CHAPTER 3
TECHNICAL ISSUES
Introduction
3.1 In its submission to the Committee the Australian Bankers' Association
identified a number of problems it saw in the Bills. The more significant
of these involved:
- the need to consult with the prescribed regulatory authorities regarding
action toward potential or existing RSA providers;
- the need to notify an employer of suspension or revocation of an RSA
provider's licence;
- inconsistency with the SIS legislation with regard to operating standards;
- problems in the application of the prohibition on interest off-setting
arrangements;
- the transfer of RSA balances;
- the requirement on RSA providers to hold money on trust in certain
circumstances
- inconsistency with SIS regarding complaints against RSA providers;
and
- a number of matters relating to the taxation arrangements.
3.2 Also, the Committee particularly noted the problems in the Bills
identified in the submission from the Life Investment and Superannuation
Association of Australia (LISA). Significant among these were:
- doubts about the relevant prudential supervisor of RSAs offered by
life companies;
- the double taxation of income and the relevant tax rate;
- consultation with the relevant regulator;
- consequences of suspension or revocation of RSA provider's approval
for employers;
- inconsistency of operating standards with SIS;
- monies to be held on trust;
- disclosure requirements;
- refunding of employer contributions; and
- death and disability cover.
3.3 Submissions made to the Committee by other organisations also raised
technical issues similar to those referred to above.
The Government's amendments
3.4 On the afternoon of its final public hearing on this matter on 25
February 1997, the Committee received the amendments which the Government
would be introducing into Parliament during the passage of these Bills.
3.5 The amendments to the RSA Bill are aimed at:
- providing for the relevant prudential regulator to be consulted before
the ISC makes decisions affecting RSA institutions;
- removing the requirement that certain money be held on trust; and
- making miscellaneous technical drafting improvements.
3.6 Amendments to the Consequential Amendments Bill seeks to:
- limit the scope of who is regarded as a 'representative of an RSA
provider' for the purposes of the Superannuation (Resolution of Complaints)
Act 1993;
- enable the Superannuation Complaints Tribunal to be constituted by
any three Tribunal Members;
- modify the tax regime on RSA providers by:
- removing concerns that the provisions could result in the double
taxation of amounts credited to RSAs;
- ensuring that the RSA component of an RSA provider's income is
not reduced by tax paid in relation to an RSA that is withdrawn by
the RSA provider from the RSA; and
- ensuring the RSA providers cannot offset losses against RSA income.
- ensure that the intercorporate dividend rebate applies appropriately
to life assurance company RSAs; and
- ensure that tax file number provisions applying to ordinary bank accounts
do not apply to RSAs.
3.7 As the Committee did not receive the amendments until shortly before
its final hearing, it has not been able to examine in detail whether the
amendments to be moved by the Government to these bills adequately address
the technical issues and anomalies identified by the ABA, LISA and other
organisations. The Committee sought information from the ISC about the
extent to which the amendments addressed these problems.
3.8 The Committee also independently examined the amendments. The Government
members of the Committee are satisfied that they appear to resolve what
it found to be the main difficulties with this legislation arising out
of the submissions and oral evidence.
Conclusions and Recommendations
3.9 The market for RSA products may be somewhat limited, as it is likely
that the interest paid on deposits in RSAs will probably be significantly
less in the longer term than the rates paid by most superannuation funds.
Nonetheless, risk aversive investors such as those approaching retirement
and persons who prefer a simpler product than conventional superannuation
will find RSAs attractive.
3.10 While proponents and opponents of this legislation have given the
concept of RSAs a mixed reception, the Government members of the Committee
consider that on balance, RSAs will be a useful addition to the range
of retirement savings products and add to the choices that are available.
Recommendation
The Government members of the Committee recommend
that the Bills be passed with the Government amendments as presented
to the Committee. |
Senator John Watson (Chairman) |
Senator Alan Ferguson |
Senator Julian McGauran |
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