EXPLANATORY STATEMENT
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
SUBJECT: TWELFTH AMENDING DEED TO THE DEED TO ESTABLISH AN OCCUPATIONAL SUPERANNUATION SCHEME FOR COMMONWEALTH EMPLOYEES AND CERTAIN OTHER PERSONS PURSUANT TO SECTION 5 OF THE SUPERANNUATION ACT 1990
Authority
The Minister for Finance, for and on behalf of the Commonwealth, established an occupational superannuation scheme to provide benefits for certain of the Commonwealth's employees and for certain other people by Deed dated 21 June 1990 under section 4 of the Superannuation Act 1990. In this statement the Deed is called “the Trust Deed”. The occupational superannuation scheme is known as the Public Sector Superannuation Scheme (PSS).
2. Section 5 of the Superannuation Act 1990 provides that the Minister for Finance and Administration may amend, subject to obtaining the PSS Board's consent to the amendment, the Trust Deed by signed instrument.
3. The Minister has amended the Trust Deed and the Rules for the Administration of the Superannuation Scheme set out in the Schedule to the Trust Deed by the following signed instruments:
Deed | Date |
First Amending Deed | 21 June 1990 |
Second Amending Deed | 1 July 1991 |
Third Amending Deed | 30 June 1992 |
Fourth Amending Deed | 21 December 1992 |
Fifth Amending Deed | 16 June 1993 |
Sixth Amending Deed | 24 January 1994 |
Seventh Amending Deed | 7 March 1994 |
Eighth Amending Deed | 28 June 1994 |
Ninth Amending Deed | 22 June 1995 |
Tenth Amending Deed | 29 January 1996 |
Eleventh Amending Deed | 10 December 1996 |
4. On 25 March 1998 the Minister for Finance and Administration amended the Trust Deed and the Rules for the Administration of the Public Sector Superannuation Scheme set out in the Schedule to the Trust Deed by signed instrument. That instrument is called the Twelfth Amending Deed in this statement. The PSS Board had consented to these amendments.
Date of Effect of Amending Deed
5. Clause 1 specifies that the Twelfth Amending Deed commences on gazettal.
AMENDMENT TO THE TRUST DEED
6. Section 47 of the Superannuation Act 1990 gives the Minister for Finance and Administration the power to delegate his powers under the Act and regulations. However, the Trust Deed does not allow the Minister to delegate his powers under the Deed and therefore under the PSS Rules.
7. Subclause 2.1 replaces subclause 1.3 so that the Minister can delegate his powers under the Trust Deed to a person as defined in clause 13. Subclause 2.2 inserts clause 13, detailing to whom the Minister can delegate his powers.
Amendments to the Rules - OVERVIEW
8. Most of the amendments to the PSS Rules, no matter how small, have been implemented by replacement of the relevant Rule, rather than by way of intricate description of insertions and/or deletions. This approach has been taken to improve the readability of the Amending Deed.
9. The most important changes included in the Twelfth Amending Deed are outlined below.
Retirement Savings Accounts
10. Since 1 July 1997 banks, building societies, credit unions and life insurance companies have been able to provide superannuation without a trust structure in the form of Retirement Savings Accounts (RSAs). These RSAs are required to be capital guaranteed, where the balance can not be reduced by crediting negative interest, or contributions or accumulated earnings of a policy can not be reduced by negative investment returns. The RSA account is fully portable, owned and controlled by the member, and subject to the retirement income standards applying to other superannuation products, including preservation and disclosure. Employees are able to transfer amounts out of RSAs anytime subject to the requirements of the fund to minimise liquidity risks and ensure orderly administration arrangements.
11. RSAs are aimed at people with small amounts of superannuation, those wishing to amalgamate several small superannuation accounts, and those nearing retirement who wish to minimise the market risk on their superannuation savings.
12. The Twelfth Amending Deed amends the PSS Rules to allow roll-overs provided for in the Rules to be made to RSAs.
Lost Members and Unclaimed Monies
13. Since 1 July 1997 regulated superannuation funds have had to keep a lost members register and supply that information to the Commissioner of Taxation in six month intervals (starting 31 October 1997). At the same time all unclaimed benefits for those lost members having reached pension age (age 65) must be transferred to the Commissioner of Taxation. This is subject to any relevant State/Territory unclaimed moneys legislation requiring these amounts to be paid to the State/Territory. The Twelfth Amending Deed amends the PSS Rules to reflect the changed treatment of unclaimed monies under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Application of the Superannuation Contributions Tax
14. The Twelfth Amending Deed inserts a new rule to ensure that the Board has the power to reduce members’ benefits in order to comply with the requirements of the Superannuation Contributions Tax (Assessment and Collection) Act 1997. The amount of the reduction, as determined by the Board, is called the Surcharge Deduction Amount.
15. The Deed also inserts new rules to specify the requirements that the Board must comply with when determining the Surcharge Deduction Amount. These requirements mirror those that are proposed for the Superannuation Act 1976.
AMENDMENTS TO THE RULES - DETAILED DESCRIPTION
Interpretation
16. Division 2 of Part 1 of the Rules defines special terms and phrases and some concepts used in the Rules.
17. Subclauses 3.1 and 3.2 replace the definitions of “eligible termination payment” and “life assurance company” respectively so that the references in those definitions to the Income Tax Assessment Act 1936 are updated to refer to that Act or the Income Tax Assessment Act 1997.
18. The definition of “roll-over” in Rule 1.2.1 currently spells out the different kinds of roll-over vehicles, which means that it must be amended whenever a new vehicle is introduced. Subclause 3.4 replaces this detailed definition with a definition that refers to a payment by the Board as an eligible termination payment within the superannuation system. The term “superannuation system” is defined in regulations under the SIS Act, and includes regulated superannuation funds, approved deposit funds, annuities, deferred annuities and RSAs.
19. Subclause 3.3 adds the definition of “Retirement Savings Account”.
Calculation of Benefits
20. Part 5 of the Rules sets out how regular and casual members' benefit are calculated in various circumstances, including resignation, retirement and invalidity retirement.
21. Subclauses 3.5 and 3.6 replace rules 5.2.24 and 5.3.24 respectively so that the incorrect references to section 33D of the Superannuation Act 1990 in these rules are changed to refer to section 33E instead.
22. Subclauses 3.7, 3.8 and 3.9 replace subparagraph (B)(ii) in rules 5.7.2, 5.7.3 and 5.7.6 respectively so that the references in those subparagraphs to the Income Tax Assessment Act 1936 are updated to refer to that Act or the Income Tax Assessment Act 1997.
Benefit Options
23. Part 6 of the Rules sets out the forms and conditions under which members' benefits can be taken. The forms and conditions vary according to the reason membership ceased.
Benefits on Resignation
24. Division 1 of Part 6 details the benefit options available on resignation.
25. Subclauses 3.10 and 3.11 amend rules 6.1.1 and 6.1.3 which were introduced to allow members to access a lump sum if the amount was less than the $500 minimum preservation threshold as specified in the SIS Act. That threshold has now been replaced with a $200 threshold, which is reflected in the amended Rules.
Preserved Benefits
26. Part 8 of the Rules sets out the conditions for access to preserved benefits.
Access to full amount of preserved benefits
27. Division 1 of Part 8 sets out the circumstances when the full amount of preserved benefits may be accessed by former PSS members.
28. Subclause 3.12 replaces paragraph 8.1.1(e) which currently allows former PSS members to access their preserved benefits if they leave Australia permanently. In order to comply with recent changes to the regulations under the SIS Act, the new paragraph 8.1.1(e) prevents former PSS members from accessing their preserved benefits unless they make a written request to the Board before 1 July 1998 and intend to leave Australia permanently before 1 July 1998.
Early access to part of a preserved benefit
29. Division 3 of Part 8 sets out the circumstances when part of preserved benefits may be accessed by former PSS members.
30. Rule 8.3.3 currently allows members to access their accumulated productivity contributions if the Insurance and Superannuation Commission approves the release on compassionate grounds or the grounds of severe financial hardship.
31. Regulations under the SIS Act have been amended with effect from 1 July 1997 to provide for new tests for access to preserved benefits on severe hardship or compassionate grounds. Transitional provisions apply to persons who apply for release of benefits before 1 July 1997.
32. Subclause 3.13 replaces Rule 8.3.3 so that transitional provisions apply to those preserved benefit members who have applied to the Insurance and Superannuation Commissioner before 1 July 1997 for the early release of their preserved benefit on compassionate grounds or on the grounds of severe financial hardship, whether or not approval has been given before that date.
33. Subclause 3.14 inserts Rule 8.3.5 so that the Board, after 30 June 1997, can approve the early release of all or part of the preserved benefit, on the grounds of severe financial hardship for those members who meet the new tests. The scheme's internal review mechanisms are available to a person affected by a decision under Rule 8.3.5 and the person would be able to appeal to the Superannuation Complaints Tribunal.
34. Subclause 3.14 inserts Rule 8.3.6 so that the Insurance and Superannuation Commissioner, after 30 June 1997, can approve the early release of all or part of the preserved benefit on compassionate grounds.
35. Subclause 3.14 inserts Rule 8.3.7 to provide former members, who have already obtained access to part of their preserved benefit under rule 8.3.3, 8.3.4, 8.3.5 or 8.3.6, with the opportunity to obtain further payments under Rule 8.3.5 or 8.3.6, provided that any further payments have been approved by the Insurance and Superannuation Commissioner, or the Board, as the case may be.
General Benefit Provisions
36. Part 12 of the Rules details general provisions in relation to benefits such as in Division 2 that sets out the Board's powers in relation to benefits.
37. Subclause 3.15 replaces Rule 12.2.4 to ensure that the administration of lost members and unclaimed monies are consistent with the SIS requirements that will come in force 1 July 1997. New Rule 12.2.4 provides that the Board must pay any unclaimed money as defined under the SIS Act to the Commissioner of Taxation.
38. Subclause 3.16 replaces Rule 12.2.6 so that the reference to the Income Tax Assessment Act 1936 is updated to Income Tax Assessment Act 1997.
39. Subclause 3.17 inserts new rule 12.2.7 to ensure that the Board has the power to reduce members’ benefits in order to comply with the requirements of the Superannuation Contributions Tax (Assessment and Collection) Act 1997. The amount of the reduction, as determined by the Board, is called the Surcharge Deduction Amount. The scheme's internal review mechanisms are available to a person affected by a decision under Rule 12.2.7 and the person would be able to appeal to the Superannuation Complaints Tribunal.
40. Subclause 3.17 inserts new rules 12.2.8, 12.2.9 and 12.2.10 to specify the requirements that the Board must comply with when determining the Surcharge Deduction Amount. These requirements mirror those that are proposed for the Superannuation Act 1976.