EXPLANATORY STATEMENT
SELECT LEGISLATIVE INSTRUMENT 2005 No. 143
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4)
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 extend the transitional arrangements provided in subregulation 9.04I(3) of the Superannuation Industry (Supervision) Regulations 1994. These transitional arrangements provide an exception from regulation 9.04I that prohibits regulated superannuation funds with fewer than fifty members (small superannuation funds) from providing defined benefit pensions.
Subregulation 9.04I(3) allows retiring members of small superannuation funds to continue with plans to commence a defined benefit pension through their fund from 12 May 2004 until 1 July 2005 (transitional period). The Regulations extend the end of the transitional period until 1 January 2006.
The extended transitional period enables retiring members of small superannuation funds to have access to a full range of pensions while the Government considers the outcomes of the ‘Review of the provision of pensions in small superannuation funds’.
Details of the Regulations are set out in the Attachment.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003. Consultation was not undertaken in relation to this instrument because it is minor or machinery in nature and does not substantially change the law.
ATTACHMENT
Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4)
Regulation 1 – Name of the Regulations
This specifies that the Regulations are the Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4).
Regulation 2 – Commencement
This provides that the Regulations commence on the day after they are registered.
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(3) of the Principal Regulations to extend the end of the transitional period in subregulation 9.04I(3) from 1 July 2005 until 1 January 2006. This permits a regulated superannuation fund with fewer than fifty members 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 January 2006. The member must become entitled to be paid the defined benefit pension before 1 January 2006 and the first pension payment must be made within 12 months after the day when the member became entitled to be paid the pension.
Overview
The Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4) were issued under the authority of the Minister for Revenue and Assistant Treasurer to amend existing regulations concerning the Superannuation Industry (Supervision) Act 1993. These regulations were enacted to address the need for a transitional period extension for small superannuation funds to provide defined benefit pensions, as previously stipulated in subregulation 9.04I(3) of the Superannuation Industry (Supervision) Regulations 1994. The original transitional period, which allowed members of small superannuation funds to continue with their plans to commence a defined benefit pension, was set to end on 1 July 2005. However, these amendments extend this period to 1 January 2006. This extension is intended to provide retiring members of small superannuation funds with continued access to a full range of pensions while the government evaluates the outcomes of the ‘Review of the provision of pensions in small superannuation funds’.
Scope and Application
The Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4) apply to entities and individuals within the scope of the Superannuation Industry (Supervision) Act 1993, particularly focusing on regulated superannuation funds with fewer than fifty members. These regulations are designed to amend the existing Superannuation Industry (Supervision) Regulations 1994, extending the transitional arrangements concerning the provision of defined benefit pensions by small superannuation funds. The regulations specifically allow small superannuation funds to continue offering defined benefit pensions to retiring members who were members of the fund prior to 12 May 2004, provided they retire from the workforce on or after the age of 55, or reach age 65, before 1 January 2006. These provisions ensure that members who were already entitled to a defined benefit pension can continue to access it, even if they retire during the extended period. The regulations also stipulate that the member must become entitled to the pension and receive the first payment within specified timeframes. The amendments are intended to provide clarity and continuity for affected members while the government reviews the overall provision of pensions in small superannuation funds.
Key Provisions
The Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 4) modify the Superannuation Industry (Supervision) Regulations 1994 by extending the transitional arrangements for small superannuation funds. These funds, which have fewer than fifty members, are normally prohibited from providing defined benefit pensions (subregulation 9.04I of the Principal Regulations). However, this prohibition is relaxed during a transitional period (subregulation 9.04I(3)) which initially ran from 12 May 2004 until 1 July 2005. The Regulations extend this transitional period until 1 January 2006. This extension allows retiring members of small superannuation funds who were members on 11 May 2004, and retire from the workforce on or after age 55, or attain age 65, before 1 January 2006, to receive a defined benefit pension from their fund. To be eligible, the member must become entitled to the pension before 1 January 2006 and the first payment must occur within 12 months of entitlement. The Regulations come into effect the day after they are registered.
The obligations imposed by the Regulations on the relevant parties, primarily the trustees of small superannuation funds, include ensuring that the defined benefit pensions provided during the extended transitional period comply with the stipulated conditions. Trustees must verify that members are eligible under the new timeframe and that the first pension payment is made within 12 months of the member becoming entitled. Failure to adhere to these conditions could result in the pension not being recognised as compliant with the Act, potentially leading to regulatory scrutiny or enforcement action.
There are no specific offences, penalties, or civil/criminal consequences outlined within the explanatory statement for breaches of these Regulations. However, any failure to comply with the Superannuation Industry (Supervision) Act 1993 or its subsidiary regulations can attract penalties under the Act itself. For instance, breaches of the Act can result in civil penalty provisions, with maximum penalties including fines up to $180,000 for corporations and $36,000 for individuals. Additionally, criminal penalties may apply for more serious breaches, with maximum penalties including fines up to $270,000 for corporations and $54,000 for individuals, along with potential imprisonment terms. Trustees must therefore ensure strict compliance to avoid these potential sanctions.