EXPLANATORY STATEMENT
Issued by authority of the Minister for Finance
Superannuation Act 2005
Tenth Amending Deed made under section 11 of the Superannuation Act 2005 to amend the Superannuation (PSSAP) Trust Deed and Rules.
On 29 June 2005 the Minister for Finance, for and on behalf of the Commonwealth, made a deed (the Trust Deed) under section 10 of the Superannuation Act 2005 (the 2005 Act) to, among other things, establish a superannuation scheme, to be known as the Public Sector Superannuation Accumulation Plan (PSSAP), and the PSSAP Fund from 1 July 2005. The Schedule to the Trust Deed includes rules for the administration of the PSSAP (the Rules).
The PSSAP is established for the benefit of most new Australian Government employees and statutory office holders. Commonwealth Superannuation Corporation (CSC) is the trustee for the PSSAP.
Section 11 of the 2005 Act provides that the Minister may amend the Trust Deed by signed instrument, subject to obtaining the consent of CSC to the amendment where necessary.
Tenth Amending Deed
The Minister amended the Rules by signed instrument. That instrument is called the Tenth Amending Deed in this Statement.
The purpose of the Tenth Amending Deed is to amend the Rules to make consequential changes to allow a person to be paid a lump sum amount from the PSSAP to pay their liability for any tax assessed under Division 293 of the Income Tax Assessment Act 1997 (Division 293 tax) and for their PSSAP benefit to be reduced accordingly.
The Tenth Amending Deed also amends the Rules to provide that the calculation of a superannuation contribution shortfall uses the relevant Superannuation Guarantee charge percentage.
Background information on the changes and the details of the Tenth Amending Deed are set out in Attachment A.
CSC Approval
Although section 11 of the 2005 Act allows the Minister to amend the PSSAP Trust Deed, section 32 of the 2005 Act requires CSC to consent to the amendments in most circumstances. CSC has consented to the amendments contained in the Tenth Amending Deed. However, CSC consent was not required for the amendments relating to employer contribution shortfalls.
Legislative Instruments Act 2003
The Tenth Amending Deed is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LIA). Although section 44 of the LIA exempts superannuation instruments from disallowance, the Tenth Amending Deed is subject to disallowance in accordance with section 11 of the 2005 Act.
Consultation
Section 17 of the LIA specifies that rule-makers should consult before making legislative instruments. CSC and ComSuper have been consulted on amendments contained in the Tenth Amending Deed.
Commencement
The amendments in the Tenth Amending Deed come into effect on the day after it is registered on the Federal Register of Legislative Instruments.
Statement of Compatibility with Human Rights
A Statement of Compatibility with Human Rights is at Attachment B.
ATTACHMENT A
BACKGROUND TO AND DETAILS OF THE TENTH AMENDING DEED
Commencement
Clause 1 specifies that the amendments to the Public Sector Superannuation Accumulation Plan (PSSAP) Rules made by the Tenth Amending Deed commence on the day after it is registered on the Federal Register of Legislative instruments.
Interpretation
2. Clause 2 indicates that, unless a contrary intention appears, a word or phrase in the Tenth Amending Deed has the same meaning that it has in the Trust Deed and the Rules.
Sustainable Superannuation Concessions
3. The ‘sustaining the superannuation contribution concession’ measure reduces the tax concession that individuals with adjusted incomes above $300,000 receive on their concessionally taxed superannuation contributions from 30 per cent to 15 per cent, excluding the Medicare levy (Division 293 tax).
4. This reduction was included in Schedule 3 to the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 which amended a number of Acts, including the Taxation Administration Act 1953 (TAA 1953) and the Income Tax Assessment Act 1997 (ITAA 97).
5. Where an individual incurs a Division 293 tax liability the Commissioner of Taxation (the Commissioner) must issue a release authority to the individual. Alternatively, if a Division 293 tax liability that is due and payable remains unpaid 120 days after the release authority is issued, the Commissioner may issue a release authority directly to the trustee of a superannuation fund that holds a defined contribution interest for the individual.
6. If the trustee of a defined contribution scheme, such as the PSSAP, receives a release authority from an individual or the Commissioner, the trustee is required to release a lump sum amount for the purpose of paying all or part of the individual’s Division 293 tax liability.
7. The amendments made by the Tenth Amending Deed reflect the obligation on the Commonwealth Superannuation Corporation (CSC) as trustee of the PSSAP to release a lump sum amount when presented with a release authority. Where this occurs CSC will reduce the PSSAP member’s benefit to reflect the amount that has been released.
8. Subclause 3.1 amends the definition of release authority contained in Rule 1.2.1 of the Trust Deed. The definition is amended to include a release authority issued by the Commissioner of Taxation under item 1 and 2 of the table in subsection 135-10(1) of Schedule 1 to the TAA 1953.
9. The note inserted by Subclause 3.2 immediately after Rule 3.1.11A explains that where a payment in respect of a release authority issued under item 1 or 2 of the table in subsection 135-10(1) of Schedule 1 to the TAA 1953 is made, Rule 3.1.11A is subject to Division 135 of Schedule 1 to that Act, which sets out the rules about release authorities and allows money to be released from a superannuation plan.
- Item 1 relates to the Commissioner of Taxation’s obligation to issue a release authority where an amount of assessed Division 293 tax for an income year is due and payable.
- Item 2 relates to the Commissioner of Taxation’s obligation to issue a release authority where an amount of assessed Division 293 tax in respect of a defined benefit interest for an income year is deferred for payment. Individuals may request that a release amount be paid from a defined contribution interest, including an interest held in PSSAP, by submitting the release authority to the trustee of that fund.
Employer Contribution Shortfalls
10. Rule 2.2.9 requires each designated employer, each quarter, to inform CSC and the member of the amount and percentage of basic and additional employer contributions in respect of an ordinary employer-sponsored member. Rule 2.2.10 requires notification of any employer contribution shortfall to CSC and the member, calculating a shortfall to be the amount by which the amount reported under Rule 2.2.9 falls short of 9 per cent.
11. Subclause 4.1 amends Rule 2.2.10 to update the superannuation charge percentage used for calculating an employer contribution shortfall by referencing the table at subsection 19(2) of the Superannuation Guarantee (Administration) Act 1992. This will ensure that the percentage used for the calculation of the shortfall will increase in line with the increase in the superannuation guarantee charge percentage.
ATTACHMENT B