Commonwealth Numbered Regulations - Explanatory Statements

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OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1992 NO.387

EXPLANATORY STATEMENT

STATUTORY RULES 1992 No. 387

ISSUED BY THE AUTHORITY OF THE TREASURER

OCCUPATIONAL SUPERANNUATION STANDARDS ACT 1987

OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT)

The Occupational Superannuation Standards Act 1987 (the Act) provides operating standards and other relevant conditions with which superannuation funds, approved deposit funds and pooled superannuation trusts are required to comply in order to be eligible for taxation concessions under the Income Tax Assessment Act 1936.

Section 22 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

Section 7 of the Act provides that the Regulations may prescribe standards applicable to the operation of superannuation funds which, among other things, relate to the disclosure of information to members of superannuation funds.

Regulations made to date prescribe the operational standards with which funds and trusts must comply. They are called the occupational Superannuation standards Regulations (the Principal Regulations).

These Regulations amend the Principal Regulations by introducing transitional provisions applying to the period commencing 1 July 1992 and ending 31 December 1992 in relation to certain new disclosure requirements which were introduced by Statutory Rules No. 224 of 1992, as gazetted on 30 June 1992 and effective from 1 July 1992.

The transitional provisions ensure that, where funds have not been able to meet some of the new reporting requirements because there was insufficient time between gazettal and when those requirements first had to be met, additional time will be allowed to enable funds to extract the required information from their records and for appropriate systems to be established.

The requirements-imposed under Statutory Rules No. 224 provided for disclosure to fund members of information additional to that previously required and were a recognition of both the need to make trustees more accountable to fund members and the critical role that an informed membership has to play in the superannuation supervisory framework.

Much of the new information to be disclosed will not have to be prepared until the end of the 1992/93 financial year, for example, the additional information to be disclosed annually on investment objectives and strategies relates only to income years ending on or after 30 June 1993.

However, in the case of the new requirements for disclosure of information to prospective members and members on leaving a fund, superannuation funds have found it difficult to introduce administrative systems to comply with these particular requirements.

To overcome these difficulties it has been necessary to provide, as a transitional arrangement, additional time in which administrative procedures can be developed and information provided to prospective members and members on leaving a fund.

The provision of additional time for the disclosure of this information as a transitional arrangement accommodates the practical difficulties being encountered by the industry while ensuring that superannuation fund members are provided with important information about their benefits and the administration of the fund, thereby improving the accountability of fund trustees and managers to fund members.

Details of the provisions of the these Regulations together with an explanation of their effect on the Principal Regulations are provided in the Attachment to this memorandum.

The Regulations will be taken to have commenced on 1 July 1992.

With regard to subsection 48(2) of the Acts Interpretation Act 1901, while the proposed regulations are expressed to take effect from a date before the date of notification, these Regulations will not adversely affect the rights of any person existing at the date of notification nor impose liabilities on any person in respect of anything done before the date of notification.

ATTACHMENT

DETAILS OF THE REGULATIONS TO AMEND THE OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS

DETAILS OF THE REGULATIONS

Details of the regulations are as follows:

Subregulation 1.1 shows the date of commencement of the amendments, which is 1 July 1992.

Subregulation 2.1 provides that the Occupational Superannuation Standards Regulations are amended as per these Regulations.

Subregulation 3.1 inserts a new regulation 18DA.

Subregulation 18DA(1) restricts the application of regulation 18DA to the period commencing on 1 July 1992 and ending on 31 December 1992.

Subregulation 18DA(2) provides that if a fund does not satisfy a standard prescribed by paragraphs 18E(2)(b), 18E(3)(d) or 18E(3)(f) in relation to the provision of information about benefits and the administration of the fund to a prospective member the fund is taken to have satisfied the standard if it provides such information to the person at the earliest practicable time after he or she becomes a member.

Subregulation 18DA(3) provides for consequential amendments to give effect to subregulation 18DA(2).

Subregulation 18DA(4) provides that information to be provided to members in accordance with subregulation 18DA(2) may be provided after 31 December 1992 if that is the earliest practicable time after the member has joined the fund.

Subregulation 18DA(5) provides that an advice given under regulation 18F to a member who leaves a fund before 1 January. 1993 does not have to include information required under paragraph 18F(c) in respect to death benefits.

Subregulation 18DA(6) provides that information given to a member who leaves a fund before 1 January 1993 need not include information on the level of fees and charges deducted from the member's account.

Subregulation 4.1 provides that a written declaration that information has been provided in accordance with the Regulations need not be obtained from a prospective member until 1 January 1993.

EFFECT OF THE REGULATIONS ON THE PRINCIPAL REGULATIONS

The effect of the regulations on the operation of the Principal Regulations is detailed below. All of the Principal Regulations referred to below took effect from 1 July 1992.

Paragraph 18E(2)(b) of the Principal Regulations requires trustees of non-employer sponsored funds to advise a prospective member in writing of:

•       any benefits the prospective member would be entitled to on joining the fund;

•       the method of determining that entitlement; and

•       any conditions relating to those benefits.

The amendment means that for the period 1 July 1992 to 31 December 1992 this standard will be met if the fund provides the member with the relevant information at the earliest practicable time after he or she joins the fund.

Paragraph 18E(3)(d) of the Principal Regulations applies to non-employer sponsored funds which are not defined benefit funds or which are defined benefit funds but accumulation accounts are kept in the names of members. It requires the trustees of such funds to give to prospective members a written statement, in respect of the 3 preceding years of income of the fund, detailing the rate of allotment of earnings (or in certain cases the notional rate of allotment) to the accounts of the class of members to which the prospective member would belong on joining the fund.

The amendment means that for the period 1 July 1992 to 31 December 1992 this standard will be met if the fund provides the member with the relevant information at the earliest practicable time after he or she joins the fund.

Paragraph 18E(3)(f) of the Principal Regulations applies to non-employer sponsored funds which make offers or invitations which are excluded offers or excluded invitations for the purposes of subsection 1018(1) of the Corporations Law. It requires the trustees of such funds to give to a prospective member information on:

•       the name and address of any person or body having authority to manage, or participate in the management of the fund;

•       the name and address of any person or body other than the trustee who is participating in the management of the fund, and the nature of the relationship between that person and the trustee and any other person who has been so appointed;

•       a summary of the principal features of the fund; and

•       the manner in which a benefit would be calculated on withdrawal from the fund.

The amendment means that for the period 1 July 1992 to 31 December 1992 this standard will be met if the fund provides the member with the relevant information at the earliest practicable time after he or she joins the fund.

With regard to paragraphs 18E(2)(b), 18E(3)(d) and 18E(3)(f) the earliest practicable time may be a time after 31 December 1992.

Regulation 18F of the Principal Regulations sets out the material that is to be contained in a written statement to be given to a person who ceases to be a member of a fund. Paragraph 18F(c) requires the information to be disclosed to include information on the member's death benefit and advice that the amount of the death benefit entitlement may change as a result of the person ceasing to be a member of the fund.

The amendment means that a failure to disclose information on the member's death benefit as required under paragraph 18F(c) to a member who ceases a fund during the period 1 July 1992 to 31 December 1992 will not constitute a breach of this standard

Paragraph 18F(d) of the Principal Regulations requires members who leave a fund other than because of his or her death, disablement or retirement to be provided with information which, inter alia, includes details of fees, charges or other expenses deducted from the member's account in the income year in which they leave.

The amendment means that a failure to disclose information on fees, charges and expenses as required under paragraph 18F(d) to a member who leaves a fund during the period 1 July 1992 to 31 December 1992 will not constitute a breach of this standard.

Paragraph 18E(3)(b) of the Principal Regulations requires trustees of non-employer sponsored funds with 5 or more members to obtain a written declaration from a prospective member that he or she has been given advice as required under the regulations.

The amendment means that this standard will only have effect in relation to information disclosed, in accordance with the Principal Regulations, on or after 1 January 1993.


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