Chapter 2
Schedule 1 – the proposed measure
Introduction
2.1
The bill will amend various parts of the superannuation legislation to
introduce a free clearing house service for small businesses.[1]
This service will reduce the red tape associated with meeting superannuation
obligations by removing the need for small businesses to deal with numerous
superannuation funds where employees have exercised choice.[2]
The Government has also attempted to limit the impact of the measure on
existing clearing houses by limiting its availability to small businesses with
less than 20 employees.[3]
2.2
The Government consulted widely during both the policy design and draft
legislation stages of this measure's development: a consultation paper
discussing the initiative and seeking the views of both the industry and public
was released on 14 November 2008; the draft legislation was later exposed
for public comment on 26 November 2009.[4]
2.3
Although the submissions received during both periods of consultation
have not been publicly released a summary of the issues raised and how those
issues have been addressed is available from the Treasury website - http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1675.
The provisions
Superannuation contributions
2.4
Under the existing provisions of the Superannuation Guarantee
(Administration) Act 1992 (SGAA) an employer can discharge their superannuation
guarantee obligations for a quarter by paying the contributions it owes in
respect of each employee to a complying superannuation fund or retirement
savings account (RSA) by the 28th day after the end of a quarter.[5]
2.5
The introduction of section 23B in the SGAA will enable employers to
meet their obligations in respect of paying superannuation contributions by a
single payment as section 23B will operate to deem that where an employer pays
an amount to an approved clearing house for the benefit of an employee, the
payment will be treated as having been made to a complying superannuation fund
or retirement savings account at that point in time.[6]
2.6
In effect, the superannuation guarantee liability is 'turned off' on
receipt of the payment by the approved clearing house, providing an incentive
for eligible small businesses to take up this free service.[7]
This is in contrast with the effect of paying these contributions through a
payroll provider or a superannuation clearing house where the employer's
obligations are only considered to have been satisfied when the money they have
paid to the payroll provider or clearing house has finally reached the fund or
RSA.[8]
Choice of fund requirements
2.7
Introduction of the choice of fund rules from 1 July 2005 now requires employers
to provide employees with a standard choice of fund form to enable employees to
choose the fund into which their compulsory employer contributions are paid.
2.8
Choice of fund was introduced to provide employees with greater freedom
to decide who manages their superannuation. The measure was also expected to
increase competition and efficiency in the superannuation industry 'leading to
improved returns and placing downward pressure on fund administration charges.'[9]
At the time the changes were introduced it was noted that the nature of the
choice of fund requirements would increase costs for some employers,
particularly small businesses less able to absorb any such impacts,[10]
but that the benefits to employees and the community outweighed those costs.[11]
2.9
The Government has sought to rectify this situation through the proposed
bill and a subsequent amendment that it will make to the choice of fund
provisions in section 32C. The amendment will operate to ensure that payment of
an employer's superannuation contributions for employees to the approved
clearing house also discharges the employer's choice of fund obligations.[12]
The approved clearing house
2.10
The final substantive change involves the introduction of a definition
of the term 'approved clearing house'.
2.11
When the measure was first announced the Government advised that the
approved clearing house would be contracted to the private sector, the
successful entity being appointed by tender.[13]
Following further development of the measure this was changed; the Government
taking the view that as risk would be transferred back to the employee in the
event of default (given the employer's liability on payment to the clearing
house is extinguished) a private clearing house provider should not be engaged.[14]
2.12
As a result, Schedule 1 of the bill now provides that the definition of
'approved clearing house' will be determined by the making of regulations; the
government announcing that following passage of the bill, regulations
identifying Medicare Australia as the approved clearing house for the purposes
of the measure will be made.[15]
Additional minor amendments
2.13
In addition to these main changes, additional minor amendments to
facilitate the measure will be made.[16]
These include changes to proposed Division 355 (confidentiality of taxpayer
information) of Schedule 1 to the TAA 1953 to allow the Tax Office to disclose
information to Medicare for the purposes of administering the clearing house
service. Division 355 has not yet been enacted; it is currently contained in the
Tax Laws Amendment (Confidentiality of Taxpayer Information) Bill 2009 which is
before the Parliament for consideration.[17]
Commencement date
2.14
Provided the bill is passed, Schedule 1 will commence on 1 July 2010.[18]
Medicare will have facilities available to those employers who intend to use
the service to register from May 2010.[19]
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