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Superannuation Legislation Amendment Bill 1998

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1998

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

SUPERANNUATION LEGISLATION AMENDMENT BILL 1998

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

(Circulated by authority of the Minister for Financial Services and Regulation, The Hon Joe Hockey MP)

18675



SUPERANNUATION LEGISLATION AMENDMENT BILL 1998

 

GENERAL OUTLINE

This Bill will make various miscellaneous amendments to the Bankruptcy Act 1966 (the ‘Bankruptcy Act’), the Superannuation Industry (Supervision) Act 1993 (the ‘SIS Act’) and the Superannuation (Resolution of Complaints) Act 1993 (the ‘SRC Act’) to improve the efficiency and effectiveness of the superannuation supervisory framework.

 

Summary of major Bankruptcy Act amendments

The Bill will amend the Bankruptcy Act to ensure members of ‘exempt public sector superannuation schemes’ within the meaning of the SIS Act are afforded the same protection in respect of their superannuation entitlements as members of regulated superannuation funds from creditors.

 

Summary of major SIS Act amendments

The Bill will amend the SIS Act to:

-      include various arrangements outlined in the Bankruptcy Act 1966 in the definition of ‘insolvent under administration’ in the SIS Act, where obligations under those arrangements have not yet been fulfilled;

-      insert a definition of ‘invest’ which means: to apply assets or make a contract for the purposes of gaining interest, income or profit;

-      amend the definition of ‘governing rules’ to provide that they may be written or unwritten;

-      permit a trustee of a superannuation fund to amend the governing rules of the fund to enable the acceptance of binding death benefit nominations from members under section 59 of the SIS Act;

-      apply the ‘in-house asset’ rules to individual sub-funds, as if these sub-funds were funds in their own right under section 69 of the SIS Act;

-      treat unrelated groups of associated employer-sponsors separately for the purposes of the ‘in-house asset’ rules under section 72 of the SIS Act;

-      insert a new division in Part 8 of the SIS Act which applies alternative ‘in-house asset’ rules to certain defined benefit funds with large accumulated surpluses;

-      improve the operation of the gazettal requirements for orders disqualifying a person from being an approved auditor under section 131 of the SIS Act;

-      remove an anomaly with the operation of the trust account provisions under section 168 and section 169 of the SIS Act which arises because the applicant in relation to a superannuation interest is not necessarily the person on whose behalf the money is received by the trustee;

-      clarify to whom contributions should be refunded when a member withdraws from a public offer fund during the 14 day cooling-off period in section 171 of the SIS Act;

-      extend, from 5 June 1997 to 5 June 1998, the transitional period during which tax file numbers (TFNs) already quoted for superannuation purposes may be taken to have also been quoted for surcharge purposes;

-      enable the Insurance and Superannuation Commissioner (now the Australian Prudential Regulation Authority (APRA)) to revoke an approval of a trustee without Ministerial approval where the revocation is requested by the trustee;

-      enable superannuation benefits to be recovered under the Australian Federal Police Act 1979 and the Crimes (Superannuation Benefits) Act 1989 ;

-      improve the operation of the Insurance and Superannuation Commissioner’s (now APRA’s and the Australian Securities and Investments Commission’s (ASIC’s) monitoring and investigation powers including amendments to provide more flexibility to the Commissioner when issuing a notice to freeze assets under Part 25 of the SIS Act; and

-      remove the right of a body corporate to claim privilege against self-incrimination in respect of notices issued under the SIS Act (in line with common law) in section 287 of the SIS Act.

 

Summary of major SRC Act amendments

The Bill will amend the SRC Act to:

-      enable the Superannuation Complaints Tribunal to be constituted by one, two or three members and to expressly confer responsibility for the operation and administration of the Tribunal on the Tribunal Chairperson;

-      ensure that section 14A applies to complaints about trustees decisions to admit persons to life policies made prior to 12 December 1995, and to apply remedies under section 37A(4) to complaints under section 14A; and

-      clarify the scope of a trustee, insurer or RSA provider’s duty to notify potential persons who may have an interest in the payment of death benefits and to reduce the penalty for failure to provide notification.

 

FINANCIAL IMPACT STATEMENT

The financial impact of this Bill is considered to be negligible.



EXPLANATORY NOTES ON THE SUPERANNUATION LEGISLATION AMENDMENT BILL 1997

 

Clause 1 - Short title

1.       This clause provides the mode of citation of the Act.

 

Clause 2 - Commencement

2.       Subclause (1) provides that, subject to this section, this Act commences on the day on which it receives the Royal Assent.  Therefore, Schedule 1, Part 1 of Schedule 2 and Schedule 3 commence on Royal Assent.

3.       Subclause (2) provides that Part 2 of Schedule 2 commences 28 days after the day of Royal Assent.

4.       Subclause (3) provides that Part 3 of Schedule 2 is taken to have commenced on 5 June 1997.

5.       Subclause (4) provides that Part 4 of Schedule 2 commences on 1 July 1999.

6.       Subclause (5) provides that Part 5 of Schedule 2 commences six months after the day of Royal Assent.

 

Clause 3 - Schedule(s)

7.       This clause provides that each Act specified in a Schedule to this Act is amended or repealed as set out in the Schedule.

 



Schedule 1

Amendment of the Bankruptcy Act 1966

 

Outline

8.       The Bankruptcy Act 1966 (the Bankruptcy Act) sets out the treatment of property in the event of the bankruptcy of a person, or the death of a bankrupt.  Generally, any benefits that the bankrupt has in superannuation up to the pension reasonable benefit limit (RBL) is not available to creditors.  This schedule amends the Bankruptcy Act to ensure benefits in an exempt public sector superannuation scheme are treated in a similar fashion to benefits in a regulated superannuation fund. 

Note:  The pension RBL is prescribed by section 140ZD of the Income Tax Assessment Act 1936.

 

Item 1 - At the end of subparagraph 116(2)(d)(iii)

9.       This item inserts new sub-subparagraph 116(2)(d)(iii)(C) into the Bankruptcy Act to provide that a member’s benefits in an exempt public sector superannuation scheme, up to the member’s pension RBL, are exempt from creditors in the event of the member’s bankruptcy.

 

Item 2 - After sub-subparagraph 249(6)(a)(ii)(B)

10.      This item inserts new sub-subparagraph 249(6)(a)(ii)(BAA) into the Bankruptcy Act to provide that where the administration of the estate of a deceased person commenced before the death of the person, the divisible property does not include a payment from an exempt public sector superannuation scheme that would not have been divisible among the creditors if the person had not died, the sequestration order had been made before death and the amount concerned had been paid immediately before the person’s death.

 

Item 3 - After sub-subparagraph 249(7)(a)(ii)(B)

11.     This item inserts new sub-subparagraph 249(7)(a)(ii)(BAA) into the Bankruptcy Act to provide that where the administration of the estate of a deceased person commenced at the time of the death of the person, the divisible property does not include a payment from an exempt public sector superannuation scheme that would not have been divisible among the creditors if the person had not died, the sequestration order had been made before death and the amount concerned had been paid immediately before the person’s death.

 

Item 4 - After sub-subparagraph 249(8)(a)(ii)(B)

12.     This item inserts new sub-subparagraph 249(8)(a)(ii)(BAA) into the Bankruptcy Act to provide that where the administration of the estate of a deceased person commenced after the death of the person, the divisible property does not include a payment from an exempt public sector superannuation scheme that would not have been divisible among the creditors if the person had not died, the sequestration order had been made before death and the amount concerned had been paid immediately before the person’s death.



Schedule 2

Amendment of the

Superannuation Industry (Supervision) Act 1993

 

Outline

13.     The Superannuation Industry (Supervision) Act 1993 (the SIS Act) sets out the framework for the prudential supervision of the superannuation industry and is administered by the Insurance and Superannuation Commission (ISC).  The SIS Act regulates the conduct of trustees of superannuation entities to ensure the prudent management of superannuation fund monies. 

Note:  The SIS Act is now administered by the Australian Superannuation and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) due to amendments made to the Act by Schedule 16 of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 (the FSR Act).  Schedule 16 repeals references in the Act to the Insurance and Superannuation Commission(er) and replaces them with references to ASIC or APRA where appropriate.  These amendments have been effective since the commencement of the Australian Prudential Regulation Authority Act 1998 .

14.     This schedule amends the SIS Act to improve the efficiency and effectiveness of the superannuation supervisory framework.

 

Part 1 - Amendments commencing on date of Assent

Item 1 - Subsection 10(1) (at the end of the definition of relevant person )

15.     This item inserts new paragraph (e) into the definition of ‘relevant person’ in subsection 10(1) of the SIS Act.  Under the current definition a custodian is not a ‘relevant person’.  Therefore, the Commissioner may not be able to directly obtain information relating to superannuation assets from a custodian.  For example, section 255 of the SIS Act provides that the Commissioner may require a ‘relevant person’ to produce books relating to the affairs of a superannuation entity.  New paragraph (e) provides that a person who is a custodian in relation to a fund or trust is a ‘relevant person’.

 

Item 2 - Before paragraph 28(2)(a)

16.     This item inserts new paragraph 28(2)(aa) into the SIS Act.  Subsection 28(2) sets out grounds upon which the Commissioner may revoke the approval of an approved trustee.  New paragraph 28(2)(aa) inserts a new ground which allows the Commissioner to revoke the approval of a trustee, without the consent of the Minister, where the trustee has requested in writing that the approval be revoked.

 

Item 3 - Subsection 28(3)

17.     This item amends subsection 28(3) of the SIS Act.  Subsection 28(3) provides that the Commissioner must not revoke the approval of an approved trustee without the written consent of the Minister.  The requirement for the Minister’s consent is not considered to be necessary where the trustee has made a voluntary request for an approval to be revoked, for example, where a trustee no longer acts as a trustee for a public offer fund.  This amendment enables the Commissioner to revoke the approval of a trustee without the consent of the Minister, where the revocation has been requested in writing by the trustee under new paragraph 28(2)(aa).

 

Item 4 - Subsection 59(1)

18.     This item amends subsection 59(1) of the SIS Act to provide for an exception (set out in new subsection 59(1A) inserted by item 8 below) to the general prohibition against the governing rules of a superannuation entity permitting a discretion to be exercised by a person other than the trustee set out in subsection 59(1).

 

Item 5 - After subsection 59(1)

19.     This item inserts new subsection 59(1A) into the SIS Act.  Section 59 of the SIS Act prevents trustees from being bound by a member’s death benefit nomination.  The payment of a death benefit is ultimately a matter of trustee discretion.  The discretionary nature of the decision in relation to the payment of a death benefit can impose significant compliance costs on superannuation entities, particularly due to the complexity of the decision in some cases.  New subsection 59(1A) permits trustees to structure the governing rules of a superannuation entity so that trustees can accept binding death benefit nominations from members.  In addition, new subsection 59(1A) enables conditions in relation to the acceptance of binding death benefit nominations by trustees to be prescribed in the SIS Regulations.

 

Item 6 - Paragraph 60(2)(a)

20.     This item amends paragraph 60(2)(a) of the SIS Act by omitting the words ‘an individual’ and substituting ‘a person other than a constitutional corporation’.  At present, subsection 60(2) prevents the amendment of a fund’s governing rules to allow individuals to be appointed trustees of funds whose sole or primary purpose is not the provision of old-age pensions.  It does not prevent the amendment of a fund’s governing rules to allow bodies corporate that are not constitutional corporations (for example, foreign corporations) from being appointed as trustees of funds whose sole or primary purpose is not the provision of old-age pensions.

21.     Under subsection 19(3) bodies corporate that are not constitutional corporations are permitted to be trustees of a regulated fund where the governing rules provide that the sole or primary purpose of that fund is the provision of old-age pensions.  Therefore, this item amends paragraph 60(2)(a) so that it applies to a person other than a constitutional corporation and removes the inconsistency between the application of subsection 19(3) and paragraph 60(2)(a).

 

Item 7 - Section 72

22.     This item repeals section 72 in Part 8 of the SIS Act and substitutes a new section 72.  Part 8 of the SIS Act sets out the rules in relation to the level of in-house assets of a regulated superannuation fund.  For example, at present, the ‘in-house asset ratio’ of a fund must not exceed 10 per cent.  The ‘in-house asset ratio’ is calculated under section 74 of the SIS Act as follows:

          cost of the in-house assets of the fund   x 100

          cost of all the assets of the fund

23.     An ‘in-house asset’ is defined in section 71 as an asset of the fund that is a loan to, or an investment in, an employer-sponsor of the fund or an associate of the employer-sponsor.

24.     Existing section 72 of the SIS Act sets out how Part 8 applies to a fund which has two or more unrelated employer-sponsors in the fund.  The section provides that unrelated employer-sponsors are treated separately for the purposes of the in-house asset rules.  For example, for each unrelated employer-sponsor the in-house asset ratio is calculated by dividing the cost of the in-house assets in the employer-sponsor or an associate divided by the cost of the total fund assets multiplied by 100.  The in-house asset ratio in relation to each unrelated employer-sponsor must not exceed ten per cent. 

25.     For example, if a fund has four unrelated employer-sponsors A, B, C and D, section 72 requires the calculation of four separate in-house asset ratios and each must not exceed ten per cent as follows:

          In-house assets of A x 100

          Total fund assets

          In-house assets of B x 100

          Total fund assets

          In-house assets of C x 100

          Total fund assets

          In-house assets of D x 100

          Total fund assets

26.     However, section 72 does not appear to provide for the separate treatment of groups of unrelated standard employer-sponsors.  For example, with a fund with four employer-sponsors A, B, C and D where A and B are related (group 1) and B and C are related (group 2) but where groups 1 and 2 are unrelated, section 72 appears to require that the fund’s in-house assets in groups 1 and 2 are to be aggregated in order to calculate the fund’s in-house assets ratio as follows:

          In-house assets of A, B, C and D x 100

          Total fund assets

27.     This is inconsistent with the treatment of the in-house assets held by the fund in individual unrelated standard employer-sponsors where the in-house assets of each unrelated employer-sponsor are treated separately.  Therefore, it has been decided that groups of unrelated employer-sponsors should be treated in the same way as individual unrelated employer-sponsors are under existing section 72.

28.     Therefore, under new section 72 a fund with, for example, four standard employer-sponsors A, B, C and D where A and B are related (group 1) and B and C are related (group 2) but where groups 1 and 2 are unrelated, the in-house asset rules will apply to each unrelated group of related standard employer-sponsors as follows:

          In-house assets of A and B   x 100

          Total fund assets

          In-house assets of C and D   x 100

          Total fund assets

29.     The result of both calculations must not exceed 10 per cent.

30.     New section 72 inserts subsections 72(1) to (5).  Subsection 72(1) provides that an employer-sponsor of a superannuation fund is an unrelated employer-sponsor of the fund if there are no other employer-sponsors of the fund who are associated with the employer-sponsor.  In addition, employer-sponsors are related if they are associates.  ‘Associate’ is defined in section 70 of the SIS Act.

31.     Subsection 72(2) provides that the class of in-house assets of a fund that corresponds to an unrelated employer-sponsor is the in-house assets that consist of loans to, or investments in the employer-sponsor or an associate.  The class of in-house assets that corresponds to two or more employer-sponsors who are related to each other is the class of in-house assets that consists of loans to, or investments in any of them or any associates of them.

32.     Subsection 72(3) provides that subsections 72(4) and 72(5) apply where there are two are more unrelated employer-sponsors of a fund or there are two or more employer-sponsors of a fund who are related to each other and there are also one or more unrelated employer-sponsors of the fund.

33.     Subsection 72(4) provides that Part 8 of the SIS Act, which sets out the rules relating to the level of in-house assets of superannuation funds, does not apply in relation to a fund in relation to the in-house assets of the fund as a whole.

34.     Subsection 72(5) provides that Part 8 applies in relation to the fund separately in relation to each of the corresponding classes of in-house assets of the fund, as set out in subsection 72(2), and each of the corresponding classes of in-house assets is to be treated as the whole of the in-house assets of the fund.

 

Item 8 - At the beginning of Division 3 of Part 8

35.     Item 11 inserts new section 80A into the SIS Act.  Section 80A provides that the rules relating to the limits on in-house assets that may be held by a superannuation fund, set out in Division 3 of Part 8, do not apply to a fund if new Division 3A, inserted into the SIS Act by item 12 below, applies to the fund.  Division 3A sets out in-house asset rules for certain defined benefit funds and requires that in order for Division 3 not to apply to a fund, the fund must comply with Division 3A, as certified by an actuary. 

 

Item 9 - After Division 3 of Part 8

36.     This item inserts a new Division 3A into Part 8 of the SIS Act to set out the limits on in-house assets of certain defined benefit funds.  At present, Division 3 of Part 8 of the SIS Act sets out restrictions on the ability of trustees to make loans to, or investments in, an employer-sponsor of the fund (the ‘in-house asset’ rules).  In particular, the rules set out a timetable for a phased reduction in the ceiling on a fund’s permitted ‘in-house’ assets, that is, from a limit of ten per cent of total fund assets on a historical cost basis in 1997-98, to five per cent of total fund assets on a market value basis by 2001-2002.

37.     Division 3A provides a limited relaxation of the ‘in-house asset’ rules set out in Division 3 for defined benefit funds that have substantial surplus assets.  In essence, Division 3A enables certain defined benefit funds to hold their existing in-house assets and not have to sell them in order to comply with the phased reduction of in-house assets under Division 3.  However, there are a number of conditions set out in new sections 83A to 83E that must be met in order for a fund to be able to take advantage of Division 3A.

38.     Section 83A sets out the definition of a number of terms used in new Division 3A.  In particular, a definition of ‘base amount’ is inserted to mean 120 per cent of whichever is the greater of the ‘fund’s liabilities in respect of vested benefits’ or the ‘fund’s accrued actuarial liabilities’ (defined in section 83A).  A definition of ‘prescribed percentage’ is inserted to mean 10 per cent in relation to the 1998-99 and 1999-2000 years of income and 5 per cent in relation to a later year of income.  A definition of ‘maximum permitted amount’ is inserted to mean the sum of an amount equal to the ‘prescribed percentage’ of the ‘base amount’ and the amount by which the market value of the fund’s assets at that time exceeds the ‘base amount’.

39.     New section 83B sets out the conditions that must be satisfied by a superannuation fund in respect of a year of income in order for Division 3A to apply to the fund.  In particular, the section requires that the fund must be a defined benefit fund, the fund must have an employer-sponsor which is a listed public company or an associate of a listed public company and the market value of the fund’s assets must not be less than the ‘base amount’ (defined in new section 83A).  The intention of the last condition is to provide a buffer against short term decreases in the value of the assets backing the vested benefits and to increase the security of fund assets.  In addition, the trustee of the fund must decide, and record this decision in writing, that Division 3A is to apply to the fund in respect of a particular year of income.

40.     New section 83C states that the market value of a fund’s in-house assets at the end of a year of income must not exceed the ‘maximum permitted amount’ (defined in section 83A).  In essence, section 83C provides that the total amount of in-house assets that a fund may hold under Division 3A is 10 per cent (5 per cent after the 1999-2000 year of income) of 120 per cent of the fund’s liabilities plus any amount of assets over and above 120 per cent of the fund’s liabilities (see example at paragraph 46 below).

41.     New section 83D sets out two limits in relation to the in-house assets that may be held by the fund.  Subsection 83D(1) provides that the market value of any in-house assets over and above 10 per cent of 120 per cent of the fund’s liabilities must consist of shares in the capital of listed public companies.  Subsection 83D(2) provides that the in-house assets of a fund must not include more than 5 per cent of the voting shares in any listed public company that is the employer-sponsor or is an associate of the employer-sponsor.

42.     New section 83E prohibits the acquisition of in-house assets unless the market value of the fund’s in-house assets has ceased to exceed the prescribed percentage (10 per cent or 5 per cent after 1999-2000) of 120 per cent of the fund’s liabilities.  The intention is that financially strong defined benefit funds can continue to hold certain in-house assets but cannot acquire additional in-house assets.  In other words, excess in-house assets should only be increased by way of revaluations, not new acquisitions.

Example of application of Division 3A

43.     For example, a fund with liabilities of $100m must have assets of at least 120 per cent of $100m in order for Division 3A to apply, ie $120m which is the ‘base amount’.  If the market value of the fund’s assets is $150m the ‘maximum permitted amount’, under section 83C, of in-house assets that the fund may have is calculated as follows:

(10% x $120m) + ($150m - $120m )

ie $12m + $30m = $42m

44.     In addition, under subsection 83D(1), any amount of in-house assets over and above the ‘prescribed percentage’ of the ‘base amount’ must be shares in the capital of listed public companies.  In other words, in the example above, $30m must be shares in the capital of a listed public company which is an employer-sponsor or an associate of an employer-sponsor.

Item 10 - Subsection 84(1)

45.     This item amends subsection 84(1) as a result of the insertion of new Division 3A in Part 8 of the SIS Act (inserted by item 12 above).  Subsection 84(1) provides that the trustee of a superannuation fund must take all reasonable steps to ensure that the provisions of Divisions 2 and 3 of Part 8 of the SIS Act are complied with.  This amendment inserts a reference to Division 3A into subsection 84(1).

 

Item 11 - Paragraph 112(1)(ba)

46.     This item amends paragraph 112(1)(ba) of the SIS Act to rectify a drafting error by substituting ‘paragraph’ for ‘subsection’.

 

Item 12 - After subsection 117(3)

47.     This item inserts new subsection 117(3A) into the SIS Act.  Subsection 117(3) currently imposes a general prohibition on trustees of standard employer-sponsored funds paying an amount, or permitting an amount to be paid out, to a standard employer-sponsor except as provided for in section 117.  As this provision overrides a standard employer-sponsor’s contractual right to be paid, it increases the trustee’s right to retain this money which could amount to an ‘acquisition of property’ for the purposes of paragraph 51(xxxi) of the Constitution and therefore would be constitutionally invalid.  Subsection 117(3A) excludes the application of subsection 117(3) in circumstances where its application gives rise to the acquisition of property otherwise than on just terms and the acquisition would be invalid because of paragraph 51(xxxi) of the Constitution. 

 

Item 13 - Subsection 126C(5)

48.     This item amends subsection 126C(5) of the SIS Act to rectify a drafting error by changing a reference to ‘subsection 126D(2)’ to ‘subsection 126D(3)’.

 

Item 14 - Subsection 131(4)

49.     This item repeals subsection 131(4) of the SIS Act and inserts new subsections 131(4), (4A) and (4B).  At present section 131 enables the Commissioner to make a written order disqualifying a person from being an approved auditor for the purposes of the SIS Act.  Paragraph 131(4)(a) requires the gazettal of any disqualification order, and paragraph 131(4)(b) requires the gazettal of any action taken in relation to reviewing the decision to make the order.  The requirement that any action taken in relation to reviewing a decision to make a disqualification order has to be gazetted means that even where the Commissioner’s decision is confirmed, that is, no change to the decision, particulars of this action may need to be published in the Gazette.

50.     New subsection 131(4) provides that the Commissioner must publish a disqualification order in the Gazette as soon as practicable after it is made.

51.     New subsections 131(4A) and (4B) provide that where an application has been made for the review of the Commissioner’s decision to make a disqualification order and the Commissioner’s decision is varied or revoked, the particulars of the variation or revocation must be published in the Gazette.

52.     Therefore, where an application has been made for the review of the Commissioner’s decision to make a disqualification order and the Commissioner’s decision is confirmed, particulars of this action are not required to be published in the Gazette.

 

Item 15 - Subsection 131(10)

53.     This item repeals subsection 131(10) and substitutes a new subsection.  This amendment clarifies that subsection 131(10) refers to a revocation of a disqualification order under subsection 131(5) rather than under new subsections 131(4A) or (4B) (inserted by item 17).

 

Item 16 - Subsection 171(4)

54.     This item amends subsection 171(4) to replace the words ‘to the applicant when redeeming the interest’ with ‘in respect of the redemption of the interest’.  Section 171 of the SIS Act requires the governing rules of a public offer superannuation fund and an Approved Deposit Fund (ADF) to include a provision that allows non-standard employer-sponsored members to redeem their interest in a fund within 14 days of the issue of the superannuation interests in that fund.  The removal of the words ‘to the applicant when redeeming the interest’ in subsection 171(4) of the SIS Act makes it clear that the individual is not always entitled to be paid the redemption money.  For example, preserved superannuation benefits must remain in the superannuation system until a condition of release is met. 

 

Item 17 - After subsection 171(4)

55.     This item inserts new subsections 171(4A) to (4D) into the SIS Act.  This amendment clarifies to whom contributions should be refunded when an applicant withdraws from a public offer superannuation fund, or an Approved Deposit Fund (ADF), within the 14 day ‘cooling-off’ period.

56.     In particular, new subsection 171(4A) provides that where a benefit has been rolled over or transferred to a public offer superannuation fund, or ADF, and a redemption occurs, the governing rules are to provide that the preserved and restricted non-preserved benefits must be paid to a superannuation fund, ADF or Retirement Savings Account (RSA) nominated by the applicant.  The money cannot be paid to the applicant.

57.     Subsection 171(4B) provides that where unrestricted non-preserved benefits have been transferred or rolled over to the fund, the governing rules are to provide that the benefits are to be paid in accordance with the directions of the applicant, including to the applicant, that is, the benefits can leave the superannuation system.

58.     Subsection 171(4C) provides that the governing rules are to provide that contributions that are paid by the employer of the applicant (such as salary sacrifice contributions) are to be paid to, or in accordance with the directions of, the employer.

59.     Subsection 171(4D) captures amounts paid that are not covered by 171(4A), 171(4B) and 171(4C) and requires that the governing rules are to provide that the amount payable in respect of the redemption of the interest is to be paid to, or in accordance with the directions of, the applicant.

 



Item 18 - Subsection 171(5)

60.     This item amends subsection 171(5) to replace the words ‘to the applicant’ with ‘in respect of the redemption of the interest’.  Section 171 of the SIS Act requires the governing rules of a public offer superannuation fund and an Approved Deposit Fund (ADF) to include a provision that allows non-standard employer-sponsored members to redeem their interest in a fund within 14 days of the issue of the superannuation interest in that fund.  The removal of the words ‘to the applicant’ in subsection 171(5) of the SIS Act makes it clear that the individual member is not always entitled to be paid the redemption money.  For example, a preserved superannuation benefit must remain in the superannuation system until a condition of release is met.

 

Item 19 - After subsection 171(5)

61.     This item inserts new subsections 171(5A) and (5B) into the SIS Act.  These subsections make it clear, for the purposes of the SIS Act and Regulations, that a payment under new subsection 171(4A) or (4B) (inserted by item 20) is taken to be a payment of a benefit, and a payment under new subsection 171(4C) or (4D) (inserted by item 20) is not taken to be a payment of a benefit.  In other words, Part 6 of the SIS Regulations applies where the purchase of a superannuation interest in a public offer superannuation fund was funded by ‘rolled over’ preserved and restricted non-preserved benefits. 

 

Item 20 - Division 1 of Part 25 (heading)

62.     This item repeals the heading of Division 1 of Part 25 and substitutes a new heading as a consequence of amendments to Division 1 of Part 25 inserted by item 24.

 

Item 21 - At the end of Division 1 of Part 25

63.     This item inserts new section 253A into Division 1 of Part 25 of the SIS Act. Part 25 of the SIS Act outlines the monitoring and investigation powers of the Insurance and Superannuation Commissioner.  There is uncertainty as to whether these powers apply to certain parties, including former trustees of an entity.  Therefore, it is important to clarify that each notice provision in Part 25 applies to a former ‘relevant person’ of an entity which includes a former trustee.  ‘Relevant person’ is defined in section 10 of the SIS Act.  New section 253A provides that each notice provision in Part 25 of the SIS Act applies to persons that have previously been a ‘relevant person’ of an entity.

 

Item 22 - At the end of section 255

64.     This item inserts a new subsection 255(4) into the SIS Act.  Section 255 provides that the Commissioner may require the production of books from a ‘relevant person’ in relation to a superannuation entity.  New subsection 255(4) makes it clear that the powers in section 255 of the SIS Act can be exercised notwithstanding that a notice of investigation has been given under subsection 263(1).

 



Item 23 - Subsection 264(1)

65.     This item amends subsection 264(1) of the SIS Act.  Section 264 gives the Commissioner the power to issue notices to obtain information and to freeze assets where it appears that conduct has been or is being engaged in a manner that is likely to affect adversely the values of the interests of beneficiaries.  This amendment ensures that the power of the Commissioner to obtain information or to freeze assets can be exercised in respect of proposed conduct, rather than only when conduct has been or is being engaged in.

 

Item 24 - Subsections 264(2), (3) and (4)

66.     This item repeals subsections 264(2), 264(3) and 264(4) and substitutes new subsections 264(2), 264(3), 264(4) and 264(4A) in the SIS Act.  Section 264 gives the Commissioner the power to obtain information and to freeze assets.  However, the power to obtain information is limited to the trustee or investment manager of a superannuation entity.  The ability to issue notices to freeze assets cannot be subject to conditions.  

67.     New subsection 264(2) gives the Commissioner the general power to obtain information from a relevant person.  New subsections 264(3) and (4) give the Commissioner the ability to issue a notice imposing a freeze on assets subject to conditions that are specified in the notice.

68.     In particular, subsection 264(3) enables the Commissioner to direct the trustee or investment manager subject to conditions as specified not to acquire assets, not to dispose of assets or to deal with assets in a particular way.

69.     Subsection 264(4) gives the Commissioner the same ability as set out in subsection 264(3) in relation to a person who has possession, custody or control of an asset.

70.     Subsection 264(4A) provides that the power of the Commissioner under subsection 264(3) or (4) to direct a person not to deal in a particular way in assets of an entity includes the power to direct a person not to remove from Australia assets of the entity that are in Australia.

 

Item 25 - Subsection 264(6)

71.     This item amends subsection 264(6) of the SIS Act.  Subsection 264(6) provides that the Commissioner must not give a notice under section 264 without the written consent of the Minister.  The requirement to obtain the written consent of the Minister in order to issue a notice requiring information delays the gathering of evidence necessary to make a recommendation to the Minister to issue a freeze order.  This amendment provides that the Commissioner does not require the written consent of the Minister to give a notice requesting information from a ‘relevant person’ under subsection 264(2).

 

Item 26 - Section 276

72.     This item amends section 276 so that a reference to paragraph 270(b) is changed to paragraph 270(d).  Due to a drafting error, no consequential amendment was made to the text of section 276 when the Superannuation Industry (Supervision) Legislation Amendment Act 1995 inserted a new section 270 into the SIS Act.







Item 27 - Section 285 (penalty)

73.     This item amends section 285 to increase the penalty provision for a breach of subsection 264(3) or 264(4) from 30 penalty units to imprisonment for two years.

 

Item 28 - Section 286 (penalty)

74.     This item amends section 286 to increase the penalty for contravention of the requirements under this section from 30 penalty units to a penalty of imprisonment for two years.

 

Item 29 - After subsection 287(2)

75.     This item inserts new subsection 287(2A) into the SIS Act to prevent a body corporate claiming privilege against self-incrimination.

76.     Notices seeking books or information can be issued to a body corporate under various sections of the SIS Act.  As subsection 287(2) stands, a body corporate in receipt of such a notice could claim privilege in respect of certain information or books.  If such a claim was made (and accepted) the fact of production, would be inadmissible in any subsequent criminal or civil penalty proceedings under subsection 287(3).  The High Court decision in Environment Protection Authority v Caltex Refining Co Pty Ltd stated that a body corporate could not claim the common law privilege against self-incrimination.  Therefore, section 287 without this amendment would provide a body corporate with more rights that it would have under the common law.

77.     The removal of the privilege against self-incrimination for a body corporate applies only in respect of requirements to produce books made after the date of Royal Assent.  In other words, the amendment will only preclude a body corporate claiming a privilege against self-incrimination in relation to a request to produce a book under Part 25 made after the date of Royal Assent.

 

Item 30 - Paragraph 290(2)(b)

78.     This item amends paragraph 290(2)(b) to prevent a body corporate claiming privilege against self-incrimination in respect of a statement made at an examination (see paragraph 270(d)).  This amendment reflects the common law position in relation to corporations seeking privilege against self-incrimination (see item 32).

 

Item 31 - Section 349

79.     This item amends section 349 of the SIS Act.  At present, section 349 provides that the SIS Act and Regulations have effect subject to any superannuation order under the Crimes (Superannuation Benefits) Act 1989 (CSB Act).  Section 349 does not currently include superannuation orders under the Australian Federal Police Act 1979 (AFP Act) and as such trustees could contravene the requirements of the SIS legislation if they were to comply with an order made under the AFP Act.  This amendment provides that the SIS Act and Regulations have effect subject to any superannuation order within the meaning of the AFP Act and the CSB Act.  This will allow trustees to comply with orders made under either the CSB Act or the AFP Act without contravening the SIS legislation.

 

Item 32 - Section 375

80.     This item repeals section 375 and substitutes a new section 375 into the SIS Act.  No consequential amendment was made to the text of section 375 when the Superannuation Laws Amendment (Small Accounts and Other Measures) Act 1995 amended subsection 153(1).  This amendment corrects this drafting error.

 

Part 2 - Amendments commencing 28 days after date of Assent

Item 33 - Subsection 10(1)

81.     This item inserts a definition of ‘asset’ in subsection 10(1) of the SIS Act.  ‘Asset’ is defined to include any form of property, including money.

 

Item 34 - Subsection 10(1) (paragraphs (d) and (e) of the definition of insolvent under administration )

82.     This item amends the definition of ‘insolvent under administration’ in subsection 10(1) of the SIS Act.

83.     Under section 120 of the SIS Act, a person who is an ‘insolvent under administration’ is a disqualified person.  The SIS Act prevents a disqualified person from being a trustee of a superannuation entity, an investment manager of a superannuation entity or a custodian of a superannuation entity.

84.     Under paragraph (d) of the current definition of ‘insolvent under administration’, a person will be an ‘insolvent under administration’ for three years after entering into a deed of assignment or a deed of arrangement.  However, once a deed of assignment or arrangement has been executed and complied with in full, any creditors who are owed a provable debt will have no further claims on a debtor. 

85.     In effect, a debtor who has executed and complied with a deed of assignment or arrangement will be in the same position as a debtor who has been discharged from bankruptcy.  However, a discharged bankrupt can immediately take part in the management of a superannuation entity while a person who has executed and complied with a deed of assignment or arrangement, and who may be in exactly the same legal position must wait up to three years.  Therefore, this item amends the definition of ‘insolvent under administration’ to remove the inconsistent treatment of a discharged bankrupt and a person who has executed a deed of assignment or a deed of arrangement.

86.     In particular, the definition of ‘insolvent under administration’ includes a person:

-      who has executed a deed of assignment and has not been issued with a certificate under section 232 of the Bankruptcy Act 1966 in respect of that deed of assignment;

-      who has executed a deed of arrangement and has not been issued with a certificate under section 237A of the Bankruptcy Act 1966  in respect of that deed of arrangement; and

-      whose creditors have accepted a composition and who has not been issued with a certificate under section 243A of the Bankruptcy Act 1966 in respect of that composition.

 

Item 35 - Subsection 10(1)

87.     This item inserts a definition of ‘invest’ in subsection 10(1) of the SIS Act. ‘Invest’ is to apply assets in any way or make a contract for the purpose of gaining interest, income, profit or gain.  The definition applies to the application of all assets of a superannuation entity for the purposes of gaining interest, income or profit, and not just to the application of money and includes investment in derivatives where there may be no up front application of money.

 

Item 36 - Subsection 10(1) (definition of investment)

88.     This item repeals the definition of ‘investment’ from subsection 10(1) of the SIS Act.  A definition of ‘invest’ is inserted by item 41.

 

Item 37 - Subsection 10(1) (definition of investment manager )

89.     This item amends the definition of ‘investment manager’ in subsection 10(1) of the SIS Act.  The amendment makes it clear that an investment manager is a person appointed by the trustee to ‘invest’ (definition inserted by item 41) on behalf of the trustee.

 

Item 38 - Subsection 109(1)

90.     This item amends subsection 109(1) by replacing the words ‘invest money of the entity’ with ‘invest in that capacity’ to clarify that this subsection refers to all of the assets of a superannuation entity for the purposes of gaining interest, income or profit, and not just the application of money.

 

Item 39 - Paragraph 109(1A)(a)

91.     This item amends paragraph 109(1A)(a) by replacing the words ‘invests money of the entity’ with ‘invests in that capacity’ to clarify that this paragraph refers to all of the assets of a superannuation entity for the purposes of gaining interest, income or profit, and not just the application of money.

 

Item 40 - After subsection 117(5)

92.     This item inserts new subsection 117(5A) into the SIS Act.  Section 117 of the SIS Act sets out the circumstances in which amounts may be paid out of an employer-sponsored fund to an employer-sponsor. 

93.     Paragraph 117(5)(d) provides that the trustee of a standard employer-sponsored fund must give notice to the members of the fund of an intention to pay an amount to the standard employer-sponsor in accordance with the governing rules of the fund.  There is no requirement in section 117 governing how this notice is to be given.  In light of the significant effect on a member’s benefits that a payment of an amount to a standard employer-sponsor may have, it has been decided to require the trustee to be reasonably satisfied that all members of the fund have been informed about the payment proposal.



94.     New subsection 117(5A) provides that when the trustee of a standard employer-sponsored fund gives notice of an intention to pay an amount to a standard employer-sponsored fund under paragraph 117(5)(d), the trustee must be reasonably satisfied that all of the members of the fund, other than lost members, have been informed about the payment proposal.

 

Item 41 - Section 168

95.     This item amends section 168 in Division 5 of Part 19 of the SIS Act.  Division 5 of Part 19 applies to money received by the trustee of a public offer entity from a person in respect of an application for the issue of a superannuation interest.  The money must be held in trust if the superannuation interest is not issued immediately.

96.     A practical issue arises from the wording of section 168 and SIS regulation 3.12 because it is assumed that the applicant is to become the beneficiary.  However, this is not the case where the money is received from the trustee of another regulated superannuation or Approved Deposit Fund or from a sponsoring employer.  Therefore, reference to ‘the applicant’ is removed from section 168 and Division 5 of Part 19 applies to money received by a trustee from a person in respect of an application for the issue of a superannuation interest.

 

Item 42 - Subsection 169(1)

97.     This item amends subsection 169(1) to provide that where application money is received but a superannuation interest is not issued immediately, the money must be held on trust for the person on whose behalf the money was received.  This amendment recognises that the applicant is not necessarily the person on whose behalf the money was received.

 

Part 3 - Amendments that are taken to have commenced on 5 June 1997

Item 43 - Paragraph 299Z(2)(a)

98.     This item amends paragraph 299Z(2)(a) of the SIS Act.  Paragraph 299Z(2)(a) provides that if, before the commencement of the Superannuation Contributions Tax (Consequential Amendment) Act 1997 (the SCT(CA) Act), an employee quoted their Tax File Number (TFN) for the purposes of the SIS Act only, and provided the employer notifies the employee or member of its intention and provides an opportunity to object, the TFN may also be used for the purposes of the Surcharge Acts (defined in section 299(W) of the SIS Act).  This amendment extends the application of this provision to 5 June 1998.

 

Item 44 - Paragraph 299Z(3)(a)

99.     This item amends paragraph 299Z(3)(a) of the SIS Act.  Paragraph 299Z(3)(a) provides that if, before the commencement of the Superannuation Contributions Tax (Consequential Amendment) Act 1997 (the SCT(CA) Act), an employee quoted their Tax File Number (TFN) for the purposes of the SIS Act only, and provided the trustee notifies the employee or member of its intention and provides an opportunity to object, the TFN may also be used for the purposes of the Surcharge Acts (defined in section 299(W) of the SIS Act).  This amendment extends the application of this provision to 5 June 1998.

 

Part 4 - Amendment commencing on 1 January 1999

Item 45 - After section 69

100.   This item inserts after section 69 of the SIS Act new section 69A.  Section 69A provides that for the purposes of the in-house asset rules set out in Part 8 of the SIS Act, a sub-fund of a regulated superannuation fund is taken to be a regulated superannuation fund.  However, in order for section 69A to apply a sub-fund must have separately identifiable assets and beneficiaries and the interest of each beneficiary of the sub-fund must be determined by reference only to the conditions governing that sub-fund. 

101.   The purpose of new section 69A is to prevent a sub-fund holding 100 per cent of its assets in in-house assets which could be achieved under the existing legislation.

 

Part 5 - Amendment commencing 6 months after date of Assent

Item 46 - Subsection 10(1) (definition of governing rules)

102.   This item repeals the definition of ‘governing rules’ in subsection 10(1) of the SIS Act and inserts a new definition.  This amendment makes its clear the governing rules of a fund include written and unwritten rules governing the establishment or operation of the fund, scheme or trust.



Schedule 3

Amendment of the Superannuation (Resolution of Complaints) Act 1993

 

Outline

103.   The Superannuation (Resolution of Complaints) Act 1993 (the SRC Act) provides for the establishment and operation of the Superannuation Complaints Tribunal (SCT) to resolve fund member complaints about trustee decisions in a manner that is fair, informal and quick.

104.   The SRC Act is amended to improve the operation of the SCT and remove unintended unfairness in some areas of its operation.

 

Item 1 - After section 7

105.   This item inserts new section 7A in the SRC Act.  The SRC Act sets out the requirements in relation to the establishment and constitution of the Tribunal, the objectives and functions of the Tribunal and administrative provisions relating to the Tribunal Chairperson and other Tribunal members.  However, there is no statutory provision in the SRC Act which expressly confers on the Tribunal Chairperson responsibility for the overall operation and administration of the Tribunal.  An amendment to make such a provision will facilitate smooth, efficient and consistent operation and administration of the Tribunal.

106.   New section 7A provides that the Tribunal Chairperson is responsible for the overall operation and administration of the Tribunal.  The Chairperson shall monitor the operations of the Tribunal, allocate its work among the members (including himself or herself and the Deputy Chairperson) and may establish written guidelines for the allocation of the work of the Tribunal

 

Item 2 - Subsection 9(1)

107.   This item amends subsection 9(1) of the SRC Act.  Section 9 of the SRC Act currently provides that three Tribunal members, selected by the Tribunal Chairperson, are required to make up a panel to review and make determinations in respect of complaints that cannot otherwise be resolved by inquiry and conciliation.  This amendment allows the Tribunal to be constituted by either one, two or three members, selected by the Tribunal Chairperson, and will enable efficiency gains and increased case through-put to be achieved.

 

Item 3 - After subsection 9(1)

108.   This item inserts new subsection 9(1A) in the SRC Act so that in circumstances where there is a ‘perception of bias’ and where it is necessary for the timely operation of the Tribunal, the Chairperson may decide that a Tribunal panel should be reconstituted.  Greater flexibility in this regard will increase the integrity of the SCT and improve the timeliness of reviews.

 



Item 4 - Subsection 9(2)

109.   This item amends subsection 9(2) of the SRC Act as a result of the amendment, inserted by item 2, to allow a Tribunal panel to be constituted by either one, two or three members.

110.   Subsection 9(2) provides that in selecting a Tribunal member or members to constitute a Tribunal panel, the Chairperson must take into account qualifications, experience and suitability having regard to the nature of the complaint.

 

Item 5 - After subsection 9(2)

111.   This item inserts new subsections 9(2A) and 9(2B) into the SRC Act as a result of the amendment, inserted by item 2, to allow a Tribunal panel to be constituted by either one, two or three members.

112.   Subsection 9(2A) provides that the Tribunal Chairperson is to formulate written guidelines setting out how the Tribunal will usually be constituted for the purposes of dealing with different classes of complaints.  These guidelines are to be made available to the public.  Subsection 9(2B) provides that subsections 9(3) to (5) only apply where the Tribunal is constituted by more than one member.  Subsections 9(3) to (5) set out who is to preside at a Tribunal meeting and how a meeting is to be conducted.

 

Item 6 - Subsection 9(4)

113.   This item amends subsection 9(4) of the SRC Act to insert a reference to subsection 9(3B).  This amendment is necessary to rectify a drafting error when subsection 9(3B) was inserted by the Retirement Savings Accounts (Consequential Amendments) Act 1997.   Subsection 9(4) provides that the conduct of a Tribunal meeting is to be in accordance with procedural rules established by the Chairperson.

 

Item 7 - Subsection 14(1A)

114.   This item amends subsection 14(1A) of the SRC Act.

115.   Section 14A of the SRC Act was inserted by the Superannuation Industry (Supervision) Legislation Amendment Act 1995 (Act No. 144 of 1995) to enable complaints to be made to the SCT that the decision of a trustee to admit a person as a member of a ‘life policy fund’ was unfair or unreasonable.  A ‘life policy fund’ is defined in subsection 3(2) as a regulated superannuation fund where the trustee maintains, in relation to at least some of the members of the fund, life policies covering those members.

116.   Section 14A enables a person who has, or claims to have, an interest in a life policy fund, either as a member of the fund who is covered by a life policy maintained by the trustee or as a person claiming through such a member, to complain to the SCT that the decision of the trustee to admit the person to the fund was unfair or unreasonable.

117.   Section 14 of the SRC Act enables complaints to be made to the SCT about decisions of trustees other than decisions to admit persons to life policy funds.  Complaints made under section 14 are subject to a more limited range of remedies, and complaints that can be made under section 14A are expressly excluded from section 14.

118.   The interaction of section 14 of the SRC Act and new section 14A has resulted in the inadvertent exclusion of certain complaints from the jurisdiction of the SCT that were able to be made prior to December 1995.  The exclusion of complaints about decisions of trustees to admit persons as members of life policy funds from section 14 in subsection 14(1A) is too wide and precludes the two following types of complaints from being made under either section 14 or 14A.

119.   First, where a person is a member of a life policy fund but is not covered by a life policy that person cannot complain under section 14A of the SRC Act, while subsection 14(1A) excludes all complaints concerning the decision of a trustee to admit a person to a life policy fund, even when that person is not covered by a life policy.

120.   Second, the interaction of the wording of the transitional provisions, subsections 15D(2) and (3), and the exclusion provision in subsection 14(1A), has resulted in the unintended consequence of precluding complaints being made about trustee decisions to admit persons to life policy funds made prior to 12 December 1995 under either section 14 or 14A of the SRC Act.

121.   New subsection 14(1A) enables complaints to be made about trustee decisions to admit a person to a life policy fund and where the trustee decision to admit a person to a life policy fund was made prior to 12 December 1995.

 

Item 8 - Subsection 24A(1)

122.   This item amends subsection 24A(1) to insert the words ‘after reasonable inquiry’ after the word ‘believes’.  Section 24A sets out notification procedures a trustee, insurer or RSA provider must follow regarding the payment of death benefits.  Subsection 24A(1) requires a trustee who has been informed by the SCT that a complaint has been lodged in respect of its decision about the payment or proposed payment of a death benefit to notify all persons (other than the complainant) whom they believe may have an interest in the outcome of the complaint. 

123.   The insertion of the words ‘after reasonable inquiry’ limits the obligation on the trustee to ascertain the persons who may have an interest in the outcome of a complaint.

 

Item 9 - Subsection 24A(1) (penalty)

124.   This item repeals the penalty in subsection 24A(1).  The penalty of imprisonment for one year may have had the effect of making trustees overly cautious in respect of death benefit payments as well as discouraging persons from becoming trustees.  A penalty of 50 penalty units is inserted by item 16.

 

Item 10 - Subsection 24A(2)

125.   This item amends subsection 24A(2) to insert the words ‘after reasonable inquiry’ after the word ‘believes’.  This amendment is intended to clarify the extent of an insurer’s duty to notify all persons (other than the complainant) whom the insurer believes may have an interest in the outcome of the complaint under section 15B of the SRC Act.

126.   The insertion of the words ‘after reasonable inquiry’ limits the obligation on insurers to ascertain the persons who may have an interest in the outcome of a complaint.

 

Item 11 - Subsection 24A(2) (penalty)

127.   This item repeals the penalty in subsection 24A(2).  A penalty of 50 penalty units is inserted by item 16.

 

Item 12 - Subsection 24A(2A)

128.   This item amends subsection 24A(2A) to insert the words ‘after reasonable inquiry’ after the word ‘believes’.  This amendment is intended to clarify the extent of an RSA provider’s duty to notify all persons (other than the complainant) whom the RSA provider believes may have an interest in the outcome of a complaint under section 15F of the SRC Act.

129.   The insertion of the words ‘after reasonable inquiry’ limits the obligation on RSA providers to ascertain the persons who may have an interest in the outcome of a complaint.

 

Item 13 - Subsection 24A(2A) (penalty)

130.   This item repeals the penalty in subsection 24A(2A).  A penalty of 50 penalty units is inserted by item 16.

 

Item 14 - Subsection 24A(2B)

131.   This item amends subsection 24A(2B) to insert the words ‘after reasonable inquiry’ after the word ‘believes’.  This amendment is intended to clarify the extent of the insurer’s duty to notify all persons (other than the complainant) whom the insurer respectively believes may have an interest in the outcome of the complaint under section 15J of the SRC Act.

132.   The insertion of the words ‘after reasonable inquiry’ limits the obligation on insurers to ascertain the persons who may have an interest in the outcome of a complaint.

 

Item 15 - Subsection 24A(2B) (penalty)

133.   This item repeals the penalty in subsection 24A(2B).  A new lower penalty of 50 penalty units is inserted by item 16.

 

Item 16 - At the end of section 24A

134.   This item inserts a penalty of 50 penalty units for a breach of subsection 24A(1), 24A(2), 24A(2A) or 24A(2B) and provides that it is necessary to prove that a failure to comply with the subsections was intentional or reckless.

135.   Previously, to attract the penalty of imprisonment for one year it was not necessary to prove that a breach of the section was intentional.

 



Item 17 - Subsection 37A(4)

136.   This item amends subsection 37A(4) of the SRC Act.  Section 37A of the SRC Act sets out the SCT’s powers when reviewing a complaint made under section 14A that the decision of a trustee to admit a person to a life policy fund is unfair or unreasonable.  In particular, subsection 37A(2) of the SRC Act sets out the powers of the SCT in relation to a decision of a trustee to admit a person to a life policy fund, for example, varying the trustee’s decision.  Subsection 37A(3) sets out the powers of the SCT in relation to a life policy, for example, the SCT can set aside the policy and/or require monies paid under the policy to be repaid with interest.  Subsection 37A(4) sets out the remedies in relation to the fund, for example, cancellation of membership or varying the governing rules of the fund.

137.   The grant of a remedy under section 37A(4) is conditional upon the grant of a remedy under subsection 37A(3).  This may restrict the effectiveness of an SCT determination where, for example, the complaint relates to a right under the governing rules of the fund which is not provided for by the policy.  The SCT is not able to vary the governing rules or cancel membership, because no action will have been taken under subsection 37A(3) in respect of the policy.

138.   This amendment provides that the grant of a remedy under subsection 37A(4) is not contingent upon the grant of a remedy under subsection 37A(3).

 

Item 18 - At the end of subsection 63(2)

139.   This item inserts a penalty of 10 penalty units at the end of subsection 63(2).  The penalty of 10 penalty units was previously inserted at the end of section 63.  This amendment is intended to make clear the applicable penalty for subsection 63(2).

 

Item 19 - Paragraph 63(3)(a)

140.   This item amends paragraph 63(3)(a) to remove the words ‘if requested by the Commissioner to do so’.  Paragraph 63(3)(a) currently only allows the SCT to provide information to the Insurance and Superannuation Commissioner where the Commissioner requests information.  This amendment enables the SCT to provide information to the Commissioner on request or when it considers it necessary.

 

Item 20 - Subsection 63(3B)

141.   This item repeals subsection 63(3B) and substitutes a new subsection 63(3B) into the SRC Act.  Subsection 63(3B) prohibits the disclosure of personal information relating to an individual to another complaint-handling body unless the individual has consented in writing to the disclosure.  Prior to this amendment, a breach could occur without having to prove that the breach occurred intentionally or recklessly.

 

Item 21 - Subsection 63(5) (penalty)

142.   This item repeals the penalty for breach of subsection 63(2).  The penalty for subsection 63(2) has been inserted into subsection 63(2) by item 18 above.