Superannuation Industry (Supervision) Regulations (Amendment) 1998 No. 108
EXPLANATORY STATEMENT
STATUTORY RULES 1998 NO. 108
Issued by the authority of the Treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Regulations (Amendment)
Section 353 of the Superannuation Industry (Supervision) Act 1993 (the Act) provides that the Governor-General may make Regulations for the purposes of the Act.
The Act and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provide for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision by the Insurance and Superannuation Commissioner.
The purpose of the Regulations is to overcome temporary situations, arising as a result of the demutualisation of life insurance companies, whereby certain superannuation funds would otherwise be required to comply with more onerous requirements (relating to member reporting and preparation of financial statements) than intended.
Regulations 3 and 4 insert an additional exception in regulation 2.31 and subregulation 8.01(3) respectively of the Principal Regulations.
Regulation 2.31 of the Principal Regulations provides that paragraphs 2.29(1)(e), (f) and (g) of the Principal Regulations (ie, annual fund information in relation to audited accounts, statement of assets and details of certain investments) do not apply to funds from which the benefits paid to each individual member are wholly determined by reference to policies of life assurance. The amendment by regulation 3 provides that, where this exception does not apply only because shares in the life insurance company issuing the policies were acquired because the company was demutualised, then the exception will apply if the benefits paid to each individual member would otherwise be wholly determined by reference to policies of life assurance and the shares have been held for no longer than 18 months from the date of acquisition.
Subregulation 8.01(3) of the Principal Regulations provides that the requirement to prepare a statement of financial position and an operating statement under paragraphs 112(1)(a) and (b) of the Act does not apply to funds from which the benefits paid to each individual member are wholly determined by reference to policies of life assurance. The policy rationale for this exception is to avoid duplication between the requirements of the superannuation supervisory regime and those under the life insurance supervisory regime whereby financial statements must be prepared for the statutory funds in which the policies are held.
The amendment by regulation 4 provides that, where this exception does not apply only because shares in the life insurance company issuing the policies were acquired because the company was demutualised, then the exception will apply if the benefits paid to each individual member would otherwise be wholly determined by reference to policies of life assurance and the shares have been held for no longer than 18 months from the date of acquisition.
The amendments provided by regulations 3 and 4 are necessary because a superannuation fund in which benefits were wholly determined by reference to a life assurance policy could, when a life insurance company demutualises, have investments in both life assurance policies and shares in the demutualised life insurance company (through no voluntary action on the part of the trustee). While regulation 2.31 and subregulation 8.01(3) of the Principal Regulations would previously have provided such funds with an exemption from paragraphs 2.29(1)(e), (f) and (g) of the Principal Regulations and paragraphs 112(1)(a) and (b) of the Act respectively, without the amendments, these funds would have to comply with those provisions.
The amendments in regulations 3 and 4 provide that the shares be held for no longer than 18 months from the date of acquisition. This means that funds who wish to take advantage of the exceptions on an ongoing basis will need to sell the relevant shares and use the cash to invest back into additional life policies in keeping with the original policy rationale for the exception.
The Regulations commence on gazettal.
Overview
The Superannuation Industry (Supervision) Regulations (Amendment) 1998 No. 108, issued under the authority of the Treasurer, amend the Superannuation Industry (Supervision) Regulations 1994 in response to the demutualisation of life insurance companies. This event created a temporary situation where certain superannuation funds faced more stringent reporting requirements than originally intended. Specifically, these funds, which are otherwise exempt from detailed member reporting and financial statement preparation due to benefits being determined by life assurance policies, encountered additional burdens as a result of acquiring shares in demutualised life insurance companies. The amendments address this issue by extending the exemptions for up to 18 months post-acquisition of such shares, provided the funds continue to derive benefits from life assurance policies. The overarching objective of these amendments is to prevent unnecessary duplication between the superannuation and life insurance supervisory regimes and to ensure that the original intent of the exemptions is maintained.
Scope and Application
The Superannuation Industry (Supervision) Regulations (Amendment) 1998 No. 108 applies to superannuation funds, approved deposit funds, and pooled superannuation trusts, particularly those affected by the demutualisation of life insurance companies. The regulations aim to ensure that these funds do not face more onerous requirements than intended by modifying the application of specific provisions in the Superannuation Industry (Supervision) Regulations. These amendments apply to funds where benefits are determined by life assurance policies, especially when shares in the demutualised life insurance company were acquired involuntarily. The regulations modify exceptions in regulation 2.31 and subregulation 8.01(3) to accommodate these funds, provided the shares in question have been held for no longer than 18 months from the date of acquisition. This ensures that these funds can continue to benefit from the intended exceptions, preventing unnecessary duplication and burden. The Regulations are made under the authority of the Treasurer and commence upon gazettal.
Key Provisions
The Superannuation Industry (Supervision) Regulations (Amendment) 1998 No. 108 introduces modifications to the existing regulations to address specific situations arising from the demutualisation of life insurance companies. Regulation 3 amends regulation 2.31 of the Principal Regulations by adding an exception that applies when shares in a life insurance company are acquired due to demutualisation, and the benefits paid to each individual member would otherwise be wholly determined by policies of life assurance, provided the shares have been held for no longer than 18 months from the date of acquisition. Similarly, Regulation 4 amends subregulation 8.01(3) of the Principal Regulations to include an exception for the same circumstances, ensuring that funds from which the benefits paid to each individual member are wholly determined by policies of life assurance are not required to prepare a statement of financial position and an operating statement.
These regulations impose specific obligations on superannuation funds affected by the demutualisation of life insurance companies. Funds must ensure that any shares acquired due to demutualisation are held for no more than 18 months to qualify for the exceptions provided by the amendments. Failure to adhere to this requirement would mean that the fund would need to comply with the more stringent reporting requirements outlined in the Principal Regulations. This includes providing annual fund information in relation to audited accounts, statements of assets, and details of certain investments, as well as preparing financial statements.
The Superannuation Industry (Supervision) Regulations (Amendment) 1998 No. 108 does not explicitly outline specific offences, penalties, or consequences for breach. However, non-compliance with the Act and its regulations can lead to various civil and criminal consequences. Under the Superannuation Industry (Supervision) Act 1993, breaches may result in civil penalties, including fines up to $21,000 for individuals and $105,000 for bodies corporate, as stipulated in section 13ZD of the Act. Additionally, serious breaches may lead to criminal charges, with potential penalties including imprisonment and fines as determined by the courts. The precise penalties would depend on the nature and severity of the breach, as well as the discretion of the court.