Retirement Savings Accounts Regulations (Amendment) 1997 No. 151
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 151
Issued by the authority of the Assistant Treasurer
Retirement Savings Accounts Act 1997
Retirement Savings Accounts Regulations (Amendment)
The Retirement Savings Accounts Act 1997 (the Act) and the Retirement Savings Accounts Regulations (the Principal Regulations) implement 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 may be offered from 1 July 1997.
Section 200 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.
Under the Principal Regulations, superannuation benefits in an RSA will generally be required to be 'preserved' in the superannuation system until retirement on or after age 55. However, subject to the terms and conditions of an RSA, early release of a preserved' benefits is permitted under the Principal Regulations in certain restricted circumstances including permanent departure from Australia. It was announced in the 1997-98 Budget that the 'permanent departure from Australia' condition of release would be removed.
The removal of the 'permanent departure from Australia' condition of release is based on a number of reasons, including that there is anecdotal evidence that this condition has been abused by people providing inconclusive or false evidence to superannuation providers of their proposed permanent departure, In addition, removal of this condition will bring Australian arrangements more into line with overseas practice and make it easier for the Government to negotiate reciprocal social security agreements with other countries.
Regulations 4.21 and 4.22 of the Principal Regulations state that a person's preserved benefits and restricted non-preserved benefits in a RSA may be cashed on or after the satisfaction by the person of a condition of release. Under Schedule 2 to the Principal Regulations 'permanent departure from Australia' is a condition of release. Subregulation 4.01(2) of the Principal Regulations defines 'permanent departure from Australia' as a departure by the person from. Australia where the RSA provider is reasonably satisfied that it is for the purpose of permanent residence outside Australia
The Regulations amend the Principal Regulations by:
* omitting the definition of 'permanent departure from Australia' from subregulation 4.01(2) of the Principal Regulations; and
* omitting item 104 from Schedule 2 to the Principal Regulations which removes 'permanent departure from Australia' as a condition of release.
Therefore, a person who permanently departs from Australia will only be able to access preserved and restricted non-preserved benefits in an RSA at retirement on or after age 55 or under other conditions of release.
The Regulations will commence on 1 July 1997.
The Office of Regulation and Review have advised that a Regulation Impact Statement is not necessary in respect of the Regulations.
Overview
The Retirement Savings Accounts Regulations (Amendment) 1997 No. 151, issued under the authority of the Assistant Treasurer, amends the Retirement Savings Accounts Regulations 1997 to update the conditions under which preserved benefits in retirement savings accounts (RSAs) can be accessed. This legislation addresses the issue of individuals exploiting the "permanent departure from Australia" condition to access their RSA benefits prematurely, a practice that has been inconsistently enforced and which, according to the 1997-98 Budget, undermines the integrity of the superannuation system. The Retirement Savings Accounts Act 1997, enacted by the Parliament of Australia, was designed to facilitate the establishment of RSAs by financial institutions, providing an alternative to traditional superannuation funds. By amending the Regulations to remove the "permanent departure from Australia" condition, the law aims to align Australian superannuation practices with international standards and facilitate better negotiations for reciprocal social security agreements with other countries. These amendments took effect on 1 July 1997.
Scope and Application
The Retirement Savings Accounts Regulations (Amendment) 1997 No. 151 applies to the Retirement Savings Accounts Act 1997 and its associated regulations, which together facilitate the establishment of retirement savings accounts (RSAs) by authorised financial institutions, including banks, building societies, credit unions, and life insurance companies. This legislative framework allows these institutions to offer superannuation without a trust structure, with RSAs becoming operational from 1 July 1997. The Act and its regulations govern the establishment, management, and operation of RSAs, including the preservation of superannuation benefits until the account holder reaches a specified retirement age or meets other conditions for release. The Regulations specifically address the conditions under which preserved and non-preserved benefits can be accessed, particularly removing the condition of permanent departure from Australia as a permissible circumstance for early release. This amendment aligns Australian superannuation practices with international standards and simplifies the negotiation of reciprocal social security agreements with other nations. The scope of these regulations extends to all entities and individuals involved in the provision or holding of RSAs within Australia, with no stated exclusions or thresholds affecting their application.
Key Provisions
The Retirement Savings Accounts Regulations (Amendment) 1997 No. 151 amend the Retirement Savings Accounts Regulations by removing the condition of "permanent departure from Australia" as a permissible condition for accessing preserved benefits within a Retirement Savings Account (RSA). Section 4.01(2) of the Principal Regulations previously defined "permanent departure from Australia" as a departure where the RSA provider was reasonably satisfied that it was for the purpose of permanent residence outside Australia, but this definition has now been omitted (reg 3). Similarly, Schedule 2 to the Principal Regulations previously listed "permanent departure from Australia" as a condition of release, but this has now been omitted (reg 4). These amendments mean that individuals who permanently leave Australia will only be able to access their preserved benefits at retirement age or under other permitted conditions.
The Regulations impose certain obligations on RSA providers, such as banks, building societies, credit unions, and life insurance companies, by removing one of the conditions under which preserved benefits in RSAs can be accessed. RSA providers must now ensure that individuals who have permanently left Australia do not access their preserved benefits unless they meet another condition of release, such as reaching retirement age or meeting a different specified condition. This change requires RSA providers to implement processes to verify that individuals meet alternative conditions of release before allowing access to preserved benefits.
Failure to comply with the new requirements under the amended Regulations may result in civil or criminal penalties, although the specific consequences are not detailed within the text. Generally, non-compliance with financial regulations in Australia can lead to financial penalties, legal action, and reputational damage for the institutions involved. The maximum penalties for breaches of financial services laws can include substantial fines and, in some cases, criminal charges for individuals responsible for the oversight of compliance.
The Regulations come into effect on 1 July 1997, and the Office of Regulation and Review has determined that a Regulation Impact Statement is not necessary for these amendments. This decision suggests that the impact of the changes is considered minimal or that the potential effects are well understood and managed within the current regulatory framework.