EXPLANATORY STATEMENT
Select Legislative Instrument 2007 No. 76
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Superannuation (Self Managed Superannuation Funds) Taxation Act 1987
Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999
Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1)
The Tax Laws Amendment (Simplified Superannuation) Act 2007 and related Acts give effect to the Simplified Superannuation reforms, as announced in the Government’s 5 September 2006 statement, A Plan to Simplify and Streamline Superannuation – Outcomes of Consultation. These reforms make superannuation easier to understand, improve incentives to work and save, and provide greater flexibility over how superannuation savings can be drawn down in retirement.
The initiatives include improving the regulation of self managed superannuation funds.
Subsection 22(1) of the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987 (SMSF Tax Act) provides that the Governor-General may make regulations, not inconsistent with the SMSF Tax Act, prescribing matters required or permitted by the SMSF Tax Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the SMSF Tax Act.
The Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999, specify a penalty amount of $10 per month for the late payment of a fund’s supervisory levy.
The purpose of the Regulations is to amend the Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999 in order to remove this late payment amount.
Details of the Regulations are set out in the Attachment A.
The SMSF Tax Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.
The Regulations commence on 1 July 2007.
The Regulations are legislative instruments for the purposes of the Legislative Instruments Act 2003.
The draft Regulations were made available on the Simpler Super website for public consultation.
ATTACHMENT A
Details of the Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1)
Regulation 1 specifies the name of the Regulations as the Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1).
Regulation 2 provides that the Regulations commence on 1 July 2007.
Regulation 3 provides that Schedule 1 amends the Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999 (Taxation Regulations).
Regulation 4 provides that the amendments made by the Regulations apply for the 2007-08 year of income and each subsequent income year.
Schedule 1 – Amendment relating to self managed superannuation funds
Regulation 5 of the Taxation Regulations currently specifies an amount of $10 per month as a penalty for the late payment of a self managed superannuation fund’s (SMSF) annual supervisory levy.
The new Regulations remove the amount of the late payment penalty.
The removal of the $10 late payment penalty is a consequence of amendments to the SMSF Tax Act. As part of the Government’s Simplified Superannuation reforms, the penalty for the late payment of an SMSF’s annual supervisory levy will be replaced by the general interest charge under the Taxation Administration Act 1953, consistent with the penalties for the late payment of other liabilities under the income tax laws.
Item 1 removes the $10 late payment amount by omitting regulation 5 of the Taxation Regulations.
Overview
The Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1) were enacted to amend the existing Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999, and were introduced to streamline and simplify the regulatory framework surrounding self-managed superannuation funds (SMSFs). These regulations were enacted by the Governor-General under the authority conferred by the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987. The primary objective of these regulations was to align the penalty structure for late payment of supervisory levies with the general interest charge under the Taxation Administration Act 1953, thereby ensuring consistency with the penalties applied to other income tax liabilities, and facilitating the overarching goal of simplifying the superannuation system as announced by the Government.
Scope and Application
The Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1) apply to self-managed superannuation funds and trustees of these funds in Australia. These Regulations are made under the authority of the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987, which allows for the creation of regulations necessary for the effective administration of superannuation laws. Specifically, the Regulations address the amendment of the penalty for late payment of the supervisory levy for self-managed superannuation funds. The changes introduced by these Regulations commenced on 1 July 2007 and are effective for the 2007-08 income year and subsequent years. The primary amendment involves the removal of a $10 per month penalty for late payment of the supervisory levy, which is replaced by the general interest charge under the Taxation Administration Act 1953. These Regulations have a national reach across Australia, applying to all self-managed superannuation funds and their trustees, irrespective of state or territory jurisdiction. The Regulations do not specify any exclusions or exemptions, and the changes are applied uniformly to all affected entities. The amendments are implemented through the subordinate instrument, and no additional thresholds are imposed for the application of these Regulations.
Key Provisions
The Superannuation (Self Managed Superannuation Funds) Taxation Amendment Regulations 2007 (No. 1) are primarily concerned with modifying the penalty structure for late payment of supervisory levies for self-managed superannuation funds (SMSF). Under section 22(1) of the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987 (SMSF Tax Act), the Governor-General has the authority to create regulations necessary for the implementation of the Act. Regulation 5 of the Superannuation (Self Managed Superannuation Funds) Taxation Regulations 1999 stipulated a penalty of $10 per month for late payments of an SMSF's supervisory levy. However, the new Regulations remove this specific penalty, aligning with the Simplified Superannuation reforms announced by the government in September 2006. Instead, late payments will now incur the general interest charge under the Taxation Administration Act 1953, which is consistent with penalties for other tax-related late payments.
The Regulations impose several obligations on trustees and members of SMSFs. Trustees must ensure that all supervisory levies are paid on time to avoid incurring the general interest charge, which will be calculated based on the standard interest rate for overdue tax debts. Trustees must also remain informed about the changes in the regulatory environment to comply with the new penalty structure. Members of SMSFs, who may include the trustees themselves, need to be aware of their responsibilities regarding the payment of these levies and the potential financial implications of late payments.
Breaching the new requirements can lead to several consequences. Firstly, late payment of supervisory levies will result in the general interest charge being applied, which can increase the financial burden on the fund. This charge compounds daily and can significantly escalate the amount owed if not settled promptly. Although the specific penalty for late payment has been removed, trustees must still adhere to the timely payment requirements to avoid these interest charges. Additionally, failure to comply with the new regulations could lead to administrative or legal actions by the Australian Taxation Office (ATO) to recover the unpaid levies and associated charges. The exact penalties and consequences for non-compliance will be determined based on the general interest charge rates and the specific circumstances of the late payment.