WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Retirement Savings Accounts (Consequential Amendments)
Bill 1996
Date Introduced: 4 December 1996
House: House of Representatives
Portfolio: Treasury
Commencement: The day on which the Retirement
Savings Accounts Bill 1996 commences.
The Bill amends a number of Acts to place Retirement Savings
Accounts (RSA) in generally the same position as superannuation
funds. The main amendments relate to:
- the taxation treatment of RSAs;
- giving the Superannuation Complaints Tribunal jurisdiction to
determine various complaints relating to RSAs;
- providing a collection mechanism for a levy on RSA providers to
fund the supervision of RSA providers; and
- ensuring that contributions to RSAs will be taken into account
for purposes of superannuation guarantee requirements.
Refer to the Digest for the Retirement Savings Accounts Bill
1996.
Taxation
The taxation treatment of RSAs is dealt with in Schedule 13 of
the Bill. Currently, superannuation funds are subject to a
concessional rate of tax (15%) if they comply with the
Superannuation Industry (Supervision) Act 1993 (SIS) which
provides for prudential standards. Where the standards are not
complied with, normal company and trust tax rates apply. Section
26AFB of the Income Tax Assessment Act 1936 (ITAA)
provides that where a superannuation fund pays a benefit to a
member, which will normally receive concessional tax treatment as
an eligible termination payment (ETP), and the fund has failed to
comply with the SIS Act the benefit is to be included in normal
income, thus being subject to a higher tax rate. The section also
provides the Commissioner of Taxation (the Commissioner) with power
to determine that the section will not apply to such a benefit, so
that it will receive the concessional tax rate available to ETPs.
Item 6 of Schedule 13 will amend
section 26AFB to extend these rules to retirement savings accounts
(RSA). Concessional tax treatment for a benefit will not be
available if the requirements of the Retirement Savings
Accounts Act 1996 (if enacted) are satisfied. The Commissioner
will also be given power to exempt people from the operation of the
section as it applies to RSAs in a similar way as the current
powers in relation to other superannuation products.
Section 26D of the ITAA provides that where a person has paid
foreign tax on certain income then part of the amount of tax
payable is to be included in their Australian assessable income.
Item 8 of Schedule 13 provides that in calculating
the amount that is determined to be foreign income, benefits paid
from a RSA, or an insurance policy paid for by a RSA benefit, are
deemed to be Australian income. The amendment is of a technical
nature and aims to ensure that tax on a RSA benefit cannot be
evaded by arrangements that would exempt the benefit as it has been
subject to tax, at a lower rate, in a foreign country.
Employer contributions to superannuation funds are generally
deductable to the employer so long as they are within the limits
contained in section 82AAC, which allow a higher deductible
contribution as the employees age increases. Item 25 of Schedule 13
provides that contributions to RSAs are to be deemed to be
contributions to a complying superannuation fund. However, to be
deductible, the contributor must also comply with Item 28
of Schedule 13 (which amends section 82AAT of the ITAA)
which provides that the deduction will only be available if the
contributor is an eligible person (this term is defined in section
82AAS and is, basically, a person who is not to receive
superannuation benefits during the relevant year of income); the
contribution was made for superannuation or death benefits; and
appropriate written notices have been given to, and acknowledged
by, the RSA provider (this enables the RSA provider to know the
extent to which contributions were deducted and so to calculate
their future tax treatment as deducted and non-deducted
contributions are treated differently when payment of a benefit
occurs). The requirements are substantially the same as those
currently contained in section 82AAT for existing superannuation
products.
Items 33 to 74 amend the treatment of income
and deductions relevant to RSAs for life insurance companies. The
taxation of life insurance companies is very complex with different
tax treatment applying to various components of the companies
income. In relation to superannuation contributions, the basic
rules are that contributions are exempt (other than untaxed
roll-over amounts) and that a deduction is allowed for expenses
incurred in attracting the contributions, such as wages, training
and research. The amendments contained in Items 33 to 74 have the
effect of placing RSA contribution and expenses in the same
situation as superannuation contributions and expenses. More
specifically, proposed sub-division AA of Division 8 of Part III of
the ITAA deals with the calculation of the RSA component of a life
assurance companies income and provides that that component is to
receive the concessional 15% rate of tax. The components of RSA
income will be taxable contributions and other amounts credited to
RSAs that are not paying a benefit in the relevant income year. If
the RSA is paying a benefit, income credited to that account will
be exempt.
Capital gains tax: CGT is currently not payable on the disposal
of a superannuation right (eg. on the transfer of such rights to
another fund or roll-over entity). Item 106 will
insert a new section 160ZZJA into the ITAA that provides that CGT
will also not apply to RSAs.
Other amendments contained in Schedule 13 insert references to
RSAs where there are currently references to superannuation
accounts to ensure standard treatment and make similar amendment to
those described above in other provisions of the ITAA.
Supervisory Levy
Superannuation funds currently pay a levy to cover the cost to
the Insurance and Superannuation Commission of supervising the
industry. Similarly, it is proposed that RSA providers will pay a
levy to meet the costs of ISC supervision of RSAs. The levy will be
imposed by the Retirement Savings Accounts Supervisory Levy Bill
1996. While that Bill formally imposes the levy, Schedule
1 of this Bill provides the mechanism for the collection
of the levy.
The levy will be payable by a RSA provider when they lodge their
annual return (Item 10). A penalty will be imposed
if the levy is not paid by the due date (Item 12),
and the ISC will be given power to remit all or part of both the
levy and any late payment penalty (Item 15). Also
refer to the Digest for the Retirement Savings Accounts Supervisory
Levy Bill 1996. Complaints
The Superannuation Industry Complaints Tribunal has the role of
determining complaints relating to the conduct and decisions of
superannuation fund trustees and insurers. The Tribunal first
attempts to resolve complaints through conciliation but if this is
unsuccessful, may substitute its own decision for that of the
trustee/insurer. The Tribunal does not impose a fee on those
lodging a complaint, and is funded through the levy on
superannuation funds. Schedule 2 of the Bill
proposes to extend the jurisdiction of the Tribunal to complaints
relating to RSAs, and the majority of the amendments in the
Schedule deal with the addition of RSAs and RSA providers in the
relevant provisions of the Superannuation (Resolution of
Complaints) Act 1993. Major amendments relate to:
- complaints relating to alleged unfair or unreasonable conduct
by a RSA provider in relation to the opening of a RSA (proposed
section 15E);
- complaints relating to decisions that affect the holder of the
RSA or others that may receive benefits under the RSA (proposed
section 15F);
- those who may make a complaint: generally those with a interest
in the benefits available under a RSA, including beneficiaries and
administrators of deceased estates (proposed section 15G);
- the ability of the Tribunal to stay all or part of a decision
of a RSA provider pending the final determination of the complaint;
and
- extending to RSA providers the power of the Tribunal to vary or
set aside a decision.
Bankruptcy
Schedule 3 will amend the Bankruptcy Act
1966 to place RSAs in the same position as superannuation
assets held by a bankrupt. Basically, a persons superannuation
assets up to their reasonable benefits level are not to be divided
between the bankrupts creditors. Items 4 and 5 of Schedule 3 will
extend this protection to a person's RSA, while Item 10 provides
that terms in an RSA that allow a RSA to be included in a bankrupts
assets, or an act of assignment of a RSA due to bankruptcy, are
void. Superannuation Guarantee
Schedules 14 and 15 will ensure that
contributions to RSAs are taken into account for purposes of the
superannuation guarantee requirements.
CHRIS FIELD
31 January 1997
Bills Digest Service
Information and Research Services
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
IRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
the public.
ISSN 1328-8091
© Commonwealth of Australia 1997
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
1997.
This page was prepared by the Parliamentary Library,
Commonwealth of Australia
Last updated: 14 July 1997
Back to top