Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Superannuation Legislation Amendment (Early Release of Superannuation) Bill 2011

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2010-2011

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Superannuation LEGISLATION AMENDMENT (Early release of superannuation) BILL 2011

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the Deputy Prime Minister and

Treasurer, the Hon Wayne Swan MP)



T able of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Administration of early release of superannuation on compassionate grounds................................................................................................ 5

Chapter 2               Amendment of the Australian Prudential Regulation Authority Act 1998           11

Index................................................................................................................. 15



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

APRA

Australian Prudential Regulation Authority

APRA Act

Australian Prudential Regulation Authority Act 1998

ASIC

Australian Securities and Investments Commission

DHS

Department of Human Services

Medicare Act

Human Services (Medicare) Act 1973

RSA Act

Retirement Savings Accounts Act 1997

RSA Regulations

Retirement Savings Accounts Regulations 1997

SIS Act

Superannuation Industry (Supervision) Act 1993

SIS Regulations

Superannuation Industry (Supervision) Regulations 1994



Administration of early release of superannuation on compassionate grounds

Part 1 of Schedule 1 to this Bill amends the Retirement Savings Accounts Act 1997 and the Superannuation Industry (Supervision) Act 1993 to facilitate the transfer of the administration of the early release of superannuation on compassionate grounds from the Australian Prudential Regulation Authority to the Chief Executive Medicare.

Part 3 of Schedule 1 to this Bill includes application and transitional provisions for these amendments.

Date of effect :   These amendments commence on a single day to be fixed by Proclamation.  However, if any of the provision(s) do not commence within the period of six months beginning on the day the Act receives the Royal Assent, they commence on the day after the end of that period.

Financial impact:   These amendments have no financial impact.

Compliance cost impact:   Low.  There are no changes to the criteria for early release of superannuation on compassionate grounds.

Amendment of the Australian Prudential Regulation Authority Act 1998

Part 2 of Schedule 1 to this Bill amends section 50 of the Australian Prudential Regulation Authority Act 1998 to include the costs of the administration of the early release of superannuation on compassionate grounds by the Department of Human Services as one of the costs covered by the determination to be made by the Minister, for each financial year, of the amount of the levy money payable to the Commonwealth.

Part 3 of Schedule 1 to this Bill includes the application provision for these amendments.

Date of effect These amendments commence on a single day to be fixed by proclamation.  However, if any of the provision(s) do not commence within the period of six months beginning on the day the Act receives the Royal Assent, they commence on the day after the end of that period.

Financial impact :  These amendments have no financial impact.

Compliance cost impact :  Low.



C hapter 1     

Administration of early release of superannuation on compassionate grounds

Outline of chapter

1.1                   Part 1 of Schedule 1 to this Bill contains amendments to the Retirement Savings Accounts Act 1997 (RSA Act) and the Superannuation Industry (Supervision) Act 1993 (SIS Act) to facilitate the transfer of the administration of the early release of benefits in a retirement savings account or superannuation benefits in an APRA-regulated entity on compassionate grounds from the Australian Prudential Regulation Authority (APRA) to the Chief Executive Medicare.  Similarly, the general administration of the early release of superannuation benefits in a self managed superannuation fund on compassionate grounds will be transferred from the Commissioner of Taxation to the Chief Executive Medicare.

Context of amendments

1.2                   The purpose of superannuation is to provide benefits for members of superannuation funds (and holders of retirement savings accounts) on retirement.  A member’s preserved superannuation benefits are generally only released prior to reaching their preservation age on death or in strictly limited circumstances such as compassionate grounds and financial hardship.

1.3                   The circumstances for early release of superannuation on compassionate grounds are set out in regulation 6.19A of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) and regulation 4.22A of the Retirement Savings Accounts Regulations 1997 (RSA Regulations).  These circumstances cover expenses in respect of medical treatment, medical transport, modifications necessary for the family home or motor vehicle due to severe disability, palliative care and funeral expenses.  Funds may also be released to prevent the foreclosure of a mortgage or exercise of a power of sale over the member’s principal place of residence.  This Bill does not contain changes to the criteria for early release of superannuation on compassionate grounds.

1.4                   Early release of superannuation on compassionate grounds is currently administered by APRA and the Commissioner of Taxation.  The administration of early release of superannuation does not fit well with APRA’s role as prudential regulator of the Australian financial services industry or the Commissioner’s role in the general administration of the tax system, and the function would be more appropriately administered by an agency that has other elements of income support and an efficient customer support infrastructure. 

1.5                   In December 2009, the Australian Government announced the development of a new service delivery approach that would significantly improve the efficiency and effectiveness of service delivery to the Australian people.  In line with the new service delivery approach, the Department of Human Services (DHS) is the agency best placed to undertake the administration of early release of superannuation.

1.6                   APRA and Medicare Australia entered into a service delivery agreement for Medicare Australia to carry out the day-to-day functions in relation to the administration of early release of superannuation in APRA-regulated superannuation entities from 3 February 2011 under delegation from APRA.  At the same time, the day-to-day functions in relation to the administration of early release of superannuation in self managed superannuation funds under delegation from the Commissioner of Taxation was transferred from APRA to Medicare Australia.  The functions of Medicare Australia were integrated into DHS upon the commencement of the Human Services Legislation Amendment Act 2011 on 1 July 2011, and DHS assumed Medicare Australia’s obligations under the service delivery agreement from that date.

Summary of new law

1.7                   The amendments in Part 1 of Schedule 1 provide for the Chief Executive Medicare to have responsibility under the RSA Act and the SIS Act for the general administration of regulations relating to the making of determinations in respect of the release of superannuation benefits on compassionate grounds.  These amendments will transfer the administration of early release of superannuation from APRA and the Commissioner of Taxation to the Chief Executive Medicare.  The function will be delivered by departmental employees of DHS.

1.8                   Part 3 of Schedule 1 sets out the application and transitional provisions for the amendments in Part 1 of Schedule 1.

Comparison of key features of new law and current law

New law

Current law

The Chief Executive Medicare has general administration of regulations made under section 38 of the RSA Act that relate to making determinations that an amount of benefits in a retirement savings account may be released on compassionate grounds .

APRA has general administration of regulations made under section 38 of the RSA Act that relate to making determinations that an amount of benefits in a retirement savings account may be released on compassionate grounds .

The Chief Executive Medicare has general administration of regulations made under Part 3 of the SIS Act that relate to making determinations that an amount of benefits in an APRA-regulated superannuation entity may be released on compassionate grounds .

APRA has general administration of regulations made under Part 3 of the SIS Act that relate to making determinations that an amount of benefits in an APRA-regulated superannuation entity may be released on compassionate grounds .

The Chief Executive Medicare has general administration of regulations made under Part 3 of the SIS Act that relate to making determinations that an amount of benefits in a self managed superannuation fund may be released on compassionate grounds .

The Commissioner of Taxation has general administration of regulations made under Part 3 of the SIS Act that relate to making determinations that an amount of benefits in a self managed superannuation fund may be released on compassionate grounds .

Detailed explanation of new law

Amendments to the RSA Act

1.9                   The object of the RSA Act is to make provision for the prudent management of retirement savings accounts and for their supervision. Paragraph 3(1)(b) of the RSA Act presently provides that APRA has general administration of sections 37 to 39 and section 49 of the RSA Act to the extent that it is not conferred on the Australian Securities and Investments Commission (ASIC) by paragraph 3(1)(d).

1.10               Paragraph 3(1)(b) will be amended such that APRA has general administration of the stated provisions to the extent it is not conferred on either the Chief Executive Medicare (by new paragraph 3(1)(ba)) or ASIC (by paragraph 3(1)(d)).  Schedule 1 inserts a new paragraph 3(1)(ba) to provide that the Chief Executive Medicare has the general administration of regulations made under section 38 of the RSA Act to the extent that they relate to making determinations that an amount of benefits in a retirement savings account may be released on compassionate grounds.  [Schedule 1, item 1, paragraphs 3(1)(b) and (ba)]

1.11               A definition of Chief Executive Medicare is also inserted into the RSA Act, providing the term with the same meaning as in the Human Services (Medicare) Act 1973 (Medicare Act).  [Schedule 1, item 2, section 16]

1.12               Section 16 of the RSA Act presently defines Regulator to mean APRA or ASIC if the provision in which it occurs is, or is being applied for the purposes of, a provision that is administered by APRA or ASIC respectively.  The definition will be amended to include the Chief Executive Medicare, if the provision in which it occurs is, or is being applied for the purposes of, a provision that is administered by the Chief Executive Medicare under new paragraph 3(1)(ba) of the RSA Act.  [Schedule 1, item 3, section 16]

1.13               Section 168 of the RSA Act provides for the power of the Regulator to intervene in any proceeding relating to a matter arising under the RSA Act.  A new subsection 168(4) is being inserted to clarify that a reference in this section to the Regulator does not include the Chief Executive Medicare as this power is not relevant to the administration of the function.  [Schedule 1, item 4, subsection 168(4)]

1.14               Part 15 of the RSA Act provides for the power of the Regulator to grant exemptions from, and make modifications to, certain provisions in the RSA Act and RSA Regulations.  A new subsection 173(2) is being inserted to clarify that a reference in Part 15 to the Regulator does not include the Chief Executive Medicare as this power is not relevant to the administration of the function.  [Schedule 1, items 5 and 6, section 173]

1.15               A new section 198 is inserted into the RSA Act to expressly acknowledge that the early release of benefits function is an additional function of the Chief Executive Medicare.  [Schedule 1, item 7, section 198]

Amendments to the SIS Act

1.16               The object of the SIS Act is to make provision for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision.  The amendments to the SIS Act generally mirror those in the RSA Act. 

1.17               Paragraph 6(1)(b) of the SIS Act presently provides that APRA has general administration of Parts 3 and 6 (other than section 60A), and section 105 of the SIS Act to the extent that it is not conferred on ASIC by paragraph 6(1)(d), or on the Commissioner of Taxation by paragraph 6(1)(f).

1.18               Paragraph 6(1)(b) will be amended such that APRA has general administration of the stated provisions to the extent it is not conferred on the Chief Executive Medicare (by new paragraph 6(1)(ba)), ASIC (by paragraph 6(1)(d)), or the Commissioner of Taxation (by paragraph 6(1)(f)).  Schedule 1 inserts a new paragraph 6(1)(ba) to provide that the Chief Executive Medicare has the general administration of regulations made under Part 3 of the SIS Act to the extent that they relate to making determinations that an amount of benefits in a superannuation entity may be released on compassionate grounds.  [Schedule 1, item 8, paragraphs 6(1)(b) and (ba)]

1.19               Paragraph 6(1)(f) of the SIS Act currently provides that the Commissioner of Taxation has general administration of Parts 3 and 6 (other than section 60A), and section 105 of the SIS Act to the extent they relate to self managed superannuation funds, and to the extent that administration is not conferred on ASIC by paragraph 6(1)(d).

1.20               Paragraph 6(1)(f) will be amended such that the Commissioner of Taxation has general administration of the stated provisions to the extent they relate to self managed superannuation funds, and to the extent administration is not conferred on ASIC (by paragraph 6(1)(d)), or on the Chief Executive Medicare (by new paragraph 6(1)(ba)).  [Schedule 1, item 9, paragraph 6(1)(f)]

1.21               A definition of Chief Executive Medicare is also inserted into the SIS Act, providing the term with the same meaning as in the Medicare Act.  [Schedule 1, item 10, subsection 10(1)]

1.22               Subsection 10(1) of the SIS Act presently defines Regulator to mean APRA, ASIC, or the Commissioner of Taxation if the provision in which it occurs is, or is being applied for the purposes of, a provision that is administered by APRA, ASIC or the Commissioner of Taxation respectively.  The definition will be amended to include the Chief Executive Medicare, if the provision in which it occurs is, or is being applied for the purposes of, a provision that is administered by the Chief Executive Medicare under new paragraph 6(1)(ba) of the SIS Act.  [Schedule 1, item 11, subsection 10(1)]

1.23               Section 320 of the SIS Act provides for the power of the Regulator to intervene in any proceeding relating to a matter arising under the SIS Act.  A new subsection 320(4) is being inserted to clarify that a reference in this section to the Regulator does not include the Chief Executive Medicare as this power is not relevant to the administration of the function.  [Schedule 1, item 12, subsection 320(4)]

1.24               Part 29 of the SIS Act provides for the power of the Regulator to grant exemptions from, and make modifications to, certain provisions in the SIS Act and SIS Regulations.  A new subsection 327(2) is being inserted to clarify that a reference in Part 29 to the Regulator does not include the Chief Executive Medicare as this power is not relevant to the administration of the function.  [Schedule 1, items 14 and 15, section 327]

1.25               A new section 351 is inserted into the SIS Act to expressly acknowledge that the early release of benefits function is an additional function of the Chief Executive Medicare.  [Schedule 1, item 16, section 351]

Application and transitional provisions

1.26               Part 3 of Schedule 1 to the Bill sets out the application and transition provisions of the Bill.

1.27               Any application for a determination for the release of benefits on compassionate grounds which is made after Schedule 1 commences will be subject to the amendments made by Part 1 of Schedule 1.  [Schedule 1, item 20]

1.28               An application for a determination for the release of benefits on compassionate grounds which is made to APRA before the commencement of Schedule 1, and in respect of which a determination has not been made before Schedule 1 commences, is taken to have been made to the Chief Executive Medicare.  [Schedule 1, item 21]

Minor amendment

1.29               A minor statute law revision is also being made to section 326 of the SIS Act.  The text in this section is numbered “(1)” however the section is no longer divided into subsections.  This amendment removes the redundant subsection number “(1)”. [Schedule 1, item 13, section 326 ]



C hapter 2     

Amendment of the Australian Prudential Regulation Authority Act 1998

Outline of chapter

2.1                    Part 2 of Schedule 1 to this Bill contains amendments to the Australian Prudential Regulation Authority Act 1998 (APRA Act) to include the costs of the administration of the early release of superannuation on compassionate grounds by DHS as one of the costs covered by the determination to be made by the Minister, for each financial year, of the amount of the levy money collected by APRA from the superannuation industry which is payable to the Commonwealth.

Context of amendments

2.2                    Under the Financial Institutions Supervisory Levies Collection Act 1998 , APRA is presently funded to administer the function of making determinations about the release of benefits from a retirement savings account or a superannuation entity on compassionate grounds through levies paid by retirement savings account providers and APRA-regulated superannuation entities.

2.3                    Under subsection 50(1) of the APRA Act, the Minister is to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth, in respect of levy (or each class of levy) for that financial year.  The amount specified in the determination is to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions.

2.4                    With the transfer of the administration of the early release of superannuation benefits on compassionate grounds from APRA and the Commissioner of Taxation to the Chief Executive Medicare, the costs of administering this function will be borne directly by the Commonwealth.  It is appropriate that the costs to the Chief Executive Medicare of undertaking this function in relation to retirement savings account providers and APRA-regulated superannuation entities continue to be recovered from the industry.  This amendment will enable the funds raised for this function to go to the Commonwealth rather than to APRA.

Summary of new law

Amendments to the APRA Act

2.5                    The amendments in Part 2 of Schedule 1 provide that the Minister’s determination under subsection 50(1) of the APRA Act will include an amount of levy money to also cover the costs of administering the function of making determinations about the release of benefits on compassionate grounds from a retirement savings account or APRA-regulated superannuation entity.

Comparison of key features of new law and current law

New law

Current law

The Minister to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth in respect of levy (or each class of levy) for that financial year, to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions and administering the function of making determinations about the release of benefits in a retirement savings account or a superannuation entity on compassionate grounds.

The Minister to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth in respect of levy (or each class of levy) for that financial year, to cover the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions.

Detailed explanation of new law

2.6                    Subsection 50(1) of the APRA Act presently provides for the Minister to make, for each financial year, a determination specifying the amount of levy money payable to the Commonwealth in respect of levy (or each class of levy) for that financial year, to set out the costs to the Commonwealth of providing market integrity and consumer protection functions for prudentially regulated institutions.

2.7                    Subsection 50(1) will be amended such that the Minister’s determination will also cover the costs to the Commonwealth of administering the function of making determinations about the release of benefits in a retirement savings account or a superannuation entity on compassionate grounds.  A note is inserted at the end of subsection 50(1) to explain that regulations made under the SIS Act and RSA Act provide for the making of determinations about the release of benefits on compassionate grounds.  [Schedule 1, item 17, subsection 50(1)]

2.8                    Definitions of retirement savings account and superannuation entity are being inserted into subsection 50(6) as a consequence of the amendments to subsection 50(1).  [Schedule 1, items 18 and 19, subsection 50(6)]

Application provision

2.9                    The amendments to the APRA Act apply to the financial year in which Schedule 1 commences, and any subsequent financial year.  [Schedule 1, item 22]



Part 1 of Schedule 1:  Administration of early release of superannuation on compassionate grounds

Bill reference

Paragraph number

Item 1, paragraph 3(1)(b) of the RSA Act

1.10

Item 2, section 16 of the RSA Act

1.11

Item 3, section 16 (at the end of the definition of Regulator ) of the RSA Act

1.12

Item 4, at the end of section 168 of the RSA Act

1.13

Item 5, section 173 of the RSA Act

1.14

Item 6, at the end of section 173 of the RSA Act

1.14

Item 7, after section 197 of the RSA Act

1.15

Item 8, paragraph 6(1)(b) of the SIS Act

1.18

Item 9, after subparagraph 6(1)(f)(i) of the SIS Act

1.20

Item 10, subsection 10(1) of the SIS Act

1.21

Item 11, subsection 10(1) (at the end of the definition of Regulator ) of the SIS Act

1.22

Item 12, at the end of section 320

1.23

Item 13, subsection 326(1)

1.29

Item 14, section 327

1.24

Item 15, at the end of section 327

1.24

Item 16, after section 350

1.25

Part 2 of Schedule 2:  Amendment of the Australian Prudential Regulation Authority Act 1998

Bill reference

Paragraph number

Item 17, paragraphs 50(1)(a) and (b) of the APRA Act

2.7

Item 18, subsection 50(6) of the APRA Act

2.8

Item 19, subsection 50(6) of the APRA Act

2.8

Part 3 of Schedule 1:  Application and transitional provisions

Bill reference

Paragraph number

Item 20, Application provision - determination about release on compassionate grounds

1.27

Item 21, Transitional - pending applications for determinations

1.28

Item 22, Application provision - determination about amount of levy money to cover Commonwealth costs

2.9