Explanatory Statement to Superannuation Industry (Supervision) Tax File Number approval No. 1 of 2007
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
This Explanatory Statement accompanies the Superannuation Industry (Supervision) Tax File Number approval No. 1 of 2007 (TFN Approval) made by the Australian Prudential Regulation Authority (APRA) for the purposes of section 299D, subsections 299E(1),299G(1), 299M(2) and 299N(2) and paragraph 299S(1)(b) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
The rules regarding TFNs and superannuation are contained in Part 25A of the SIS Act. APRA shares administration of Part 25A with the Commissioner of Taxation. Under section 6 of the SIS Act, APRA has the general administration of Part 25A, other than Division 1 (quotation of employee’s tax file number) and Division 3A (incorrect quotation of tax file number) which are the responsibility of the Commissioner of Taxation. Generally APRA administers these provisions in relation to superannuation entities other than self managed superannuation funds (SMSFs). The Commissioner of Taxation also has the general administration of Divisions 2, 3, 4 and 5 of Part 25A to the extent that they relate to SMSFs.
A similar TFN approval in respect of Retirement Saving Accounts is being made under Part 11 of the Retirement Savings Accounts Act 1997.
- Background
TFN approvals made under Part 25A of the SIS Act take into account the Privacy Commissioner’s TFN guidelines made under section 17 of the Privacy Act 1988. The Privacy Commissioner’s guidelines require that individuals be informed of the legal basis for the collection of their TFN, that declining to quote a TFN is not an offence and the consequences of not quoting a TFN.
On 19 June 1997, the Insurance and Superannuation Commissioner, who at that time administered Part 25 in relation to all eligible superannuation entities and regulated exempt public sector superannuation schemes, made the following TFN approvals (the ISC TFN Approvals):
(a) Approval of Manner of Quoting Tax File Numbers to an Employer dated 19 June 1997, which was made under paragraph 299P(a) for the purposes of section 299A of the SIS Act;
(b) Approval of Manner of Requesting and Informing of Tax File Numbers dated 19 June 1997, which was made under and for the purposes of subsections 299E(1), 299F(1), 299G(1) and paragraph 299P(a) (for the purposes only of section 299D) of the SIS Act;
(c) Approval of Manner of Setting Out Tax File Numbers in an Application for Benefits dated 19 June 1997, which was made under and for the purposes of paragraph 299S(1)(b) of the SIS Act;
(d) Approval of Manner of Informing of Tax File Numbers dated 19 June 1997, which was made under and for the purposes of subsections 299M(2) and 299N(2) of the SIS Act.
The ISC TFN Approvals have become out of date as a result of recent amendments to superannuation and taxation legislation which implement the Government’s superannuation simplification policy initiatives from 1 July 2007. The consequences of quoting or not quoting a TFN have also been affected by the abolition of the superannuation surcharge with effect from 1 July 2005. Superannuation Industry (Supervision) Tax File Number approval No. 1 of 2007 revokes and replaces the ISC TFN Approvals to reflect these changed consequences of quoting or not quoting a TFN.
Under section 202DHA of the Income Tax Assessment Act 1936, individuals who complete a TFN Declaration for PAYG tax purposes on or after 1 July 2007 are taken to have authorised their employer to pass their TFN onto their superannuation provider. To promote consistency in the superannuation related information provided to individuals when they quote their TFN, the TFN Approval reflects the superannuation information included in the instructions accompanying the TFN Declaration.
2. Purpose of the instrument
The TFN Approval has been made for the purposes of section 299D, subsections 299E(1), 299G(1), 299M(2) and 299N(2) and paragraph 299S(1)(b) in Part 25A of the SIS Act.
Section 299D of the SIS Act provides that a person who is a beneficiary, or an applicant to become a beneficiary, of an eligible superannuation entity (a regulated superannuation fund or an approved deposit fund) or a regulated exempt public sector superannuation scheme may quote their TFN for superannuation purposes. The methods of quoting a TFN for superannuation purposes are set out in section 299P of the SIS Act. Paragraph (a) of section 299P provides that one of the methods of quoting is where a person informs another person in a manner approved by the Regulator. For these purposes, APRA is the Regulator, except where an eligible superannuation entity is an SMSF (see section 6 of the SIS Act).
Section 299E of the SIS Act provides that a trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme may at any time request an individual to quote their TFN for superannuation purposes. The request must be made in a manner approved by the Regulator. APRA is the Regulator, except in the application of the section to an eligible superannuation entity that is an SMSF.
Section 299G of the SIS Act requires that, where the trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme does not hold an individual’s TFN, the trustee must request the individual to quote their TFN for superannuation purposes within 30 days of the individual becoming a beneficiary of the fund or scheme. The request must be made in a manner approved by the Regulator. APRA is the Regulator, except where the eligible superannuation entity is an SMSF.
Section 299M of the SIS Act requires that, where an individual has quoted their TFN to the trustee of an eligible superannuation entity and the trustee subsequently transfers the member’s benefit to another superannuation provider (an eligible superannuation entity, a regulated exempt public sector scheme or an RSA provider), the trustee inform the superannuation provider of the member’s TFN at the time of the transfer and in the manner approved by the Regulator. This obligation does not apply where a member has requested in writing before the transfer of their benefit that their TFN not be given to another superannuation provider. APRA is the Regulator in relation to this provision, except where the fund is an SMSF.
Section 299N of the SIS Act allows a trustee of a regulated exempt public sector superannuation scheme, where an individual has quoted their TFN to the trustee and the trustee subsequently transfers the member’s benefit to another superannuation provider, to inform the superannuation provider of the member’s TFN at the time of the transfer and in the manner approved by the Regulator. A trustee of a regulated exempt public sector scheme is not permitted to inform another superannuation provider of a member’s TFN where the member has requested in writing before the transfer of their benefit that their TFN not be given to another superannuation provider. APRA is effectively the Regulator in relation to this provision, as it only applies to regulated exempt public sector superannuation schemes.
Section 299S of the SIS Act provides that an individual may, in a manner approved by APRA, quote their TFN in an application to the trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme for payment of a benefit. The approval power in this provision is expressly conferred on APRA, rather than “the Regulator”.
3. Operation of the instrument
The TFN Approval comes into force from the day after it is registered on the Federal Register of Legislative Instruments.
Paragraph 1 of the instrument fully revokes the ISC TFN approval made on 19 June 1997 under section 299S(1)(b), and revokes the other three ISC TFN Approvals except to the extent they apply to SMSFs regulated by the Commissioner of Taxation.
Paragraph 2 of the instrument approves, for the purposes of subsections 299E(1) and 299G(1), the manner in which a trustee of an eligible superannuation entity (other than an SMSF) or a regulated exempt public sector superannuation scheme is to make any request for a TFN from an individual. The manner, set out in paragraphs 1 to 5 of the Schedule, requires the trustee to advise that it is authorised under the SIS Act to collect the individual’s TFN, that the TFN will only be used for lawful purposes (which may change in the future as a result of legislative change) and that the trustee may disclose their TFN to another superannuation provider, when their benefits are being transferred, unless the individual requests in writing, before their benefits are transferred, that their TFN not be disclosed to another superannuation provider.
A trustee must inform an individual that, while it is not an offence not quote their TFN, the following advantages of quoting a TFN may not otherwise apply:
- their superannuation fund will be able to accept all types of contributions to their account/s;
- the tax on contributions to their superannuation account/s will not increase;
- other than the tax that may ordinarily apply, no additional tax will be deducted when they start drawing down their superannuation benefits; and
- it will make it much easier to trace different superannuation accounts in their name so that they receive all their superannuation benefits when they retire.
A trustee may provide the TFN information orally or in writing and a TFN may be quoted orally or in writing. The Schedule includes a form of words that a trustee may use but this form of words is not mandatory. A trustee is also able to provide information additional to that contained in the Schedule so long the additional information is not inconsistent with the information in the Schedule.
Where a telephone or electronic system of TFN collection allows members to respond to information previously provided, for example, in member statements, newsletters or electronic bulletins, trustees should be satisfied that the member has in fact been given the information required by the TFN approval.
Paragraph 3 of the instrument approves, for the purposes of section 299D, the manner for an individual to quote their TFN to the trustee of an eligible superannuation entity (other than an SMSF) or a regulated exempt public sector superannuation scheme. The manner is set out in paragraph 6 of the Schedule (which in turn refers paragraphs 1 to 5 of the Schedule as described above).
Paragraph 4 of the instrument approves, for the purposes of paragraph 299S(1)(b), the manner of an individual setting out their TFN where the individual makes an application to the trustee of an eligible superannuation entity (including an SMSF) or a regulated exempt public sector superannuation scheme for payment of a benefit. The manner is set out in paragraph 6 of the Schedule (which, in turn, requires the approach set out in paragraphs 1 to 5 of the Schedule as described above).
Paragraphs 5 and 6 of the instrument approve, for the purposes of subsections 299M(2) and 299N(2) respectively, the manner for a trustee to inform another superannuation provider of an individual’s TFN. The manner is set out in paragraphs 7 and 8 of the Schedule. Where a trustee provides another trustee with an individual’s TFN, the trustee must do so in writing (including by means of electronic transfer of information) but may subsequently give the TFN orally to clarify or complete a TFN given in writing. Also, when giving a TFN to another superannuation provider the trustee must give the superannuation provider all information in the possession of the trustee that could reasonably help the superannuation provider to locate or identify the individual and which the individual would reasonably expect to be disclosed. The trustee is not obliged to give the superannuation provider any information that the individual has requested the trustee not to divulge.
The TFN Approval does not approve a manner of an employee quoting their TFN to their employer for the purposes of section 299A. The reason for this is that the Commissioner for Taxation has exclusive administration of section 299A, which is in Division 1 of Part 25A (see section 6 of the SIS Act). The Commissioner of Taxation has separately made an approved form (as defined in section 388-50 of the Taxation Administration Act 1953), which operates as an approval under paragraph 299P of the SIS Act for the purposes of section 299A.
4. Consultation
In developing this instrument, APRA consulted the Australian Taxation Office on the superannuation information to be included with the TFN Declaration from 1 July 2007. APRA also consulted the Privacy Commissioner and provided industry associations representing superannuation providers with a draft instrument for comment. The industry associations did not recommend any material changes to the draft instrument; however, some minor changes to the drafting recommended by industry associations have been incorporated in the final instrument.