Chapter 1 - Introduction
Background
1.1
The Superannuation Industry (Supervision) Amendment
Regulations 2004 (No. 2), as contained in Statutory Rules 2004 No. 84 and made
under the Superannuation Industry
(Supervision) Act 1993, were notified in the Commonwealth of Australia Gazette on 12 May 2004, and tabled in
both Houses of Parliament on 13 May 2004.
Purpose of the regulations
1.2
The regulations are claimed to improve the integrity of
the superannuation system[1] by addressing an
alleged range of tax avoidance strategies primarily involving small and
non-arms length superannuation funds (DIY funds). These strategies are allegedly
designed to avoid limits applying to tax concessions and social security means
tests and allow superannuation to be used for wealth accumulation and estate
planning arrangements rather than for retirement income purposes.
1.3
The regulations target potential strategies involving
the forfeiture of superannuation benefits and the use of reserve accounts. They
also strengthen the prudential standards that apply to funds that provide
defined benefits and pensions to ensure that these funds have the capacity to
provide the benefits.
1.4
The regulations require:
-
benefits in accumulation funds to be fully
vested in a given member;
-
contributions to accumulation funds to be
allocated to a member of a fund;
-
defined benefit funds to have at least 50
members; and
-
funds providing defined benefit pensions to have
at least 50 members.
Reference of the regulations
1.5
On 16 June
2004, the Senate referred the regulations to the Senate Economics
Legislation Committee for consideration and report, with particular reference
to:
(a)
the extent to which defined benefit arrangements have
been used for:
(i)
the purposes of tax minimization,
(ii)
estate planning,
(iii) reasonable
benefit limit avoidance, and
(iv) any
other purpose other than providing retirement income;
(b)
the extent of past losses to revenue from the above
measures; and
(c)
the estimated future
losses to revenue likely in the absence of these regulations.
Submissions
1.6
The Committee advertised its inquiry into the regulations
on the internet and in The Australian
newspaper. In addition, the Committee contacted a number of organisations
alerting them to the inquiry and inviting them to make a submission. A list of
submissions received appears at Appendix
1.
Hearings and evidence
1.7
The Committee held two public hearings in Melbourne
on Monday, 26 July 2004,
and in Canberra, on Monday, 9 August 2004.
1.8
Witnesses who appeared before the Committee at the
hearings are listed in Appendix 2.
1.9
Copies of the Hansard transcripts are tabled for the
information of the Senate. They are also
available through the internet at http://aph.gov.au/hansard.
Acknowledgment
1.10
The Committee wishes to thank all those who assisted
with its inquiry.