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Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020

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2019-2020

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of Senator the Hon Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology)

 

 



Table of contents

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

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

Chapter 1 ........... Reuniting More Superannuation.................................... 5

Chapter 2 ........... Statement of Compatibility with Human Rights.......... 15

 

 



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

Abbreviation

Definition

APRA

Australian Prudential Regulation Authority

ATO

Australian Taxation Office

Bill

Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020

Commissioner

Commissioner of Taxation

RSA Act

Retirement Savings Accounts Act 1997

SIS Act

Superannuation Industry (Supervision) Act 1993

SUMLM Act

Superannuation (Unclaimed Money and Lost Members) Act 1999

 

 



Reuniting More Superannuation

This Bill amends the SIS Act , RSA Act and SUMLM Act, to facilitate the closure of eligible rollover funds by 30 June 2021 and allow the Commissioner to reunite amounts he or she receives from eligible rollover funds with a member’s active account.  

Date of effect The amendments in this Bill commence the day after Royal Assent.

Proposal announced This Bill fully implements the measure Superannuation - facilitating closure of eligible rollover funds from the 2019-20 MYEFO.

Financial impact This measure is estimated to have a gain to the budget of $143.0 million in fiscal balance terms over the forward estimates period. In underlying cash balance terms this measure is estimated to have a gain to the budget of $199.0 million over the forward estimates period. The difference between the fiscal and cash estimates reflects the time taken to reunite amounts with individuals.

Human rights implications :  This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.1-2.14.

Compliance cost impact The amendments in this Bill are consistent with recommendation 5 of the Productivity Commission inquiry into Superannuation: Assessing Efficiency and Competitiveness and are estimated to have a minor regulatory impact on business and individuals.

The Superannuation: Assessing Efficiency and Competitiveness inquiry report was certified by the Department of the Treasury as a process and analysis equivalent to a Regulation Impact Statement.

The Superannuation: Assessing Efficiency and Competitiveness inquiry report can be found at this link:

https://www.pc.gov.au/inquiries/completed/superannuation/assessment/report

 

 



Chapter 1          

Reuniting More Superannuation

Outline of chapter

1.1                   This Bill amends the SIS Act, the RSA Act and the SUMLM Act to facilitate the closure of eligible rollover funds by 30 June 2021 and allow the Commissioner to reunite amounts he or she receives from eligible rollover funds with a member’s active account. 

Context of amendments

1.2                   An eligible rollover fund is a fund that is eligible to receive benefits rolled over from another fund without member consent (see section 243 of the SIS Act).

1.3                   Eligible rollover funds are intended to be a temporary repository for small account balances or for accounts belonging to persons that cannot continue to be a member of a fund (for example, because the member changes employment).

1.4                   Currently, eligible rollover funds are able to transfer accounts to another superannuation fund where the member has an account with that fund and that fund has received a contribution in respect of the member in the last 12 months or through a successor fund transfer.

1.5                   Similar to other superannuation funds, an eligible rollover fund is also required to transfer amounts to the ATO where requirements in the SUMLM Act are met, such as where the amount is unclaimed or is an inactive low-balance account. Conversely, where the requirements in the SUMLM Act are not satisfied, the trustee of a fund cannot transfer the balance to the ATO.  

1.6                   In its report, Superannuation: Assessing Efficiency and Competitiveness the Productivity Commission found that eligible rollover funds have not been successful in reuniting members with lost superannuation. The Productivity Commission recommended the ATO be responsible for holding lost accounts and that APRA oversee the wind-up of eligible rollover funds.

1.7                   Furthermore, the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 , introduced a new requirement for superannuation funds to transfer inactive low-balance accounts to the ATO. Broadly, an inactive low-balance account is a superannuation account where the superannuation provider has not received a contribution in the past 16 months and the balance of the account is less than $6,000. Historically, these accounts may have been transferred to an eligible rollover fund.

Summary of new law

1.8                   This Bill amends the SUMLM Act to require the balance of all accounts less than $6,000 held by eligible rollover funds on 1 June 2020 be transferred to the ATO by 30 June 2020 and the balance of all remaining accounts held by eligible rollover funds be transferred to the ATO by 30 June 2021.

1.9                   An eligible rollover fund can voluntarily report and pay the balance of the account to the ATO from 1 June 2020 up until the day when the statement and payment is due.

1.10               Where the Commissioner receives an amount from an eligible rollover fund, the Commissioner will be able to proactively reunite the amount where the member has an active account.

1.11               The Bill also amends the SIS Act and RSA Act to prevent superannuation funds and retirement savings account providers from transferring new amounts to eligible rollover funds from the later of seven days after Royal Assent or 1 May 2020.

1.12               Further, an application cannot be made to operate a new eligible rollover fund from the day after Royal Assent.

Comparison of key features of new law and current law

New law

Current law

A retirement savings account or superannuation provider can no longer transfer a member’s account balance into an eligible rollover fund.

A retirement savings account provider or superannuation provider can transfer a member’s account balance into an eligible rollover fund.

New law

Current law

New circumstances will be included where an eligible rollover fund must pay amounts to the ATO:

•        for accounts with balances less than $6,000 on 1 June 2020, these must be paid to the ATO by 30 June 2020;

•        all remaining accounts must be paid by 30 June 2021; 



unless the trustee ceases holding the account.

Amounts must be paid to the ATO where at the end of an unclaimed money day:

•        the definition of unclaimed money is met;

•        the definition of lost member account is met; or

•        the definition of inactive low-balance account is met;



unless the trustee ceases holding the account.

 

Amounts must also be paid to the ATO when the amount belongs to a former temporary resident.

Amounts paid to the ATO from an eligible rollover fund will be included in the amounts that the Commissioner can proactively reunite with an active superannuation account.

The Commissioner is able to proactively transfer amounts paid under the SUMLM Act to a person’s active superannuation account.

Detailed explanation of new law

Facilitating the closure of eligible rollover fund accounts

1.13               Currently, an eligible rollover fund must transfer an amount held for a member to the ATO if one of the existing circumstances in the SUMLM Act is met:

•        the amount is unclaimed money as defined in the SUMLM Act;

•        the amount is held on behalf of a former temporary resident who has departed Australia;

•        the account is a lost member account as defined in the SUMLM Act; or

•        the account is an inactive low-balance account - that has been inactive for at least 16 months and has a balance less than $6,000.

1.14               The Bill amends the SUMLM Act to require the trustee of an eligible rollover fund to pay the balance of all accounts held for members to the ATO.

1.15               The Bill does not rely on the existing concepts of unclaimed money day and statement day. Rather on 1 June 2020, the trustee of an eligible rollover fund must identify those accounts held on behalf of members that have a balance less than $6,000 (an ERF low balance account) and those that do not. A statement of those accounts must be provided to the Commissioner.

1.16               For ERF low balance accounts (those accounts held by eligible rollover funds on 1 June 2020 with a balance of less than $6,000) the statement is due by the end of 30 June 2020. [Schedule 1, item 38, subsection 21A(1) of the SUMLM Act]

1.17               For all other accounts held by eligible rollover funds on 1 June 2020 the statement is due by the end of 30 June 2021. [Schedule 1, item 38, subsection 21A(4) of the SUMLM Act]

1.18               If an account balance decreases or increases after 1 June 2020 it does not change the due date for the statement.

Example 1.1 

On 1 June 2020, the trustee of the Rose eligible rollover fund holds an account on behalf of Sophia and the balance of the account is $6,000. The account is not an ERF low balance account.

On 29 June 2020, the trustee of the Rose eligible rollover fund still holds the account and the balance of the account is now $5,950.

Even though the account balance is now less than $6,000, the account was not an ERF low balance account on 1 June 2020 and therefore the statement must be made to the ATO by 30 June 2021 (Note: the fund could still make the statement to the ATO earlier if they choose to).

Example 1.2 

On 1 June 2020, the trustee of the Nyland eligible rollover fund holds an account on behalf of Dorothy and the balance of the account is $5,900. The account is therefore an ERF low balance account.

On 25 June 2020, the trustee of the Nyland eligible rollover fund still holds the account and the balance of the account is $6,200.

Even though the account balance is now above $6,000, the account was an ERF low balance account on 1 June 2020 and the statement must be made to the ATO by 30 June 2020.

1.19               The statement from the superannuation provider must be given in an approved form. The Commissioner can require information about eligible rollover fund accounts and tax file numbers in the form. [Schedule 1, item 44, subsection 25(3) of the SUMLM Act]

1.20               A superannuation provider who becomes aware of a material error or omission, in any information in a statement must give the corrected or omitted information to the Commissioner in the approved form and no later than 30 days after the superannuation provider becomes aware of the error or omission. [Schedule 1, item 38, section 21B of the SUMLM Act]  

1.21               A trustee of an eligible rollover fund is also required to pay the balance of the accounts it holds to the ATO. [Schedule 1, item 38, subsection 21C(1) of the SUMLM Act]

•        For accounts that are ERF low balance accounts, the amount is due and payable by 30 June 2020. [Schedule 1, item 38, subsection 21C(2)(a) of the SUMLM Act]

•         For all other accounts held by eligible rollover funds on 1 June 2020, the amount is due and payable by 30 June 2021. [Schedule 1, item 38, subsection 21C(2)(b) of the SUMLM Act]

1.22               An eligible rollover fund can voluntarily report and pay the balance of the account to the ATO from 1 June 2020 up until the day when the statement and payment is due.

1.23               The trustee of an eligible rollover fund is not required to transfer the balance of an account held on 1 June 2020 to the ATO if the trustee of the eligible rollover fund ceased holding the balance of the account before it is due and payable (or before the day that the trustee of the eligible rollover fund pays amounts to the Commissioner).

Example 1.3  

On 1 June 2020, the trustee of the Coco eligible rollover fund holds an account on behalf of Chloe. The balance of the account is $4,500. The account is an ERF low balance account and payable to the ATO by 30 June 2020.

On 15 June 2020, Chloe directs the trustee of the Coco eligible rollover fund to transfer the balance of the account to the Lola superannuation fund.

The trustee of the Coco eligible rollover fund gives effect to Chloe’s request on 18 June 2020.

The trustee of the Coco eligible rollover fund no longer holds the balance of the account and therefore is no longer required to pay the amount to the ATO by 30 June 2020.  

Example 1.4  

On 1 June 2020, the trustee of the Golden eligible rollover fund held an account on behalf of Miles. The balance of the account is $50,000. The account is due and payable to the ATO by 30 June 2021.

On 15 January 2021, the trustee of the Golden eligible rollover fund initiates a successor fund transfer and transfers the balance of Miles’ account to another superannuation fund.

The trustee of the Golden eligible rollover fund no longer holds the balance of the account and therefore is no longer required to transfer the balance of the account to the ATO by 30 June 2021.

1.24               The Bill also sets out the relationship between amounts held by the trustee of an eligible rollover fund and other circumstances under the SUMLM Act when amounts must be reported and paid to the ATO.

1.25               Balances of accounts held in eligible rollover fund accounts from 1 June 2020 are reportable and payable to the ATO under the eligible rollover fund account provisions inserted by this Bill in priority to other provisions in the SUMLM Act.

Example 1.5  

The trustee of the Petrillo eligible rollover fund held an account on behalf of Blanche on 31 December 2019. This is an unclaimed money day for the purposes of the SUMLM Act. On that day, the account satisfied the meaning of inactive low-balance account under Part 3B of the SUMLM Act. The balance of the account is payable to the ATO in accordance with the inactive low-balance account provisions by the next scheduled statement day - 30 April 2020.

Prior to 30 April 2020, this Bill receives the Royal Assent.

Between Royal Assent and 30 April 2020, no amounts held by eligible rollover funds become reportable and payable under the amendments inserted by this Bill and therefore the balance of the inactive low-balance account remains payable and reportable to the ATO under Part 3B of the SUMLM Act by 30 April 2020.

Example 1.6  

The trustee of the Deveraux eligible rollover fund held an account on behalf of Stanley on 1 June 2020. The balance of the account is $6,200. The account is not an ERF low balance account and therefore must be reported and paid to the ATO by 30 June 2021.

On 31 December 2020 the trustee still holds the account and the balance of the account is now $5,900. This is an unclaimed money day for the purposes of the SUMLM Act. On that day, the account satisfied the meaning of inactive low-balance account under Part 3B of the SUMLM Act.

The requirements under the ERF accounts provisions inserted by this Bill take priority and the account is not payable or reportable to the ATO under Part 3B. Instead the account remains reportable and payable to the ATO by 30 June 2021.

1.26               The Commissioner has the discretion to extend the date when payments and statements are due. In exercising this power the Commissioner may give consideration to the impact on relevant members, the reasonableness of the request (taking into account how long the trustee has had to make appropriate arrangements), and the intent of the policy. For example, a deferral may be appropriate if there is a death benefit claim being processed or there is a claim currently being considered by the Australian Financial Complaints Authority. If the information is not given by the required time, the Taxation Administration Act 1953 provides for offences and administrative penalties.

1.27               Consistent with similar arrangement in the SUMLM Act, the amounts transferred to the ATO by eligible rollover funds will be included on the Unclaimed Money Register to assist people to find their superannuation balances. [Schedule 1, item 27, paragraphs 19(1)(dc) and (dd) of the SUMLM Act]

1.28               Where a family law payment split applies to an account, that is part of the member’s account is payable to a non-member spouse, the trustee of the eligible rollover fund must pay the amount to the Commissioner. [Schedule 1, item 38, section 21C(5) of the SUMLM Act]

1.29               A superannuation provider has no further liability for an amount paid to the Commissioner. That is, the former member or beneficiary is unable to seek the balance of the account from the provider. [Schedule 1, item 38, subsection 21C(6) of the SUMLM Act]  

Paying out amounts paid to the Commissioner by eligible rollover funds

1.30               Amounts that have been paid to the Commissioner by an eligible rollover fund must be paid by the Commissioner:

•        to a superannuation fund if directed by the member;

•        to the person’s beneficiaries, if the person has died and the Commissioner is satisfied that the original fund would have paid the amount to the beneficiaries;

•        to the person, if the person has reached eligibility age, the amount is less than $200 or the person has a terminal medical condition within the meaning of the Income Tax Assessment Act 1997; or

•        to a person’s active superannuation account.      

[Schedule 1, items 38 and 43, section 21E and subparagraph 24NA(1)(a)(iia) of the SUMLM Act]

1.31               When the Commissioner makes a payment, the Commissioner must also pay an amount of interest, worked out in accordance with the regulations. [Schedule 1, item 38, subsections 21E(5) and (6) of the SUMLM Act].  

1.32               If an amount was overpaid by the Commissioner, the Commissioner is able to recover that amount from the superannuation provider or the person to whom the overpayment was made. [Schedule 1, item 38, section 21G of the SUMLM Act]

1.33               If a superannuation provider receives an amount in respect of a person but is unable to credit an account held by that person within 28 days, the superannuation provider must return the amount to the Commissioner. [Schedule 1, item 38, section 21H of the SUMLM Act]

1.34               Giving the Commissioner the ability to proactively reunite an amount with a person’s active superannuation account is consistent with other parts of the SUMLM Act. Part 4B, inserted by the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 gives the Commissioner the ability to transfer amounts received in respect of a person into a single active account held by a superannuation provider in respect of the person without needing to be directed by the person.

Application for an interest in an eligible rollover fund

1.35               Currently, a retirement savings account provider or superannuation fund provider can transfer the balance of a member’s benefit to an eligible rollover fund without needing the member’s consent or being directed by the member.

1.36               To do this the retirement savings account provider or the superannuation fund provider applies to the eligible rollover fund to issue an interest in the eligible rollover fund on the member’s behalf.

1.37               From the later of seven days after the Bill receives Royal Assent or 1 May 2020, a retirement savings account provider must not apply to a trustee of an eligible rollover fund, on behalf of the holder of a retirement savings account, for the issue to the holder of a superannuation interest in the eligible rollover fund. [Schedule 1, item 15, subsection 89(2A) of the RSA Act]

1.38               Similarly, from the later of seven days after the Bill receives Royal Assent or 1 May 2020, the trustee of a superannuation fund may not apply for an interest in an eligible rollover fund on behalf of a beneficiary of the fund. [Schedule 1, item 17, subsection 243(2A) of the SIS Act]

1.39               After commencement of this Bill, a trustee of an eligible rollover fund must continue to give effect to a member’s request to rollover or transfer the whole or part of a member’s withdrawal benefit to another superannuation fund or approved deposit fund, an RSA provider or an exempt public sector superannuation scheme where the request is received in accordance with the regulations before 30 June 2021 and the amount has not already been paid to the ATO.

Consequential amendments

1.40               The Income Tax Assessment Act 1997 is amended to provide for the tax treatment of the amounts paid to the Commissioner or by the Commissioner. [Schedule 1, items 1-14, section 301-125, subparagraph

301-225(2)(b)(ia), subsection 307-5(1) (table item 5, column 2 and 3), paragraph

307-120(2)(e), subsections 307-142(1), 307-142(2), and 307-142(3) (after table item 3A), subsection 307-142(3B), 307-300(1), 307-300(2) (method statement, step 1, note),

307-300(3) (after table item 3A), 307-300(3A) (note) and 307-350(2B) of Income Tax Assessment Act 1997]

1.41               The Taxation Administration Act 1953 is amended to provide that the liabilities listed are tax-related liabilities. [Schedule 1, items 46 and 47, subsection 8AAB(4) of the Taxation Administration Act 1953 and subsection 250-10(2) in schedule 1 to the Taxation Administration Act 1953]

1.42               It will not be possible for applications to be made to APRA to operate an eligible rollover fund on or after the Bill commences. [Schedule 1, item 16, subsection 242A(4A) of the SIS Act]



Chapter 2          

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020

2.1                   This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.2                   This Bill amends the SIS Act , the RSA Act and the SUMLM Act to facilitate the closure of eligible rollover funds by 30 June 2021 and allow the Commissioner to reunite amounts it receives from eligible rollover funds with a member’s active account.

2.3                   An eligible rollover fund is a fund that is eligible to receive benefits rolled over from another fund without member consent (see section 243 of the SIS Act).

2.4                   Eligible rollover funds are intended to be a temporary repository for small account balances or accounts belonging to persons that cannot continue to be a member of a fund (for example, because the member changes employment).

2.5                   Currently, eligible rollover funds are able to transfer accounts to another superannuation fund where the member has an account with that fund and that fund has received a contribution in the last 12 months or through a successor fund transfer.

2.6                   Similar to other superannuation funds, an eligible rollover fund is also required to transfer amounts to the ATO where requirements in the SUMLM Act are met, such as where the amount is unclaimed or is an inactive low-balance account.

2.7                   In its report, Superannuation: Assessing Efficiency and Competitiveness the Productivity Commission found eligible rollover funds have not been successful in reuniting members with lost superannuation. The Productivity Commission recommended that the ATO be responsible for holding lost accounts and that APRA oversee the wind-up of eligible rollover funds.

2.8                   Furthermore, the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 , introduced a new requirement for superannuation funds to transfer inactive low-balance accounts to the ATO. Broadly, an inactive low-balance account is a superannuation account where the superannuation provider has not received a contribution in the past 16 months and the balance of the account is less than $6,000. Historically, these accounts may have been transferred to an eligible rollover fund.

2.9                   This Bill amends the SUMLM Act to require the balance of all accounts less than $6,000 held by eligible rollover funds to be transferred to the ATO by 30 June 2020 and the balance of all remaining accounts held by eligible rollover funds to be transferred to the ATO by

30 June 2021.

2.10               An eligible rollover fund is able to transfer amounts it holds to the ATO at any time up to these dates.

2.11               Where the Commissioner receives an amount from an eligible rollover fund, the Commissioner will be able to proactively reunite the amount with the member’s active account.

2.12               The Bill also amends the SIS Act and RSA Act to prevent superannuation funds and retirement savings account providers from transferring new amounts to eligible rollover funds.

Human rights implications

2.13               This Bill does not engage any of the applicable rights or freedoms.

Conclusion

2.14               This Bill is compatible with human rights as it does not raise any human rights issues.