EXPLANATORY STATEMENT
Select Legislative Instrument 2007 No. 203
Issued by the authority of the Minister for Revenue and Assistant Treasurer
Retirement Savings Accounts Act 1997
Retirement Savings Accounts Amendment Regulations 2007 (No. 2)
The purpose of these regulations is to support the implementation of the Government’s Simplified Superannuation reforms announced in the 5 September 2006 statement A Plan to Simplify and Streamline Superannuation – Outcomes of Consultation. These regulations complement other regulations supporting the reforms which were registered on 27 April 2007.
Subsection 200(1) of the Retirement Savings Accounts Act 1997 (RSA Act) provides in part that the Governor-General may make regulations prescribing matters required or permitted by the RSA Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the RSA Act.
The Retirement Savings Accounts Regulations 1997 set out the contribution acceptance rules.
The Regulations modify to whom amounts should be returned when a holder’s contribution is unable to be accepted.
Details of the Regulations are set out in the Attachment.
The RSA Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.
The Regulations commence on 1 July 2007.
The Regulations outlined above are legislative instruments for the purposes of the Legislative Instruments Act 2003.
No public consultation was undertaken on the draft Regulations. However, discussions took place with industry during the development stage of the regulations.
ATTACHMENT
Details of the Retirement Savings Accounts Amendment Regulations 2007 (No. 2)
Regulation 1 specifies the name of the Regulations as the Retirement Savings Accounts Amendment Regulations 2007 (No. 2).
Regulation 2 provides that the Regulations commence on 1 July 2007.
Regulation 3 provides that Schedule 1 amends the Retirement Savings Accounts Regulations 1997 (RSA Regulations) as amended by the Retirement Savings Accounts Amendment Regulations 2007 (No. 1).
Schedule 1 Amendments
Item 1
The RSA Regulations as amended by the Retirement Savings Accounts Amendment Regulations 2007 (No.1) provide that where an amount paid to a retirement savings account (RSA) institution cannot be accepted under the contribution acceptance rules set out in subregulations 5.03(1), (2) or (3), the amount is returned to the RSA holder regardless of who paid the amount on the RSA holder’s behalf.
Item 1 amends subregulations 5.03(4) and (5) such that where an RSA holder does not meet the contribution acceptance rules, the amount paid is returned to the entity or person that paid the amount.
This avoids the unintended consequences that would arise if the amount were returned to the RSA holder, such as an increased tax liability.
Overview
The Retirement Savings Accounts Amendment Regulations 2007 (No. 2) were issued to facilitate the implementation of the Government's Simplified Superannuation reforms, as announced on 5 September 2006 in the statement titled "A Plan to Simplify and Streamline Superannuation – Outcomes of Consultation." These regulations were enacted by the Minister for Revenue and Assistant Treasurer under the authority of the Retirement Savings Accounts Act 1997. They aim to modify the contribution acceptance rules by specifying the appropriate recipient of returned contributions when they fail to meet the stipulated criteria, thereby preventing unintended consequences such as increased tax liabilities for account holders. The regulations complement other measures introduced to support the broader superannuation reforms and came into effect on 1 July 2007.
Scope and Application
The Retirement Savings Accounts Amendment Regulations 2007 (No. 2) apply to entities and individuals involved in transactions concerning retirement savings accounts, specifically targeting retirement savings account institutions and their holders. These regulations modify the existing Retirement Savings Accounts Regulations 1997, addressing the rules for contribution acceptance and the return of amounts that cannot be accepted under these rules. The amendments outlined in Schedule 1 of the Regulations are designed to ensure that contributions are returned to the correct entity or individual, thereby preventing unintended tax consequences for the retirement savings account holders. The Regulations have a national jurisdictional reach within Australia, aligning with the Retirement Savings Accounts Act 1997 and its overarching legislative framework. The Regulations do not explicitly state any exclusions, exemptions, or thresholds, but they are intended to support broader superannuation reforms by ensuring clarity and accuracy in the handling of contributions to retirement savings accounts. The power to make these regulations is derived from subsection 200(1) of the RSA Act, which allows the Governor-General to prescribe matters necessary for carrying out or giving effect to the RSA Act.
Key Provisions
The Retirement Savings Accounts Amendment Regulations 2007 (No. 2) (the Regulations) are designed to implement the Simplified Superannuation reforms as announced in the 5 September 2006 statement titled "A Plan to Simplify and Streamline Superannuation – Outcomes of Consultation". These Regulations complement other regulations that were registered on 27 April 2007. Specifically, they amend the Retirement Savings Accounts Regulations 1997 to address the issue of unaccepted contributions in retirement savings accounts. Regulation 2(1) states that the Regulations commence on 1 July 2007, and Regulation 3 specifies that Schedule 1 amends the RSA Regulations as amended by the Retirement Savings Accounts Amendment Regulations 2007 (No. 1).
The main operative sections of these Regulations are found in Schedule 1, which modifies the contribution acceptance rules outlined in subregulations 5.03(4) and (5) of the RSA Regulations. These modifications address the issue of unaccepted contributions by specifying to whom the unaccepted amounts should be returned. In plain terms, Regulation 3, through Schedule 1, Item 1, alters the return mechanism for unaccepted contributions. If a contribution does not meet the contribution acceptance rules, the amount is returned to the entity or person that made the payment, rather than to the RSA holder. This change is designed to prevent unintended consequences, such as an increased tax liability for the RSA holder.
The Regulations impose specific obligations and requirements on parties involved in retirement savings accounts. For instance, under the amended rules, retirement savings account institutions must ensure that unaccepted contributions are returned to the correct party, i.e., the entity or person who made the payment, rather than the RSA holder. This requirement ensures that the financial implications for the RSA holder are minimized and that the correct entity is liable for any tax or other consequences arising from the unaccepted contribution. Moreover, it places a responsibility on the institutions to verify the identity of the payer and the payee before processing the return of funds.
Failure to comply with the provisions of these Regulations may lead to various consequences, both civil and criminal, depending on the nature and severity of the breach. While the explanatory statement does not explicitly detail the penalties for non-compliance, it is understood that breaches of superannuation regulations can result in significant financial penalties. Under the Superannuation Industry (Supervision) Act 1993, penalties for non-compliance can include fines up to $22,200 for individuals and up to $111,000 for corporations, along with potential criminal charges for serious breaches. The exact penalties and consequences would depend on the specific nature of the breach and the jurisdiction in which it occurs.