Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9) 2004 No. 249
EXPLANATORY STATEMENT
STATUTORY RULES 2004 No. 249
Issued by authority of the Minister for Revenue and Assistant Treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9)
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 make a technical correction to the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) to allow a 'complying' lifetime pension or a 'complying' lifetime annuity to be commuted in order to purchase a market linked income stream, and to correct a minor typographical error.
The market linked income stream was one of a number of measures announced by the Treasurer on 25 February 2004 as part of A more flexible and adaptable retirement income system. The measure extends 'complying' status to market linked income streams from 20 September 2004. 'Complying' income streams qualify for concessional tax and social security treatment. Regulations giving effect to the measure were considered by Executive Council on 24 June 2004 and gazetted on 25 June 2004.
Market linked income streams will be similar in most respects to existing 'complying' pensions and annuities, except that payments from a market linked income stream will not be guaranteed but will be influenced by changes in the market value of the underlying asset portfolio.
'Complying' pensions and annuities are generally non-commutable. However, the policy intention is that these products can be commuted where the proceeds from the commutation are transferred directly to the purchase of another 'complying' income stream. This facilitates competition between income stream providers and ensures that recipients are not locked in to a particular provider or type of 'complying' product once it has commenced.
As the SIS Regulations currently stand, a 'complying' lifetime income stream cannot be commuted in order to purchase a market linked income stream. The Regulations correct this deficiency to ensure that commutation of a lifetime income stream can occur for this purpose.
The Regulations also correct a minor typographical error in the SIS Regulations.
Details of the Regulations are set out in the Attachment.
The Regulations commence on 20 September 2004.
The Office of Regulation Review has advised that a Regulation Impact Statement (RIS) is not required to be included with the Regulations because the changes are of a minor or machinery of government nature and do not substantially alter existing arrangements.
ATTACHMENT
Details of the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 1)
Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9).
Regulation 2 provides that the Regulations commence on 20 September 2004.
Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations).
Schedule 1 - Amendments
Item 1
The Regulations amend subregulation 1.03(1) to correct a typographical error in the definition of a market linked income stream.
Item 2
The Regulations amend subparagraph 1.05(2)(f)(iii) to ensure that a 'complying' lifetime annuity can be commuted where the eligible termination payment resulting from the commutation is transferred directly to the purchase of a market linked annuity or a market linked pension (paid from either a superannuation fund or a Retirement Savings Account institution).
Item 3
The Regulations amend subparagraph 1.06(2)(e)(iii) to ensure that a 'complying' lifetime pension can be commuted where the eligible termination payment resulting from the commutation is transferred directly to the purchase of a market linked annuity or a market linked pension (paid from either a superannuation fund or a Retirement Savings Account institution).
Overview
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9), enacted in 2004, address a technical issue in the Superannuation Industry (Supervision) Regulations 1994, specifically allowing the commutation of 'complying' lifetime pensions or annuities to purchase a market-linked income stream and correcting a minor typographical error. Enacted under subsection 353(1) of the Superannuation Industry (Supervision) Act 1993, these regulations aim to facilitate flexibility in retirement income by enabling the transfer of funds from one type of 'complying' product to a market-linked stream, thus ensuring that retirees are not locked into a single provider or product type. The policy objective is to introduce a more adaptable retirement income system, as announced by the Treasurer on 25 February 2004. These amendments also ensure that 'complying' status extends to market-linked income streams, thereby qualifying them for concessional tax and social security treatment.
Scope and Application
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9) amends the Superannuation Industry (Supervision) Regulations 1994 to facilitate the commutation of 'complying' lifetime pensions and annuities for the purchase of market linked income streams. These Regulations apply to all superannuation funds, entities providing retirement income products, and individuals holding 'complying' lifetime income streams in Australia. The amendment allows for the commutation of 'complying' lifetime pensions and annuities, provided the proceeds are used to purchase another 'complying' income stream, such as a market linked annuity or pension, thereby promoting competition and flexibility within the superannuation industry. The changes take effect from 20 September 2004, ensuring that the regulatory framework aligns with the government's policy to introduce more flexible retirement income options. The Regulations also correct a minor typographical error in the existing regulations, ensuring clarity and accuracy in the legal definitions and provisions.
Key Provisions
The Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9) primarily aim to amend the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) to permit the commutation of 'complying' lifetime pensions and annuities for the purchase of market linked income streams. This is detailed in regulation 3 of Schedule 1, which amends subregulations 1.05(2)(f)(iii) and 1.06(2)(e)(iii). These amendments ensure that a 'complying' lifetime annuity or pension can be commuted, provided the proceeds are used to purchase a market linked annuity or pension. Moreover, the Regulations correct a typographical error in the definition of a market linked income stream, as stated in Item 1 of Schedule 1, which amends subregulation 1.03(1).
The obligations imposed by the Regulations on relevant parties, such as superannuation funds and Retirement Savings Account institutions, include ensuring that any commutation of 'complying' lifetime pensions or annuities for market linked income streams is executed in accordance with the amended provisions. This involves the transfer of the commutation proceeds directly to the purchase of a market linked income stream. The Regulations also require these entities to comply with the corrected definition of a market linked income stream.
Failure to comply with the provisions of the Regulations may result in regulatory consequences. Although the explanatory statement does not explicitly outline specific offences or penalties, non-compliance with superannuation regulations generally can lead to enforcement actions by the Australian Prudential Regulation Authority (APRA). Such actions may include fines and other sanctions. The exact penalties are not specified in the explanatory statement but are typically determined under the governing Act, the Superannuation Industry (Supervision) Act 1993.
In summary, the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9) provide technical corrections to the SIS Regulations to facilitate the commutation of 'complying' lifetime pensions and annuities for market linked income streams, while also correcting a minor typographical error. The Regulations impose specific obligations on relevant entities to ensure compliance with the amended provisions and, while specific penalties are not detailed, non-compliance could result in regulatory enforcement actions under the Superannuation Industry (Supervision) Act 1993.