Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS (AMENDMENT) 1997 NO.153

Statutory Rules 1997 No. 153

Issued by the authority of the Assistant Treasurer

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Regulations (Amendment)

The Superannuation Industry (Supervision) Act 1993 (the Act) and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provide 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.

Section 353 of the Act provides that the Governor-General may make Regulations for the purposes of the Act

At present, superannuation benefits are generally required to be 'preserved' in the superannuation system until retirement on or after age 55. However, subject to the governing rules of the superannuation fund, early release of 'preserved' benefits is permitted under the Principal Regulations in certain restricted circumstances including permanent departure from Australia, severe financial hardship or compassionate grounds or where, on termination of gainful employment, the amount subject to preservation is less than $500.

It was announced in the 1997-98 Budget that the current arrangements for early release of superannuation benefits would be reformed. In particular, it was announced that the 'permanent departure from Australia' condition of release would be removed.

The removal of the 'permanent departure from Australia' condition of release is based on a number of reasons, including that there is anecdotal evidence that this condition has been abused by people providing inconclusive or false evidence to trustees of their proposed permanent departure. In addition, removal of this condition will bring Australian arrangements more into line with overseas practice and make it easier for the Government to negotiate reciprocal social security agreements with other countries.

Under regulations 6.18, 6.19 and 6.23 of the Principal Regulations, a person's preserved benefits and restricted nonpreserved benefits in a regulated superannuation fund and approved deposit fund (ADF) may be cashed on or after the satisfaction by the person of a condition of release- Pans 1 and 2 of Schedule 1 to the Principal Regulations specify 'permanent departure from Australia' as a condition of release. Subregulation 6.01(2) of the Principal Regulations defines 'permanent departure from Australia' as a departure by the person from Australia where the trustee is reasonably satisfied that it is for the purpose of permanent residence outside Australia.

The Regulations amend the Principal Regulations by:

*       omitting the definition of 'permanent departure from Australia' from subregulation 6.01(2) of the Principal Regulations;

*       Omitting item 104 from Part 1 of Schedule 1 to the Principal Regulations which removes 'permanent departure from Australia' as a condition of release in relation to regulated superannuation funds ; and

*       omitting item 204 from Part 2 of Schedule 1 to the Principal Regulations which removes 'permanent departure from Australia' as a condition of release in relation to ADFs.

Therefore, a person who permanently departs from Australia will only be able to access preserved and restricted non-preserved benefits at retirement on or after age 55 or under other conditions of release.

A transitional provision is inserted to enable trustees to release amounts on the grounds of permanent departure overseas after 30 June 1997 where a member has made a written request to the trustee on or before 30 June 1997 for release of benefits on those grounds. In these circumstances, the trustee must deal with the written request as if the amendments to remove 'permanent departure overseas' as a condition of release had not been made.

The Regulations will commence on 1 July 1997.

The Office of Regulation and Review have advised that a Regulation Impact Statement is not necessary in respect of the Regulations.