Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8) 2004 No. 155
EXPLANATORY STATEMENT
STATUTORY RULES 2004 No. 155
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Subject - Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8)
Subsection 353(1) of the Superannuation Industry (Supervision)Act 1993 (the Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The purpose of the Regulations is to provide transitional relief from requirements in the Superannuation Industry (Supervision) Amendment Regulations 2004 (No.2) that commenced on 12 May 2004, which prohibit regulated superannuation funds with fewer than fifty members from putting new defined benefit pension arrangements in place.
The Regulations will ensure that retiring members of small superannuation funds are able to continue with their plans to commence a defined benefit pension through their fund between 11 May 2004 and 1 July 2005 (transitional period). Defined benefit pensions include life time and life expectancy complying pensions which receive taxation and social security concessions.
The transitional period will also provide impending retirees with sufficient time to make an informed decision on their retirement income arrangements following the commencement of the new market-linked income stream on 20 September 2004. All regulated superannuation funds will be able to provide market-linked income streams. These income streams will be complying pensions and therefore will be eligible for taxation and social security concessions.
Details of the Regulations are set out in the Attachment.
The Regulations commence on the date of their notification in the Gazette.
ATTACHMENT
Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8)
Regulation 1 - Name of the Regulations
This specifies that the Regulations are the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8).
Regulation 2 - Commencement
This provides that the Regulations commence on the date of their notification in the Gazette.
Regulation 3 - Amendment of the Superannuation Industry (Supervision) Regulations 1994
This provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations).
Schedule 1 - Amendments
Item 1 amends Subregulation 9.04I(1) of the Principal Regulations to insert an exception to the requirement that a regulated superannuation fund with less than 50 members must not provide a defined benefit pension. The exception would be set out in new Subregulation 9.04I(3) - see item 2 below.
Item 2 inserts new subregulation 9.04I(3) in the Principal Regulations. This permits a regulated superannuation fund to provide a defined benefit pension to a person who was a member of the fund on 11 May 2004, and who retires from the workforce on or after age 55, or attains age 65, before 1 July 2005. The member must become entitled to be paid the defined benefit pension before 1 July 2005 and the first pension payment must be made within 12 months after the day when the member became entitled to be paid the pension.
Superannuation funds taking advantage of this exception will need to comply with notification requirements under section 140M of the Income Tax Assessment Act 1936 on commencement of the pension.
Overview
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8) were enacted to provide transitional relief for small superannuation funds, particularly those with fewer than fifty members, in response to the new restrictions on defined benefit pensions introduced by the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 2). These regulations were designed to ensure that members of small superannuation funds who were already planning to commence a defined benefit pension on or before 11 May 2004 could continue with their plans until 1 July 2005. This transitional period aimed to allow impending retirees to make informed decisions about their retirement income arrangements following the introduction of new market-linked income streams on 20 September 2004. The policy objective of these regulations was to provide a temporary exception to the prohibition on defined benefit pensions for small funds, while ensuring compliance with notification requirements under the Income Tax Assessment Act 1936.
Scope and Application
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8) provide transitional relief to regulated superannuation funds with fewer than fifty members, allowing them to offer new defined benefit pension arrangements to retiring members within a specified transitional period. These Regulations apply to regulated superannuation funds, which are entities managing retirement savings for their members, and are subject to the provisions of the Superannuation Industry (Supervision) Act 1993. The Regulations are applicable nationally across Australia, providing a uniform approach to superannuation regulation in alignment with the Act. Notably, they exclude funds with 50 or more members from the transitional provisions, focusing their relief on smaller superannuation funds. The Regulations extend their application through amendments to the Superannuation Industry (Supervision) Regulations 1994, as detailed in the attachment, ensuring that specific transitional measures are incorporated into existing regulatory frameworks.
Key Provisions
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 8) primarily seek to provide transitional relief for certain provisions in the Superannuation Industry (Supervision) Amendment Regulations 2004 (No.2) that came into effect on 12 May 2004. These regulations, under section 353(1) of the Superannuation Industry (Supervision) Act 1993, allow the Governor-General to make regulations necessary to implement the Act. The key operative sections of these Regulations, referenced in Regulation 3 and Schedule 1, amend the Superannuation Industry (Supervision) Regulations 1994 to allow small superannuation funds to continue providing defined benefit pensions under specific conditions. Regulation 1 names the Regulations, and Regulation 2 confirms their commencement date as the date of notification in the Gazette.
These Regulations impose certain obligations on regulated superannuation funds, particularly those with fewer than 50 members. They must adhere to the amended provisions set out in Subregulation 9.04I(3), which allows them to provide defined benefit pensions to members who were part of the fund on 11 May 2004 and who retire on or after age 55, or reach age 65 before 1 July 2005. These members must become entitled to the pension before 1 July 2005, and the first payment must be made within 12 months of the entitlement date. Additionally, the funds must comply with notification requirements under section 140M of the Income Tax Assessment Act 1936 when the pension commences.
Failure to comply with the provisions of these Regulations can lead to significant legal consequences. Although the specific penalties are not detailed in the explanatory statement, breaches of superannuation regulations generally result in substantial fines and potential criminal penalties. The maximum penalties can include fines of up to $21,000 for individuals and $105,000 for bodies corporate, as outlined in the Superannuation Industry (Supervision) Act 1993. Furthermore, persistent non-compliance can result in more severe criminal charges, potentially leading to imprisonment. The exact penalties depend on the nature and severity of the breach, as well as any previous offences.