Explanatory Statement to Retirement Savings Accounts Tax File Number approval No. 1 of 2007
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
This Explanatory Statement accompanies the Retirement Savings Accounts approval No. 1 of 2007 (TFN Approval) made by the Australian Prudential Regulation Authority (APRA) for the purposes of section 134, subsections 135(1),136(1), 138(2) and 142(1) of the Retirement Savings Accounts Act 1993 (the RSA Act).
The rules regarding TFNs are contained in Part 11 of the RSA Act. APRA shares administration of Part 11 with the Commissioner of Taxation. Under section 3 of the RSA Act, APRA has the general administration of Part 11, other than Division 2 (quotation of holder’s tax file number) and Division 4A (incorrect quotation of tax file number) which are the responsibility of the Commissioner of Taxation.
A similar TFN approval in respect of Superannuation funds is being made under Part 25A of the Superannuation Industry (Supervision) Act 1993.
- Background
TFN approvals made under Part 11 of the RSA Act take into account the Privacy Commissioner’s TFN guidelines made under section 17 of the Privacy Act 1988. The Privacy Commissioner’s guidelines require that individuals be informed of the legal basis for the collection of their TFN, that declining to quote a TFN is not an offence and the consequences of not quoting a TFN.
On 19 June 1997, the Insurance and Superannuation Commissioner, who at that time administered Part 11 in relation to Retirement Savings Accounts, made the following TFN approvals (the ISC TFN Approvals):
(a) Approval of Manner of Quoting Tax File Numbers to an Employer dated 19 June 1997, which was made under paragraph 139(a) for the purposes of section 131 of the RSA Act;
(b) Approval of Manner of Requesting and Informing of Tax File Numbers dated 19 June 1997, which was made under and for the purposes of subsections 135(1), 136(1) and paragraph 139(a) (for the purposes only of section 134) of the RSA Act;
(c) Approval of Manner of Informing of Tax File Numbers dated 19 June 1997, which was made under and for the purposes of subsection 138(2) of the RSA Act.
(d) Approval of Manner of Setting Out Tax File Numbers in an Application for Benefits dated 19 June 1997, which was made under and for the purposes of subsection 142(1) of the RSA Act;
The ISC TFN Approvals have become out of date as a result of recent amendments to superannuation and taxation legislation which implement the Government’s superannuation simplification policy initiatives from 1 July 2007. The consequences of quoting or not quoting a TFN have also been affected by the abolition of the superannuation surcharge with effect from 1 July 2005. Retirement Savings Accounts Tax File Number approval No. 1 of 2007 revokes and replaces the ISC TFN Approvals to reflect these changed consequences of quoting or not quoting a TFN.
Under section 202DHA of the Income Tax Assessment Act 1936, individuals who complete a TFN Declaration for PAYG tax purposes on or after 1 July 2007 are taken to have authorised their employer to pass the TFN onto their superannuation provider. To promote consistency in the superannuation related information provided to individuals when they quote their TFN, the TFN approval reflects the superannuation information included in the instructions accompanying the TFN Declaration.
2. Purpose of the instrument
The TFN Approval has been made for the purposes of section 134 and subsections 135(1), 136(1), 138(2) and 142(1) in Part 11 of the RSA Act.
Section 134 of the RSA Act provides that a person who is a holder, or an applicant to become a holder, of an RSA may quote their TFN for superannuation purposes. The methods of quoting a TFN for superannuation purposes are set out in section 139 of the RSA Act. Paragraph (a) of section 139 provides that one of the methods of quoting is where a person informs another person in a manner approved by APRA.
Subsection 135(1) of the RSA Act provides that an RSA provider may at any time request an individual to quote their TFN for superannuation purposes. The request must be made in a manner approved by APRA.
Subsection 136(1) of the RSA Act requires that, where the RSA provider does not hold an individual’s TFN, the RSA provider must request an individual to quote their TFN for superannuation purposes. The request must be made in a manner approved by APRA. Subsection 136(2) provides that the RSA provider must make this request within 30 days of the individual becoming a holder of the RSA.
Subsections 138(1) and (2) of the RSA Act require that, where an individual has quoted their TFN to the RSA provider and the RSA provider subsequently transfers the member’s benefit to another superannuation provider (i.e. a superannuation entity, a regulated exempt public sector scheme or another RSA provider), the RSA provider inform the superannuation provider of the RSA holder’s TFN at the time of the transfer and in the manner approved by APRA. Subsection 138(3) provides that this obligation does not apply where the RSA holder has requested in writing before the transfer of their benefit that their TFN not be given to another superannuation provider.
Section 142 of the RSA Act provides that an individual may, in a manner approved by APRA, quote their TFN in an application to the RSA provider for payment of a benefit.
3. Operation of the instrument
The TFN Approval comes into force from the day after it is registered on the Federal Register of Legislative Instruments.
Paragraph 1 of the instrument fully revokes the four ISC TFN approvals made on 19 June 1997.
Paragraph 2 of the instrument approves, for the purposes of subsections 135(1) and 136(1), the manner in which an RSA provider is to make any request for a TFN from an individual. The manner, set out in paragraphs 1 to 5 of the Schedule, requires the RSA provider to advise that it is authorised under the RSA Act to collect the individual’s TFN, that the TFN will only be used for lawful purposes (which may change in the future as a result of legislative change) and that the RSA provider may disclose their TFN to another superannuation provider, when their benefits are being transferred, unless the individual requests in writing before their benefit is transferred that their TFN not be disclosed to another superannuation provider.
An RSA provider must inform an individual that, while it is not an offence not to quote their TFN, the following advantages of quoting a TFN may not otherwise apply:
- their RSA will be able to accept all types of contributions to their account/s;
- the tax on contributions to their RSA/s will not increase;
- other than the tax that may ordinarily apply, no additional tax will be deducted when they start drawing down their superannuation benefits; and
- it will make it much easier to trace different superannuation account/s in their name so that they receive all their superannuation benefits when they retire.
An RSA provider may provide the TFN information orally or in writing and a TFN may be quoted orally or in writing. The Schedule includes a form of words that an RSA provider may use but this form of words is not mandatory. An RSA provider is also able to provide information additional to that contained in the Schedule so long as the additional information is not inconsistent with the information in the Schedule.
Where a telephone or electronic system of TFN collection allows holders to respond to information previously provided, for example, in annual statements, newsletters or electronic bulletins, RSA providers should be satisfied that the holder has in fact been given the information required by the TFN approval.
Paragraph 3 of the instrument approves, for the purposes of subsection 138(2), the manner for an RSA provider to inform another superannuation provider of an individual’s TFN. The manner is set out in paragraphs 7 and 8 of the Schedule. Where an RSA provider provides another superannuation provider with an individual’s TFN, the RSA provider must do so in writing (including by means of electronic transfer of information) but may subsequently give the TFN orally to clarify or complete a TFN given in writing. Also, when giving a TFN to another superannuation provider, the RSA provider must give the superannuation provider all information in the possession of the RSA provider that could reasonably help the superannuation provider to locate or identify the individual and which the individual would reasonably expect to be disclosed. The RSA provider is not obliged to give the superannuation provider any information that the individual has requested the trustee not to divulge.
Paragraph 4 of the instrument approves for the purposes of section 134, the manner for an individual to quote their TFN to an RSA provider. The manner is set out in paragraph 6 of the Schedule (which in turn refers paragraphs 1 to 5 of the Schedule as described above).
Paragraph 5 of the instrument approves, for the purposes of subsection 142(1), the manner of a person setting out their TFN where the person makes an application to the RSA provider for payment of a benefit. The manner is set out in paragraph 6 of the schedule (which, in turn, requires the approach set out in paragraphs 1 to 5 of the Schedule as described above).
The TFN Approval does not approve a manner of an employee quoting their TFN to their employer for the purposes of section 131. The reason for this is that the Commissioner for Taxation has exclusive administration of section 131, which is in Division 2 of Part 11 (refer subsection 3(1)(e) of the RSA Act). The Commissioner of Taxation has separately made an approved form (as defined by section 388-50 in Schedule 1 to the Taxation Administration Act 1953), which operates as an approval under paragraph 139(a) of the RSA Act for the purposes of section 131.
4. Consultation
In developing this instrument and a similar instrument made under the Superannuation Industry (Supervision) Act 1993, APRA consulted the Australian Taxation Office on the superannuation information to be included with the TFN Declaration from 1 July 2007. APRA also consulted the Privacy Commissioner and provided industry associations representing superannuation providers with a similar draft instrument made under the SIS Act for comment. The industry associations did not recommend any material changes to the draft instrument; however, some minor changes to the drafting recommended by industry associations have been incorporated in the final instrument.