EXPLANATORY STATEMENT
STATUTORY RULES NO 255 1988
ISSUED BY AUTHORITY OF THE TREASURER
OCCUPATIONAL SUPERANNUATION STANDARDS ACT 1987
OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT)
LEGISLATIVE BASIS FOR THE REGULATIONS
The Occupational Superannuation Standards Act 1987 (the Act) contains provisions concerned with operating standards and other relevant conditions with which superannuation funds and approved deposit funds (ADFs) are required to comply in order to be eligible to receive taxation concessions applicable to them under the Income Tax Assessment Act 1936.
Section 22 of the Act provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act, matters necessary or convenient to be prescribed for carrying out or giving effect to the Act and, in particular, prescribing fees payable in respect of any matter under the Act.
BACKGROUND
The Occupational Superannuation Standards Act 1987 provides that the Insurance and Superannuation Commissioner shall give a notice in writing to the trustees of a superannuation fund or ADF stating whether the Commissioner is satisfied that the fund has satisfied the prescribed superannuation fund or ADF conditions in relation to a particular year of income, haying regard to, inter alia, the Annual Return and certain prescribed certificates required by the Act.
One such certificate is a certificate by an approved auditor, to be provided in the prescribed form. The Occupational Superannuation Standards Regulations, in Forms 2 and 3 respectively of the Schedule, prescribe the audit certificates for superannuation funds and ADFs. The purpose in the audit certificate is to provide confirmation by an independent auditor that the information provided in the Annual Return by the trustees is true and fair.
The Insurance and Superannuation Commission has received a number of representations, including from the accounting profession’s Auditing Standards Board, that difficulties are being experienced by auditors in completing the prescribed certificates. The difficulties arise because the form of
words specified in the certificates does not permit the relevant certificate to be qualified in any way. In each case, the auditor’s certificate has to express in an absolute way that the return by the trustees to which it relates is true and fair; there are apparently numerous situations where it is not possible for auditors to comply with this requirement. It has been suggested that auditors cannot give the certificate required where, for example, there are assets of a fund the value of which the auditor has not been able to verify as part of the audit of the accounts and records of the fund. The auditor may also disagree with the fund trustees on the compliance of the fund with one or more of the standards.
Representatives of the Auditing Standards Board have also expressed concern based on experience that where audit qualifications of a fund’s accounts and records are involved, unless there is reference to such qualifications in the certificate itself, the relevant auditor could find his or her professional standing at risk were there to be a legal action at some time in the future with respect to the superannuation fund or ADF concerned.
The regulation revises the audit certificates in Forms 2 and 3 of the Schedule to the Occupational Superannuation Standards Regulations so that they not only provide greater flexibility to auditors by permitting them to provide certificates subject to qualifications where appropriate, but also maintain the substance and intent behind the certificates themselves. The revised certificates permit:
• an auditor to express an opinion that the information supplied by the trustees in the return is consistent with the audited accounts and records of the fund;
• an auditor to specify any qualifications made in the audit report on the accounts and records of the fund; and
• an auditor to specify that the audit included tests to determine compliance with the prescribed standards applicable to the fund and to specify any qualifications concerning the fund’s compliance with the standards.
Details of the regulation are as follows:
The regulation amends the Schedule to the Occupational Superannuation Standards Regulations by omitting Forms 2 and 3 and substituting for them new Forms 2 and 3 which provide greater flexibility to approved auditors by permitting them to provide certificates subject to qualifications where appropriate.
DATE OF OPERATION
The regulation is effective from the date of Gazettal.
Overview
The Occupational Superannuation Standards Regulations (Amendment) Statutory Rules No 255 1988 were enacted to address issues faced by auditors in completing the audit certificates for superannuation funds and approved deposit funds (ADFs) under the Occupational Superannuation Standards Act 1987. The difficulties experienced by auditors stem from the inflexibility of the prescribed certificate forms, which do not permit any qualification of the auditor's opinion. This situation arose because the forms required an absolute statement that the trustees' return was true and fair, which auditors could not comply with in certain circumstances, such as when the value of some assets could not be verified. The amendments aim to provide auditors with greater flexibility by allowing them to issue certificates subject to qualifications, while maintaining the core intent of the certificates. The regulations were issued under the authority of the Treasurer and the policy objective was to facilitate smoother operation of the superannuation funds by allowing for more realistic and legally defensible audit certificates.
Scope and Application
The Occupational Superannuation Standards Regulations (Amendment) Statutory Rules 1988, issued under the authority of the Treasurer, modify the existing regulations to the Occupational Superannuation Standards Act 1987. This Act governs the operating standards and conditions that superannuation funds and approved deposit funds must meet to qualify for tax concessions under the Income Tax Assessment Act 1936. The regulation specifically targets the audit certificates required by superannuation funds and approved deposit funds, allowing for greater flexibility for auditors when providing their certificates. These certificates are essential as they provide confirmation by an independent auditor that the information provided in the Annual Return by the trustees is true and fair. The amendment enables auditors to issue qualified certificates, specifying any qualifications made in the audit report on the accounts and records of the fund and any qualifications concerning the fund's compliance with the prescribed standards. This change addresses difficulties faced by auditors who previously could not qualify their certificates, thereby protecting their professional standing. The regulation is effective from the date of its gazettal and applies to all superannuation funds and approved deposit funds governed by the Occupational Superannuation Standards Act 1987.
Key Provisions
The main operative sections of the Occupational Superannuation Standards Regulations (Amendment) are the modifications to Forms 2 and 3 in the Schedule, which pertain to the audit certificates for superannuation funds and approved deposit funds (ADFs) (reg 1). These new forms provide flexibility for auditors by allowing them to issue certificates that include qualifications where necessary. This means that an auditor can now express an opinion that the information provided by the trustees in the return is consistent with the audited accounts and records of the fund, and can specify any qualifications made in the audit report on the accounts and records of the fund (reg 1(1)). Additionally, the amended forms allow auditors to specify that the audit included tests to determine compliance with the prescribed standards applicable to the fund and to detail any qualifications concerning the fund’s compliance with those standards (reg 1(2)).
The Act imposes several obligations on trustees of superannuation funds and ADFs, which are primarily concerned with ensuring compliance with prescribed standards to be eligible for taxation concessions. Trustees must provide an Annual Return and certain prescribed certificates, including an audit certificate by an approved auditor, to the Insurance and Superannuation Commissioner each year (s 10). The Commissioner then assesses whether the fund has satisfied the prescribed conditions based on the Annual Return and the certificates (s 11). The new regulations now allow for these audit certificates to include qualifications, thereby providing greater flexibility to auditors while maintaining the integrity and intent of the certification process (reg 1).
In terms of potential consequences, the regulations do not explicitly state new offences or penalties for non-compliance. However, the Act generally provides that non-compliance with the standards set out in the Occupational Superannuation Standards Regulations can result in the loss of eligibility for the taxation concessions provided under the Income Tax Assessment Act 1936 (s 20). While the new regulations do not introduce additional civil or criminal penalties, they aim to address practical issues faced by auditors in providing accurate and legally sound certificates. Failure to adhere to the requirements of the amended audit certificates could still potentially lead to legal scrutiny, particularly if there is a dispute about the qualifications or the accuracy of the information provided in the Annual Return (s 10, s 11).