CHAPTER 7
CHAPTER 7
These amendments are consistent with measures announced in the 1997-98
Budget reforming current arrangements for the early release of superannuation
benefits to members.[1]
7.1 As outlined in Chapter 1, the first step in the inquiry behind the
first six chapters of this report was the Senate referring the Small Superannuation
Accounts Amendment Bill 1997 to the Committee on 19 June 1997 for inquiry
and report by 28 August 1997. The provisions of this Bill tighten the
arrangements relating to the early release of monies held in the Superannuation
Holding Accounts Reserve (SHAR).
7.2 The Committee is still required to make a separate report on the
above Bill, and that is the subject of this chapter.
7.3 The SHAR is a collection mechanism administered by the Australian
Taxation Office.[2] It was established
to receive superannuation contributions from employers which are required
to be paid under the Super Guarantee Scheme (SG). SHAR was foreshadowed
by the then Treasurer in June 1994 as part of a policy to protect small
superannuation accounts from being eroded by fees and charges. The legislation
establishing SHAR was the Small Superannuation Accounts Act 1995.
7.4 SHAR comprises separate notional accounts for individuals, with each
individual only allowed one account. Money credited to an individual's
account is not held on trust. Accordingly, the money may not be dealt
with in any other way other than in accordance with the SHAR legislation.
7.5 This reserve is not a superannuation fund or superannuation scheme.
Deposits are not superannuation contributions and do not attract contributions
tax within SHAR. However, employers may treat such deposits as superannuation
contributions for the purpose of SG and be able to claim these deposits
as deductions for income tax purposes.
7.6 While SHAR was established primarily for the collection of deposits
in lieu of contributions under SG, it may also accept other amounts. For
example, employers may wish to provide superannuation support for certain
employees even though SG may not be required for them if, say, their monthly
wages are below $450.
7.7 The Committee notes that it is 'the Government's intention that
SHAR will be gradually phased out over a 2 year period':
Whilst the Government has not finalised the precise details of
this process, individuals who have money held on their behalf in SHAR
and do not access their money before SHAR is phased out, will not lose
access to their money. The Government will ensure arrangements are put
in place so that those individuals will retain access to money consistent
with the rules which apply to access to other superannuation entitlements.[3]
7.8 The following table provides details of SHAR membership as at 25
August 1997.[4]
Table 7.1
|
Number
|
Amount
$
|
Total Accounts in SHAR
|
86 331
|
15 218 818
|
With unconfirmed address
|
1 314
|
162 958
|
Those untraceable
|
34
|
9 478
|
7.9 Labor and Democrat Senators wish to highlight their concern for
the monies contained in SHAR accounts whose owners are untraceable or
have unconfirmed addresses, which totalled some $172 436 as at 2 September
1997. The Government has indicated its intention to phase out SHAR but
has not announced the detail of this proposal. Labor and Democrat Senators
are not yet convinced that SHAR should be phased out, or that the Government
has in place adequate alternative mechanisms to deal with the problem
of small accounts. Labor and Democrat Senators recommend that the Senate
closely examines the Government's legislation with the intention of ensuring
that people do not lose their funds if the Government closes SHAR.
7.10 The Bill amends the Small Superannuation Accounts Act 1995
'to tighten the arrangements relating to the early release of monies'
held in the SHAR.[5] The amendments
have the following effects:
- abolishing the $500 threshold;
- replacing the "severe hardship" test with an objective test
of hardship based on receipt of specified income support payments for
a certain period; and
- releasing monies to non-residents only after preservation age (currently
age 55).
7.11 In the previous four chapters, the above effects have been examined
in relation to the superannuation system proper, and recommendations have
been made in Chapter 6. In the case of the SHAR accounts the Committee
makes the same findings.
7.12 The Committee notes that no provision for early release on compassionate
grounds was included in the Bill. For the sake of uniformity, the Committee
considers that compassionate grounds should be provided for in SHAR in
the same manner as for the superannuation system proper.
7.13 Accordingly, the Committee recommends that the Small Superannuation
Accounts Amendment Bill be amended to give effect to the following recommendations.
Recommendation 7.1
The Committee supports the abolition of the $500 threshold but recommends
the Government substitutes a lower threshold of $200.
Senator Lyn Allison does not support this recommendation. The Australian
Democrats are not persuaded that low income workers are better off being
required to hold such small amounts in superannuation funds and will reserve
their position on this matter.
Recommendation 7.2
In relation to Australian citizens or permanent residents departing overseas
for whatever period, the Committee recommends retaining the Government's
change for the release of superannuation benefits only after such persons
have reached preservation age.
To this recommendation the Labor and Democrat Senators add the following:
There should be a reasonable transition period of six months from the
date of operation of the revised regulations to allow those people who
were leaving Australia to notify their superannuation fund of their intention.
The transition period for people notifying their superannuation fund
should end on 30 December 1997 and will only apply to those people who
are planning on leaving Australia before 30 December 1998.
Recommendation 7.3
For temporary residents in Australia holding temporary visas, Labor and
Democrat Senators recommend that, on their permanent departure overseas,
these visa holders be granted full access to all preserved superannuation
benefits.
The Coalition Senators acknowledge that the evidence received during
the inquiry overwhelmingly supports the position that temporary residents
in Australia holding temporary visas be granted full access to all preserved
superannuation benefits on their permanent departure overseas.
However, the Coalition Senators note the continued unfavourable treatment
of Australians employed overseas in respect of social security taxes in
countries such as the United States, as described in the Assistant Treasurer's
letter. The Coalition Senators consider that if the Government agreed
to grant full access to all preserved benefits for temporary residents
at this time, this may unduly weaken its position in respect of the social
security agreement negotiations yet to be concluded.
The Coalition Senators believe that, in the longer term, holders of 456,
457 and 411 visas should be granted access to their superannuation on
permanent departure. Such access should occur as social security agreements
are concluded. The Coalition Senators express their concern at the slow
rate of making these agreements, and the lack of understanding of the
differences between Australia's superannuation system and that of other
countries.
Recommendation 7.4
The Committee recommends that there be no exemption beyond those already
granted from the application of the Super Guarantee for temporary residents.
Recommendation 7.5
The Committee recommends that the following changes be made to the Government's
new test for severe financial hardship:
(a) the income support definition be extended, beyond those Commonwealth
income support payments presently specified, to include all like payments;
(b) the required period of receipt of such payments be reduced; and
(c) a subjective test be added, being the total inability to meet reasonable
and immediate family living expenses.
Labor Senators conclude that a reasonable waiting period in continuous
receipt of income support needed to satisfy the objective test for severe
financial hardship should be twelve weeks.
Recommendation 7.6
The Committee recommends that the Insurance and Superannuation Commission
be the appropriate body to assess claims on grounds of severe financial
hardship.
Recommendation 7.7
The Committee recommends that compassionate grounds be provided for on
the same basis as in the superannuation system proper. This would include
a provision for a residual discretion for the Insurance and Superannuation
Commissioner to release benefits, other than in accordance with the listed
criteria, where such serious and special circumstances exist as to justify
compassionate consideration.
Senator John Watson
Chairman
[1] Second Reading Speech,
Small Superannuation Accounts Amendment Bill 1997.
[2] Information in this section
has been drawn from Australian Superannuation Law and Practice,
CCH., paras 55-100 to 55-120.
[3] Answers to Questions taken
on Notice, Treasury Advice of 2 September 1997, p. 4.
[4] ibid
[5] Second Reading Speech,
Small Superannuation Accounts Amendment Bill 1997.
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