Superannuation Industry (Supervision) modification declaration No. 1 of 2013

Administered by Department of the Treasury

Legislation au F2013L01253 Not in force Legislative Instrument

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Superannuation Industry (Supervision) modification declaration No. 1 of 2013

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Superannuation Industry (Supervision) Act 1993, section 335

Under section 332 of the Superannuation Industry (Supervision) Act 1993 (the Act), APRA has the power to declare that a modifiable provision is to have effect as if it were specified in the declaration. The ‘modifiable provisions’ are identified in section 327 of the Act.

Under section 335 of the Act, APRA has the power to revoke declarations made under section 332 of the Act.

On 28 June 2013, APRA made Superannuation Industry (Supervision) modification declaration No. 1 of 2013 under section 335 of the Act (the instrument). The instrument revokes Superannuation Industry (Supervision) Act 1993 Modification Declaration No. 23 (Modification Declaration No. 23) which was made under section 332 of the Act on 12 January 1999 and subsequently amended on 18 October 2000 and 25 January 2001.

The instrument commences on 1 July 2013.

  1. Background

Modification Declaration No. 23 set prudential requirements relating to fund solvency for trustees of defined benefit funds that paid a defined benefit pension. It did this by modifying the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). In particular, Modification Declaration No. 23 inserted a definition of ‘defined benefit pension’ in the SIS Regulations and a modified definition of ‘defined benefit member’ which, for the purposes of certain provisions, included a member in receipt of a defined benefit pension. The purpose of this was to ensure that provisions relating to the actuarial investigation of defined benefit funds (or defined benefit sub-funds) in Part 9 of the SIS Regulations would apply, as modified, to funds paying such a pension (even if they were otherwise not treated as defined benefit funds).  Annual actuarial investigation and reporting requirements replaced the established triennial requirement for trustees of such funds, although the Modification Declaration No. 23 provided for trustees of funds with more than four members to apply to APRA for relief from the annual requirement.  Small APRA funds and self-managed superannuation funds regulated by the Australian Taxation Office were subject to the annual requirements.

Two changes, each of which takes effect on 1 July 2013, necessitate the revocation of Modification Declaration No. 23.

Firstly, APRA determined Prudential Standard SPS 160 Defined Benefit Matters (SPS 160) on 28 June 2013.  SPS 160 will apply to APRA-regulated defined benefit funds, and where applicable, defined benefit sub-funds in relation to actuarial investigations of the kind that prior to 1 July 2013 have been covered by Division 9.5 of the SIS Regulations as modified by Modification Declaration No. 23. 

Secondly, Superannuation Legislation Amendment (MySuper Measures) Regulation 2013, will (among other things) amend Division 9.5 of the SIS Regulations to confine the scope of its application to defined benefit funds that are self-managed superannuation funds and to make amendments incorporating modifications that have been in Modification Declaration No.23, such as regulation 9.29A. In addition, the amendments will insert new definitions of ‘defined benefit member’, ‘defined benefit pension’, ‘defined benefit sub-fund’ and ‘defined benefit fund’ in the SIS Regulations, which will be similar to the terms in Modification Declaration No. 23. 

2.             Purpose and operation of the instrument

The purpose of the instrument is to revoke Modification Declaration No. 23. The determination of SPS 160 and Superannuation Legislation Amendment (MySuper Measures) Regulation 2013, make Modification Declaration No. 23 redundant.

3.             Consultation

Section 17 of the Legislative Instruments Act 2003 (LIA) imposes consultation obligations on the makers of legislative instruments, particularly where the proposed instrument is likely to have a direct, or a substantial indirect, effect on business, or to restrict competition.

Section 18 of the LIA sets out circumstances where consultation may be unnecessary or inappropriate.  They include the circumstance that the legislative instrument is of a minor or machinery nature and does not substantially alter existing arrangements (paragraph 18(2)(a)).

In the present case, the instrument revokes a modification declaration that has been made redundant because its provisions have been replicated in SPS 160 and the amended SIS Regulations. This approach was canvassed during the consultation process for SPS 160 and the amendments to the SIS Regulations and therefore further consultation for the instrument is not warranted.

4.             Regulation Impact Statement

The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required for the instrument.

5.             Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

A Statement of Compatibility with Human Rights prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.

 

 

 


ATTACHMENT A

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Superannuation Industry (Supervision) modification declaration No. 1 of 2013

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).

Overview of the Legislative Instrument

This Legislative Instrument revokes Superannuation Industry (Supervision) Act 1993 Modification Declaration No. 23 (Modification Declaration No. 23), under section 335 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Modification Declaration No. 23 has no present practical effect and is redundant. Modification Declaration No.23 set prudential requirements relating to fund solvency for trustees of defined benefit funds that paid a defined benefit pension. The prudential requirements set by Modification Declaration 23 have now been replicated in Prudential Standard SPS 160 Defined Benefit Matters and in Division 9.5 of the Superannuation Industry (Supervision) Regulations 1994 as amended by the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013.

Human rights implications

APRA has assessed this Legislative Instrument against the international instruments listed in section 3 of the HRPS Act and determined that it does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

 

Overview

The Superannuation Industry (Supervision) modification declaration No. 1 of 2013 was enacted to address a redundancy issue arising from the Superannuation Industry (Supervision) Act 1993 (SIS Act). This modification declaration, made by the Australian Prudential Regulation Authority (APRA) under section 335 of the SIS Act, revokes Superannuation Industry (Supervision) Act 1993 Modification Declaration No. 23, which had previously set prudential requirements for trustees of defined benefit funds paying a defined benefit pension. The revocation became necessary due to the issuance of Prudential Standard SPS 160 Defined Benefit Matters and amendments to the Superannuation Industry (Supervision) Regulations 1994 through the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013. These changes rendered Modification Declaration No. 23 redundant, as its provisions were incorporated into the new regulatory framework. The revocation was effective from 1 July 2013, and no further consultation was deemed necessary as the redundancy had been addressed in prior consultations. The revocation was also found to be compatible with human rights, as it did not engage any of the rights or freedoms recognised in the relevant international instruments.

Scope and Application

The Superannuation Industry (Supervision) modification declaration No. 1 of 2013, issued by the Australian Prudential Regulation Authority (APRA) under the Superannuation Industry (Supervision) Act 1993, revokes the Superannuation Industry (Supervision) Act 1993 Modification Declaration No. 23, which had previously set prudential requirements for trustees of defined benefit funds that paid defined benefit pensions. This revocation is due to the issuance of Prudential Standard SPS 160 Defined Benefit Matters and the amendments made by the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013, which now encompass the requirements previously outlined in Modification Declaration No. 23. The instrument applies nationally across Australia, targeting trustees of defined benefit funds, particularly those with defined benefit pensions, ensuring they meet the updated regulatory standards set forth in the new Prudential Standard and amended regulations. The revocation of Modification Declaration No. 23 does not require further consultation as its provisions have been effectively incorporated into the new standards and regulations.

Key Provisions

The key operative sections of Superannuation Industry (Supervision) modification declaration No. 1 of 2013 are sections 332 and 335 of the Superannuation Industry (Supervision) Act 1993 (the Act). Section 332 of the Act empowers the Australian Prudential Regulation Authority (APRA) to declare that a modifiable provision is to have effect as if it were specified in the declaration, while section 335 allows APRA to revoke such declarations. This specific declaration, issued on 28 June 2013, revokes the Superannuation Industry (Supervision) Act 1993 Modification Declaration No. 23, which was made on 12 January 1999 and subsequently amended on 18 October 2000 and 25 January 2001. The revocation of Modification Declaration No. 23 is effective from 1 July 2013. This declaration was necessary because Modification Declaration No. 23 had become redundant due to the introduction of Prudential Standard SPS 160 and the amendments to the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) by the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013. The obligations and requirements imposed by this Act primarily revolve around the prudential standards and regulations that govern the superannuation industry. Trustees of defined benefit funds that pay a defined benefit pension must comply with these standards and regulations, ensuring they meet the requirements for actuarial investigations and reporting. Modification Declaration No. 23, which has been revoked, previously set these prudential requirements. Now, trustees must adhere to the provisions of SPS 160 and the amended SIS Regulations. These regulations detail the requirements for actuarial investigations, the frequency of these investigations, and the reporting obligations for trustees. Trustees of funds with more than four members may apply to APRA for relief from the annual requirement if necessary. There are no explicit offences, penalties, or civil/criminal consequences mentioned in the declaration for breaches of the repealed Modification Declaration No. 23. However, trustees who fail to comply with the current prudential standards and regulations, such as SPS 160 and the amended SIS Regulations, could face regulatory action. Penalties for non-compliance with APRA regulations can include fines and other enforcement actions as stipulated under the Superannuation Industry (Supervision) Act 1993 and related regulations. The specific penalties would depend on the nature and severity of the breach, and APRA has the authority to impose appropriate sanctions to ensure compliance with the regulatory framework.

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