Commonwealth Numbered Regulations - Explanatory Statements

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OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1993 NO. 213

EXPLANATORY STATEMENT

STATUTORY RULES 1993 No. 213

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.

The regulations amend the Occupational Superannuation Standards Regulations (the Regulations) in the light of operational experience since they were introduced. In particular, the amendments seek to make the operational standards under the Regulations more practical and easier to comprehend and apply.

The regulations which have retrospective effect operate to the benefit of those concerned.

The regulations have been developed in consultation with representatives of the superannuation industry, and related professional organisations.

The regulations are described in detail in the attachment.

The regulations commence on the dates specified in regulation 1 of the attachment.

ATTACHMENT

Occupational Superannuation Standards Regulations (Amendment)

Regulation 1 - Commencement

Subregulation 1.1 provides that subregulation 3.1 commenced on 24 December 1992.

Subregulation 1.2 provides that subregulations 9.1 and 9.2 commenced on 1 July 1992.

Subregulation 1.3 provides that subregulation 9.3 commenced on 1 July 1991.

Subregulation 1.4 provides that regulation 10 commenced on 26 June 1991.

Subregulation 1.5 provides that regulation 12 commences on the day section 47 of the Taxation Laws Amendment (Superannuation) Act 1993 commences.

Subregulation 1.6 provides that regulations 13, 14, 15 and 16 commenced on 1 July 1992.

Subregulation 1.7 provides that regulation 19 commenced on 24 December 1992.

The remainder of the Regulations commence on gazettal.

Regulation 2 - Amendment

Subregulation 2.1 provides that the Occupational Superannuation Standards Regulations (the Regulations) are amended as set out in these Regulations.

Regulation 3 - Regulation 3 (interpretation)

Subregulation 3.1 provides an amendment to regulation 3(1) in relation to the definition of 'benefit'. Benefit means a superannuation pension or an annuity, or an amount payable under a superannuation pension or an annuity, and includes an Eligible Termination Payment (ETP).

Subregulation 3.2 inserts a definition of 'issue'. The definition provides that 'issue', in relation to a prospectus, has the meaning given to it by section 9 of the Corporations Law.

Background

Amendments to Regulations which were gazetted on 24 December 1992 changed the definition of 'benefit' from 'a superannuation pension, an annuity or an ETP' to 'a superannuation pension or an annuity or a payment under a superannuation pension or annuity, as the case requires, and in Part 1A, includes an ETP.'

By specifying that 'benefit' includes an ETP in relation to Part 1A, the definition implies that ETPs are excluded from the definition of 'benefit' in other parts of the Regulations. As a result, lump sum payments (being classed as ETPs) are excluded from the notion of 'benefit' except in Part 1A. This was an unforeseen consequence, which occurred from moving the definition of benefit from the Reasonable Benefits Limit (RBL) Section of the Regulations, which will be repealed from 1 July 1994, to the general definition section of the Regulations. It poses difficulties as 'benefit' is used to include lump sum payments throughout the regulations. The amendment restores the original meaning of 'benefit' to include lump sum payments.

A definition of the word 'issue' was needed in the regulations to ensure that there was a clear understanding of the term in relation to the application of regulation 5AAA.

Regulation 4 - Regulation 3E (Meaning of "annuity"- subsection 3 (1) of the Act)

Subregulation 4.1 provides an amendment to regulation 3E in relation to annuities and pensions. A benefit provided by a life assurance company or a registered organisation is taken to be an annuity for the purposes of the Act if it is a benefit that:

(a)        arises under a contract that meets the standards of subregulations (2), (4), (6), (7) or (8); and

(b)       in the case of a benefit purchased on or after the commencement of the regulation - is purchased with the whole or part of a rolled-over amount within the meaning of section 27A of the Income Tax Assessment Act (1936) (the Tax Act).

Background

The Taxation Laws Amendment (Superannuation) Act 1992, which received Royal Assent on 22 December 1992, inserted a number of amendments into the Tax Act and the Act in relation to annuities and pensions.

It was intended that allocated annuities which receive concessional taxation treatment consistent with other superannuation products should be able to be purchased only with rolledover ETPs. However, the amendments to the Tax Act and to the Act did not give effect to this intention and instead allowed them to be purchased with non ETP money.

The regulation amends the definition of an annuity so that it only applies to annuities purchased with rollover of an ETP within the meaning of Section 27A of the Tax Act by including a reference to purchase through the rollover of an ETP in subregulation 31E(1).

Regulation 5 - Regulation 3F (Meaning of "pension" - subsection 3(1) of the Act)

Subregulation 5.1 provides an amendment to regulation 3F (meaning of 'pension' in subsection 3(1) of the Act) to correct a drafting error in the specified date in paragraph 3F(6)(c). The date is to be amended from '30 June 1994' to '1 July 1994'.

Background

The amendment is necessary because the standards set out in subregulation 3F(6) are intended only to apply to pensions which have a commencement date on or after 1 July 1994.

Regulation 6 - Regulation 5AAA (Standards: funds not to invite contributions, etc., unless prospectus registered)

Regulation 6 provides an amendment to regulation 5AAA in relation to prospectus requirements. Subregulation 6.1 provides that the regulation is omitted and new regulations substituted.

The amendment to regulation 5AAA provides, as a superannuation fund standard, that certain funds are not to invite persons to become members of the fund or to begin making contributions in respect of new members unless a prospectus from the fund has been registered by the Commissioner. This standard does not apply to a fund that was, immediately before 22 December 1992, in a class of superannuation funds that was exempt from any requirement under the Corporations Law to lodge a prospectus, or the fund would have been in such a class of superannuation funds if it had been in existence immediately before 22 December 1992, or if the fund invests only in life policies issued by a related life assurance company.

The amendment to regulation 5AAA also clarifies the Commissioner's prospectus registration procedures. Briefly, a prospectus must be registered if the Commissioner is of the opinion that the prospectus complies with the requirements of the applied provisions and does not contain any false or misleading statements or substantial omissions. The Commissioner may register a prospectus that substantially complies with the applied provisions. The Commissioner must notify a superannuation fund that has lodged a prospectus for registration within 14 days whether the prospectus has been registered or not.

If the Commissioner notifies a fund that the prospectus has not been registered, the reason for not doing so must be given. If the Commissioner fails to notify a fund within 14 days, the prospectus is taken to be registered.

A prospectus that was lodged with the Commissioner prior to the commencement of this regulation, which complied with the previous applied provisions, or a prospectus that, immediately before 22 December 1992, had been registered under the Corporations Law, is taken to be registered for the purposes of this regulation.

Regulation 5AAB provides the meaning and interpretation of the applied provisions. The applied provisions are the sections of the Corporations Law (and any associated regulations) listed in the regulation. In the application of the applied provisions references to:

•       the Commissioner is taken to be a reference to the Insurance and Superannuation Commissioner;

•       securities of a corporation is taken to be a reference to the interest of a member in a superannuation fund;

•       the allotment or sale of securities of a corporation is taken to be a reference to a person becoming a member of a superannuation fund;

•       a buyer is taken to be a reference to a person who becomes a member of the superannuation fund.

In all other cases, terms that are used in the applied provisions and are defined in the Corporations Law are taken to have the same meaning as they do in the Corporations Law.

Regulation 5AAC provides, as a superannuation standard, that funds are not to invite persons to become members of the fund or to begin making contributions in respect of new members on the basis of an outdated prospectus. A prospectus is outdated 6 months after it was issued.

Regulation 5AAD provides, as a superannuation standard, that funds are not to invite persons to become members of the fund or to begin making contributions in respect of new members on the basis of a prospectus that the Commissioner has issued a specified notice in respect of that prospectus. The specified notice may be issued if the Commissioner is of the opinion that the prospectus contravenes, in a substantial respect, the requirements of the applied provisions or that it contains a false or misleading statement or a substantial omission. The effect of the notification is that the prospectus should no longer be used. The Commissioner may, if satisfied that the reasons for issuing the notice no longer exist, cancel the notice.

Background

In December 1992 the Australian Securities Commission (ASC) issued without notice, a class order exempting trustees and managers of these funds from registering a prospectus with it. There was a gap in the regulatory process until responsibility was taken up by the ISC in February 1993.

Operational experience has shown that regulation 5AAA required amendment to clarify a number of issues:

It was not clear which superannuation funds were exempt from the requirement to lodge a prospectus. The regulation now clarifies that all funds which were, by operation of sections 66A and 1017 of the Corporations Law, not required to lodge a prospectus with the ASC and superannuation funds which only invest in policies of life insurance issued by a related life assurance company are exempt. The amendment also clarifies that these funds are taken to have been exempt from 24 February 1993.

There was currently no legislative backing for the procedures necessary for the ISC to approve the prospectus as meeting the relevant standards, thereby establishing the date on which the prospectus may be marketed. The regulation establishes these procedures by replacing the requirement for the fund to simply lodge the prospectus with the ISC, with a process of lodging a prospectus which the ISC must then either register or not. The prospectus may be used in the marketplace once the prospectus has been registered.

The amendment also prohibits the allotment or issue of securities to a new member when a prospectus has expired.

The amendment also deletes the applied provision that was intended to enable the Commissioner to issue an order that a prospectus be withdrawn from the market (section 1033 of the Corporations Law) which has been found to be ineffectual, and replaces it with a clear authority for the Commissioner to do so.

Regulation 7 - Regulation SAC (Standards: ages for payment of benefits)

Subregulation 7.1 provides an amendment to regulation 5AC - payment of benefits. Paragraph 5AC(2)(a) is amended by inserting after age 65 the words 'or, if contributions are accepted in accordance with these regulations in respect of the member after the member has reached age 65, at the time those contributions properly cease to be accepted'.

Background

Previously, funds were allowed under subregulation 18B(3) to accept award type contributions made on behalf of members after age 65 where a person is not employed full-time or part-time. However, as regulation 5AC was drafted the funds were unable to retain these contributions. The amendment overcomes this anomaly by allowing funds to retain contributions and only require a payment from a fund, where a person continues working past age 65, when all contributions to that fund in respect of that member have ceased. Therefore, a limited exemption to the general requirement to pay out or start to pay out benefits after age 65, reflecting that compulsory award type contributions may continue after age 65, applies.

Regulation 8 - Regulation 8A (Vesting standard: limitation on increases)

Regulation 8 provides an amendment to Regulation 8A - which is a vesting Standard.

Subregulation 8.1 provides that in paragraph 8A(1) the words 'fund that:' will be substituted with the word 'fund:'.

Subregulation 8.2 provides that in paragraph 8A(1)(a) the word 'that' should be inserted before the words 'is not'.

Subregulation 8.3 provides that in subregulation 8A(2) the words 'of benefits arising' should be substituted with the words 'benefits that arise'.

Subregulations 8A(3) and (4) should be omitted and the following subregulation 8A(3) substituted to provide that 'the rate of increase of benefits vested in a member of a fund must not be such that, if the fund were to be terminated immediately after the vesting of those benefits, the assets of the fund would be insufficient to pay the minimum requisite benefit in respect of the other members of the fund.'.

Background

Regulation 8A sets a minimum funding standard for funds that are not defined benefit funds (which are generally known as defined contribution funds). The effect of this requirement is that a fund cannot distribute earnings to members if that would result in the assets in the fund being insufficient to pay all members the minimum benefit required to be vested by the superannuation fund conditions, if the fund were terminated immediately after the proposed distributions. The requirement, therefore, assists to ensure, through limiting the possibility of a fund having negative reserves, that fund assets can cover benefits even if a substantial proportion of members leave.

The amendment is intended to overcome an inconsistency in the existing wording and to make the regulation simpler to understand.

Regulation 9 - Regulation 9 (Preservation standards)

Subregulation 9.1 provides an amendment to paragraph 9(1)(a) to provide for the deferral of preservation of Superannuation Guarantee (SG) contributions.

Paragraph 9(1)(a) has been reworded to provide 'in relation to each member of a superannuation fund, the amount of any benefits vested in the member in accordance with the standard set out in regulation 8:

(i)       subject to regulation 10, must be preserved if they are employer-financed benefits of a kind referred to in subregulation 8(1A) that:

(A)       arise directly or indirectly from contributions of a kind referred to in paragraphs 8(1A)(a) or (b); and

(B)       accrue on or after 1 July 1994; and

(ii)       must be preserved if they are employer-financed benefits of a kind referred to in subregulation 8(1A) that arise directly or indirectly from contributions of a kind referred to in paragraph 8(1A)(c).

Subregulation 9.2 provides for an amendment of subregulation 9(1B). The words 'other than benefits to which regulation 8 applies' at the end of the subregulation are omitted.

Subregulation 9.3 provides for subregulation 9(4) to be omitted.

Background

It was intended that benefits arising from contributions made as a consequence of the Superannuation Guarantee (SG) arrangements would be preserved from 1 July 1993. The Government has decided to defer the date of commencement of preservation of SG amounts until the start of the new prudential legislation (1 July 1994). To achieve the preservation of SG benefits arising from contributions from 1 July 1994, an amendment to paragraph 9(1)(a) needed to be introduced into the regulations.

The amendment was made retrospective to reflect the deferral of preservation of SG amounts to 1 July 1994. This would be considered advantageous by people who would be able to access their benefits on termination of employment (prior to retirement),

An amendment to subregulation 9(1B) to release from preservation member contributions that only receive a maximum $100 rebate from 1 July 1992 was also required. Prior to 1 July 1992 more substantial tax deductions and rebates were available for certain member contributions to superannuation funds and consequently these contributions were required to be preserved. From 1 July 1992 the previous concessions were replaced with a means tested 10 per cent rebate for $1000 of contributions (giving a maximum rebate of $100). As only minimal rebates are now available for employees' superannuation contributions it was proposed that there should not be a requirement for these contributions and earnings to be preserved on the basis that:

-       only minimal tax concessions on contributions are available;

-       it would be very difficult for funds to distinguish between member contributions that do not receive any tax concession (which are not presently preserved in employer sponsored funds) from contributions which receive a maximum $100 rebate, because to identify these a fund would need to know members' incomes. In addition, if a member contributed more than $1000 the maximum contribution eligible for rebate - funds would need to identify the excess and not preserve it to avoid an inequity with members who do not receive any tax concession on their contributions.

-       these contributions (although not any earnings paid on them) will become unpreserved from 1 July 1996 under the proposed 1996 preservation requirements.

The amendment would be considered equitable by the members and administratively convenient by the funds.

The amendment has retrospective effect from the date when member contributions ceased to attract substantial tax concessions.

The omission of subregulation 9(4) frees from preservation contributions to eligible schemes. During 1991-92 contributions by recognised members to eligible schemes attracted a 25 per cent rebate on contributions up to $3000 (an eligible scheme was one where the average level of employer support other than 'industrial agreement contributions' was less than $1,600). From 1 July 1992 all deductions and rebates, including those relating to member contributions to eligible schemes, were replaced by a $100 rebate. As outlined above, it was proposed that contributions which only receive this rebate not be required to be preserved. While the proposal removes an existing preservation requirement, all undeducted contributions (which includes contributions to eligible schemes) will become unpreserved under the proposed 1996 preservation requirements.

The amendment has retrospective effect as it would be administratively simpler for most funds not to require the preservation of member contributions to eligible schemes which only existed in 1991-92.

Regulation 10 - Regulation 18B (Standards relating to contributions)

Subregulation 10.1 provides for an amendment of paragraph 18B(3)(a) to allow contributions to be accepted from a person up to age 70 in certain circumstances. The amendment to paragraph 18B(3)(a) provides that a fund can accept contributions from a person who 'turned 60 on or before 30 June 1990 and has not turned 70;'.

Background

Prior to an amendment to paragraph 18B(3) in 1991 contributions from a person up to age 70 could be accepted by a superannuation fund, on the proviso that the person was gainfully employed, and was aged at least 60 on 1 July 1990. The transitional conditions allowing fund members over 60 at 1 July 1990 to contribute to a superannuation fund whilst gainfully employed were removed unintentionally during previous regulation amendments. The amendment restores the original intention of the legislation.

Although the amendment has retrospective effect it is to the benefit of members who are able to take advantage of the transitional provisions.

Regulation 11 - Regulation 18Q (Information to be given to an employer-contributor and to the Commissioner)

Regulation 11 provides an amendment to subregulations 18Q(1), (2), (3) & (4) which prescribe information required to be provided to employer contributors and the Commissioner. Existing subregulations 180(1), (2), and (3) are to be substituted with the following:

'(1)       The trustees of a superannuation fund must give, on request, a copy of the current governing rules of the fund to an employer who makes superannuation guarantee contributions to the fund.

(2)       In subregulation (1), 'current governing rules', in relation to a superannuation fund, means the governing rules of the fund as in force on 1 July 1992 or on the day on which the employer first makes superannuation guarantee contributions to the fund, whichever day is the later, and any subsequent amendments to those rules in force on the day of the request.

(3)       The trustees of a superannuation fund in respect of which the Commissioner is satisfied that the fund:

(a)       satisfies the superannuation fund conditions; or

(b)       should be treated as if it satisfied the superannuation fund conditions;

must give, or cause to be given, a statement to that effect, signed by or on behalf of the trustees, to an employer who:

(a)       makes, or is about to make, superannuation guarantee contributions to the fund; and

(b)       has not been given a statement to that effect by the trustee before the commencement of this regulation.

(3A) A statement under subregulation (3) must be given to the employer:

(a)       if the employer made one or more superannuation guarantee contributions before the commencement of this regulation - before or as soon as practicable after the employer makes the first contribution after the commencement of this regulation; or

(b)       in any other case - before or as soon as practicable after the employer makes the first contribution.'

Subregulation 11.2 provides that subregulation 180(4) is amended by inserting the words 'Subject to regulation 18QA' before 'if' in the first line.

Subregulation 11.3 inserts a new subparagraph (7) as follows:

'(7)       In this regulation, 'superannuation guarantee contributions', in relation to a superannuation fund, means contributions to the fund that result in a reduction of the superannuation guarantee charge under the Guarantee Act in respect of one or more members of the fund.'

Background

Subregulations 18Q(1), (2), (3) and (4) were introduced on 1 July 1992 to provide that any employer paying any amount of SG moneys (even if the amount contributed only represented a portion of the employer's total 5G obligation) will have access to a copy of the governing rules of the fund. Operational experience has shown the need for the following amendments:

•       Under subregulation 18Q(1) any employer that contributes to a superannuation fund more than the minimum SG amount may not be provided with a copy of the governing rules of the fund. Subregulation 18Q(1) makes it clear that any employer paying any amount of SG moneys (even if the amount contributed only represented a portion of the employer's total SG obligation) must be provided with a copy of the governing rules of the fund on request.

•       Subregulation 18Q(2) requires that an employer who has been contributing to a superannuation fund before 1 July 1992 and elects to nominate those contributions as SG moneys, must be provided with a copy of the governing rules in operation when their first contribution was made. In some cases this would require a copy of the governing rules that applied since the employer first made contributions to the fund be provided. The intention of this regulation, however, was to require that the trustee provide a copy of the governing rules as in force at 1 July 1992 or at the time the employer first makes a SG contribution to the fund if it is after that date. Subregulation 18Q(2) changes the wording so as to give effect to this intention.

•       Subregulation 18Q(3) requires trustees to provide a statement as to the superannuation fund's compliance every time a new member joins a superannuation fund. This was not the intention of the legislation. It was intended that the statement should only be provided after 1 July 1992 and only at the time the first contribution is made by an employer in respect of a group of employees after that date. Subregulations 18Q(3) and 18Q(3A) give effect to these intentions.

Regulation 12 - New Regulation 118QA

Subregulation 12.1 inserts a new regulation 180A - Notification of breach to employer sponsors: subsection 12(3A) of the Act.

This new regulation prescribes information as required by subsection 12(3A) of the Act in relation to a breach of the superannuation fund conditions as follows:

'(1)       For the purposes of sub-subparagraph 12(3A)(a)(ia) of the Act, a trustee's response to a breach of a superannuation fund condition is covered by this regulation if the trustee causes the breach to be rectified within 30 days after becoming aware of the breach.

(2)       For the purposes of subparagraph 12(3A)(a)(ia) of the Act, the Commissioner may give to the trustee of a superannuation fund written notice requesting the trustee to take all reasonable steps to notify a breach of a superannuation fund condition to all prescribed employer sponsors in relation to the fund.

(3)       For the purposes of subparagraph 12(3A)(a)(ia) of the Act, a prescribed employer sponsor, in relation to a fund, is an employer sponsor who was an employer sponsor in relation to the fund at any time during which a breach of a superannuation fund condition referred to in that subparagraph existed.

(4)       For the purposes of subparagraph 12(3A)(a)(ib) of the Act, the Commissioner may give to the trustee of a superannuation fund a written waiver from the requirements of that subparagraph.

(5)       For the purposes of subparagraph 12(3A)(a)(ib) of the Act, a prescribed employer sponsor, in relation to a fund, is an employer sponsor who was an employer sponsor in relation to the fund at any time during which a breach of a superannuation fund condition referred to in that subparagraph existed.

(6)       For the purposes of subparagraph 12(3A)(a)(ib) of the Act, the specified period is 60 days after the trustee becomes aware of the breach.'.

Background

Section 12(3A) of the Act was amended by Taxation Laws Amendment (Superannuation) Act 1993 to provide that notification to all employer sponsors of a breach by a fund of the superannuation fund conditions would only be required in prescribed circumstances which will be specified in the regulations. Subregulation 18QA means that it will not be a requirement for funds to notify all employer sponsors if a breach is rectified within 30 days. (However, subregulation 18QA(2) allows the Commissioner to require, for example, in the case of repeated breaches, for the trustee to notify employer sponsors.) Subregulation l8QA(4) provides that employers are required to be notified (unless the Commissioner decides otherwise, for example in the case of a minor breach that cannot be rectified quickly) if the breach is not rectified within 30 days.

Subregulation 18QA(6) provides that if the breach is not fixed within 30 days, trustees have 60 days from becoming aware of the breach to notify employers.

The regulations provide that 'employer sponsor' should be prescribed as an employer sponsor who contributed to the fund during any period affected by the breach (for example, if the breach spanned two financial years, employer sponsors in both years should be notified).

These amendments are intended to ensure adequate information to employer sponsors, but not to be unnecessarily burdensome on funds.

Regulation 13 - Regulation 18U (Certificates of contribution and solvency)

Subregulation 13.1 provides that regulation 18U (Certificates of Contribution and Solvency) is omitted.

Regulation 14 - Regulation 18V (Limited certificates to be issued in certain circumstances)

Subregulation 14.1 provides that regulation 18V (Limited certificates to be issued in certain circumstances) is omitted.

Regulation 15 - Regulation 18W (Further certificates: variation of rules or payment to employers)

Subregulation 15.1 provides that regulation 18W (Further certificates: variation of rules or payment to employers) is omitted.

Regulation 16 - Regulation 18X (Contributions to funds not in accordance with certificates)

Subregulation 16.1 provides that regulation 18X (Contributions to funds not in accordance with certificates) is omitted.

Regulation 17 - Regulation 18Y (Financial year 1992-93: special provisions)

Subregulation 17.1 provides that regulation 18Y (Financial year 1992-93: special provisions) is omitted and the following is substituted:

'18Y (Rate of contributions: financial year 1993-94)

(1)       This regulation applies in relation to the financial year beginning on 1 July 1993 to a fund other than a fund the benefits of which are guaranteed by the Commonwealth or by a State or Territory.

(2)       The rate at which contributions are made by an employer to a fund in respect of a member of the fund must be:

(a)       if one or more actuarial investigations into the fund have been made - a rate not less than the rate recommended in the latest actuarial investigation as the minimum rate at which the contributions should be made., or

(b)       if no actuarial investigation into the fund has been made - the rate determined by an actuary to be the rate that would have been recommended by the actuary in accordance with paragraph 17(2)(c) for the purposes of the actuarial report referred to in paragraph 17(1)(b) if an actuarial investigation into the fund had been made.'.

Background (Regulations 13 - 17)

An amendment to Regulations 18U, 18V, 18W, 18X and 18Y - Certificates of Contribution and Solvency.

Regulations 18U, 18V, 18W and 18X deal with Certificates of Contribution and Solvency which apply to defined benefit superannuation funds. It had been the Government's intention that the requirements for certification should apply from 1 July 1993 (or commencement date of funds established after 1 July 1993). Given the complexity of the actuarial arrangements involved, and the deferral of the SIS legislation until 1 July 1994, the Treasurer approved on 6 April 1993 the deferral of the commencement date of the certification requirements until 1 July 1994. Accordingly, it was considered most efficient to repeal these Regulations with retrospective effect from 1 July 1992 and make new regulations under the SIS Bill.

It is not considered that any disadvantageous effects will result from the retrospective repeal of regulations 18U through 18X, inclusive, industry has not, in general, responded to the requirements imposed by these regulations, awaiting clarification of the intended implementation from the ISC. The deferral results in administrative savings for superannuation funds.

It intention of Regulation 18Y will continue (in a new Regulation that will apply for 1993-94) so that defined benefit funds (other than those guaranteed by the Commonwealth or a state or territory) are covered by interim measures, which basically require contributions to be made, in the 1993-94 year, in accordance with the last actuarial investigation of the fund.

Regulation 18 - Regulation 21 (Preservation and portability standards)

Subregulation 18.1 provides an amendment to regulation 21 (Approved Deposit Fund's repayment of preserved moneys) by inserting new subparagraph 21(1)(b)(iii)(BA) as follows:

'(BA) the attainment by the depositor of the age of 65 years;'.

Subregulation 18.2 provides for an insertion in paragraph 21(2)(b). Insert '(BA)' after '(B)'.

Background

Approved Deposit Funds (ADFs) must repay a depositor all deposits held in the ADF on the sixtyfifth anniversary of the depositor's birth (in order to prevent undue tax deferral). However, it is also a requirement that preserved components must not be paid if such a person has not retired from the workforce.

This has lead to an inconsistency where a person has not retired from the workforce on reaching age 65. The intention is that a deposit with an ADF should be paid to a depositor on their sixtyfifth anniversary notwithstanding their employment status at that time. This amendment gives effect to the intention of the legislation.

Regulation 19 - Schedule IIA (Payment limits)

Regulation 19 provides an amendment to Schedule 1A (Payment Limits) to correct an incorrect reference. Subregulation 19.1 provides an amendment to clause 1 of Schedule 1A to provide that '3F(4)(f)' should be replaced with '3F(4)(e)'.

Subregulation 19.2 makes an amendment to clause 2 of Schedule 1A to provide that '3F(4)(f)' should be replaced with '3F(4)(e)'.

Background

The Senate Standing Committee on Regulations and Ordinances has noted a reference error in Schedule 1A of the regulations. The regulations currently refer to '... maximum limits mentioned in paragraph 3E(4)(f) or 3F(4)(f) ...' This is incorrect and this amendment ensures that the clause carries out its original intent and states '... maximum limits mentioned in paragraph 31E(4)(f) or 3F(4)(e) ...'.

Regulation 20 - Application of repealed provisions.

Regulation 20 provides for the application of repealed provisions. Subregulation 20.1 provides that the provisions of regulation 5AAA in force immediately before the commencement of this regulation are taken not to apply and never to have applied to a fund if the fund was, immediately before 22 December 1992, in a class of superannuation funds that was exempt from any requirement under the Corporations Law to lodge a prospectus, or the fund would have been in such a class of superannuation funds if it had been in existence immediately before 22 December 1992, or if the fund invests only in life policies issued by a related life assurance company.

Background

Regulation 5AAA, prior to this amendment, was not clear in relation to which funds were required to lodge a prospectus with the ISC. The amendment is to clarify that those funds that were in a particular class of superannuation fund that was not required to lodge a prospectus with the Australian Securities Commission, are also exempt from any requirement to lodge a prospectus with the ISC and have been exempt since 24 February 1993.


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