EXPLANATORY STATEMENT
STATUTORY RULES NO. 24 1989
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 to be prescribed, or 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 eligibility of an employee for tax deductions in respect of contributions made to a superannuation fund, where that employee’s only employer-provided superannuation benefits arise from certain industrial awards, is governed by the provisions of Subdivision AB of Division 3 of Part III of the Income Tax Assessment Act 1936.
This Subdivision was amended (Act No. 138 of 1987 refers) in connection with the handover by the Commissioner of Taxation to the Insurance and Superannuation Commissioner of the supervision of non-assessment requirements relating to superannuation funds and ADFs.
The amended Subdivision AB now provides that eligibility for tax deductions (presently up to a limit of $1,500, but soon to a limit of $3,000) depends only on the employee’s contributions being made to an ‘eligible superannuation fund’. An ‘eligible superannuation fund’ for this purpose means a fund which receives a notice issued by the Insurance and Superannuation Commissioner under the Occupational Superannuation Standards Act 1987 to the effect that it has satisfied or may be regarded as having satisfied the superannuation fund conditions.
This situation has created a loop-hole in that prior to the amendment, in order to claim a tax deduction, an employee would have been obliged to make his or her personal contributions to a superannuation fund falling within the provisions of former section 23FB of the Income Tax Assessment Act 1936, which provides for the preservation of benefits in that fund until retirement at an age not earlier than 55. The effect of the amendment is that an employee can now elect to make tax deductible contributions to a fund falling within the provisions of former section 23F of the Act, namely an employer-sponsored fund, where there is no corresponding preservation requirement. This anomaly is exacerbated by the fact that employee contributions to employer-sponsored funds or industry funds are currently not subject to any preservation standards under the Occupational Superannuation Standards Regulations.
The regulations close this loop-hole by making any member-financed benefits that relate to contributions to an eligible superannuation fund that are made on or after 13 March 1989 and are eligible for a tax deduction under Subdivision AB of Division 3 of Part III of the Income Tax Assessment Act 1936, subject to the preservation standards specified in the Occupational Superannuation Standards Regulations. In addition, the regulations require any member-financed benefits arising from contributions in excess of the tax deductible limit to be preserved. This is in line with the provisions of former section 23FB of the Act.
Details of the regulations are as follows:
The regulations amend Regulation 9 of the Occupational Superannuation Standards Regulations by inserting a new paragraph (c). The new paragraph provides for the preservation of the total amount of member-financed benefits arising from contributions made by a member on or after 13 March 1989 to a fund which complies with the superannuation fund conditions under the Occupational Superannuation Standards Act, where the member’s only employer-financed benefits arise from a 3 per cent (productivity) payment. The contributions to be preserved include contributions in excess of the amount allowable to the member as a tax deduction under Subdivision AB of Division 3 of Part III of the Income Tax Assessment Act 1936.
The regulations also amend Regulation 11 of the Occupational Superannuation Standards Regulations to make it clear that the benefits arising directly or indirectly from amounts contributed to superannuation funds in relation to each member of a fund that are required to be preserved under the Regulations are those benefits that relate to the member.
DATE OF OPERATION
The regulations are effective from 13 March 1989.