Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Choice of superannuation funds

Retirement Savings Accounts Act 1997

1A Division 3 of Part 5

Repeal the Division.

Superannuation Guarantee (Administration) Act 1992

1 Subsection 5(1)

Omit “Commonwealth is”, substitute “Commonwealth, Commonwealth Departments and untaxable Commonwealth authorities are”.

2 Subsection 5(2)

Repeal the subsection, substitute:

However, subject to this Act and to such modifications as are prescribed, this Act applies in all other respects, in respect of any matter or thing in respect of the employment of a Commonwealth employee, as if:

(a) the employee were employed by the responsible Department and not by the Commonwealth; and

(b) the responsible Department were a company and each other Department, and each authority of the Commonwealth, were a company related to the responsible Department; and

In addition, subject to such modifications as are prescribed, this Act applies in relation to an untaxable Commonwealth authority in the same way as it applies in relation to a Commonwealth Department.

The Finance Minister may give such directions in writing as are necessary or convenient to be given for carrying out or giving effect to this section and, in particular, may give directions in relation to the transfer of money within an account, or between accounts, operated by the Commonwealth or a Commonwealth entity.

Directions under subsection (2B) have effect, and must be complied with, notwithstanding any other law of the Commonwealth.

3 Subsection 5(3)

After “Commonwealth”, insert “, a Commonwealth Department or an untaxable Commonwealth authority”.

4 Subsection 5(4)

After “Commonwealth”, insert “, Commonwealth Departments or untaxable Commonwealth authorities”.

5 At the end of section 5

Add:

In this section:

Commonwealth Department means:

(a) a Department of State; or

(b) a Department of the Parliament; or

(c) a branch or part of the Australian Public Service in relation to which a person has, under an Act, the powers of, or exercisable by, the Secretary of a Department of the Australian Public Service.

Commonwealth entity means:

(a) an Agency (within the meaning of the Financial Management and Accountability Act 1997); or

(b) a Commonwealth authority (within the meaning of the Commonwealth Authorities and Companies Act 1997);

that cannot be made liable to taxation by a Commonwealth law.

Finance Department means the Department administered by the Finance Minister.

Finance Minister means the Minister administering the Financial Management and Accountability Act 1997.

modifications includes additions, omissions and substitutions.

responsible Department, in relation to the employment of a Commonwealth employee, means:

(a) where the remuneration in respect of that employment is or was paid wholly or principally out of money appropriated under an annual Appropriation Act—the Commonwealth Department in respect of which the money was appropriated; and

(b) where the remuneration in respect of that employment is or was paid wholly or principally out of money appropriated under an Act other than an annual Appropriation Act:

(i) if the employee performs or performed the duties of that employment in, or in respect of, a Commonwealth Department—that Commonwealth Department; or

(ii) in any other case—the Department of State administered by the Minister who administers the Act under which that money was appropriated, insofar as the Act appropriated that money; and

(c) where the remuneration in respect of that employment is or was paid wholly or principally out of money appropriated by the Constitution—the Finance Department.

untaxable Commonwealth authority means an authority of the Commonwealth that cannot, by a law of the Commonwealth, be made liable to taxation by the Commonwealth.

6 Subsection 6(1)

Insert:

Commonwealth employee means an employee of the Commonwealth.

7 Subsection 6(1)

Insert:

Commonwealth industrial award means:

(a) an industrial award or determination made under a law of the Commonwealth; or

(b) an industrial agreement approved or registered under such a law.

8 Subsection 6(1)

Insert:

CSS means the scheme known as the Commonwealth Superannuation Scheme.

9 Subsection 6(1)

Insert:

defined benefit member means a member entitled on retirement to be paid a benefit defined, wholly or in part, by reference to either or both of the following:

(a) the amount of the member’s salary:

(i) at the date of the member’s retirement or an earlier date; or

(ii) averaged over a period before retirement;

(b) a specified amount.

10 Subsection 6(1)

Insert:

defined benefit superannuation scheme has the meaning given by section 6A.

11 Subsection 6(1) (definition of industrial award)

Repeal the definition, substitute:

industrial award means a Commonwealth industrial award, a State industrial award or a Territory industrial award.

12 Subsection 6(1)

Insert:

PSS means the Public Sector Superannuation Scheme within the meaning of the Superannuation Act 1990.

13 Subsection 6(1)

Insert:

State industrial award means:

(a) an industrial award or determination made under a law of a State; or

(b) an industrial agreement approved or registered under such a law.

14 Subsection 6(1)

Insert:

Territory industrial award means:

(a) an industrial award or determination made under a law of a Territory; or

(b) an industrial agreement approved or registered under such a law.

15 Subsection 6(1)

Insert:

unfunded public sector scheme means a public sector scheme that is a defined benefit superannuation scheme:

(a) in respect of which no fund is established for the purposes of the scheme; or

(b) under which all or some of the amounts that will be required for the payment of benefits are not paid into the fund established for the purposes of the scheme or are not paid until the members become entitled to receive the benefits.

15A After subsection 19(2)

Insert:

(2A) If an employer makes one or more contributions (the no choice contributions) to an RSA or a complying superannuation fund other than a defined benefit superannuation scheme, for the benefit of an employee during a quarter and the contributions are not made in compliance with the choice of fund requirements, the employer’s individual superannuation guarantee shortfall for the employee for the quarter is increased by the amount worked out in accordance with the formula:

where:

notional quarterly shortfall is the amount that would have been worked out under subsection (1) if the no choice contributions had not been made.

Note 1: See also subsection (2E) and section 19A.

Note 2: Part 3A sets out the choice of fund requirements.

If:

(a) a reduction of the charge percentage for an employee for a quarter is made under subsection 22(2) in respect of a defined benefit superannuation scheme; and

(b) there is at least one relevant day in the quarter where, if contributions (the notional contributions) had been made to the scheme by the employer for the benefit of the employee on the day, the notional contributions would have been made not in compliance with the choice of fund requirements; and

(c) section 20 (which deals with certain cases where no contributions are required) does not apply to the employer in respect of the employee in respect of the scheme for the quarter;

the employer’s individual superannuation guarantee shortfall for the employee for the quarter is increased by the amount worked out in accordance with the formula:

where:

notional quarterly shortfall is the amount that would have been worked out under subsection (1) if no reduction were made under subsection 22(2) in respect of the scheme.

number of breach of condition days is the number of relevant days in the quarter on which, if a contribution had been made to the scheme by the employer for the benefit of the employee, those contributions would have been made not in compliance with the choice of fund requirements.

Note 1: See also subsection (2E) and section 19A.

Note 2: Part 3A sets out the choice of fund requirements.

(2C) The following days in a quarter are relevant days for the purposes of subsection (2B):

(a) if the value of B in the formula in subsection 22(2) for the quarter is 1—every day in the quarter; or

(b) in any other case—every day in the quarter that is in the shorter of the scheme membership period or the certificate period referred to in subsection 22(2).

A reference in subsections (2A) and (2B) to an employer’s individual superannuation guarantee shortfall being increased includes a reference to the shortfall being increased from nil.

The Commissioner may reduce (including to nil) the amount of an increase in an employer’s individual superannuation guarantee shortfall for an employee for a quarter under subsection (2A) or (2B).

Note: The Commissioner must have regard to written guidelines when deciding whether or not to make a decision under this subsection: see section 21.

15B Subsection 19(4)

Omit “An employer’s individual superannuation guarantee shortfall”, substitute “Despite subsections (1), (2A) and (2B), an employer’s individual superannuation guarantee shortfall”.

15C After section 19

Insert:

19A Limit on shortfall increases arising from failure to comply with choice of fund requirements

Subject to subsections (2) and (3), if the total of the amounts worked out for an employee for a quarter under subsections 19(2A) and (2B) exceeds $500, the total is taken to be $500.

If:

(a) the total (the previous amount) of the amounts worked out for an employee under subsections 19(2A) and (2B) for previous quarters within an employer’s notice period for an employee does not exceed $500; and

(b) the current quarter is within the same employer’s notice period for the employee; and

(c) the total of the amounts worked out under subsections 19(2A) and (2B) for the employee for the current quarter and the previous quarters within the employer’s notice period for the employee exceeds $500;

then, the total of the amounts worked out under subsections 19(2A) and (2B) for the employee for the current quarter is taken to be the amount by which $500 exceeds the previous amount.

(3) If a quarter (the later quarter) in an employer’s notice period for an employee follows a quarter within that notice period:

(a) to which subsection (1) applied; or

(b) to which paragraph (2)(c) applied;

in respect of the employee, the total of the amounts worked out for the employee under subsections 19(2A) and (2B) for the later quarter is taken to be nil.

(4) An employer’s notice period for an employee:

(a) begins on:

(i) in the case of the first employer’s notice period for the employee—the later of 1 July 2005 and the day on which the employee is first employed by the employer; or

(ii) in any other case—when the immediately preceding employer’s notice period for the employee ends; and

(b) ends on the day the Commissioner gives the employer written notice that the employer’s notice period for the employee has ended.

15D After proposed section 19A

Insert:

20 Scheme in surplus or member has accrued maximum benefit

This section applies to an employer in respect of an employee in respect of a defined benefit superannuation scheme for a quarter if the employee is a defined benefit member of the scheme and either subsection (2) or (3) is satisfied.

Scheme in surplus

This subsection is satisfied if:

(a) the employee was a defined benefit member of the fund immediately before 1 July 2005 and has not ceased to be such a member since that time and before the start of the quarter; and

(b) an actuary has provided a certificate in accordance with regulations under the Superannuation Industry (Supervision) Act 1993 stating that the employer is not required to make contributions for the quarter and there has been such a certificate covering all times since 1 July 2005; and

(c) an actuary has provided a certificate stating that, in the actuary’s opinion, at all times from 1 July 2005 until the end of the quarter, the assets of the scheme are, and will be, equal to or greater than 110% of the greater of the scheme’s liabilities in respect of vested benefits and the scheme’s accrued actuarial liabilities.

The certificate under paragraph (c) must have been provided no earlier than 15 months before the end of the quarter.

Member has accrued maximum benefit

This subsection is satisfied if, after the start of the quarter, the defined benefit that has accrued to the employee will not increase other than:

(a) as a result of increases in the employee’s salary or remuneration; or

(b) by reference to accruals of investment earnings; or

(d) in any other way prescribed for the purposes of this paragraph.

Meaning of scheme’s accrued actuarial liabilities and scheme’s liabilities in respect of vested benefits

In this section:

scheme’s accrued actuarial liabilities, at a particular time, means the total value, as certified by an actuary, of the future benefit entitlements of members of the scheme in respect of membership up to that time based on assumptions about future economic conditions and the future of matters affecting membership of the scheme, being assumptions made in accordance with applicable professional actuarial standards (if any).

scheme’s liabilities in respect of vested benefits, at a particular time, means the total value of the benefits payable from the scheme to which the members of the scheme would be entitled if they all voluntarily terminated their service with their employers at that time.

15E Before section 22

Insert:

21 Guidelines for reducing an increase in an individual superannuation guarantee shortfall

The Commissioner must develop written guidelines that he or she must have regard to when deciding whether or not to make a decision under subsection 19(2E).

Note: Subsection 19(2E) allows the Commissioner to reduce (including to nil) the amount of an increase in an individual superannuation guarantee shortfall under subsection 19(2A) or (2B).

The guidelines are to be made available for inspection on the Internet.

16 At the end of subsection 23(2)

Add:

17 At the end of subsection 23(3)

Add:

18 At the end of subsection 23(4)

Add:

19 At the end of subsection 23(4A)

Add:

20 At the end of subsection 23(4D)

Add:

21 At the end of subsection 23(5)

Add:

22 After Part 3

Insert:

Note: In certain cases, the choice of fund requirements provide that the employee’s notional earnings base is adjusted: see section 32Y.

Note: In certain cases, the choice of fund requirements provide that the employee’s ordinary time earnings are adjusted: see section 32Y.

Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004

Part 3A — Choice of fund requirements

Division 1 — Overview of Part

Division 2 — Which contributions satisfy the choice of fund requirements?

Division 3 — Eligible choice funds

Division 4 — Choosing a fund

Division 6 — Standard choice forms

Division 8 — Miscellaneous