Superannuation Industry (Supervision) Act approval of provision of benefits (No.1) 2007
Explanatory Statement
General Outline of Instrument
- This determination is made under subparagraph 62(1)(b)(v) of the Superannuation Industry (Supervision) Act 1993 (the SISA) and under subsection 33(3) of the Acts Interpretation Act 1901
- This determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
3. This instrument comes into force from the day after registration on the Federal Register of Legislative Instruments.
What this instrument is about
4. The instrument enacts an approval for funds under the Australian Taxation Office (the ATO) jurisdiction. This approval applies only to the trustees of self managed superannuation funds regulated by the ATO. The instrument approves the provision of benefits for, or in respect of, each member of a fund which Part 6 of the Superannuation Industry (Supervision) Regulations 1994 (the SISR) permits or requires to be paid when, to the extent that, and to the persons to whom, the fund is permitted or required under Part 6 of the SISR to pay them. To avoid doubt, the instrument makes clear that this includes situations where benefits are provided in accordance with Part 6 of the SISR as modified by the ATO under section 332 of the SISA and/or the provision has been facilitated by an exemption made by the ATO under section 328 of the SISA.
What is the effect of this instrument
5. The effect of this instrument will ensure that the trustees of a self-managed superannuation fund do not face civil or criminal consequences and that the funds status as a complying fund is not at risk where payments are made in circumstances, and to persons, permitted by Part 6 of the SISR.
Background
6. The sole purpose requirements in section 62 of the SISA limit the provision of superannuation benefits by regulated superannuation funds to a range of prescribed or approved retirement or retirement-related circumstances under the core and ancillary purposes. The core purposes set out the reasons for which a fund may exist and pay benefits. They operate in conjunction with the payment standards. Ancillary purposes are those purposes for which a superannuation fund may be maintained under paragraph 62(1)(b) of the SISA. A regulated superannuation fund maintained for an ancillary purpose must also be maintained for at least one of the core purposes set out in paragraph 62(1)(a) of the SISA. Under subparagraph 62(1)(b)(v) of the SISA, a fund may provide other ancillary benefits not specified in the prescribed core or ancillary purposes where the fund has obtained the Regulator’s written approval.
7. Both the (the ATO) and the Australian Prudential Regulation Authority (APRA) have the power to approve other ancillary purposes in writing under subparagraph 62(1)(b)(v) with respect to the funds that they regulate. This power was previously held by the former Insurance and Superannuation Commissioner whose 1 July 1997 approval of ancillary purposes for which benefits may be provided continued to have effect after the ATO and APRA took over the administration of the SISA from the ISC. APRA has advised that it has revoked the previously issued instrument and has issued a replacement instrument which has effect with respect to the funds that APRA regulates.
Operation of this instrument
8. The approval of provision of benefits under subparagraph 62(1)(b)(v) of the SISA comes into force from the day after the date of registration on the Federal Register of Legislative Instruments.
The ancillary purpose approval relating to the provision of benefits under Part 6 of the SISR addresses tensions which might otherwise arise between the sole purpose test of section 62 and the payment standards of Part 6. For example:
- the sole purpose provisions allow for payment of benefits only to members, dependants or the legal personal representative of the member, whereas regulation 6.22 authorises payment of benefits in certain, very limited, circumstances to any individual;
- the sole purpose test may prohibit payment of benefits that had become unrestricted non-preserved benefits because of termination of employment, but that had been rolled over to a second fund. The benefits would not then be payable from the second fund owing to the terms of paragraph 62(1)(b)(i), which apply only to benefits to which the relevant employer had contributed; and
- the sole purpose test may prohibit payment of a benefit under $200 to a lost member who is found. The benefit may be paid under item 111 of the Conditions of release under Schedule 1 of the SISR.
However, the ancillary purpose approval ensures these benefits remain payable at any time.
The approval of benefits also recognises that the application of payment standards under Part 6 of the SISR may be affected by the ATO’s powers of exemption and modification. Part 6 of the SISR is a ‘modifiable provision’ under paragraph 327(c) of the SISA, as the payment standards of Part 6 are regulations made for the purposes of Part 3 of the Act.
Consultation
9. Section 18 of the Legislative Instruments Act 2003 specifically provides for circumstances where consultation may not be necessary or appropriate. One of those circumstances is where the instrument is considered minor or machinery in nature, and does not substantially change the law.
10. This instrument resolves an inconsistency between the SISA and the SISR by ensuring that payments made in accordance with the standards set in the SISR do not result in a contravention of the SISA. It does not alter the application of the law and neither restricts nor extends the rights of fund trustees beyond the standards set in the SISA and the SISR.
11. As a result limited consultation was undertaken. The views of APRA were sought to ensure consistency as between the regulators of superannuation funds. The views of the Treasury were also sought.
Deputy Commissioner of Taxation
Date: 6 December 2007
Legislative references:
Superannuation Industry (Supervision) Act 1993
Legislative Instruments Act 2003
Acts Interpretation Act 1901
Superannuation Industry (Supervision) Regulations 1994
Other references:
Australian Prudential Regulation Authority
Federal Register of Legislative Instruments