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SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS (AMENDMENT) 1994 NO. 189
EXPLANATORY STATEMENTSTATUTORY RULES 1994 No. 189
ISSUED BY THE AUTHORITY OF THE TREASURER
Superannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Regulations (Amendment)
The Superannuation Industry (Supervision) Act 1993 (the Act) provides for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision by the Insurance and Superannuation Commissioner.
The basis for supervision is that those funds and trusts are subject to regulation under the Commonwealth's powers with respect to corporations or pensions (for example, because the trustee is a corporation). In return, the supervised funds and trusts may become eligible for concessional taxation treatment under the Income Tax Assessment Act 1936.
Section 353 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.
The regulations are described in detail in the attachment. They amend the Superannuation Industry (Supervision) Regulations (the Principal Regulations) by:
- prescribing the types of benefits which will be taken, for the purposes of the Act, to be annuities and pensions; and
- prescribing which requirements of the Act, the Principal Regulations and the Corporations Law will apply to entities which retain a two party responsible entity structure, and also which requirements will apply to which party; and
- making a number of miscellaneous amendments to the Principal Regulations aimed at enhancing the system of prudential supervision and clarifying the operation of the Principal Regulations.
The regulations have been developed in consultation with representatives of the superannuation industry.
The regulations which prescribe the types of benefits which will be taken to be annuities and pensions will commence on 1 July 1994. The remainder of the regulations will commence on gazettal though will not generally be effective until 1 July 1994.
ATTACHMENT
Superannuation Industry (Supervision) Regulations (Amendment)
Regulation 1 - Commencement
Subregulation 1.1 provides that regulation 4 (which prescribes the types of benefits which will be considered to be annuities and pensions for the purposes of the Act) commences on 1 July 1994.
The remainder of the proposed regulations will commence on gazettal.
Regulation 2 - Amendment
Regulation 2 provides that the Superannuation Industry (Supervision) Regulations (the Principal Regulations) are amended as set out in these Regulations.
Regulation 3 - Regulation 1.03. (Interpretation)
Subregulation 3.1 amends regulation 1.03 of the Principal Regulations by:
- defining 'commencement day', in relation to a pension or annuity, as the first day of the period to which the first payment of the pension or annuity relates; and
- amending the definition of 'member' so that it covers unitholders in a pooled superannuation trust.
Regulation 4 - New Part 1A
Subregulation 4.1 inserts a new Part (Part 1A - Annuities and Pensions') into the Principal Regulations.
Background
Section 10 of the Act defines the terms 'annuity' and 'pension' as including certain types of benefits which are taken under the regulations to be annuities or pensions. The new Part 1A prescribes, for the purposes of section 10, the types of benefits which will be taken to be annuities or pensions. If a particular type of benefit is taken to be an 'annuity' or 'pension' then it will be subject to concessional tax treatment under the Income Tax Assessment Act 1936.
Prior to the introduction of the Act the Occupational Superannuation Standards Act 1987 and Regulations (the OSS Act and Regulations) was the principal legislation governing superannuation. Like section 10 of the Act, the OSS Act defined the terms 'annuity' and 'pension' by reference to the meaning of those terms in regulations. The relevant OSS Regulations were 3E, 3F and 3G. Schedule 1A and Schedule 3 of the OSS Regulations were also relevant.
The new Part 1A of the Principal Regulations is, for most intents and purposes, simply a copy of the existing provisions in OSS Regulations 3E, 3F and 3G. Schedules 1A and 3 of the OSS Regulations are also replicated in the Principal Regulations, as new Schedules 1A and 1B respectively.
The only real change that has been made, in transferring the existing OSS Regulations on annuities and pensions to the Principal Regulations, is that the requirements of OSS Regulations 3E(2)(f)(iii) and 3F(2)(e)(iii) have not been replicated in the Principal Regulations as they are no longer relevant. For all other intents and purposes the new Part 1A of the Principal Regulations makes no changes to existing law.
The new Part 1A will comprise two divisions.
Division 1A.1 consists of new regulations 1.05, 1.06 and 1.07. Division 1A.2 consists of new regulation 1.08.
New Regulation 1.05
New regulation 1.05 prescribes the types of benefits which would be considered annuities for the purposes of the Act and, subject to the change outlined above regarding OSS Regulation 3E(2)(f)(iii), it continues the effect of existing OSS Regulation 3E.
New regulation 1.05 recognises, as did OSS Regulation 3E, five types of annuities.
Defined annuities payable for life
The first of these five types is covered by new subregulation 1.05(2). A benefit that complies with the standards set out in this subregulation will be considered to be an annuity. The principal features of these types of benefits are that payments are defined, the benefit must generally be payable for life, there are minimum indexation requirements and commutation is restricted. There are also other standards to be complied with relating to conversion of the purchase price into annuity income, residual capital value, reversion and transfer of the annuity and the use of the annuity as security for borrowing.
Allocated annuities
The second of the five types is covered by new subregulation 1.05(4). A benefit that complies with the standards set out in this subregulation will also be considered to be an annuity. The principal feature of these types of benefits is that payments are not defined. These types of benefits are commonly known as allocated annuities and the owner of the annuity can choose how much to draw down each year, subject to certain restrictions. Other standards that apply to these products relate to transfer of the annuity and the use of the annuity as security for borrowing. Payments under these types of annuities are subject to maximum and minimum limits which are prescribed under new Schedule 1A (which is inserted into the Principal Regulations by regulation 39 of these Regulations).
Defined annuities
The third category is covered by new subregulation 1.05(6). A benefit that complies with the standards set out in this subregulation will also be considered to be an annuity. The principal features of these types of benefits is that payments are defined and there are standards relating to reversion and transfer of the annuity and the use of the annuity as security for borrowing. There are also requirements that payments must not vary from year to year other than within prescribed limits and that the purchase price must be converted into income.
Defined annuities with bonus payments
The fourth category is covered by new subregulation 1.05(7). A benefit that complies with the standards set out in this subregulation will also be considered to be an annuity. The annuities in this category have two components - a defined component which must comply with the standards for defined annuities provided for in subregulation 1.05(6) and a bonus component. Certain restrictions apply to the bonus component such as the requirement that the bonus payments must not generally account for mote than 50% of the total annuity payments.
Annuities with defined and allocated components
The final category is covered by new subregulation 1.05(8). A benefit that complies with the standards set out in this subregulation will also be considered to be an annuity. The annuities in this category combine features of the defined annuities covered in subregulation 1.05(6) and the allocated annuities covered in subregulation 1.05(4). The standards (as outlined above) relating to defined annuities apply to the defined component of these mixed annuities and the standards relating to allocated annuities apply to the allocated component.
New Regulation 1.06
New regulation 1.06 prescribes the types of benefits which would be considered pensions for the purposes of the Act and, subject to the change outlined earlier regarding OSS Regulation 3F(2)(e)(iii), it continues the effect of existing OSS Regulation 3F.
New regulation 1.06 recognises, as did OSS Regulation 3F, three types of pensions.
Defined pensions payable for life
The first of the three types is covered by new subregulation 1.06(2). A benefit that complies with the standards set out in this subregulation will be considered to be a pension. The principal features of these types of benefits are that payments are defined, the benefit must generally be payable for life, there are minimum indexation requirements and commutation is restricted. There are also other standards to be complied with relating to residual capital value, reversion and transfer of the pension and the use of the pension as security for borrowing.
Allocated pensions
The second type is covered by new subregulation 1.06(4). A benefit that complies with the standards set out in this subregulation will also be considered to be a pension. The principal feature of these types of benefits is that payments are not defined. These types of benefits are commonly known as allocated pensions and the owner of the pension can choose how much to draw down each year, subject to certain restrictions. Other standards that apply to these products relate to transfer of the pension and the use of the pension as security for borrowing. Payments under these types of pensions are subject to maximum and minimum limits which are prescribed under new Schedule 1A (which is inserted into the Principal Regulations by regulation 39 of these Regulations).
Defined pensions
The third category is covered by new subregulation 1.06(6). A benefit that complies with the standards set out in this subregulation will also be considered to be a pension. The principal features of these types of benefits is that payments are defined and there are standards relating to reversion and transfer of the pension and the use of the pension as security for borrowing. There are also restrictions on the manner of commutation and requirements that payments must not vary from to year other than within prescribed limits.
New Regulation 1.07
New regulation 1.07 continues the effect of existing OSS Regulation 3G and allows for annuities and pension to be suspended while a beneficiary holds paid public office.
New Regulation 1.08
Division 1A.2 consists of new regulation 1.08. New regulation 1.08 continues the effect of existing OSS Regulation 18A. The new regulation provides that a regulated superannuation fund must not, without the approval of the Commissioner, use a factor for converting a pension to a lump-sum if that factor is greater than the pension valuation factor that would apply to the pension under new Schedule 1B (which is inserted into the Principal Regulations by regulation 39 of these Regulations). This requirement does not apply if the pension is 'one that complies with the standards of new subregulation 1.06(2).
As the regulation has the same effect as existing OSS Regulation 18A it does not change existing law.
Regulation 5 - Regulation 2.03 (Duties and requirements arising under this Part)
Regulation 5 corrects a minor typographical error in the Principal Regulations.
Regulation 6 - Regulation 3.10 (Commission and Brokerage)
Regulation 6 amends paragraph 3.10(2)(d) of the Principal Regulations to clarify that, where commission or brokerage is paid, the amount or rate of proposed payment of commission or brokerage must be provided to persons before they are issued an interest in a public offer entity.
Regulation 7 - Regulation 4.03 (Trustee of employer-sponsored fund - prescribed direction by employer-sponsor or associate of employer-sponsor)
Subregulation 7.1 clarifies that regulation 4.03 of the Principal Regulations does not apply to excluded funds.
Section 58 of the Act and Principal Regulation 4.03 currently provide, amongst other things, that the governing rules of a superannuation entity (other than an excluded fund) must not permit the trustee of the fund to be subject to a direction of an employer-sponsor (or associate) that would adversely affect members' rights to accrued benefits.
Subregulation 7.2 replaces this requirement with a broader test (which encompasses the current requirement) that the direction must not be one that would require the trustee to contravene the Act (other than section 55) or Principal Regulations.
Subregulation 7.3 makes a minor typographical adjustment to paragraph 4.03(1)(c) of the Principal Regulations.
Regulation 8 - Regulation 4.04 (Governing rules of a superannuation entity - prescribed exercise of discretion by non-trustee)
Subregulation 8.1 makes a minor typographical amendment to the Principal Regulations.
Section 59 of the Act and Principal Regulation 4.04 currently provide, amongst other things, that the governing rules of an employer-sponsored fund (other than an excluded fund) must not permit a discretion by a non-trustee to be exercised, without trustee consent, if it would adversely affect members' rights to accrued benefits.
Subregulation 8.2 replaces this requirement with a broader test (which encompasses the current requirement) that the exercise of discretion must not be of a kind that, had the person exercising the discretion been the trustee, it would have resulted in the Act (other than section 55) or Principal Regulations being breached.
Subregulation 8.3 makes a minor typographical adjustment to paragraph 4.04(1)(c) of the Principal Regulations.
Regulation 9 - Regulation 4.05 (Governing rules of a superannuation entity - prescribed circumstances of amendment
Section 60 of the Act and Principal Regulation 4.05 currently provide, amongst other things, that the governing rules of an employer-sponsored fund (other than an excluded fund) must not permit those rules to be amended, without trustee consent, if it would adversely affect members' rights to accrued benefits.
Subregulation 9.1 replaces this requirement with a broader test (encompassing the current requirement) that the amendment must not be of a kind that, had the person making the amendment been the trustee, it would have resulted in the Act (other than section 55) or Principal Regulations being breached.
Subregulation 9.2 makes a minor typographical adjustment to paragraph 4.05(1)(c) of the Principal Regulations.
Regulation 10 - Regulation 4.09 (Operating standard - investment strategy)
Subregulation 10.1 corrects a typographical error in the Principal Regulations.
Regulation 11 - Regulation 5.01 (Interpretation)
Subregulation 11.1 amends the definition of 'deferred annuity' in Principal Regulation 5.01(1) to provide that the provider of the annuity must not recognise, or in any way encourage or sanction the giving of a charge over, or in relation to, the annuity.
Subregulations 11.2 and 11.3 amend the definition of 'superannuation system' to include 'exempt public sector superannuation schemes'.
Regulation 12 - New regulation 5.01A
Regulation 12 inserts a new regulation (regulation 5.01A) which provides that certain requirements in relation to costs and investment return are operating standards for the purposes of sections 31 and 32 of the Act.
Regulation 13 - Regulation 5.03 (Investment returns)
Regulation 13 clarifies the effect of regulation 12 on Principal Regulation 5.03(2).
Regulation 14 - Regulation 6.01 (Interpretation)
Subregulations 14.1, 14.2 and 14.4 make it clear, consistent with existing ISC guidelines on the early release of benefits, that the financial hardship of the member must be severe financial hardship.
Subregulation 14.2 also makes it clear that in-specie payments are permissible except when payment is made in accordance with a reference to "lump sum" in a cashing restriction (as set out in Schedule One of the Principal Regulations) eg. payment on the ground of severe financial hardship.
Subregulation 14.3 inserts a new subregulation (subregulation 6.01(3A)) which provides that certain requirements in relation to the changeover day are operating standards,
Regulation 15 - Regulation 6.06 (Effect of rollover or transfer on preserved benefits)
Regulation 15 amends Principal Regulation 6.06 to provide that benefits which were preserved benefits in the source from which they were received continue to be preserved benefits in the transferee fund.
Regulation 16 - Regulation 6.08 (Restricted non-preserved benefits in regulated superannuation funds - on and after the changeover day)
Regulation 16 amends Principal Regulation 6,08 so that subregulations 6.08(2) and (3) apply subject to Subdivision 6.1.5 as well as Principal Regulation 6.12.
Regulation 17 - Regulation 6.10 (Unrestricted non-preserved benefits - regulated superannuation funds)
Subregulations 17.1 and 17.2 amend paragraphs 6.10(b) and (c) to restructure regulation 6.10 and to provide that unrestricted non-preserved benefits in a regulated superannuation fund include unrestricted non-preserved benefits received from any source and certain eligible termination payments (eg. employer ETP's) received by the fund.
Regulation 18 - Regulation 6.11 (Unrestricted non-preserved benefits-approved deposit funds)
Subregulations 18.1 and 18.2 amend paragraphs 6.11(c) and (d) to restructure regulation 6.11 and to provide that unrestricted non-preserved benefits in an approved deposit fund include unrestricted nonpreserved benefits received from any source and certain eligible termination payments (eg. employer ETP's) received by the fund.
Regulation 19 - Regulation 6.13 (Effect of rollover or transfer on unrestricted non-preserved benefits)
Regulation 19 amends Principal Regulation 6.13 to provide that subject to Subdivision 6.1.5, benefits which were unrestricted non-preserved benefits in the source from which they were received continue to be unrestricted non-preserved benefits in the transferee fund.
Regulation 20 - Regulation 6.20 (Voluntary chasing of unrestricted benefits in regulated superannuation funds)
Regulation 20 amends Principal Regulation 6.20 to correct an incorrect cross-reference in the Principal Regulations.
Regulation 21 - Regulation 6.21 (Compulsory chasing of benefits in superannuation funds)
Regulation 21 amends Principal Regulation 6.21 to allow for benefits to be cashed in the form of one or more pensions (rather than allowing just one pension) or in the form of one or more annuities (rather than allowing for just one annuity). It also clarifies that:
- in the case of lump sum payments, where benefits are cashed in favour of more than one person (eg. on the death of a member) then each such person can receive a lump-sum payment.
- benefits can be cashed from sources other than the particular fund in which the obligation to cash all the member's benefits arose (eg. this need may arise because the fund does not offer pensions).
Regulation 22 - Regulation 6.22 (Limitation on cashing of benefits in regulated superannuation funds in favour of persons other than -members or their legal personal representative)
Regulation 22 amends Principal Regulation 6.22 to provide that:
- a member's benefits in a regulated superannuation fund may be cashed to the member's legal personal representative (eg. the trustee of the estate of a person under a legal disability) even if the member has not died.
- the trustee of a regulated superannuation fund may cash a member's benefits in favour of an individual (other than a dependant or legal personal representative (eg. the executor of the member's will) of the member) in circumstances mentioned in the Regulation despite the amount of the benefits exceeding $5,000.
In making the decision to pay to such an individual, the trustee of the fund still remains subject to other laws governing this area.
Regulation 23 - New regulation 6.22A
Regulation 23 inserts a new regulation (regulation 6.22A) into the Principal Regulations which provides that if benefits in a regulated superannuation fund are to be cashed on the basis of a member satisfying a condition of release where the cashing restriction is not "nil" (eg. severe financial hardship) then in cashing benefits in accordance with the cashing restriction unrestricted non-preserved benefits are to be cashed first, restricted non-preserved benefits second and preserved benefits last.
This aims to ensure that the benefits that the member would have most immediate access to in any case are taken from first, thus retaining, to the extent possible, the preserved benefits in the fund.
Regulation 24 - Regulation 6 25 (Compulsory cashing of benefits- in approved deposit funds)
Regulation 24 amends Principal Regulation 6.25 to clarify that:
- in the case of lump sum payments, where benefits are cashed in favour of more than one person (eg. on the death of a member) then each such person can receive a lump-sum payment.
- depending on the circumstances of the member, benefits can be maintained in or cashed from sources other than the particular fund in which the obligation to cash all the member's benefits arose.
Regulation 25 - Regulation 6.26 (Limitation on cashing of benefits in approved deposit funds in favour of persons other than members or their legal persona representatives)
Regulation 25 amends Principal Regulation 6.26 to provide that:
- a member's benefits in an approved deposit fund may be cashed to the member's legal personal representative (eg. the trustee of the estate of a person under a legal disability) even if the member has not died.
- the trustee of an approved deposit fund may cash a member's benefits in favour of an individual (other than a dependant or legal personal representative (eg. the executor of the member's will) of the member) in circumstances mentioned in the Regulation despite the amount of the benefits exceeding $5,000.
In making the decision to pay to such an individual, the trustee of the fund still remains subject to other laws governing this area.
Regulation 26 - New regulation 6.27A
Regulation 26 inserts a new regulation (regulation 6.27A) into the Principal Regulations which provides that if benefits in an approved deposit fund are to be cashed on the basis of a member satisfying a condition of release where the cashing restriction is not "nil" (eg. severe financial hardship) then in cashing benefits in accordance with the cashing restriction unrestricted non-preserved benefits are to be cashed first, then preserved benefits.
This aims to ensure that the benefits that the member would have most immediate access to in any case are taken from first, thus retaining, to the extent possible, the preserved benefits in the fund.
Regulation 27 - Regulation 6.30 (Obligations of trustees)
Regulation 27 amends Principal Regulation 6.30 to clarify that 6.30(2) applies subject to the making of deductions under, or in accordance with, the Tax Act.
Regulation 28 - Regulation 9.27 (Interpretation)
Regulation 28 amends Principal Regulation 9.27 so that the definition of accrued benefits refers to the benefits to which the member has an absolute or potential entitlement (rather than referring only to a potential entitlement).
Regulation 29 - Regulation 9.36 (Prescription of standards - accumulation funds)
Regulation 29 amends Principal Regulation 9.36 to provide that the requirements of Principal Regulation 9.39 are an operating standard pursuant to section 31 of the Act.
Regulation 30 - Subdivision 13.1.1 (Information to be given to members)
Subregulation 30.1 changes the heading to Subdivision 13.1.1 of the Principal Regulations to create a definitional Subdivision in Division 13.1.
Regulation 31 - Regulation 13.01 (Interpretation)
Regulation 31 makes a number of minor changes necessary as a result of the renaming of Subdivision 13. 1.1 and inserts a number of new definitions into regulation 13.01 of the Principal Regulations.
Regulation 32 - New Subdivision heading
Regulation 32 creates a new Subdivision (Subdivision 13.1.1A - Information to be given to members).
Regulation 33 - Subdivision 13.1.2 (Contribution and benefit accrual standards)
Regulation 33 omits the passage "13.05-13.10: [Reserved]".
Regulation 34 - New subdivision 13.1.3 and 13.1.4
Background
Regulation 34 inserts two new Subdivisions in Division 13.1:
The two new subdivisions relate to Part 31 of the Act. Part 31 of the Act deals with the transition from the two party responsible entity structure of the Corporations Law to the one party responsible entity structure of the Act.
At present, superannuation entities which sell superannuation interests are permitted by Corporations Law to have a management company, which effectively runs the fund, and a trustee company, which generally is a supervisor and custodian, each being appointed with its own defined set of responsibilities to interest holders.
The two party structure is not consistent with the SIS legislation which requires a single responsible entity (the trustee) to bear responsibility. The SIS legislation provides a mechanism for two party structured superannuation entities to convert to a one party structure. Conversion to one responsible entity is not compulsory but if it does not occur two party entities are generally prohibited from selling any superannuation interests to prospective interest holders (that is, they cannot accept new members).
Regulations relating specifically to two party entities (referred to as Part 31 entities) are prescribed in the two new subdivisions inserted into the Principal Regulations by this regulation.
The new Subdivision 13.1.3 consists of one regulation being new regulation 13.05. This regulation relates to the conversion of a Part 31 entity to a one party structure.
The new Subdivision 13.1.4 consists of five regulations, being new regulations 13.06, 13.07, 13.08, 13.09 and 13.10. These regulations relate to the ongoing requirements imposed on two party entities (including specifying what provisions of the SIS legislation, the Corporations Law and the Corporations Regulations will apply to two party entities, and to which party they will apply).
New Regulation 13.05 - Amendment by trustee of governing rules
New Regulation 13.05 specifies that for the purposes of making consequential amendments to trust instruments which are part of the governing rules of a superannuation entity, being a superannuation entity which has converted from a two party structure, the trustee must notify members of the amendments within 28 days of making the amendments.
New Regulation 13.06 - Application
New Regulation 13.06 provides that the modifications made by new Subdivision 13.1.4 are made for the purposes of section 376 of the Act and apply during the 'transitional period' as that term is defined by section 373 of the Act.
New Regulation 13.07 - Modifications of the Act and these Regulations
New subregulation 13.07(1)
This subregulation provides that certain provisions of the Act and the Principal Regulations relating to:
- trustee covenants (sections 52-55 and regulations 4.01-4.02);
- trustee indemnification (sections 56-57);
- the requirement for the trustee to be the sole responsible entity (sections 58-60 and regulations 4.03 - 4.05);
- the duty of trustees to seek information from investment managers (section 102);
- the content of agreements between trustees and investment managers (section 116);
- the requirement for investment managers not to appoint or engage custodians without the trustee's consent (section 122);
- the persons who may be appointed as custodians and investment managers (sections 123, 125 and 126);
- the requirement to appoint investment managers in writing (section 124);
do not apply in relation to a Part 31 entity.
New subregulation 13.07(2)
This subregulation provides that subject to subregulations (3) and (4), if certain provisions of the Act and the Regulations relating to:
- powers in respect of 'relevant persons' (sections 10, 255, 269 and 270);
- the duty of trustees of certain funds to take reasonable steps to ensure that there are adequate arrangements for dealing with inquiries and complaints from beneficiaries (section 101);
- the duty of trustees of superannuation entities to keep relevant minutes (subsections 103 (2) and (3));
- the duty of trustees of superannuation entities to notify the Commissioner of significant adverse events (subsections 106 (1) and (3));
- the persons who may be the trustee of a superannuation entity or a responsible officer of such trustee (section 121);
- the powers to suspend or remove a trustee of a superannuation entity (section 133);
- the prohibition against misleading conduct by trustees of superannuation entities (section 147);
- the duty of trustees of certain superannuation entities to comply with requirements in relation to the payment of commission and brokerage (section 154 and regulation 3.10);
- the duty of trustees of certain superannuation entities to act fairly and reasonably as between prospective/departing beneficiaries and other beneficiaries of the entity in relation to the issue/redemption of superannuation interests (sections 155 and 156); the power to obtain information or freeze assets (section 264);
- the power to require a person to identify and explain how certain persons have kept account of property of a superannuation entity (section 275);
- the power of the court to grant relief to superannuation officials (section 3 10); and the effect of irregularities (section 312);
apply to the trustee of a Part 31 entity, they also apply to the existing management company of the entity.
This subregulation does not prevent other provisions of the Act and regulations from applying to the existing management company through their ordinary application.
New subregulation 13.07(3)
This subregulation provides that for the purposes of applying provisions to the existing management company pursuant to subregulation 13.07(2), where a provision makes a distinction between a corporate trustee and other types of trustees, the reference to corporate trustee is in effect replaced by a reference to the existing management company and the reference to other types of trustees is disregarded.
New subregulation 13.07(4)
This subregulation implements the general intent of subregulation 13.07(3) in a particular case.
New Subregulation 13.07(5)
This subregulation modifies section 346 of the Act so as to provide an exception to the secrecy rules in that section for the disclosure of names and addresses of superannuation entities which are Part 31 entities.
New Subregulation 13.07(6)
This subregulation defines "prescribed provisions" for the purposes of subregulations 13.07 (1) and (2).
New Regulation 13.08 - Modification of the ACT Corporations Law and Regulations
Subregulation 13.08(1)
This subregulation provides that for the purposes of subsection 376(3) of the Act, Division 5 of Part 7.12 of the Corporations Law (as in force on 30 November 1993) and Part 7.12 of the Corporations Regulations (as in force on 30 November 1993) as modified by the Regulations apply in relation to Part 31 entities.
Subregulation 13.08(2)
This subregulation provides for the omission of a number of sections (and subsections) of the Corporations Law in their application to Part 31 entities. These sections relate to:
- modifications of the law (subsection 1063(2));
- the persons who may issue prescribed interests (section 1064);
- the requirement not to issue prescribed interests without an approved deed (sections 1065-1068);
- situations where no deed is in force (subsection 1069(8));
- prospective amendments to the covenants required to be in approved deeds (subsections 1069(9)and (9A));
- the calculation of price (subsection 1069(10));
- the lodgement and disclosure of returns relating to prescribed interests (subsection 1070(3) and section 1071); and
- the non-application of Division 5 in certain circumstances (section 1075).
Subregulation 13.08(3)
This subregulation provides a number of modifications consequential to the modifications contained in subregulation 13.08(2).
Subregulation 13.08(4)
This subregulation provides for the omission of a number of regulations (and subregulations) of the Corporations Regulations in their application to Part 31 entities. These regulations relate to:
- approved deeds (regulations 7.12.15(1)(a) and 7.12.15(1)(e));
- prospectuses (regulations 7.12.15(1)(b) and 7.12.15(2)(c));
- statements by the auditor of the existing management company (regulations 7.12.15(6)(c));
- matters addressed by Division 5 of Part 19 of the SIS Act (regulations 7.12.15(2)(h) and 7.12.15(6)(ba));
- matters addressed by section 154 of the SIS Act (and regulation 3.10) (regulation 7.12.15(6)(h) and (j)); and
- other miscellaneous matters (regulations 7.12.02-7.12.04; 7.12.07-7.12.14; 7.12.15(4) - (5B); 7.12.15(7); 7.12.15(8)(e); 7.12.15(10)(h); 7.12.15A - 7.12.17).
Subregulation 13.08(5)
This subregulation makes two further omissions:
- the omission of the definitions of "approved deposit fund" and "superannuation fund" from regulation 7.12.01 (these definitions are dealt with in subregulation 13.09(2));
- the omission of regulation 7.12.15(6)(b) (which relates to the obligations of the existing management company to pay application moneys to the trustee) and its replacement by a similar covenant consistent with Division 5 of Part 19 of the SIS Act.
New Regulation 13.09 - ACT Corporations Law and Regulations - interpretation of the applied provisions
Subregulation 13.09(1)
This subregulation provides that subject to subregulation (2), Division 5 of Part 7.12 of the Corporations Law (as in force on 30 November 1993) and Part 7.12 of the Corporations Regulations (as in force on 30 November 1993), as modified by the Regulations, are to be interpreted in their application to Part 31 entities, in the same way as they would have been interpreted on 30 November 1993.
Subregulation 13.09(2)
This subregulation defines a number of terms in Division 5 of Part 7.12 of the Corporations Law (as in force on 30 November 1993) and Part 7.12 of the Corporations Regulations (as in force on 30 November 1993).
Subregulation 13.09(3)
This subregulation defines the term "applied provisions" for the purposes of subregulation 13.09(1).
New Regulation 13.10 - Offences - Corporations Law. sections 1070, 1072 and 1074 as modified
Regulations 13.10 continues in modified form the existing offences for contravening sections 1070, 1072 and 1074 of the Corporations Law.
Regulation 35 - Regulation 13.11 (Interpretation)
Subregulation 35.1 inserts a definition of 'approved non-bank financial institution' into Principal Regulation 13.11. The effect of the definition is that a building society, credit union or other organisation registered as a society or special service provider under the relevant State Financial Institutions Codes will be an approved non bank financial institution. The new definition is relevant for the amendment made to Principal Regulation 13.17 by regulation 38 of these regulations.
Regulation 36 - Regulation 13.13 (Charges over a member's benefits)
Subregulation 36.1 amends Principal Regulation 13.13 so that, subject to Principal Regulation 13.15, the trustee of a regulated superannuation fund or approved deposit fund must not recognise, encourage or sanction a charge over any part of a member's benefit not just those parts of a member's benefits currently referred in Principal Regulation 13.13.
Subregulation 36.2 provides that this requirement does not apply to specific charges exercised before a fund became a regulated superannuation fund or approved deposit fund if those charges were allowable under the occupational Superannuation Standards Regulations or the Superannuation Industry (Supervision) (Transitional Provisions) Regulations.
Regulation 37 - Regulation 13.16 (Accrued benefits - restriction on alteration)
Subregulation 37.1 amends Principal Regulation 13.16(2)(a) to clarify that the reference to minimum benefits in paragraph 2(a) of regulation 13.16 means minimum benefits within the meaning of Part 5 of the Principal Regulations.
Subregulation 37.2 amends Principal Regulation 13.16(2)(b) to clarify that an alteration falls within the ambit of paragraph (2)(b) if it is necessary for compliance with taxation legislation such as the Income Tax Act 1986.
Subregulation 37.3 amends Principal Regulation 13.16 by inserting paragraph (2)(c) to provide that a member's right or claim to accrued benefits, and the amount of those benefits, may be adversely altered if the alteration is expressly permitted by the Act or Principal Regulations.
Regulation 38 - Regulation 13.17 (Loans etc. by trustees of approved deposit funds)
Subregulation 38.1 omits regulation 13.17 of the Principal Regulations and replaces it with three new regulations.
New regulations 13.17 and 13.17A restrict trustees of approved deposit funds and public offer superannuation funds from lending or investing fund monies in the trustees themselves or in related body corporates. This requirement does not apply however where the related body investment is a life policy in a life insurance company or a deposit in an approved bank or approved non-bank financial institution.
New regulation 13.17B prescribes that the trustee of a regulated superannuation fund or approved deposit fund must not fail, without lawful excuse, to comply with an order, direction or determination of the Superannuation Complaints Tribunal. This provides for direct action to be taken against a fund that contravenes section 34 of the Act by intentionally or recklessly failing to comply with an order, direction or determination of the Tribunal.
Regulation 39 - New Schedules 1A and 1B
Regulation 39 inserts two new Schedules into the Principal Regulations.
The two new Schedules are used for the purposes of the annuity and pension regulations which are to be included in the Principal Regulation by virtue of regulation 4 of these regulations and, as they are copied from the OSS Regulations, they do not represent any change to existing law.
New Schedule 1A is, for all intents and purposes, an exact copy of Schedule 1A of the OSS Regulations. The Schedule prescribes, for the purposes of new regulations 1.05(4) and 1.06(4) the maximum amount which can be drawn-down, and the minimum amount that must be drawn-down, from an allocated pension or allocated annuity during a year. Together these restrictions aim to ensure that allocated annuities/pensions provides a reasonable source of retirement income.
New Schedule 1B is, for all intents and purposes, an exact copy of Schedule 3 of the OSS Regulations. The Schedule provides the pension valuation factors which are to be used for converting a pension to a lump-sum. The Schedule is relevant for the purposes of new regulation 1.06(6)(g) and new regulation 1.08.
Regulation 40 - Schedule 1 (Conditions of release and cashing restrictions - preserved benefits and restricted non-preserved benefits)
Subregulation 40.1 amends Schedule 1 of the Principal Regulations as a consequence of the amendment made by regulation 14 of these Regulations to Principal Regulation 6.01.
Subregulation 40.2 provides for a new condition of release being a condition of release specified in an ancillary purpose approval made under section 62 of the Act.
Subregulation 40.3 adds a clarification note to Schedule 1.
Regulation 41 - Schedule 2 (Modifications of the OSS Laws with effect from the commencement day in relation to preserved benefits in regulated superannuation funds)
Subregulations 41.1, 41.2 and 41.6 clarify that, for the purposes of complying with regulation 9(1)(a)(i) of the OSS Laws (the requirement to preserve super guarantee contributions and shortfall components which are not award contributions from 1 July 1994) and regulation 10 of the OSS Laws (the requirement to preserve certain new or improved employer financed benefits), superannuation funds need only preserve the greater of the amount of benefits required by each regulation to be preserved.
Subregulation 41.3 clarifies that investment earnings arising from undeducted contributions are not required to be preserved.
Subregulations 41.4 and 41.5 make some minor typographical corrections.