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
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Superannuation (Unclaimed Money and
Lost Members) Bill 1999
Date Introduced: 30 June 1999
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent
To:
-
- consolidate existing provisions relating to the notification
and payment of unclaimed superannuation money, and the notification
of lost members of superannuation entities
-
- reduce from two to one the number of Commonwealth entities
involved in unclaimed money and lost members; and
-
- provide that for State/Territory authorities to be able to
collect unclaimed money they must operate under laws that meet
similar requirements to those applicable to the proposed single
Commonwealth entity involved in the area.
The concepts of unclaimed money and lost members
are defined for superannuation funds (which for the purposes of
this Digest includes approved deposit funds) in the
Superannuation Industry (Supervision) Act 1993 (SIS) and
its regulations and for Retirement Savings Accounts (RSA) in the
Retirement Savings Accounts Act 1997 and its regulations.
The definitions of the terms are substantially the same for both
superannuation funds and RSAs.
Unclaimed monies occur where a superannuation
fund or RSA provider holds money on behalf of a member/account
holder and:
-
- the person has reached eligibility age for the aged pension
(currently 65 for males and 61.5 increasing to 65 in 2013 for
females)
-
- under the terms of the fund/RSA a benefit, other than a
pension, is payable to the person
-
- the member/RSA holder has not contacted the fund/RSA provider
to have the benefit paid, and
-
- after taking reasonable steps to find the person, the
superannuation fund/RSA provider is unable to pay the benefit as
they cannot locate the person.
If the member/RSA holder has died, the same
rules apply with the superannuation fund/RSA provider having to
take reasonable steps to locate the beneficiary entitled to the
benefit.
The definitions for a 'lost member' are also
substantially the same for superannuation funds and RSA providers.
The main circumstances where a member is taken to be lost are:
-
- where the member cannot be contacted as the fund/RSA provider
has never had an address for the person; or has written to the
person's last known address twice (once if the trustee/RSA provider
so chooses) and the letters have been returned unclaimed
-
- the member/RSA holder has become inactive as they have been a
member/RSA holder for at least 2 years and there has been no
contribution on behalf of the person for 2 years, or
-
- for superannuation funds, the member joined as a lost member
from another fund or as a RSA lost member.
The above will not apply if during the last 2
years the fund/RSA provider has verified the person's address and
has no reason to believe that the address is now incorrect. It also
will not apply where the member/RSA holder has taken a positive
step that indicates that they wish to remain a member/RSA holder or
has communicated an intention to so remain.
In addition, a trustee/RSA provider may
determine that a member/RSA holder is permanently excluded from
being a lost member. However, the trustee/RSA provider may also
determine that a specific member/RSA holder, a class of members/RSA
holders or all members/RSA holders are not to be permanently
excluded from becoming lost.
The consequences of money becoming 'unclaimed'
are similar for superannuation funds and RSA providers in that they
are paid to government bodies rather than being retained. It may be
noted that no interest is payable on such funds. It could be argued
that a rate of interest similar to that payable for long term
government bonds should be payable as there are virtually no costs
in retaining such funds other than those associated with processing
a claim.
For unclaimed money in a superannuation fund,
SIS provides that the trustee is to prepare a statement every 6
months of the unclaimed money and forward the statement to the
Australian Securities and Investments Commission (ASIC). The
unclaimed money is also to be forwarded to ASIC. However, if a
State or Territory law requires that either a statement of
unclaimed money be made to an authority of the relevant
State/Territory, or the money paid to such an authority, the
relevant part of the Commonwealth law need not be complied with. In
effect, the State and Territory laws will have precedence even
though the Commonwealth has Constitutional power to legislate in
this area. Similar rules apply to unclaimed money in RSAs, although
in such a case the money is to be paid to the Treasury rather than
ASIC.
If unclaimed money has been paid to ASIC or the
Treasury and a claim is subsequently made by the member/holder of
the RSA, the recipient must pay the money to the person if the
claim is valid. If the money has been paid to a State/Territory
authority, there is a significant difference in the legislation
governing superannuation funds and RSAs. Regarding RSAs, the
Retirement Savings Account Act 1997 provides that if money
is to be paid to a State/Territory authority, the law providing for
the payment to the authority must also provide for repayment of the
money to a successful claimant (section 84). SIS contains no such
requirement, merely requiring that the relevant State/Territory law
provide for the unclaimed money to be paid to a State/Territory
authority (section 225). While the State/Territory law may provide
for such repayments, this is not a requirement for the money to be
paid to the State/Territory authority rather than ASIC.
Lost members remain in the fund/RSA and are
subject to some member protection standards, the most important of
which is that administrative costs are not to exceed the investment
return on the money held. A return is to be made supplying
information on the lost member and their entitlement to the
relevant body (ASIC for superannuation funds and the Commissioner
of Taxation for RSAs - there is no provision for the information to
be supplied to a State/Territory authority), and other requirements
relate to the transfer of information if the money is transferred
to another fund (or from an RSA to a fund).
There is little available information on the
number of lost members and the amount of unclaimed money. In regard
to lost members in superannuation funds, funds have been required
to forward information to ASIC after the first reporting period
ending on or after 30 June 1996 (the statement of reportable lost
members is to be made every 6 months). Similar rules apply to RSAs
except that the information is to be reported to the Commissioner
of Taxation and the period commences on 1 July 1997. In regard to
unclaimed money, funds are liable to pay the money to ASIC every 6
months from 1 January 1996 and RSAs liable are to pay the money to
the Commissioner of Taxation every 6 months from 2 June 1997.
However, as noted above, the unclaimed money will not have to be
paid or reported to the Commonwealth if, instead, it is paid to a
relevant State/Territory authority. An accurate assessment of the
total of unclaimed money from superannuation funds and RSA
providers would therefore involve an examination of all the
Australian jurisdictions and further checking to establish if the
State/Territory figures involved only these bodies and did not also
include money from State/Territory regulated bodies such as credit
unions. Such a task is beyond the scope of this Digest. It is
notable that neither the second reading speech nor explanatory
memorandum to the Bill contain an estimate of either the number of
lost members or the total unclaimed money.
However, to give an indication of the magnitude
of the area, the Australian Taxation Office estimates that as at
May 1999 there were approximately 2.5 million lost members and $2
billion in unclaimed money.(1) (Note: A person may be a member of
or than one fund and each time they are lost to a fund they are
considered to be a lost member.)
'Eligibility age' is defined in clause
10 to be 65 years for males and 60 for females, or in each
case, such other age as prescribed by regulation. (As noted above,
the eligibility age relates to eligibility for the aged pension,
the age for females of which is already 61.5 years.)
Sub-clauses 10(3) and 10(4) aim
to impose a duty on superannuation providers (which is defined to
include RSA providers) to obtain and keep records of the date of
birth and sex of members of the fund.(2)
Part 3 of the Bill deals with
payment of unclaimed money to the Commissioner of Taxation. The
definition of unclaimed money is substantially the same as that
currently used (see above) with the additional requirement that no
contribution has been made on behalf of the member (or for a
defined benefit scheme, no additional benefit has accumulated) for
at least two years. As well, the current requirement that the
member has not contacted the fund to have their benefit paid will
be removed (clause 12).
Clause 13 repeats the
requirement contained in proposed paragraph 12(d)
that reasonable steps are to be taken to ensure that a member
receives their benefits and makes it an offence, with a maximum
penalty of 100 penalty units, to fail to comply with this
obligation.
Clauses 14 and 15 repeat the
substance of clauses 12 and 13 but in respect of dead members and
death benefits.
Statements of unclaimed money are dealt with in
clause 16 which provides that such a statement, in
the approved form, must(3) be given to the Commissioner stating the
unclaimed money at the end of each half year. If the provider has
paid money to the person entitled to it between the end of the
relevant half year and the giving of the statement to the
Commissioner, the statement must contain details of this amount.
The statement is to be given by 1 November in respect of the half
year ending 30 June and the following 1 May in respect to that
ending on 31 December, although the Commissioner will have power to
extend the period. It will be an offence, with a maximum penalty of
100 penalty units, to breach these requirements. However, it will
not be an offence if sub-clause 18(2), which deals
with statements to a State/Territory authority, has been complied
with, so in effect there is no enforceable duty to report to the
Commissioner.
Clause 17 deals with the
payment of unclaimed money to the Commissioner, and should be read
subject to clause 18. The fund is to pay to the Commissioner the
difference between the amount of unclaimed money held by the fund
and any amount listed as unclaimed but subsequently paid to a
successful claimant. If the money has been paid to the Commissioner
and is subsequently successfully claimed, the Commissioner is to
pay the claim (note that no interest is payable). If the
superannuation provider satisfies the Commissioner that the money
sent by the provider to the Commissioner in respect of a person was
greater than the person's entitlement, the difference between the
amount paid and the person's entitlement is to be refunded to the
provider. A payment by the Commissioner to a person will discharge
the provider's obligation to the person to the extent of the
payment. Again it will be an offence to breach these requirements,
with a maximum penalty of 100 penalty units, although it will not
be an offence if the money is paid to a relevant State/Territory
authority (sub-clause 17(6)).
The effect of statements and payments to a
State/Territory authority are dealt with in clause
18. The clause will have effect where a State/Territory
law satisfies the requirements listed in the clause, which mirror
those relating to the Commissioner for the keeping of a register,
statements, payment of unclaimed money to the authority, payments
to claimants and refunds to providers for overpayments, are met. If
such a law exists, the clause 16 requirement to make a statement to
the Commissioner will not apply where a statement has been prepared
and provided to a State/Territory authority, while the clause 17
requirement to pay unclaimed money to the Commissioner will not
apply where the law requires the money to be paid to a
State/Territory authority.
The Commissioner is to keep a register that will
contain details of unclaimed money paid to the Commissioner by a
fund and the member in respect of whom the money was paid. The
register may also contain details provided by a State/Territory
and, where a trustee of such a fund gives details to the
Commissioner, details relating to an exempt public sector fund
(clause 19).
The Commissioner may provide details from the
register to a State/Territory authority if the State/Territory has
a law which satisfies the requirements listed in clause 18
(clause 20).
Lost members are dealt with in Part
4 of the Bill. The current definition of a lost member,
see the background section, will be used in the Bill
(clause 22). Information about lost members is
dealt with in clause 23. The regulations may
establish a scheme which will provide for information regarding
lost members to be supplied by superannuation providers (the use of
the word 'may' gives a discretion as to whether such a scheme is
established), but any regulations establishing such a scheme must
provide for the creation of a register of lost members. It will be
an offence, with a maximum penalty of 100 penalty units, for a
superannuation provider not to supply information in accordance
with the regulations and the Commissioner may provide information
regarding lost members to the State/Territory authority if the
relevant State/Territory law satisfies the requirements contained
in clause 18 (clause 24).
Part 5 of the Bill deals with
the provision and use of tax file numbers (TFN), which may be
required:
-
- in statements by a superannuation provider relating to
unclaimed money and provided to the Commonwealth or State/Territory
authorities; (clause 25) and
-
- in information relating to the unclaimed money that has been
provided by exempt public sector funds (clause
26).
In the above cases, the TFN of the fund and the
relevant member may be supplied and the person's TFN may be
included on the register (clause 27).
If the Commissioner has been quoted a person's
TFN for any other purpose (which would appear almost certain given
the use of TFNs in taxation matters), the Commissioner may use that
TFN for the purposes of the Bill (clause 28).
If a person claims entitlement to unclaimed
money or that they are a lost member, the Commissioner, and in the
case of unclaimed money the relevant State/Territory authority, may
request the person to supply their TFN. However, it is specified
that a person need not comply with such a request and non-supply is
not to prevent a person from being paid unclaimed money
(clause 29).
Secrecy is dealt with in Part 6
of the Bill and will apply to a wide range of people: the
Commissioner, Deputy Commissioners and Second Commissioners;
employees of the Commissioner; and anyone appointed or employed by,
or a provider of services for, the Commonwealth (clause
31). Part 6 also provides that:
-
- it will be an offence to record or divulge information provided
under the Bill except for the operation of the Bill (clause
32)
-
- information is not to be provided to a court except for the
purposes of the Bill (clauses 33 and 36)
-
- information may be supplied to people performing duties under
other Acts administered by the Commissioner (clause
34)
-
- information may be divulged with the consent of the relevant
superannuation provider/member (clause 37);
and
-
- information may be supplied to Australian Prudential Regulation
Authority; the Minister, Secretary or authorised officer of the
Department (Department is not defined but presumably will be the
Treasury which administers the ATO); the Superannuation Complaints
Tribunal; ASIC; a financial sector supervisory agency (as defined
in the Australian Prudential Regulation Authority Act
1998); and the Australian Statistician. Such disclosure must
be for the purposes of this Bill or the exercise of the body's
powers and functions (clause 38).
Miscellaneous matters are dealt with in
Part 8 and include:
-
- the registers may be made available to members of the public
but TFNs are not to be published or otherwise made available
(clause 44)
-
- officers will have power to enter premises and obtain
information (clauses 46 and 47); and
-
- superannuation providers are to keep records necessary to
comply with the Bill for at least 5 years (clause
48).
The Bill may be regarded as a consolidation with
minor improvements of existing provisions relating to unclaimed
money and lost members. In particular, for unclaimed money the Bill
continues the situation of multiple Commonwealth and
State/Territory registers and, while providing for the exchange of
information between the bodies responsible for such registers, does
not make this compulsory. There is therefore no guarantee that a
'one stop shop' will be established where a former member of a fund
can make enquires to establish if there is unclaimed money that
they may claim. Given the lack of a guarantee of a complete
exchange of information between the relevant bodies it will still
be necessary for a prudent person to make multiple enquiries.
The question may be asked as to why the
Commonwealth does not take sole responsibility for the collection
of unclaimed money by requiring superannuation funds and RSA
providers to contribute the information to a Commonwealth register
and the unclaimed money to the Commonwealth? Allowing
superannuation funds/RSA providers to not have to provide
information to the Commonwealth if it is provided to a
State/Territory authority which complies with the same requirements
as the Commonwealth body may ensure that standardised information
is provided but also ensures that the information may potentially
be held in a number of places. This is not addressed by only
providing that the State/Territory bodies may, rather than must,
supply the information to the Commonwealth body.
Take, for example, the case of a person who
prior to reaching eligibility age for the aged pension has worked
in a number of jobs throughout Australia where superannuation was
paid but the person has not kept records of the funds to which they
were paid. On retirement at reaching eligibility age for the aged
pension the person wishes to determine if there is any unclaimed
money that they are entitled to. Under the scheme proposed by this
Bill it will be necessary for the person to make enquiries to the
relevant authorities in the Commonwealth and all States and
Territories. This may sound straightforward but the body to whom
such enquiries should be made in any one jurisdiction, such as the
Commonwealth, is not widely known, and this becomes more
complicated when more jurisdictions are involved. The question
arises as to why a consumer should be confronted with such an
exercise when it is possible for there to be a single register of
unclaimed money to which a single application could be made.
While there would be some financial loss for the
States/Territories from the loss of access to interest free loans
from unclaimed money that is later claimed, or from effective gifts
of money where it is not claimed, there is a strong argument that
the Commonwealth has Constitutional power to establish a single
register of unclaimed money and to require all such money to be
paid to the Commonwealth, which can be demonstrated by the current
Commonwealth regulation of superannuation through such measures as
SIS and other superannuation legislation. The current practice
regarding the Commonwealth unclaimed money register and payment of
some unclaimed money to the Commonwealth could be made mandatory
for all lost members and unclaimed money and overrule inconsistent
State/Territory laws. Financial adjustments to other areas to
ensure no overall loss of money for the States/Territories would
seem to be a relatively easy task if necessary to establish a
centralised register to which consumer claims could be made.
-
- Conversation with an officer of the Australian Taxation Office,
15 July 1999.
- The sub-clauses use the wording 'should', rather than 'must',
which is unusual when imposing a duty. It is also worth noting that
clause 10 provides that if there is no information as to the sex of
a person, they are deemed to be a male, with the higher eligibility
age.
- On this occasion the word 'must' is used in comparison to the
earlier use of 'should'.
Chris Field
30 July 1999
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 1999
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