EXPLANATORY STATEMENT
SELECT LEGISLATIVE INSTRUMENT 2005 NO. 335
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 9)
Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (the Act) provides 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 create a new class of licence for trustees appointed by the Australian Prudential Regulation Authority (APRA) as acting trustees of an entity or entities pursuant to section 134 of the Act. Section 134 requires APRA to appoint an acting trustee to a superannuation entity where the trustee of the entity is either suspended or removed. The Regulations also make technical corrections to certain other provisions contained in the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations).
The Act requires all trustees of APRA-regulated superannuation entities to obtain a Registrable Superannuation Entity (RSE) licence and register the entities for which they are responsible with APRA.
Section 29J of the Act makes it an offence for a trustee to operate an RSE without holding an RSE licence. Under transitional arrangements (licensing transition period), trustees who were trustees of an RSE and in existence on 1 July 2004 have been given until 30 June 2006 to obtain an RSE licence and register their RSEs. All new trustees are required to obtain an RSE licence and register their RSEs before commencing operation.
At times, pursuant to section 134 of the Act, it is necessary for APRA to appoint an acting trustee to a superannuation entity. Subject to the conditions of appointment, the role of the acting trustee is to exercise the functions and duties of a trustee in relation to the superannuation entity until such time as a permanent trustee takes control of the entity or the entity itself is wound up.
As the licensing requirements apply to all trustees operating RSEs, acting trustees must also hold an RSE licence in order to perform their functions and duties after the end of the licensing transition period. Additionally, any acting trustee appointed during the licensing transition period must have an RSE licence if it was not a trustee at the start of the period.
The Regulations create a new licence class for acting trustees to distinguish, from that of other trustees, the special role acting trustees perform in relation to the entity to which they are appointed. In particular, a new licence class transparently reflects the fact that acting trustees, unlike other trustees, are usually appointed on a temporary basis and the primary business of most acting trustees is not the management of superannuation entities. Additionally, a new licence class provides APRA with greater flexibility to tailor licence conditions for acting trustees.
The Regulations also make technical corrections to the note to subregulation 3A.03(2) and to the definition of ‘statement of financial position’ in regulation 3A.05 of the Principal Regulations.
In addition, the Regulations update references to the soon‑to‑be‑superseded Australian Accounting Standards Board standard (AASB) 1017 in regulation 3A.04 of the Principal Regulations.
No consultation has been undertaken in relation to the Regulations creating a new licence class for acting trustees. This is because the general arrangements for licensing trustees of RSEs were consulted on prior to their introduction from 1 July 2004. The licensing of acting trustees is consequential to these arrangements. The other amendments introduced by the Regulations are technical corrections and do not require consultation.
A Regulation Impact Statement (RIS) has been prepared in relation to the creation of the new licence class for acting trustees, as required by the Office of Regulation Review (ORR). The ORR has advised that a RIS is not required for the amendments to subregulations 3A.03(2) and regulations 3A.04 and 3A.05, as these are of a minor or machinery of government nature and do not substantially alter the existing arrangements.
Details of the Regulations are set out in the Attachment.
The Regulations commenced on gazettal.
Authority: Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993.
ATTACHMENT
Details of the Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 9)
REGULATION 1
Name of Regulations
Regulation 1 specifies that the Regulations are the Superannuation Industry (Supervision) Amendment Regulations 2005 (No. 9).
REGULATION 2
Commencement
Regulation 2 provides that regulations 1 to 4 and Schedule 1 commence on the day after they are registered.
REGULATION 3
Amendment of Superannuation Industry (Supervision) Regulations 1994
Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the Principal Regulations).
REGULATION 4
Transitional
Regulation 4 provides that the amendment made by item 3 of Schedule 1 applies in relation to an application for an RSE licence made on, or after, the day on which these Regulations commence. This ensures that applicants who have been granted an RSE licence before the day on which these Regulations commence will not be required to have their licences re-examined.
SCHEDULE 1 – AMENDMENTS
ITEM 1
Item 1 makes a technical correction to the note to subregulation 3A.03(2) of the Principal Regulations. The note to subregulation 3A.03(2) in its current form makes reference to an extended public offer entity licence only being able to be granted to, and held by, ‘a registrable superannuation entity’ that is a constitutional corporation. The amendment changes this reference so that it refers to a ‘trustee’ that is a constitutional corporation. This is because it is the trustee of the RSE that applies for, and is granted, an RSE licence.
ITEM 2
Item 2 inserts a new regulation, 3A.03A, creating a new licence class for acting trustees appointed by APRA under section 134 of the Superannuation Industry (Supervision) Act 1993 (the Act) .
Creating a new licence class for acting trustees ensures that acting trustees hold a licence of a class that reflects the circumstances of their appointment and the conditions under which APRA appoints them to entities and distinguishes them from other licensed trustees.
Conditions on acting trustee licences
Pursuant to subsection 29E(7) of the Act, subregulations 2, 3 and 4 impose certain conditions on acting trustee licences. These conditions are in addition to the universal conditions imposed on all RSE licences by subsection 29E(1) and any other conditions that APRA may impose on a particular acting trustee licence pursuant to subsection 29EA(1) of the Act.
Subregulation 2 ensures the licensee is only licensed to perform the duties of an acting trustee in relation to the entity, or entities, to which it is appointed by APRA under section 134 of the Act.
The purpose of subregulation 2 is to reflect the fact that an acting trustee is appointed in relation to a specific entity or entities, for a limited but generally uncertain duration, and to perform the particular functions of an acting trustee in relation to that entity or entities.
Subregulation 3 prohibits a trustee, for the period of the appointment, from carrying on a business other than the business of being a trustee of an RSE or RSEs to which the appointment relates, without APRA’s approval. Subregulation 4 provides that APRA may only give approval if satisfied that the carrying‑on of the other business would not prejudice the proper and efficient performance of the trustee’s functions.
The purpose of subregulations 3 and 4 is to ensure the trustee’s other business operations do not expose the superannuation entity to wider risks and the trustee to conflicts of interest while performing its functions and duties in relation to the entity, or entities, to which it is appointed.
ITEM 3
Item 3 amends subregulations 3A.04(3) and (4) to update references to the soon‑to‑be‑superseded AASB standard 1017 to refer to the new AASB 124. AASB 1017 and AASB 124 set out accounting treatment for related party disclosures.
Applicants for public offer and extended public offer RSE licences need to satisfy certain minimum capital requirements. Subsection 29DA(2) of the Act provides that applicants meet these requirements if APRA is satisfied that the value of the applicant’s net tangible assets is equal to, or greater than, the amount prescribed by regulations. Regulation 3A.04 prescribes the amount as $5 million for the purposes of subsection 29DA(2).
For the purposes of calculating the value of net tangible assets, the value of receivables from, and receivables payable to, the trustee is currently calculated with reference to AASB 1017. For reporting periods commencing on or after 1 January 2005, AASB 1017 will be superseded by AASB 124.
The amendments also incorporate transitional arrangements. As AASB 124 applies to periods commencing on or after 1 January 2005, trustees whose financial year ends after that date would still need to rely on their 2004-05 financial statements (which would have been prepared in accordance with AASB 1017) when calculating their net tangible assets for the purpose of a licence application or to demonstrate compliance with minimum capital requirements. As a 31 December balance date is the last possible balance date for trustees, and since trustees need to lodge their financial statements with the Australian Securities and Investments Commission within four months of their balance date, trustees could conceivably rely on their 2004-05 statements as late as 30 April 2007.
As such, the transitional arrangements provide trustees with the option of using either, but not both, AASB 1017 or AASB 124 for the purpose of calculating net tangible assets up until 30 April 2007. From 1 May 2007, trustees would be required to use AASB 124 for this purpose.
ITEM 4
Item 4 makes a technical correction to the definition of ‘statement of financial position’ in regulation 3A.05 of the Principal Regulations. Regulation 3A.05 provides definitions for the purposes of the licence application fees table prescribed in Regulation 3A.06.
As the Principal Regulations currently stand, the definition of ‘statement of financial position’ refers to section 112 of the Act that outlines requirements for accounts and statements to be prepared by a self‑managed superannuation fund (SMSF). However, SMSFs are not RSEs and are not subject to the RSE licensing requirements.
The amendment correctly ensures that the definition of ‘statement of financial position’ refers to the reporting standards for RSEs that are made under section 13 of the Financial Sector (Collection of Data) Act 2001.