Retirement Savings Accounts Amendment Regulations 2010 (No. 3)

Administered by Department of the Treasury

Legislation au F2010L02057 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 236

Issued by the authority of the Minister for Financial Services, Superannuation and Corporate Law

                Superannuation Industry (Supervision) Act 1993

     Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3)

     Retirement Savings Accounts Act 1997

     Retirement Savings Accounts Amendment Regulations 2010 (No. 3)

Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the SIS Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the SIS Act.

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 Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) require that a minimum payment be made from a superannuation account-based pension at least annually. Minimum payments are determined by age and the value of the account balance at 1 July of each year. The minimum annual payment rule is designed so that retirees draw down on their superannuation capital over their retirement. This rule recognises that superannuation is a retirement savings vehicle with substantial tax concessions.

The purpose of the Regulations is to give effect to the Government’s announced measure to reduce the minimum payment amounts for account-based pensions for the 2010‑11 financial year.  This extends the pension drawdown relief provided in respect of the 2008-09 and 2009-10 financial years.

The reduction in the minimum payment amounts for 2010-11 applies to account-based annuities and pensions, allocated annuities and pensions, and market-linked annuities and pensions.

This measure is designed to assist pension account balances to recover from capital losses associated with the global financial crisis. It will benefit holders of account-based pensions by reducing the need to sell assets at a loss in order to satisfy the minimum payment requirement for 2010-11.

The SIS Regulations, inter alia, contain the payment rules for annuities and pensions, including those products in relation to which there is an account balance attributable to the recipient.  The Retirement Savings Accounts Regulations 1997 (RSA Regulations) contain parallel payment rules for pensions payable from Retirement Savings Accounts. 

The Regulations halve the minimum annual payment amounts for account‑based, allocated and market-linked annuities and pensions, and for pensions payable from Retirement Savings Accounts, for the 2010-11 financial year.


Details of the amendments to the SIS Regulations are set out in Attachment A and details of the amendments to the RSA Regulations are set out in Attachment B.

The SIS Act and the RSA Act specify no conditions that need to be met before the power to make the proposed Regulations may be exercised.

The Regulations are legislative instruments for the purposes of the Legislative Instruments Act 2003.

The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

Given the straightforward nature of the Regulations no public consultation was undertaken.

Authority: Subsection 353(1) of the  Superannuation Industry               (Supervision) Act 1993.

 Subsection 200(1) of the  Retirement Savings Accounts               Act 1997.


ATTACHMENT A

Details of Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3 )

Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3).

Regulation 2 provides that the Regulations commence on the day after registration.

Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations).

Schedule 1 Amendments

Items 1 and 2

Schedules 1A and 1AAB to the SIS Regulations set out the method for calculating the minimum and maximum payment limits for allocated pensions (and for the equivalent annuity product).  Clause 2 in each of these Schedules sets out the method for calculating the minimum payment limits. 

Clause 3A in each of Schedules 1A and 1AAB provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, the minimum payment limit is half the amount worked out using the formula in clause 2. Items 1 and 2 amend clause 3A in each of these Schedules so that it also applies to the financial year commencing on 1 July 2010. 

Item 3

Schedule 6 to the SIS Regulations contains the payment rules for market‑linked income streams. Clause 1 of Schedule 6 sets out the formula for determining the annual payment amount for a market‑linked income stream.

Clause 10 of Schedule 6 provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, an amount is taken to have been determined in accordance with clause 1 if it is not less than 45 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1. Item 3 amends clause 10 so that it also applies to the financial year commencing on 1 July 2010.

Item 4

Schedule 7 to the SIS Regulations contains the rules for calculating the minimum payment amount for a superannuation income stream. The method for calculating the minimum payment amount for an account-based pension (and for the equivalent annuity product) is set out in clause 1 of Schedule 7.    

Clause 4A of Schedule 7 provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, the minimum payment amount is half the amount worked out using the formula in clause 1.  Item 4 amends clause 4A so that it also applies to the financial year commencing on 1 July 2010.


ATTACHMENT B

Details of Retirement Savings Accounts Amendment Regulations 2010 (No. 3)

Regulation 1 specifies the name of the Regulations as the Retirement Savings Accounts Amendment Regulations 2010 (No. 3). 

Regulation 2 provides that the Regulations commence on the day after registration.

Regulation 3 provides that Schedule 1 amends the Retirement Savings Accounts Regulations 1997 (RSA Regulations).

Schedule 1 Amendments

Items 1 and 2

Schedules 1 and 1A to the RSA Regulations set out the method for calculating the minimum and maximum payment limits for allocated pensions paid from retirement savings accounts. Clause 2 in each of these Schedules sets out the method for calculating the minimum payment limits.  

Clause 3A in each of Schedules 1 and 1A provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, the minimum payment limit is half the amount worked out using the formula in clause 2. Items 1 and 2 amend clause 3A in each of these Schedules so that it also applies to the financial year commencing on 1 July 2010. 

Item 3

Schedule 4 to the RSA Regulations contains the rules for calculating the annual payment amounts for market‑linked pensions. The formula for determining the annual payment amount is set out in clause 1 of Schedule 4.

Clause 10 of Schedule 4 provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, an amount is taken to have been determined in accordance with clause 1 if it is not less than 45 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1. Item 3 amends clause 10 so that it also applies to the financial year commencing on 1 July 2010.

Item 4

Schedule 5 to the RSA Regulations contains the rules for calculating the minimum payment amount for an account‑based pension. The method for calculating the minimum payment amount is set out in clause 1 of Schedule 5.    

Clause 3A of Schedule 5 provides that, for the financial years commencing on 1 July 2008 and 1 July 2009, the minimum payment amount is half the amount worked out using the formula in clause 1.  Item 4 amends clause 3A so that it also applies to the financial year commencing on 1 July 2010.

 

Overview

The Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3) and the Retirement Savings Accounts Amendment Regulations 2010 (No. 3) were enacted to amend the Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Accounts Regulations 1997 respectively. These regulations were introduced by the Commonwealth of Australia under the authority of the Minister for Financial Services, Superannuation and Corporate Law. The primary objective of these regulations was to address the economic impact of the global financial crisis on superannuation account balances by reducing the minimum payment requirements for account-based pensions for the 2010-11 financial year. This measure aimed to provide relief to pension holders by lessening the need to sell assets at a loss to meet the minimum payment obligations, thereby aiding in the recovery of pension account balances affected by the financial crisis. These regulations are instrumental in modifying the existing rules concerning the minimum annual payment from superannuation accounts, specifically for account-based, allocated, and market-linked annuities and pensions, as well as pensions payable from Retirement Savings Accounts. By halving the minimum annual payment amounts for these pensions for the 2010-11 financial year, the regulations sought to support retirees during a period of economic uncertainty. The changes were designed to be in line with similar measures implemented in the preceding financial years, extending the pension drawdown relief to benefit a broader range of pension account holders.

Scope and Application

The Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3) and the Retirement Savings Accounts Amendment Regulations 2010 (No. 3) apply to the superannuation industry and entities involved in retirement savings accounts within Australia. These regulations amend the Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Accounts Regulations 1997 respectively. They are designed to modify the minimum payment amounts for account-based, allocated, and market-linked annuities and pensions, as well as pensions payable from Retirement Savings Accounts for the financial year 2010-11. The regulations aim to provide relief to account-based pension holders by reducing the minimum payment requirements, thereby mitigating the impact of capital losses experienced during the global financial crisis. These amendments apply to all entities and individuals managing or holding superannuation accounts and retirement savings accounts within the Australian jurisdiction.

Key Provisions

The Superannuation Industry (Supervision) Amendment Regulations 2010 (No. 3) and the Retirement Savings Accounts Amendment Regulations 2010 (No. 3) (collectively referred to as the Regulations) provide for a reduction in the minimum payment amounts for account-based pensions, allocated annuities and pensions, and market-linked annuities and pensions for the 2010-11 financial year. These Regulations amend the existing Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and the Retirement Savings Accounts Regulations 1997 (RSA Regulations) to halve the minimum payment amounts for these pension products. The purpose of these amendments is to provide relief to account-based pension holders by reducing the need to sell assets at a loss in order to satisfy the minimum payment requirement for 2010-11, thereby assisting pension account balances to recover from capital losses associated with the global financial crisis. The Regulations impose obligations on superannuation funds, trustees, and account holders. Superannuation funds and trustees must ensure that the minimum payment amounts for the specified pension products are halved for the 2010-11 financial year, as per the amended rules in the SIS Regulations and RSA Regulations. Account holders are required to comply with the new minimum payment amounts when drawing down on their superannuation capital. Failure to adhere to these obligations may result in non-compliance with the regulations and potential financial penalties. Breaching the provisions of the Regulations may result in civil or criminal penalties. Under the Superannuation Industry (Supervision) Act 1993 (SIS Act), trustees who fail to comply with the Regulations may be subject to civil penalty provisions, including fines of up to $50,000 for each contravention. Additionally, under section 1300 of the SIS Act, criminal penalties may apply for breaches of the regulations, with maximum fines of up to $210,000 for individuals and $1,050,000 for bodies corporate. Similarly, under the Retirement Savings Accounts Act 1997 (RSA Act), trustees who fail to comply with the RSA Regulations may be subject to civil penalty provisions, including fines of up to $50,000 for each contravention. There are no specific criminal penalties mentioned under the RSA Act for breaches of the Regulations. The specific penalties depend on the nature and severity of the breach, and the discretion of the court.

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