Superannuation Industry (Supervision) Regulations (Amendment) 1995 No. 47
EXPLANATORY STATEMENT
STATUTORY RULES 1995 No. 47
Issued by the authority of the treasurer
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Regulations (Amendment)
The Superannuation Industry (Supervision) Act 1993 (the Act) and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provides 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.
Section 353 of the Act provides that the Governor General may make Regulations for the purposes of the Act. Section 353 enables regulations to prescribe 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.
Section 31 of the Act enables regulations to prescribe standards applicable to the operation of regulated superannuation funds.
The regulations prospectively, give effect to the part of measures which the Treasurer announced, on 28 June 1994 would be implemented before 1 July 1995 for the protection of small superannuation amounts (these measures were contained in paragraph 16 of the statement entitled "Superannuation Policy -Statement of Measures").
The regulations amend the Principal Regulations and are described in detail in the attachment.
The regulations commenced on gazettal.
ATTACHMENT
Superannuation Industry (Supervision) Regulations (Amendment)
COMMENCEMENT
The regulations commenced on gazettal.
BACKGROUND
Section 353 of the Act enables regulations to prescribe 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.
Section 31 of the Act enables regulations to prescribe standards ("operating standards") applicable to the operation of regulated superannuation funds.
Regulations have already been made under the Act (Principal Regulations).
The principal function of the regulations is to insert two new operating standards into the Principal Regulations.
The insertion of the two new operating standards is part of the progression of the Treasurer's Superannuation Statement of 28 June 1994.
On 28 June 1994, the Treasurer announced a number of measures concerning the protection of small superannuation amounts ("Superannuation Policy -Statement of Measures"). The bulk of these measures ("member protection") are proposed to commence on 1 July 1995.
The Treasurer also announced in paragraph 16 of the Statement of Measures, that measures would be implemented before 1 July 1995 to prevent actions by funds before 1 July 1995 which would be detrimental to members.
These regulations prospectively, give effect to the pan of the measures which the Treasurer announced, would be implemented before 1 July 1995. The measures have been prolonged by one year to 1 July 1996 to give maximum protection to the small superannuation amounts of members in the first year of member protection and to prevent actions by funds to avoid the measures announced by the Treasurer as applying before 1 July 1995.
TWO NEW OPERATING STANDARDS
The first standard - a restriction on exit fees
The regulations insert a new operating standard into Part 5 of the Principal Regulations which provides that a trustee of a regulated superannuation fund which has more than 4 members must not charge exit fees in certain cases before 1 July 1996.
The certain cases are the rollover or transfer of a benefit where:
- the benefit rolled over or transferred (the net benefit) is less than $1000;
- the benefit contains, or has contained, mandated employer financed benefits; and
- the benefit is rolled over, or transferred at the instigation of the fund (ie. where the fund requires the member's benefit to be rolled over or transferred out of the fund), regardless of whether or not the member chooses the entity to which the benefit is rolled over or transferred.
The restriction means that:
- if the member's gross benefit in the fund is less than or equal to $1000, the trustee cannot charge an, exit fee;
- if the member's gross benefit in the fund is greater than $1000, the trustee cannot charge an exit fee which would reduce the benefit to less than $1000.
An exit fee is a fee (however described) that the trustee would not have charged if the rollover or transfer had not occurred.
For the purposes of the restriction, the trustee must assume that the benefit contains, or has contained, mandated employer financed benefits unless the trustee knows otherwise.
The standard set out in subregulation 5.02(3) of the Principal Regulations (which is an operating standard by virtue of subregulation 5.01A of the Principal Regulations) is subject to the restriction on exit fees. This means that the uncharged exit fee, if charged against the benefits of members, must be distributed in a fair and reasonable manner as between:
- all the "other members of the fund"; and
- the various kinds of benefits of each such member of the fund.
The "other members of the fund" are:
- the remaining members of the fund; and
- the other departing members of the fund (if any) who are not subject to the restriction on exit fees.
The second standard - a rule prohibiting the introduction of new fees or the increase in existing fees designed to circumvent the restriction on exit fees
The regulations insert a new operating standard into Part 5 of the Principal Regulations which provides that a trustee of a regulated superannuation fund which has more than 4 members must not introduce new fees or increase existing fees with the intention to circumvent the restriction on exit fees (mentioned above) as it applies to the period before 1 July 1996.
Duration of the restriction on exit fees
The restriction on exit fees only applies to rollovers or transfers occurring on or after the date of gazettal of the regulations but before 1 July 1996.
From 1 July 1996, it is expected that operating standards containing indirect restrictions on exit fees ("member protection") will apply to the same cases that the restriction on exit fees applies.
It is expected that these operating standards will already have been prescribed and taken effect from 1 July 1995 and will apply to other cases (eg. the case where the member rather than the fund instigates the rollover or transfer).