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
Superannuation Contributions Tax (Members of
Constitutionally Protected Superannuation Funds) Assessment and
Collection Bill 1997
Date Introduced: 2 October 1997
House: House of Representatives
Portfolio: Treasury
Commencement: Royal Assent
To provide for the assessment and collection of the
superannuation surcharge from members of constitutionally protected
superannuation funds.
This Background is written for the following six Bills :
- Superannuation Contributions Tax (Members of Constitutionally
Protected Superannuation Funds) Assessment and Collection Bill
1997;
- Superannuation Contributions Tax (Members of Constitutionally
Protected Superannuation Funds) Imposition Bill 1997;
- Superannuation Contributions Tax Imposition Amendment Bill
1997;
- Termination Payments Tax Imposition Amendment Bill 1997;
- Superannuation Contributions and Termination Payments Taxes
Legislation Amendment Bill 1997; and
- Superannuation Legislation Amendment (Superannuation
Contributions Tax) Bill 1997
These six Bills complete a package of legislation designed to
give a legislative framework to the introduction of a
superannuation contributions surcharge for high income earners.For
further background the reader is referred to Bills Digest Nos.
124-130 1996-97which discusses the preliminary seven Bills
introduced into Parliament in February 1997 dealing with the
superannuation surcharge.Such legislation was introduced pursuant
to a revenue measure announced in the 1996-97 Budget.Briefly, the
Government sought to reduce the concessional treatment provided to
superannuation for high income earners.A 'surcharge' was to apply
to superannuation members whose taxable income and superannuation
contributions (employer / self employed) exceeded $70,000.The
surcharge would be imposed at the rate of 0.001% for each $1 of
annual income in excess of $70,000 with a maximum of 15% achieved
when taxable income and superannuation contributions reached
$85,000.
The surcharge would apply to both accumulated benefit funds and
defined benefit funds.Accumulated benefit funds (more common in the
private sector) are those superannuation funds where the member's
benefit depends on the performance of the funds and how their
superannuation contributions and earnings have accumulated.Defined
benefit funds (more common in the public sector) do not depend on
the fund's performance.In defined benefit funds, the member's
benefits are defined (often by a formula), and usually depend on
the number of years of contributions of the member and their final
salary.
It is estimated that the revenue impact of the surcharge will be
$480 million in 1997-98, $470 million in 1998-99 and $530 million
in 1999-2000.
While the policy to reduce superannuation concessions to high
income earners was simple, the design of its administration to
realise such policy was quite complex and faced considerable
opposition from the superannuation industry and other key
players.The following lists a chronology of various events in
relation to the somewhat problematic path of the previous
superannuation contributions surcharge legislation.
Date Event
August 1996 Superannuation Surcharge announced in Budget, applying to
Budget all funds. An Actuarial Advisory Committee was
established to report on the application of the
superannuation contributions surcharge to defined benefit
funds and unfunded and constitutionally protected
schemes.
September 1996 At an address to the Association of Superannuation Funds
Salary of Australia (ASFA), the Taxation Commissioner, Mr
sacrifice Carmody advised that the Tax Office was aware of the
arrangements to possibility of salary packaging arrangements to defeat
be thwarted the proposed superannuation surcharge, and would take
appropriate action if such planning practices emerged.
October 1996 Assistant Treasurer, Senator Kemp, advised at an ASFA
Surcharge Conference in Brisbane that the Tax Office and the
collection Insurance and Superannuation Commission were consulting
mechanisms to extensively with industry to discuss the development of
be reviewed efficient and effective mechanisms related to the
administration of the surcharge.
December 1996 The Tax Office established an Implementation Advisory
ATO considers Group to oversee the process of implementing the
implementation superannuation surcharge measure with a view to
issues developing optimal solutions to implementation issues.
February 1997 Details of how the proposed superannuation contributions
Treasurer surcharge would apply to constitutionally protected
announces schemes, defined benefit schemes, unfunded schemes and
surcharge golden handshakes were outlined in the Treasurer's Press
implementation Release, 5 February 1997. The Treasurer observed there
details were constitutional issues associated with applying the
proposed administrative and payment mechanisms to some
schemes, in particular those run by the Commonwealth and
State Governments. The Government would consult with the
States and Territories to achieve a workable outcome for
their schemes.
February 1997 A package of five superannuation-related Bills was
Surcharge Bills introduced into Parliament to give legislative effect to
introduced the superannuation contributions surcharge and
termination payments surcharge for higher income earners.
These Bills dealt with the assessment and collection,
imposition and consequential amendments to the surcharge.
March 1997 A further two Bills were introduced into Parliament.
Further These Bills provided for the notional application of the
Surcharge Bills superannuation contributions surcharge to members of
introduced non-contributory Commonwealth superannuation schemes (eg
judges). These two Bills and the five surcharge Bills
introduced in February were referred to the Senate Select
Committee on Superannuation for report by March 1997.
March 1997 Denis Rose QC provided preliminary advice on the
Constitutional constitutional validity of the proposed surcharge, which
validity was submitted to the Senate Select Committee on
questioned Superannuation by the Business Council of Australia.
March 1997 The superannuation contributions surcharge bills were
Surcharge Bills passed by the House of Representatives with Government
passed with amendments, to be debated in the Senate in the Budget
amendments by session of Parliament. Important amendments included
House of dealing with the Constitutional issues raised by Denis
Reresentatives Rose QC to ensure the constitutional validity of the
scheme, clarifying that the surcharge applied to exempt
public sector superannuation schemes, changing the
definition of 'holder' so that it covered unfunded
defined benefits schemes and a provision for the
calculation of the notional surchargeable contributions
for members of defined benefit schemes.
March 1997 The Senate Select Committee on Superannuation reported on
Senate the superannuation surcharge legislation. In the report,
Committee Government Senators recommended that the Senate pass the
report on legislation, subject to certain technical amendments
surcharge proposed by the Government which were subsequently passed
by the House of Representatives (see above). The Labor
and Democrat Senators, however, considered that it was
inappropriate for the Government to require Parliament to
pass legislation which could be constitutionally invalid.
They also recommended an alternative collection
mechanism.
May 1997 The legislation was passed with further amendments aimed
Surcharge Bills at ameliorating its effect on redundancy payouts and low
passed with income earners who failed to provide their tax file
amendments number (TFN). Also, the word 'surcharge' was changed to
'tax'.
June 1997 The seven Bills dealing with the Superannuation
Surcharge Bills Contributions Tax and the Termination Payments Tax
receive assent received Royal Assent.
Accordingly, superannuation legislation is currently in place to
deal with most private sector schemes which are accumulation
funds.
The remaining six superannuation surcharge Bills complement the
existing legislation.These Bills and their consequential amendments
to various statutes will ensure that the superannuation
contributions surcharge applies to all high income earners and
includes Federal Parliamentarians, new federal Judges and certain
tribunal members with the status of a judge, Commonwealth sector
civilian employees, Defence Force Personnel and the
Governor-General and certain State public servants.
This Assessment and Collection Bill ensures that the
superannuation contributions tax will apply to members of
constitutionally protected superannuation funds and has effect from
20 August 1996.
The existing surcharge legislation applies a surcharge or tax on
the superannuation providers.Certain State superannuation funds
however, are protected constitutionally from revenue measures. This
Bill overcomes constitutional problems posed in relation to members
of State-run defined benefit funds by imposing the liability on the
member rather than on the superannuation fund.The surcharge
liability for a member for a year will be accumulated in a
surcharge debt account (maintained by the Taxation Commissioner)
for the member and will be payable by the member when the member's
superannuation benefit becomes payable.The member will have the
option of paying off the debt as it arises once an amount of
surcharge has been assessed.
Part 1 deals with preliminary matters to the
Bill.Clause 7 provides that the Act does not apply
tomembers (of a constitutionally protected superannuation fund) who
are State judges at the commencement of the Act.
Part 2 deals with the liability for the
surcharge.The superannuation contributions surcharge is payable by
the member (Clause 11).This surcharge applies to
financial years commencing 1 July 1996, and will be payable if the
member's adjusted taxable income is greater than the surcharge
threshold for the financial year (Clause 8).The
surchargeable contributions for accumulated benefits schemes are
based on amounts actually paid to the superannuation providers, but
in defined benefits schemes are based on their respective annual
salaries multiplied by a notional factor (determined by reference
to equivalent accumulated benefits schemes) (Clause
9).The surcharge threshold is $70,000 for the 1996-97
financial year and will be indexed in subsequent years.The new
thresholds will be published by the Taxation Commissioner .
(Clause 10).
Part 3 refers to the assessment and collection
of the superannuation surcharge. Clause 12
requires that a superannuation provider give statements to the
Taxation Commissioner at the end of the year setting out
particulars including the name and tax file number of the member
and the total contributions for the year.In addition, the
superannuation Provider must give a statement to the Taxation
Commissioner when the benefit a becomes payable to a
member.Clause 14 provides that the Taxation
Commissioner must assess a member's surcharge for a financial year
based on their adjusted taxable income, and provide a copy of
assessment with particulars to the member. Clause
15 provides for the deferment of the liability of a member
to pay the surcharge, and for interest to accrue on the deferred
amount.The Taxation Commissioner is to keep a surcharge debt
account for each member, debiting the account with the surcharge
and interest (based on the treasury bond rate).The debt becomes
payable when the member receives their benefit (lump sum or
pension) and must be paid within three months from the date that
the Taxation Commissioner gives the member a notice stating their
surcharge debt account liability.A member may voluntarily reduce
their surcharge debt account, and the Taxation Commissioner is
required to acknowledge receipt, credit the payment and notify the
member.Clauses 16 and 17 set out circumstances in
which assessments may be amended. Where an assessment has been
increased, the member must pay interest to the Commonwealth
(Clause 18).The Taxation Commissioner may use TFNs
for the purpose of this Bill (Clause 19), and a
member has rights to object against an assessment where the member
is dissatisfied with the Taxation Commissioner's calculation of the
adjusted taxable income (Clause 20).
Part 4 refers to the recovery of unpaid
surcharge, interest or late payment penalty.Clause
21 provides that the Taxation Commissioner may impose a
penalty where a member has failed to make payment of their
surcharge liability on the date that it is due and payable
andClause 22 provides that debts of surcharge,
interest and late payment penalty may be recovered.Where the
Taxation Commissioner decides not to remit the whole or part of any
interest or late payment penalty, such a decision is subject to
review prescribed by the administrative review procedures set out
in Clause 25.
Part 5 deals with various administration
provisions. The Taxation Commissioner has the general
administration of the legislation (Clause 26) and
must provide an annual report to the Treasurer (Clause
27).Certain information acquired under the Act is
protected and officers administering it are subject to secrecy
provisions laid out in Clause 28.Persons who
divulge protected information face imprisonment for two years
unless the disclosure is appropriate under certain circumstances
set out in this clause,ega person may divulge information to a
court only for the purposes of the Act.
Part 6 deals with various miscellaneous
provisions.Clause 30 provides that assessment is
conclusive evidence of the correctness of calculations, and
includes copies and certificates signed by the Taxation
Commissioner, Deputy Commissioner or a Second
Commissioner.Clause 31 provides the power to
authorise access to premises, providing the officers carry
authorised proof of identity.An occupier of such premises is
required to provide all reasonable facilities and assistance tothe
authorised officer.Clause 32 gives the power to
the Taxation Commissioner (by written notice) to request verbal or
written information or documents from a person.The Taxation
Commissioner has the power to require such information on oath or
affirmation.Clause 33 provides that a
superannuation provider must keep records in English (or readily
accessible and convertible) which explain all transactions and
other acts required by the provider under the Act, so that any
liability under the Act can be be readily worked out.Clause
34 gives the Taxation Commissioner the power to collect
money from persons who owe money to a member, and such persons must
comply with the Taxation Commissioner's direction.Clause
35 states that the Criminal Code applies to all offences
under the Act.Clause 36 provides that the
Governor-General may make regulations prescribing matters necessary
or convenient for the working of the Act.
Part 7 deals with interpretation.Clause
37 contains all the definitions used in the Act.
John Harrison
24 October 1997
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
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: 24 October 1997
Back to top