EXPLANATORY STATEMENT
Select Legislative Instrument 2008 No. 171
Issued by authority of the Minister for Superannuation and Corporate Law
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2008 (No. 3)
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 amend the Superannuation Industry (Supervision) Regulations 1994 to allow contributions to superannuation, from First Home Saver Accounts (FHSAs), for those over 65 and under 70 years of age. It is also to prescribe certain matters that the Court may take into account in disqualification proceedings.
The First Home Saver Account Act 2008 (the FHSA Act) requires FHSAs to be closed within 30 days of the account holder reaching age 65. On reaching age 65, FHSA holders may choose to withdraw their funds, or contribute the balance to superannuation. However, the superannuation laws did not allow regulated superannuation funds to accept contributions for those aged over 65 and under 70 without meeting the ‘work test’ under the superannuation laws (this is explained in the Attachment). The Regulations allow contributions to superannuation from FHSAs for those over 65 and under 70 years of age, bypassing the work test requirement.
The Regulations also prohibit a ‘disqualified person’ (as defined in Part 15 of the Act) from being an investment manager or a custodian of an FHSA trust or superannuation entity. In addition, the proposed Regulations would set out the matters that the Federal Court may take into account when considering a disqualification.
Details of the amendments to the Regulations are set out in the Attachment.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.
These Regulations form part of a package of amendments relating to the introduction of the First Home Saver Accounts scheme. As part of consultation for the package of regulations, the Government has consulted the Australian Taxation Office, the Australian Prudential Regulation Authority and industry representatives through a Technical Reference Group in making these regulations.
ATTACHMENT
Details of the Superannuation Industry (Supervision) Amendment Regulations 2008 (No. 3)
Regulation 1 – Name of Regulations
This regulation provides that the title of the Regulations is the Superannuation Industry (Supervision) Amendment Regulations 2008 (No. 3).
Regulation 2 – Commencement
This regulation provides for the Regulations to commence on the day after they are registered.
Regulation 3 – Amendment of Superannuation Industry (Supervision) Regulations 1994
This regulation provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations).
Schedule 1 - Amendments
Item 1
Item 1 inserts the definition of the term ‘FHSA Act’.
Subregulation 1.03(1) of the SIS Regulations is amended to insert ‘FHSA Act’, to mean the First Home Saver Accounts Act 2008, after the definition of ‘excluded member’.
Item 2
Item 2 imposes a licence condition on the Registrable Superannuation Entity (RSE) licence of trustees that are also authorised First Home Saver Account (FHSA) providers. This licence condition requires trustees to remove their investment manager or custodian when they become aware that the body corporate has become a ‘disqualified person’ under Part 15 of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
In effect, once a body corporate becomes a ‘disqualified person’ under section 120 of the SIS Act, the person is not permitted to be, or act as, either investment manager or custodian of an FHSA trust or a superannuation entity. An equivalent regulation was also made under the First Home Saver Accounts Act 2008 (the FHSA Act).
Investment managers and custodians have the same duties and responsibilities in relation to superannuation entities as they do in relation to FHSA trusts. Moreover, the provisions of the FHSA prudential regulation framework in relation to the disqualification of bodies corporate are consistent with the provisions of the superannuation prudential regulation framework in relation to such disqualifications. Therefore, it is appropriate to require trustees to ensure that bodies corporate that have contravened the FHSA Act is not permitted to be, or act as, the investment manager or custodian of a superannuation entity.
Item 3
Item 3 substitutes subregulation 7.04(1), table, item 2.
The FHSA Act requires FHSAs to be closed within 30 days of the account holder reaching age 65. On reaching age 65, FHSA holders may choose to withdraw their funds, or contribute the balance to superannuation. FHSAs provide benefits which are similar to superannuation. Individuals over age 65 may be able to use their superannuation as a means of saving for their first home.
However, the current superannuation laws do not allow regulated superannuation funds to accept personal contributions for those aged over 65 and under 70 without the individual meeting a ‘work test’. Under the ‘work test’, an individual needs to be ‘gainfully employed’ on at least a part time basis. This generally involves being gainfully employed for at least 40 hours in a period of no more than 30 consecutive days.
The Regulations allow contributions to superannuation from FHSAs for those over 65 and under 70 years of age, without having to meet the ‘work test’ requirement.
Subregulation 7.04(1), table, item 2, is amended to allow regulated superannuation funds to accept contributions if the member is not under 65 but is under 70, and the contributions that are made in respect of the member are payments from an FHSA of a kind mentioned in the FHSA Act:
• compulsory contributions of the balance of an inactive FHSA to superannuation as mentioned in subparagraph 31(1)(b)(i); or
• voluntary contributions of the balance of FHSAs to superannuation as mentioned in subparagraph 31(1)(b)(ii).
Item 4
Item 4 inserts the definition of the term ‘FHSA’. Subregulation 7.04(7) is amended to insert ‘FHSA’, to have the meaning as given by section 8 of the FHSA Act.
Item 5
Item 5 inserts a new regulation 13.19A to prescribe matters that the Federal Court may take into account when considering a disqualification.
Under section 126H of the SIS Act, the Federal Court may disqualify an individual if it is satisfied the requirements in subsections 126H(3), (4) or (5) of the SIS Act have been met. The court may also take into account matters prescribed in the regulations under paragraph 126H(6)(a). This regulation prescribes that the court may consider the individual’s conduct in relation to FHSAs in disqualification proceedings, as well as the individual’s conduct in relation to superannuation.
During disqualification proceedings, the Court may take into account whether the individual has contravened a provision of the FHSA Act; whether the individual is or has been a responsible officer of a body corporate that is or has been a disqualified person under Part 15 of the FHSA Act; and whether the individual’s conduct in relation to FHSAs makes the individual otherwise not ‘fit and proper’.
The provisions of the FHSA prudential regulation framework in relation to the disqualification of individuals, including the criteria and scope of disqualification orders, are consistent with the provisions of the superannuation prudential regulation framework in relation to such disqualifications. Moreover, holding an appropriate class of RSE licence is a precondition for a trustee being authorised as an FHSA provider. For these reasons, it is appropriate to allow the Court to take into account an individual’s conduct in relation to FHSAs or compliance with the FHSA Act, where these are relevant to disqualification proceedings under the SIS Act.