Bills Digest No. 8 1999-2000
Superannuation (Unclaimed Money and Lost Members) Bill 1999
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
Information and Research Services
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ISSN 1328-8091
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