Appendix 2
List of Witnesses
Association of Superannuation Funds of Australia
Dr Michaela Anderson
Australian Taxpayers Association
Ms Barbara Smith
Australian Retirement Income Streams Association
Mr Tony Negline, Deputy Chair
Australian Society of Certified Practising Accountants
Mr Brad Pragnell
Small Independent Funds Association
Mr Graeme McDougall
Managed Superannuation Services Pty Ltd
Mr Michael Lorimer
Government Representatives
Assistant Treasurer Senator the Hon Rod Kemp
Mr Donald Gruber
Mrs Rosemary Robinson
Mr Nigel Murray
Mr Trevor Thomas
Mr Andrew Allan
Ms Erica Lejins
APPENDIX 3
QUESTIONS ON NOTICE
Senator Ferguson (Cost to Appoint an Approved Trustee)
(Question No.1, Hansard p22)
Senator FERGUSON asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
What is the cost of appointing an approved trustee to an existing excluded
fund?
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
Enquiries were made with 2 major approved trustees regarding the cost
of appointing an approval trustee to an existing excluded fund. One of
the approved trustees quoted a one-off transfer fee of $300; the other
quoted a one-off transfer fee of 1.5 per cent of the fund's assets.
Ongoing fees and charges may incurred for the management of funds, preparation
of taxation returns etc.
Senator Ferguson (Overseas Residency and Compliance of Self Managed
Superannuation Funds)
(Question No.2, Hansard p22)
Senator FERGUSON asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
Given that families nowadays are very mobile – it is not uncommon,
for example, to have a daughter working in England for a number of years
– we have got a problem of non-resident members, and it seems a bit
rough that it can then become a non-compliant fund. How can we lessen
the problem? What is the way around it? Should we be able to give these
people the right to appoint a nominee or something?
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
All complying superannuation funds, including self-managed superannuation
funds have to meet the requirements of a resident superannuation fund.
To be a complying resident superannuation fund the central management
and control of the fund must remain in Australia. There is also a -requirement
that more than half the accumulated entitlements of active fund members
relate to resident members, where a resident is a person who is a resident
for tax purposes. An active member is a person who is a contributor to
the fund, or has contributions made on his/her behalf.
It is important to note that the requirements for a resident superannuation
fund are unchanged by the Superannuation Legislation Amendment Bill (No.3).
Consequently, it could be expected that in most cases, the travel overseas
of a family member of a self managed superannuation fund for a period
of time will not prevent that person remaining a member and not breach
the requirements of a resident superannuation fund.
If the travel overseas of a family member would breach the central management
and control requirement, the fund may appoint an approved trustee. The
fund would still have to meet the requirement that more than half the
accumulated entitlements of active fund members relate to resident members.
Any changes to the requirements relating to resident superannuation funds
need to be considered in the broader context of determining the circumstances
in which Australia's superannuation tax concessions should be available
to non-residents.
Senator Murphy (Capital Gains Tax and the Death of a Member)
(Question No.3, Hansard p28)
Senator MURPHY asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
With regard to a fund that complies in the first instance so it becomes
a self managed fund and it has fewer than five members – let us assume
it has four – and one of those members dies. …in respect of
capital gains tax, what happens if a self managed superannuation fund,
which is a family fund in this case, cannot then comply and they have
to change and go back to, if you like, a non-compliant self managed fund,
or back to an APRA fund, what arrangements have been made for those sorts
of circumstances in respect to costs? After the transitional period, a
lot of funds could actually become self managed funds, but then shortly
thereafter, as a result of the death of a member, they could become a
non-compliant fund.
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
When a member dies the legal personal representative of that member may
act as a trustee of the fund or a director of the body corporate that
is a trustee of the fund. In such cases, the fund will remain a self managed
superannuation fund until the payment of death benefits commences in respect
of the member. The payment of death benefits through a lump sum or through
the commencement of a pension will usually extinguish a deceased member's
interest in a fund.
In addition, where a fund no longer satisfies the definition of a self
managed superannuation fund, a period of six months is provided to allow
the fund to either restructure so as to either remain a self managed superannuation
fund or appoint an approved trustee and move to APRA regulation.
Under SLAB 3, where death benefits are paid in the form of a pension,
the pension recipient(s) must be a member(s) of the self managed superannuation
fund.
If this results in the fund no longer satisfying the definition of
a self managed fund, the fund will move to APRA regulation and an approved
trustee will need to be appointed.
If this results in membership of the fund being five or more, the fund
will similarly move to APRA regulation. While there is no need for an
approved trustee (as the fund will have 5 or more members), the fund will
need to meet additional reporting requirements and provide member complaints
mechanisms.
No capital gains tax liability is triggered in any of these events. However,
as is the case for all superannuation funds, where a self managed superannuation
fund needs to sell assets in order to pay death benefits, capital gains
tax liabilities will be incurred if there is a capital gain.
Senator Sherry (Capital Gains Tax)
(Question No.4, Hansard p29)
Senator SHERRY asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
Can I have an assurance that capital gains tax will not apply, in any
circumstance, on the restructuring of the fund as a consequence of this
legislation?
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
There is no need for Capital Gains Tax to be incurred by any fund as
a consequence of the legislation. Funds will always have the option of
appointing all existing family and/or business-linked members as trustees
in the case of self managed funds, or of retaining their current membership
and appointing an approved trustee in the case of small APRA funds. These
events will not trigger capital gains tax liabilities.
Where a fund appoints an approved trustee, or specific amendments are
made to the trust deed to comply with the Superannuation Industry (Supervision)
Act 1993, existing capital gains tax rollover provisions in the Income
Taxation Assessment Act 1997 will apply.
- Capital gains tax rollover relief is available for disposals of assets
if a complying superannuation funds amends or replaces its trust deed
to enable it to comply with the SIS Act, provided the fund's members and
assets do not change.
- In addition, the mere replacement of a trustee(s), with unchanged membership
of a fund, should not lead to capital gains tax liability, as there is
no change in beneficial ownership of fund assets.
A fund may decide to choose to transfer arm's length members out of the
fund in order to become a self managed fund. These funds would need to
transfer the benefits of those members to another complying superannuation
fund. In such circumstances, the normal taxation consequences would apply.
For example, where these benefits are paid from cash reserves or temporary
borrowing no capital gains tax is due. Capital gains tax liability would
only be incurred where an asset is sold to pay benefits and a capital
gain is made.
As already noted, the fund can avoid any capital gain tax liability by
retaining existing membership and appointing an approved trustee.
Senator Watson (Deeming Rules)
(Question No.5, Hansard p30)
Senator WATSON asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
Part of the solution to Senator Sherry's question might be answered by
the submission from the Taxpayers' Association, by Barbara Smith which
says:
Legislation needs deeming rules so that changes in this legislation are
deemed to be included in the deed and to deem the assets are held in the
names of all trustees to enable seamless transfer, e.g. 1 trustee as custodian
holding assets on behalf of the fund.
How does this appeal to you?
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
Introducing deeming rules so that changes in the legislation are deemed
to be included in the governing rules of a superannuation fund appears
neither necessary nor likely to prove workable in practice.
The Bill does not expressly require funds to change their trust deeds
in order to meet the definition of a self managed superannuation fund.
Whether a fund meets the definition of a self managed superannuation fund
will be determined by the actual membership/trustee structure adopted
by the fund and not on the terms of its trust deed.
Whether a deed will need to be amended as a consequence of the Bill will
depend on the individual terms of the trust deed. In this regard it is
not possible to define what changes, if any, would need to be made to
an individual trust deed.
Similarly, it would not be possible for the legislation to deem the transfer
of assets to a new trustee where the identity of the new trustee/s was
unknown.
In order for the assets of the fund to vest in equity the instrument
of transfer would need to name the new trustee/s.
Further, for the transfer of the assets of the fund to vest in law
the instrument of transfer may need to be registered under the law of
a State or Territory. It is not possible for Commonwealth legislation
to override such registration requirements.
Senator Watson (Penalties)
(Question No.6, Hansard p31)
Senator WATSON asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
The penalty regime seems very onerous here. For example, if we have a
problem with the retirement savings account and not sending the piece
of paper in on time, there could be an $11,000 penalty. Is that right?
It seems an extraordinarily high penalty for a retirement savings account
and a very simple thing where nobody can do much fiddling.
If we look at the late lodgment of a company tax return it is $10 per
week with a maximum of $200. If you compare that late lodgment of a company
tax return with the sending in of a piece of paper on a retirement savings
account of $11,000, you cannot tell me that is comparable.
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
Item 44 of Schedule 1 of Superannuation Legislation Amendment Bill (No.
3) 1999 inserts new section 106A into the Superannuation Industry (Supervision)
Act 1993. Subsection (1) of new section 106A provides that the trustee
of a superannuation entity must give a written notice to the Commissioner
of Taxation if the trustee has knowledge that the superannuation entity
has ceased to be a self managed superannuation fund or has switched to
become a self managed superannuation fund. Subsection (3) of new section
106A provides that a person who contravenes subsection (1) is guilty of
an offence punishable on conviction by a fine not exceeding (ie, a maximum
of) 100 penalty units. In order for a penalty to be imposed the offence
needs to be proven before a Court. Further, the Court would have the discretion
to impose a lower monetary penalty than the maximum applying to the penalty
provision.
New section 106A is critical to the effective regulation of self managed
superannuation funds and non-self managed superannuation funds by the
Australian Taxation Office (ATO) and APRA. Non-compliance with section
106A will result in significant regulatory uncertainty, inefficiency and
ultimately unnecessary regulatory cost for funds, APRA and the ATO. In
particular, non-compliance has the potential to give rise to regulatory
duplication in some cases and inadequate supervision from either regulator
in other cases.
All of the penalties contained within the Bill have been determined in
consultation with the Attorney-General's Department and are consistent
with Commonwealth criminal law policy and comparable with other SIS Act
offence provisions and penalties.
For example, failure to lodge an annual return under the SIS is an
offence provision, which carries a maximum fine of 50 penalty units.
- This is comparable with the penalty for failing to lodge a taxation
return under the Income Tax Assessment Act 1936.
: Failure to lodge a tax return is an offence under section 8C of the
Taxation Administration Act 1953, punishable, in the case of a first offence,
by a maximum fine of $2,000, rising to a maximum fine of $5,000 or 12
months imprisonment (or both) in the case of a third or subsequent offence.
Senator Watson (Levies)
(Question No.7 Hansard p31)
Senator WATSON asked the Minister representing the Treasurer upon notice,
on Thursday, 27 May 1999:
As a result of these changes, they are now going to move from at least
$50 to $1,000, aren't they?
This question is taken to refer to the annual levies payable by superannuation
funds when lodging their annual returns with the regulator.
Senator Kemp: The following answer to the honourable Senator's
question has been provided:
The rate of levy payable in immediate past years, for excluded funds,
is $200 per $500 000 assets, (capped). Most excluded funds pay $200.
The Government announced in the 1998-99 Budget that the levy charged
in the year 2000 (in respect of the 1998-99 year of income annual returns)
for excluded funds will be a flat rate amount of less than $50. This is
based on recovery of supervision costs.
All levies for APRA regulated funds are now also determined on a cost
recovery basis.