, or
benefits paid, from RSAs;
• new
subsection 299E(3) ensures that an RSA provider is not entitled to
a deduction for amounts credited to RSAs.
236. In addition, consistent
with complying superannuation funds, an RSA provider that is a financial
institution is able to treat all contributions (whether or not deductible to the
contributor) that are paid into RSAs as assessable income for the purpose of
claiming deductions. [Item 124 - new
section 277AA]
Calculation of the RSA amount of
taxable income
237. New section 299C sets out
how to calculate the RSA amount of taxable income of a financial institution.
The RSA amount of taxable income is the sum of:
• all taxable
contributions made during the year of income to RSAs [new
paragraph 299C(2)(a)]; and
• all amounts (other than
contributions) credited during the year of income to RSAs reduced by amounts
credited to RSAs that are paying out current pensions (see paragraphs 226
to 232) [new paragraph 299C(2)(b) and
subsections 299C(3) - (5)];
less any amounts paid
or withdrawn from RSAs other than benefits paid to, or in respect of, the
holders of RSAs [new subsection 299C(2)] or tax paid in
respect of RSAs [new
subsection 299C(2A)].
Restricting losses to the
standard component of taxable income
238. New
section 299CA operates to ensure that RSA providers cannot offset
losses against RSA income. The new section applies if:
• the
taxable income of the RSA provider is less than the RSA amount [new
paragraph 299CA(a)]; or
• the RSA provider has no
taxable income [new paragraph 299CA(b)].
239. In these
circumstances:
• the RSA provider is taken to have both a taxable
income and a tax loss for the year of income [new
paragraph 299CA(c)];
• the taxable income is equal to
the RSA amount [new paragraph 299CA(d)];
and
• the tax loss is taken to be the amount that would have been
the RSA provider's tax loss if the RSA amount were not income derived [new
paragraph 299CA(e)].
Calculation of the components of
taxable income
240. New subsection 299D(1)
divides the taxable income of an RSA provider that is a financial institution
into:
• the RSA component of taxable income; and
• the standard component of taxable income.
RSA
component of taxable income
241. Subsection 267(1) will be
amended to insert a definition of RSA component to have the
meaning given by new section 299D.
[Item 116 - new definition of RSA
component]
242. The RSA component of taxable income is equal to
the RSA amount worked out under new section 299C. [New
subsection 299D(2)]
Standard component of taxable
income
243. The definition of standard component in
subsection 267(1) will be amended so that, in relation to an RSA, the
standard component has the meaning given by new section 299D.
[Item 118]
244. The standard component of taxable
income is any amount remaining after deducting the RSA component from taxable
income. [New subsection 299D(3)]
Example
1
245. Megabank's total taxable income is $250 million. This
amount includes taxable contributions deposited to RSAs of $10 million and
total interest credited to RSAs of $12 million ($1.5 million was
credited to RSAs paying out current pensions).
246. The RSA amount of
Megabank's taxable income will be $20.5 million. This amount is the sum of
taxable contributions ($10 million) and amounts credited to RSAs
($12 million) reduced by the amount credited to RSAs that are paying out
current pensions ($1.5 million). The whole of the RSA amount will be
allocated to the RSA component of Megabank's taxable income.
247. The
standard component of Megabank's taxable income will be $229.5 million.
This amount is Megabank's total taxable income ($250 million) reduced by
the RSA component of taxable income ($20.5 million).
Example 2
248. The Livingston Bank has
taxable income of $100 000. It received taxable contributions in RSAs of
$220 000 during the year of income. No earnings were credited to RSAs and
no amounts were withdrawn, except to pay tax on taxable contributions.
Therefore, the RSA amount calculated under new section 299C
is $220 000.
249. New section 299CA will apply so
that the Livingston Bank will have both a taxable income and a tax loss for the
year of income. The taxable income will be the RSA amount of $220 000. This
amount will be allocated to the RSA component of the Livingston Bank's taxable
income and will be subject to tax at a rate of 15 per cent. The tax loss will be
the amount that would have been the tax loss if no taxable contributions were
derived - that is, $120 000.
250. If in this example the
Livingston Bank had a tax loss of $50 000, new
section 299CA would apply so that its taxable income would be
$220 000 and its tax loss would be $270 000.
Life assurance
companies
251. Division 8 of Part III deals with the tax
treatment of life assurance companies.
252. Section 116CA recognises
four classes of assessable income for life assurance companies. The purpose of
identifying different classes of assessable income of a life assurance company
is primarily to enable the application of different rates of tax to different
parts of the life insurer's business. The four classes of assessable income
are:
• the non-complying superannuation (NCS) class - which is
taxed at a rate of 47%;
• the complying superannuation/roll-over
annuity (CS/RA) class - which is taxed at a rate of 15%;
• the
non-fund class - which is taxed at a rate of 36% in the case of a non-mutual
life assurance company and 39% in the case of a mutual life assurance
company;
• the accident and disability/residual life assurance
(AD/RLA) class - which is taxed at a rate of 39%.
253. RSAs will form
part of the non-fund component of taxable income. However, as RSAs provided by
life assurance companies are life assurance policies, the non-fund component
will now include assessable income derived from assets held in the insurance
funds as defined in subsection 110(1). Therefore, the name of the
non-fund component of taxable income is to be changed to the general fund
component of the taxable income.
254. A number of amendments are
necessary to Division 8 of Part III to ensure that the general fund
component of taxable income is properly determined and to identify the RSA
component and standard component of the general fund component of taxable
income.
255. In addition, amendments are required to the ITAA to
recognise the change in name from the non-fund component to the general fund
component.
256. Several definitions in subsection 110(1) will be
amended and new definitions inserted in relation to the amendments to
Division 8:
• AD/RLA policy - this definition
is being amended to ensure that an RSA is not an AD/RLA policy. [Item
33]
• annuity - this definition is being
amended to ensure that a pension, within the meaning of the Retirement
Savings Accounts Act 1997, paid from an RSA is an annuity for the purposes
of Division 8. [Item 34]
• exempt
policy - the current annuity exemption that relates to RSAs is
contained in new subsection 116DAF. Therefore, paragraph (a)
of the definition of exempt policy is being amended so that, in
relation to ordinary life assurance companies, RSAs will not be exempt policies
which are subject to subsection 112A(1). [Item 35]
However, an RSA that is paying out an immediate annuity will be an eligible
policy as defined in subsection 110(1) and will need to satisfy the
approved annuity conditions as defined in
subsection 110(1).
Paragraph (b) of the definition of
exempt policy is also being amended so that, in relation to an
SGIO, RSAs are not exempt policies. [Item 36] An SGIO is
defined in subsection 6(1) to mean, broadly, a State or Territory body that
carries on life assurance business.
• general fund assessable
income - general fund assessable income is the sum of assessable
income that is not fund assessable income (as defined in
subsection 110(1)) together with fund assessable income that relates to
RSAs reduced by AD premiums, specified roll-over amounts (other than those paid
into RSAs) and amounts transferred from superannuation funds under
section 275 [Item 37]. Fund assessable income that
relates to RSAs consists of the amount included in assessable income under
new section 116DAB. The definition of general fund
assessable income replaces the previous definition of non-fund assessable
income [Item 40].
• general fund
component - this definition replaces the previous definition of
non-fund component and means the component of taxable income determined
under section 116CJ for the general fund class.
[Items 38 and 41]
• life assurance
policy - this definition is amended to ensure that, for the
purposes of Division 8, an RSA provided by a life assurance company is a
life assurance policy. [Item 39]
• RSA
component - the RSA component is the component of the general fund
component of taxable income worked out under new
section 116DAD.
[Item 42]
• standard
component - the standard component is the component of the general
fund component of taxable income worked out under new
section 116DAD.
[Item 43]
• taxable
contribution - the definition of taxable contribution is
relevant for working out the taxable income of an RSA provider under new
section 116DAB and the RSA amount of taxable income under new
section 116DAC. The amount of taxable contributions is worked out
under Part IX (see paragraphs 306 to 311).
[Item 44]
257. Subsection 111(1) provides that
premiums received in respect of life assurance policies are exempt income of a
life assurance company. New subsection 111(1B) ensures that
taxable contributions made to RSAs are not exempt from tax under
subsection 111(1). [Item 45]
258. Section 111AC
allows a deduction for expenditure incurred in gaining superannuation premiums.
Section 111AC is being amended to allow a deduction for certain expenses
incurred in relation to collecting all contributions that are paid into RSAs.
[Items 46 - 50]
259. Section 111AD,
which allows a deduction for expenditure incurred in obtaining the investment
component of relevant life assurance premiums, will be amended so that RSA
contributions are not relevant life assurance premiums.
[Item 51]
260. Section 111C provides that deductions
of a life assurance company, other than deductions allowable under certain
specified provisions (including section 111AC), are to be reduced to the
extent that they do not relate exclusively to producing assessable income. The
definition of Assessable income in subsection 111C(4) will be
amended to ensure that RSA contributions are assessable income for the purposes
of section 111C. [Item 52]
261. Section 112
denies deductions for expenditure exclusively incurred in gaining certain
premiums that are exempt under section 111. However, a deduction is
allowed for expenditure incurred in gaining superannuation premiums to which
section 111AC applies (subparagraph 112(1)(a)(i)).
Subparagraph 112(1)(a)(i) will be amended so that section 112 will not
deny a deduction in relation to expenditure incurred in gaining RSA
contributions to which section 111AC applies.
[Item 53]
262. Subsection 112A(1A) will be
amended to include taxable contributions made to RSAs in the assessable income
of SGIOs. [Item 54 - new
paragraph 112(1A)(aa)]
263. Section 113 broadly allows
life assurance companies a deduction for general management expenses that are
not exclusively incurred in gaining or producing assessable income in the same
proportion that the proportion of assessable income of the company bears to the
total income of the company. Subsection 113(5) will be amended to ensure
that RSA contributions are assessable income for the purposes of
section 113. [Item 55]
264. Section 113A
allows deductions for general management expenses incurred by life assurance
companies which are exclusively incurred in gaining or producing assessable
income. Such expenditure is deductible to the extent that it is incurred in
gaining or producing superannuation premiums to which section 111AC applies
or the investment component of relevant life assurance premiums to which
section 111AD applies. Paragraph 113A(1)(c), paragraph 113A(2)(b)
and the definition of relevant life assurance premiums in
subsection 113A(5) will be amended so that section 113A applies to RSA
contributions in the same way that it applies to superannuation premiums.
[Items 56 and 57; Item 58 - new
paragraph 113A(5)(aa)]
265. Section 116CA identifies the
classes of assessable income and policies of life assurance companies. The
Table in subsection 116CA(1), which relates to ordinary life assurance
companies, and the Table in subsection 116CA(2), which relates to SGIOs,
will be amended to identify the general fund class of assessable income and to
identify RSAs as belonging to the general fund class. [Items 59 and
60]
266. Section 116CB provides for the allocation between
the classes of assessable income of gains and losses arising from the disposal
of fund assets of a life assurance company. A fund asset is defined in
subsection 110(1) to be an asset that was included in the insurance funds
immediately before disposal. Assets supporting RSAs will be included in the
insurance funds and, consequently, will be fund assets. The formula for
allocating gains and losses between the classes is based on the calculated
liabilities that relate to each class of assessable income
(subsection 116CB(2)) and will apply appropriately to
RSAs.
267. Section 116CC will be amended so that it allocates
amounts received on the disposal of non-fund assets to the general fund class of
assessable income. The definition of non-fund asset in
subsection 110(1) will remain unchanged as it relates to assets held
outside the insurance funds.
[Item 61]
268. Subsections 116CD(5) and (6) set
out the order for applying prior year capital losses in reducing the residual
overall 160Z gain to the classes of assessable income. The residual overall
160Z gain is defined in subsection 110(1). Subsection 116CD(5),
which relates to ordinary life assurance companies, will be amended to replace
the reference to the non-fund class of assessable income with a reference to the
general fund class of assessable income. Subsection 116CD(6), which relates
to SGIOs, will be amended to recognise the general fund class of assessable
income. [Item 62; Item 63 - new
paragraph 116CD(6)(aa)]
269. Section 116CE allocates
assessable income of a life assurance company between the classes of assessable
income. Subsection 116CE(2) will be amended so that it refers to the
general fund class of assessable income rather than the non-fund class of
assessable income [Item 64]. Subsection 116CE(2) will
also be amended so that the assessable income of the general fund class will
include:
• amounts received on the sale of fund assets allocated to
that class under subsections 116CB(3) or 116CC(2) or section 116CD
[Item 65];
• any assessable income allocated to
that class under subsection 116CE(5)
[Item 66 - new paragraph 116CE(2)(aa)];
and
• any amounts included in assessable income that included in
the RSA amount of an RSA provider under new paragraphs 116DAC(2)(a)
or (b)
[Item 66 - new paragraph 116CE(2)(ab)].
That is, taxable contributions made to RSAs and other amounts credited to RSAs
will be included in the general fund class of assessable
income.
270. Subsection 116CE(5) allocates residual assessable
income derived from assets included in a particular one of the insurance funds
between the classes of assessable income based on the calculated
liabilities that relate to each class of assessable income and will apply
appropriately to RSAs.
271. Section 116CF allocates deductions between
the classes of assessable income. Subsection 116CF(1) provides that
deductions which relate exclusively to a particular class of assessable income
shall be allocated to that class of assessable income. Subsection 116CF(2)
provides a formula for allocating residual deductions between the classes of
assessable income based on amount of assessable income in each
class.
272. Subsection 116CF(4) will be amended to ensure that RSA
contributions are taken to be assessable income for the purposes of the
definition of Total income in subsection 116CF(2).
[Item 67]
273. In addition, for the purposes of the
application of subsection 116CF(2) to the general fund class of assessable
income, RSA contributions to which section 111AC applies will be assessable
income of the general fund class for the purposes of the definition of Income
of class in subsection 116CF(2).
[Item 68 - new subsection 116CF(8)]
274. Section 116CH
sets out the order for applying prior year loss deductions to the classes of
assessable income. Subsection 116CH(1), which relates to ordinary life
assurance companies, will be amended to change the reference to the non-fund
class of assessable income to a reference to the general fund class of
assessable income. Subsection 116CH(2), which relates to SGIOs, will be
amended to recognise the general fund class of assessable income.
[Item 69; Item 70 - new
paragraph 116CH(2)(aa)]
RSA business of life assurance
companies
275. Item 71 inserts new
Subdivision AA into Division 8 of Part III to outline the
taxation treatment of an RSA provider that is a life assurance company.
New Subdivision AA of Division 8 contains new
sections 116DAA to 116DAF.
276. Broadly the amendments
identify the taxable income of the RSA provider
recognising:
• specific amounts which are exempt from
tax;
• specific amounts which are included in the general fund
component of assessable income of the RSA provider; and
• specific
deductions that are available to an RSA provider.
277. The amendments
also work out the RSA amount of taxable income. The RSA amount of taxable income
cannot be reduced by tax losses made by a life assurance company on it's
ordinary business.
278. Once the general fund component of taxable income
of a life assurance company that is an RSA provider is established, it is
divided into an RSA component (which is taxed at a rate of 15%) and a standard
component (which is taxed at a rate of 36% in the case of a non-mutual life
assurance company and 39% in the case of a mutual life assurance
company).
279. Chart 2 illustrates the operation of new
Subdivision AA of Division 8 of Part III.
Taxable income of an RSA provider
280. New
section 116DAA provides that new Subdivision AA
of Division 8 of Part III sets out how to calculate the taxable income
of an RSA provider that is a life assurance company.
Exempt
income
281. New section 116DAF exempts an RSA
provider that is a life assurance company from tax on any amounts that, but for
the operation of new subsection 116DAC(3), would have been
taken into account under new paragraph 116DAC(2)(b) in
calculating the RSA component of the general fund component of taxable income.
New paragraph 116DAC(2)(b) applies to work out the RSA amount
which is allocated to the RSA component of the general fund component of taxable
income under subsection 116DAD(2).
282. New
subsection 116DAC(3) excludes from the RSA amount of taxable income
interest or any other amounts credited by an RSA provider to an RSA that is
paying out an immediate annuity. The amount which is excluded from the RSA
amount, and which is exempt from tax under new
section 116DAF, is worked out under new
subsections 116DAC(4) and (5).
283. If an RSA is paying
out an annuity in respect of the whole of the year of income that the RSA was in
existence, then the whole amount credited to the RSA will be exempt from tax.
[New
subsection 116DAC(4)]
284. If an RSA is paying out an
annuity for only part of the year of income that the RSA was in existence, then
the amount that is exempt from tax is the amount calculated using the
formula:
[New
subsection 116DAC(5)]
285. In this regard, the number of
days in the part of the year in respect of which the annuity was paid is the
number of days in the period from the first day of the period to which the
annuity relates until either the end of the year of income or the day on which
the RSA ceased to exist, whichever is earlier. The application of the formula is
illustrated by the example at paragraphs 231 and
232.
Assessable income
286. New
section 116DAB provides that the taxable income, and consequently
the assessable income, of an RSA provider that is a life assurance company
includes all taxable contributions (see paragraphs 306 to 311) made during
the year of income to RSAs provided by the RSA provider. Investment income
derived by RSA providers is included in the RSA provider's assessable income
under the ordinary provisions of the income tax law.
Allowable
deductions
287. New section 116DAE ensures that an
RSA provider is not entitled to a deduction for amounts credited to
RSAs.
288. Section 112BA operates to deny a deduction for benefits
paid from RSAs operated by life assurance companies.
289. Similarly,
section 111AC will operate to allow a deduction for certain expenses
incurred in relation to collecting all contributions that are paid into RSAs.
[Items 46 to 50 - amended
section 111AC]
Calculation of the RSA amount of
taxable income
290. New section 116DAC sets
out how to calculate the RSA amount of taxable income of a life assurance
company. The RSA amount is the sum of:
• all taxable contributions
made during the year of income to RSAs [new
paragraph 116DAC(2)(a)]; and
• all amounts (other than
contributions) credited during the year of income to RSAs reduced by amounts
credited to RSAs that are paying out current pensions (see paragraphs 281
to 285) [new paragraph 116DAC(2)(b) and
subsections 116DAC(3) - (5)];
less any amounts
paid or withdrawn from RSAs other than benefits paid to, or in respect of, the
holders of RSAs [new subsection 116DAC(2)] or tax paid in
respect of RSAs [new
subsection 116DAC(2A)].
291. Amounts which are included in
assessable income as part of the RSA amount, because they come within the scope
of new paragraph 116DAC(2)(a) or (b), are allocated to the
general fund component of assessable income of a life assurance company.
[Item 66 - new
paragraph 116CE(2)(ab)]
Calculation of the components
of the general fund component of taxable income
292. New
subsection 116DAD(1) divides the general fund component of taxable
income of an RSA provider that is a life assurance company
into:
• the RSA component of the general fund component of taxable
income; and
• the standard component of the general fund component
of taxable income.
RSA component of the general fund component
of taxable income
293. Subsection 110(1) will be amended to
insert a definition of RSA component to mean the component
of the general fund component of taxable income worked out under new
section 116DAD. [Item 42 - new definition of
RSA component]
294. The RSA component of taxable income is the
RSA amount worked out under new section 116DAC. [New
subsection 116DAD(2)]
Standard component of the
general fund component of taxable
income
295. Subsection 110(1) will be amended to insert a
definition of standard component to mean the component of
the general fund component of taxable income worked out under new
section 116DAD. [Item 43 - new definition of
standard component]
296. The standard component of taxable income
is any amount remaining after deducting the RSA component from the general fund
component of taxable income. [New
subsection 116DAD(3)]
Restricting losses to the
standard component of taxable income
297. New
section 116DADA operates to ensure that RSA providers cannot offset
losses against RSA income. The new section applies if:
• the RSA
provider has no taxable income [new
paragraph 116DADA(1)(a)];
• the RSA provider has no
general fund component of taxable income [new
paragraph 116DADA(1)(b)]; or
• the general fund
component of taxable income of an RSA provider is less than the RSA amount
[new paragraph 116DADA(1)(c)].
298. In these
circumstances, new subsection 116DADA(2) applies
if:
• the RSA provider has no taxable income; or
• the
taxable income of the RSA provider is less than the RSA amount.
299. The
consequences of new subsection 116DADA(2) applying are
that:
• the RSA provider is taken to have both a taxable income and
a tax loss for the year of income [new
paragraph 116DADA(2)(a)];
• the taxable income is
equal to the RSA amount [new
paragraph 116DADA(2)(b)];
• the tax loss is taken to
be the amount that would have been the RSA provider's tax loss if the RSA amount
were not income derived [new
paragraph 116DADA(2)(c)];
• the general fund component
of taxable income and the RSA component of the general fund component are equal
to the RSA amount [new paragraph 116DADA(2)(d)];
and
• all other components of taxable income are taken to be nil
[new paragraph 116DADA(2)(e)].
300. If the
circumstances in new subsection 116DADA(1) apply and the
taxable income of the RSA provider is equal to or greater than the RSA amount,
then new subsection 116DADA(3) provides
that:
• the general fund component of taxable income and the RSA
component of the general fund component are taken to be equal to the RSA amount
[new paragraph 116DADA(3)(a)]; and
• the
difference between the RSA amount and the amount that would, but for new
subsection 116DADA(3), have been the general fund component is
applied to reduce the other components of taxable income in the following
order:
• if the RSA provider is an ordinary life assurance
company - AD/RLA;
• CS/RA;
• NCS [new
paragraph 116DADA(3)(b)].
Example
301. The
Isis Life Company has taxable income of $50 000. It received taxable
contributions in RSAs of $140 000 during the year of income. No earnings
were credited to RSAs and no amounts were withdrawn, except to pay tax on
taxable contributions. Therefore, the RSA amount calculated under new
section 116DAC is $140 000. New
section 116DAB and new paragraph 116CE(2)(ab)
will operate to allocate the whole of Isis Life's taxable income to the general
fund component (because it effectively represents taxable contributions).
302. New section 116DADA will apply to Isis Life
because its general fund component of taxable income ($50 000) is less than
the RSA amount ($140 000) - new paragraph 116DADA(1)(c).
As Isis Life's taxable income is less than the RSA amount, new
subsection 116DADA(2) will apply so that Isis Life will have both a
taxable income and a tax loss for the year of income. The taxable income will be
the RSA amount of $140 000. This amount will be allocated to the RSA
component of the general fund component of Isis Life's taxable income and will
be subject to tax at a rate of 15 per cent. The tax loss will be the amount that
would have been the tax loss if no taxable contributions were
derived - that is, $90 000.
303. New
subsection 116DADA(3) would apply if in this example Isis Life had
taxable income of $530 000 which, applying section 116CJ of the
Income Tax Assessment Act 1936, consists of:
• general fund
component of $50 000
• AD/RLA component of $190 000;
and
• CS/RA component of $290 000.
304. In these
circumstances new section 116DADA will apply to Isis Life
because its general fund component of taxable income ($50 000) is less than
the RSA amount ($140 000) - new paragraph 116DADA(1)(c).
As Isis Life's taxable income ($530 000) is greater than the RSA amount,
new subsection 116DADA(3) will apply so that the general fund
component of Isis Life's taxable income will be the RSA amount of $140 000.
This amount will be allocated to the RSA component of the general fund component
of Isis Life's taxable income and will be subject to tax at a rate of 15 per
cent. The difference between the RSA amount ($140 000) and the general fund
component of taxable income worked out under section 116CJ ($50 000)
of $90 000 will be applied to reduce the AD/RLA component of Isis Life's
taxable income to $100 000.
Change in name from the non-fund
component to the general fund component
305. A number of
amendments are necessary to change references in the ITAA to the non-fund class
of assessable income and non-fund component of taxable income to references to
the general fund class of assessable income and general fund component of
taxable income:
• sections 46 and 46A - which
relate to the inter-corporate dividend rebate.
[Items 17 to 24]
• sections 116DC,
116DE and 116DF - which relate to the life insurance policy holders'
protection levy. [Items 72, 73 and
74]
• sections 160APA, 160APHB, 160APVA, 160APVBA,
160APVBB, 160APVC, 160APVD, 160AQCCA, 160AQCD, 160AQCE, 160AQCJ, 160AQCK and
160AQCL - which relate to the dividend imputation provisions.
[Items 78 and 79,
83 to 105]
• sections 221AK, 221AL, 221AZB
and 221AZE - which relate to the collection of company tax.
[Items 109 to 113]
Taxable
contributions
306. Taxable contributions made to an RSA provider are
included in the RSA provider's assessable income and allocated to the RSA
component of taxable income:
• if the RSA provider is a financial
institution - taxable contributions are included in the RSA provider's
taxable income under new section 299B. Taxable
contributions are included in the RSA amount under new paragraph
299C(2)(a) and allocated to the RSA component of the RSA provider's
taxable income under new
subsection 299D(2);
• if the RSA provider is a life
assurance company - taxable contributions are included in the RSA
provider's taxable income under new section 116DAB. Taxable
contributions are included in the RSA amount under new paragraph
116DAC(2)(a) and allocated to the RSA component of the general fund
component of the RSA provider's taxable income under new
subsection 116DAD(2).
307. Taxable contributions are
defined in section 274. Subsection 274(1) will be amended to include
appropriate contributions made to RSAs as taxable contributions. [Items
119 and 120]
308. Contributions made to RSAs will be
taxable contributions if:
• the contributions are made to the RSA
by a person other than the RSA holder, such as the RSA holder's employer
[new subparagraph 274(1)(ba)(i)];
• the
contributions are specified roll-over amounts. That is, the contributions are
the post-June 1983 component - untaxed element of a rolled-over
eligible termination payment (ETP)
[new subparagraph 274(1)(ba)(ii)]. In this regard the
definition of specified roll-over amount in subsection 267(1) has
been amended to recognise that such amounts can be paid to an RSA provider
[Item 117];
• the contributions are made to the
RSA by the RSA holder and the RSA holder is entitled to a deduction for those
contributions and has satisfied the notice provisions under new
subsection 82AAT(1CB)
[new subparagraph 274(1)(ba)(iii)];
• the
contributions are made under section 65 of the
Superannuation Guarantee (Administration) Act
[new subparagraph 274(1)(ba)(iv)].
309. Personal
contributions to RSAs form part of the taxable contributions of an RSA provider
only if the RSA holder is entitled to a deduction for those contributions and
has given an appropriate notice to the RSA provider. If such a notice is
received before the RSA provider has lodged its income tax return for the year
in which the contributions were made, the RSA provider must include those
contributions in its taxable contributions in the year in which those
contributions were made [new
sub-subparagraph 274(1(ba)(iii)(A)]. If the notice is received
after the RSA provider has lodged its income tax return for the year in which
the contributions were made, then the contributions will be included in the RSA
provider's taxable contributions in the year that the notice is received
[Item 121 - new
subsection 274(3)].
310. If an amount has been included as
taxable contributions of an RSA provider and the RSA holder subsequently gives
the provider a notice under new subsection 82AAT(1CD)
reducing the amount previously included in the RSA provider's taxable income,
the RSA provider will be entitled to a deduction for the amount covered in the
notice in the year the notice is received. [Item 122 - new
subsection 276(2)]
311. If the Commissioner is satisfied
that the RSA provider is unable to appropriately use the deduction available
under new subsection 276(2), the amount covered by the
new subsection 82AAT(1CD) notice will be excluded from the
assessable income of the RSA provider in the year in which the contributions
were made. [Item 123 - amended subsections 276(3)
and (4)]
Concessions for contributions to
RSAs
Employer contributions
312. An employer is
entitled to a deduction up to specified limits for contributions made on behalf
of an employee to a complying superannuation fund under section 82AAC.
New section 82AADA ensures that a contribution made by an
employer to an RSA is treated as a contribution to a complying superannuation
fund for the purposes of section 82AAC.
[Item 25]
313. New section 82AAQB
includes in a taxpayer's assessable income any amount received by the taxpayer
as a refund of a contribution where the taxpayer has been allowed a deduction
for the contribution under section 82AAC [Item 26].
New section 82AAQB is similar to sections 82AAQ
and 82AAQA which ensure that the assessable income of a taxpayer includes
amounts refunded from a superannuation fund or deposits refunded under the Small
Superannuation Accounts Act respectively.
314. Section 82AAR
ensures that superannuation contributions paid for the benefit of an employee,
including contributions made to RSAs, are deductible only under the provisions
of Subdivision AA of Division 3 of Part III.
[Item 27 - new
subsection 82AAR(4)]
Personal superannuation
contributions
Deductions for personal superannuation
contributions
315. A taxpayer who is an eligible person
(as defined in subsection 82AAS(2)) is entitled to a deduction up to
specified limits for personal superannuation contributions made to a complying
superannuation fund under subsection 82AAT(1) provided that the taxpayer
complies with certain notice requirements.
316. Item 28
inserts provisions to allow a deduction in identical circumstances for personal
superannuation contributions made to an RSA. That is, new
subsection 82AAT(1CA) allows a deduction for personal contributions
made by a person provided that:
• the person is an eligible person
in the year the contribution is made;
• the person has made the
contribution in order to obtain superannuation benefits; and
• the
person has given a notice to the RSA provider under new
subsection 82AAT(1CB) and has received an acknowledgment of that
notice from the RSA provider.
317. The amount of the deduction cannot be
more than the amount covered by the new subsection 82AAT(1CB)
notice and is also subject to the deduction limits in
subsection 82AAT(2).
318. New
subsection 82AAT(1CB) allows a taxpayer who has made a contribution
to an RSA to notify the RSA provider that he or she is intending to claim a
deduction for the whole of or part of the contribution. The RSA provider must
acknowledge the notice without delay. Generally, the acknowledgment will be
considered to have been given without delay if it is given by the later
of:
• 30 June of the financial year in which the contribution
to which the notice relates is made; or
• within 30 days of
receipt of the notice.
319. Failure by the RSA provider to give a notice
will be a breach of section 8C of the Taxation Administration Act
1953.
320. New subsection 82AAT(1CC) imposes some
restrictions on new subsection 82AAT(1CB) notices. That
is:
• a person cannot give a notice that covers the whole or any
part of an amount covered by a previous notice;
• a person cannot
give a notice to an RSA provider once he or she has ceased to hold the RSA;
and
• a person cannot revoke or withdraw a notice (but can vary it
under new subsection 82AAT(1CD)).
321. New
subsection 82AAT(1CD) allows a person to give notice to the RSA
provider reducing the amount covered by the new
subsection 82AAT(1CB) notice. However, the amount cannot be reduced
below the amount that has been allowed as a
deduction.
322. Subsection 82AAT(1D) provides that
section 82AAT notices must be given in a form and manner approved by the
Commissioner. The requirements of section 82AAT notices are outlined in
Taxation Determination TD 93/24.
323. Subsection 82AAT(1E) will
be amended to ensure that a person is not entitled to a deduction for personal
superannuation contributions to an RSA until they receive an acknowledgment from
the RSA provider in accordance with new
subsection 82AAT(1CB).
[Item 29]
324. Subsection 82AAT(1F) denies a
deduction for personal superannuation contributions made to a complying
superannuation fund by a taxpayer who has opted out of the Superannuation
Guarantee arrangements because he or she has superannuation benefits in excess
of his or her reasonable benefit limit. The subsection will be amended to ensure
that a deduction will also be denied for contributions to an RSA.
[Item 30]
325. Subsection 82AAT(2A) specifies the
deduction limit that applies for contributions to complying superannuation
funds. Some technical amendments are being made to the subsection to ensure that
it applies in the same way to RSAs.
[Item 31]
326. Subsection 82AAT(3) ensures that a
deduction is not allowed for an ETP that has been rolled-over to a complying
superannuation fund and will be amended so that it also applies to RSAs.
[Item 32]
Rebates for personal superannuation
contributions
327. Subsection 159SZ(1) allows a rebate for
eligible personal superannuation contributions for a taxpayer who is not
entitled to a deduction for personal superannuation contributions and has
assessable income less than $31 000. The definition of eligible
personal superannuation contributions in subsection 159SZ(2) will be
replaced so that a rebate will be available for contributions to a
complying superannuation fund or an RSA.
[Item 77]
Payments from RSAs
328. Lump
sum payments from RSAs will be taxed as ETPs. This will be achieved by amending
the definition of superannuation fund in subsection 27A(1) to
include RSAs. Consequently, for the purposes of Subdivision AA of
Division 2 of Part III (the ETP Subdivision), an RSA will be a
superannuation fund. Therefore, a lump sum payment from an RSA will be taxed in
the same way as a lump sum payment from a complying superannuation fund.
[Item 10 - new paragraph (c) of the definition of
superannuation fund in subsection 27A(1)]
329. RSA providers
are liable to tax in relation to RSAs. Therefore, to ensure that the
post-June 83 component of ETPs paid from RSAs are taxed as ETPs from a
taxed source under section 27AB, the definition of taxed superannuation
fund in subsection 27A(1) will be amended so that RSAs will be taxed
superannuation funds. [Items 11 and 12 - new
paragraph (a) and amended paragraph (c) of the definition of taxed
superannuation fund in subsection 27A(1)]
330. New
subsection 27A(22) will be inserted so that, for the purposes of
the ETP Subdivision, an RSA is taken to be a fund and that the holder of an RSA
is taken to be a member of that fund. This will ensure that the provisions of
the ETP Subdivision which apply to superannuation funds will apply appropriately
to RSAs. [Item 15]
331. To allow ETPs to be
rolled-over to RSAs, amendments will also be made to subsection 27A(12),
paragraph 27A(13)(a) and subparagraph 27D(1)(b)(i).
[Item 13 - new paragraph 27A(12)(d); Items 14 and
16]
332. To ensure that pensions paid from RSAs and lump sum
payments received on the commutation of a pension entitlement or which represent
the residual capital value of a pension entitlement are taxed appropriately
under the ETP Subdivision, the definition of pension in
subsection 27A(1) will be amended to include a pension within the meaning
of the Retirement Savings Accounts Act 1997.
[Item 9 - new definition of pension in
subsection 27A(1)]
333. Similar amendments will be made to
the definition of pension in section 140C, subsection 221A(1)
and subsection 267(1). [Items 75, 114
and 115]
334. In addition, the definition of rebatable
superannuation pension in subsection 159SJ(1) will be amended to ensure
that pensions paid from RSAs qualify for the rebate that applies to
superannuation pensions and ETP annuities.
[Item 76 - amended definition of rebatable superannuation
pension in subsection 159SJ(1)]
335. Section 26AFB
includes in assessable income the whole of an amount paid from a fund that is,
or has been, a complying superannuation fund where the benefit is paid out in
breach of the Superannuation Industry (Supervision) Act 1993. If an
amount is included in assessable income under section 26AFB, it is not an
ETP (see subparagraph (b)(iii) of the definition of eligible termination
payment in subsection 27A(1)). New
subsection 26AFB(4A) will ensure that a benefit paid out of an RSA
in breach of the Retirement Savings Accounts Act 1997 will be taxed as
ordinary income rather than as an ETP. The Commissioner will have a discretion
not to apply new subsection 26AFB(4A) if, having regard to
the whole of the circumstances, he considers that it would be unreasonable to
apply the subsection. [Item 6 - new
subsections 26AFB(4A) and (4B)]
336. Section 26AH
includes in assessable income bonuses received on short-term life assurance
policies. Subsection 26AH(7) will be amended to ensure that benefits paid
from RSAs provided by life assurance companies are not assessable under
section 26AH. [Item 7 - new
paragraph 26AH(7)(aa)]
337. New
section 26E will:
• deem that benefits paid from RSAs
have an Australian source [new subsection 26E(1)];
and
• deem that any amounts paid under an insurance policy that
relates to an RSA are benefits paid from the RSA by the RSA provider [new
subsection 26E(2)].
[Item 8]
Reasonable
benefit limits
338. The reasonable benefit limit (RBL) provisions in
Division 14 of Part III will apply to RSAs and RSA providers in the same
way that they apply to complying superannuation funds and the trustees of
complying superannuation funds as a result of the amendment to the definition of
superannuation fund in subsection 27A(1).
339. That
is:
• payments from RSAs will have to be notified to the
Commissioner by the payer (section 140M);
• the Commissioner
will be required to make an RBL determination
(section 140R);
• the benefit will be counted for RBL purposes
(section 140ZC);
• the appropriate RBL amount will be
determined (section 140ZH, section 140ZK and section 140ZL) - in
this regard the manager of an RSA is considered to be a trustee for the purposes
of section 140ZH. The definition of trustee in section 140C
includes a person who is a trustee for the purposes of Part IX.
Section 268 in Part IX provides that, if applying ordinary principles
a fund does not have a trustee, the person who is managing the fund is deemed to
be a trustee of the fund. Therefore, the manager of an RSA will be a trustee for
the purposes of section 140ZH.
Dividend
imputation
340. Under the dividend imputation provisions contained in
Part IIIAA, the amount of franking credits or debits arising from the
payment or refund of tax is equal to the adjusted amount of the tax paid
or refunded (which includes reductions of tax and crediting or applying tax
refunds against other liabilities).
341. Under section 160APA, the
adjusted amount is determined by the formula:
342. In relation to franking credits and debits arising from the
payment and refund of tax, the basic amount is the amount of tax
paid or refunded.
343. To exclude franking credits or debits arising from
the payment or refund of tax where those amounts are attributable to the RSA
business of a company, the basic amount will be reduced by the reduction
amount. [Items 80 and 81 - new subsection
160APAAA(2A) and amended subsection
160APAAA(3)]
Example - Ordinary company (tax
paid)
344. A company pays a company tax instalment of
$10 000 in the 1995-96 income year, $1 000 of which is attributable to
the RSA business of the company.
345. The franking credit resulting from
the payment of the instalment would be calculated as follows:
Class C
franking credit = adjusted amount of the tax paid
(section
160APM)
((basic amount – reduction amount) × 64/36
=
($10 000 – $1 000) × 64/36
=
$16 000.
346. The Income Tax Regulations will provide for the
determination of the amount that is attributable to the RSA business of a
company. [Item 82 - new subsection
160APAAA(3A)]
347. However, sometimes it may not be possible to
determine exactly the amount of a tax payment that is attributable to an RSA
amount. This is because an instalment of tax is based on either an earlier
year's tax amount or a company's own estimate of the tax payable. As a result,
the regulations will provide that, where necessary, a balancing franking credit
or debit will arise at the end of the company's franking year.
[Item 82 - new subsection
160APAAA(3C)]
348. Where a company uses an estimate to establish
the amount that is attributable to the RSA business of a company, the Income Tax
Regulations may also provide that a franking debit arises where the estimate
used by the company is incorrect. [Item 82 - new subsection
160APAAA(3B)]
Capital
gains
349. Section 160ZZJ exempts from capital gains tax
payments made to members of superannuation funds and ADFs. New
section 160ZZJA will apply in the same way to payments from RSAs.
[Item 106]
Tax file numbers
350. Parts 8
and 11 of the Retirement Savings Accounts Bill 1997 propose to allow RSA
providers to be able to use tax file numbers (TFNs) in the same way as other
superannuation entities.
351. New paragraph 202(k)
will allow TFNs to be used to facilitate:
• the administration of
Parts 8 and 11 of the Retirement Savings Account Act 1997 in relation to
individuals; and
• the administration of that Act in relation to
RSA providers.
352. The use of TFNs is strictly controlled under taxation
law. There are penalties of up to $10 000 or 2 years imprisonment for
unauthorised requesting, recording, use or communication of a person's TFN
(sections 8WA and 8WB of the Taxation Administration Act 1953). In
recognition of the TFN privacy considerations, the wording of new
paragraph 202(k) indicates that the use of TFNs for superannuation
purposes by RSA providers is restricted to Parts 8 and 11 of the Retirement
Savings Accounts Act. [Item 107]
353. RSA providers
that qualify as financial institutions under section 202A will not be
subject to the TFN rules that apply to interest bearing accounts or
interest bearing deposits in relation to RSAs. This ensures that RSA
providers that are financial institutions are only required to comply with the
superannuation TFN provisions in relation to RSAs. [Items 107A and
107B]
354. New subsection 202DI will ensure
that where an RSA holder has quoted his or her TFN to the RSA provider, the TFN
will also be taken to have been quoted for the purpose of calculating the tax to
be deducted from an ETP. Consequently, if the RSA holder has quoted his or her
TFN, the RSA provider will deduct tax from the RSA holder's ETP at the normal
concessional rates of tax. Where appropriate the TFN will also be disclosed on
the holder's group certificate and to the ATO for RBL purposes.
[Item 108]
Schedule 14 - Amendments
to the Superannuation Guarantee Charge Act
355. Schedule 14 of the
Bill amends the Superannuation Guarantee Charge Act to insert RSAs in the Title
to the Act. The amendment recognises that the Act applies to RSAs in the same
way that it applies to superannuation funds.
[Item 1]
Schedule 15 - Amendments to
the Superannuation Guarantee (Administration) Act
356. Schedule
15 of the Bill makes amendments to the Superannuation Guarantee (Administration)
Act.
357. Definitions of RSA and RSA provider will
be inserted in subsection 6(1) of the Act so that they have the same
meaning as in the Retirement Savings Accounts Act 1997 (see
paragraph 218). [Items 1 and 2]
358. Section
14 determines the notional earnings base in relation to an employee for
Superannuation Guarantee purposes in most circumstances where an employer was
not contributing under an award, occupational superannuation arrangement or
superannuation scheme immediately before 21 August 1991. The
amendments to section 14 ensure that the notional earnings base in relation
to an employee for contributions made to an RSA will also be determined under
section 14 and will be calculated in the same way that the notional
earnings base for contributions made to a superannuation fund is calculated.
[Items 3 to 6]
359. Section 15A provides for
the determination of the entitlement amount of the superannuation benefits of an
employee. The entitlement amount is relevant to subsections 19(4) and
19(7), which effectively exempts an employer from the Superannuation Guarantee
charge in respect of an employee who makes an election because his or her
accumulated superannuation entitlements exceeds the pension RBL. The amendments
to section 15A ensure that benefits in RSAs will be taken into account when
determining the total of the employee's accumulated superannuation entitlements
for the purposes of section 15A.
[Items 7, 8 and 9].
360. Section 23
relates to the measurement of employer support for Superannuation Guarantee
purposes in superannuation funds other than defined benefit superannuation
schemes. If an employer is providing superannuation support in a complying
superannuation fund that is not a defined benefit superannuation scheme, the
percentage level of the employer's support will be the proportion of the
employer's contribution to the fund over the employee's notional earnings base
in respect of that fund. The amendments to section 23 ensure that this
section applies to RSAs in the same way that it applies to complying
superannuation funds. [Items 10 to
34].
361. Subsection 65(1) allows the Commissioner to pay
the Superannuation Guarantee shortfall component to a complying superannuation
fund or to a complying ADF nominated by the employee. The amendment to
paragraph 65(1)(a) will allow the Commissioner to pay a Superannuation
Guarantee shortfall component to an RSA nominated by the employee.
[Item 35]
Schedule 16 - Amendments to
the Small Superannuation Accounts Act
362. Schedule 16 of the Bill
amends the Small Superannuation Accounts Act. The Small Superannuation Accounts
Act provides a legislative framework for employers to make payments to
the Superannuation Holding Accounts Reserve (SHAR) instead of making small
superannuation contributions to a superannuation fund. An amount in SHAR can be
withdrawn by being transferred to a superannuation fund. The amendments in
Schedule 16 will allow an amount which is held in SHAR to be transferred to
an RSA.
363. The amendments:
• insert and amend appropriate
definitions in section 4 [Items 1 to
5];
• amend the outline of debits to accounts in section 14
[Items 6 and 7];
• amend the simplified
outline in section 56 describing the types of withdrawals from accounts
[Item 8];
• change the Heading to Division 4 of
Part 7 [Item 9]; and
• make appropriate changes
to section 61 to allow an amount which is held in SHAR to be transferred to an
RSA
[Items 10 to 13].
Schedule 17 - Amendments
to the Fringe Benefits Tax Assessment Act
364. Schedule 17 of the
Bill amends the Fringe Benefits Tax Assessment Act to ensure that, like an
employer contribution to a complying superannuation fund, an employer
contribution to an RSA is not a fringe benefit.
[Item 1 - new subparagraph (j)(iii) of the definition
of fringe benefit in
subsection 136(1)]
Schedule 18 - Amendments
to the Income Tax Rates Act
365. Schedule 18 of the Bill amends the
Income Tax Rates Act.
366. Subsection 3(1) will be amended
to:
• change the name of the non-fund component of taxable
income of a life assurance company to the general fund component
[Items 1 and 2]; and
• insert a definition
of RSA component and replace the definition of standard component
[Items 3 and 4]
367. Subsection 23(4A)
specifies the rates of tax payable by a life assurance company. The amendments
to section 23(4A) ensure that:
• the RSA component of the
general fund component of the taxable income of a life assurance company is
taxed at a rate of 15% [Item 6 - new
paragraph 23(4A)(ba)];
• the standard component of the
general fund component of the taxable income of a life assurance company (which
is equivalent to the current non-fund component) continues to be taxed at a rate
of 36% in the case of a non-mutual life assurance company and 39% in the case of
a mutual life assurance company [Item 7 - amended
paragraph 23(4A)(c)].
368. New
subsection 23(4BA) specifies the rates of tax payable by a company,
other than a life assurance company, which is an RSA provider to
be:
• in respect of the RSA component of taxable
income - 15%;
• the respect of the standard component of
taxable income - 36%.
[Item 5 - new
paragraph 23(2)(ca); Item 8 - new
subsection 23(4BA)]