1996

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

RETIREMENT SAVINGS ACCOUNTS BILL 1996

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Amendment to be moved on behalf of the Government

(Circulated by authority of the Assistant Treasurer, Senator the Hon Rod Kemp)

80620 Cat. No. 96 5911 0 ISBN 0644 496932

AMENDMENTS TO RETIREMENT SAVINGS ACCOUNTS BILL 1996

GENERAL OUTLINE OF THE AMENDMENTS

The amendments to the Retirement Savings Accounts Bill 1996 (RSA Bill) are intended to enhance the effectiveness and efficiency of the new regime for regulating retirement savings accounts (RSAs) and to remove doubt over the application of certain provisions in the Bill.

In particular, the amendments will:

•	provide that the relevant prudential regulator be consulted before the Insurance and Superannuation Commissioner makes a decision to refuse an application for approval as an RSA institution or directs an RSA institution not to accept contributions made to RSAs by specified employers;

•	remove the requirement that certain money is to be held on trust; and

•	make various miscellaneous technical amendments to ensure that the wording of particular provisions achieves the effect intended.

FINANCIAL IMPACT STATEMENT

There is no financial impact as a result of these amendments.

EXPLANATORY NOTES ON THE AMENDMENTS TO THE RETIREMENT SAVINGS ACCOUNTS BILL 1996

Clause 16 - Definitions

1.	Amendment (1) inserts a definition of AFIC Codes in clause 16 of the RSA Bill.  This is to replace the definition of Financial Institutions Codes.

Clause 16 - Definitions

2.	Amendment (2) amends the definition of building society in clause 16 of the RSA Bill to include a reference to the AFIC Codes.

Clause 16 - Definitions

3.	Amendment (3) amends the definition of credit union in clause 16 of the RSA Bill to include a reference to the AFIC Codes.

Clause 16 - Definitions

4.	Amendment (4) amends the definition of financial institution in clause 16 of the RSA Bill to include a reference to the AFIC Codes.

Clause 16 - Definitions

5.	Amendment (5) omits the definition of Financial Institutions Codes in clause 16 of the RSA Bill.  This is replaced by the definition of AFIC Codes.

Clause 26 - Deciding an application for approval

6.	Amendment (6) amends clause 26 of the RSA Bill by replacing subclause 26(2) with new subclauses 26(2) and 26(2A).

7.	The effect of this amendment is to provide that the prescribed regulatory agency (if any) must be consulted before the Commissioner can be satisfied that the applicant cannot be relied upon to conduct RSAs in accordance with the Act and regulations and therefore refuse the application.  

8.	The requirement to consult with the relevant prudential supervisor before refusing an application for approval will enable the Commissioner to be appraised of any potential systemic consequences of refusing an RSA application.  It will also clearly signal to the market that refusal of an application is not indicative of prudential failings, but only of the institution’s inability to conduct RSAs in accordance with the RSA Act and regulations.

9.	The Commissioner is both the prudential and functional regulator of life insurance companies and therefore technically cannot consult with himself.  As such, the Commissioner will only be required to consult before refusing an application for approval where there is a relevant prescribed regulatory agency, that is, the Reserve Bank of Australia in the case of banks, and the Australian Financial Institutions Commission and State Supervisory Authorities in the case of building societies and credit unions.

Clause 33 - Suspension or revocation of approval

10.	Amendment (7) amends clause 33 of the RSA Bill in order to clarify the circumstances in which the Commissioner is required to consult with a prescribed regulatory agency (if any) when suspending or revoking an RSA institution’s approval.

11.	The Commissioner is both the prudential and functional regulator of life insurance companies and therefore technically cannot consult with himself.  As such, clause 33 is amended to clarify that the Commissioner will only be required to consult before suspending or revoking the approval of an RSA institution where there is a relevant prescribed regulatory agency.

Clause 34 - Consequences of suspension or revocation

12.	Amendment (8) amends the note in subclause 34(4) of the RSA Bill to remove the reference to some amounts being held in trust.  The amended note will indicate that some amounts that are given to an RSA provider will not be accepted as a contribution but must be held and dealt with in the manner prescribed by the regulations.

13.	This amendment is necessary as a result of amendments made to clause 60.

Clause 40 - Interest off-set arrangements etc. not permitted

14.	Amendment (9) inserts a new subclause in clause 40 of the RSA Bill.  This amendment will provide that, where an RSA provider contravenes the requirement not to enter into any interest off-set or combination account arrangements where one of the accounts involved is an RSA, the validity of such an arrangement will not be affected to the extent that it relates to an account other than an RSA.

15.	The effect of this will be, for example, that if an arrangement is put in place to link a savings account with a home loan, and the RSA is inadvertently included, the legitimate linking of the savings account and home loan will not be invalid.

Clause 41 - Certain uses of RSAs prohibited

16.	Amendment (10) inserts a new penalty provision in clause 41 of the RSA Bill.  The purpose of this amendment is to clarify that a penalty applies in respect of subclause 41(3) and provides that an intentional or reckless contravention of that provision is an offence.

Clause 41 - Certain uses of RSAs prohibited

17.	Amendment (11) omits the penalty provision after subclause 41(4) which inadvertently imposed a penalty on RSA providers for breaches of both subclauses 41(2) and (3).  The intention of this requirement is that only subclause 41(3) should be a penalty provision.

18.	Amendment (10) inserts a penalty provision in respect of subclause 41(3).

Clause 50 - Duty to transfer balance of RSA

19.	Amendment (12) replaces subclause 50(2) of the RSA Bill in order to clarify the maximum period of time allowed when transferring the balance of an RSA.

20.	In keeping with the intent that RSAs be fully portable and controlled by the RSA holder, the amendment will clarify when the RSA provider is required to transfer the balance of an RSA.

21.	When an RSA holder requests the RSA provider to transfer the balance of his or her RSA:
•	if the contract or agreement for the provision of the RSA specifies a notice period, the RSA provider must transfer the balance within that period; or
•	if there is no notice period specified in the contract or agreement, the RSA provider must transfer the balance as soon as practicable.  

22.	In any case, the balance must be transferred within 12 months after receipt of the written request.

23.	The ability of an RSA provider to specify a notice period (within 12 months) will minimise liquidity risks and ensure orderly administrative arrangements for RSA providers.

Clause 54 - Documents to be given to employees

24.	Amendment (13) inserts a penalty in clause 54 in order to provide that an RSA provider who intentionally or recklessly contravenes this provision is guilty of an offence.

25.	Clause 54 requires the RSA provider to provide prescribed information to an RSA holder (who has become an RSA holder as a result of his or her employer making an application to open the RSA on his or her behalf) as soon as practicable after providing the RSA.

Heading to Division 6 of Part 5

26.	Amendment (14) amends the heading to Division 6 of Part 5 of the RSA Bill in order to remove the reference to trust.  This is consistent with the amendments made by amendments (15) to (17).

Clause 60 - RSA provider to comply with requirements of the regulations in relation to certain money

27.	Amendment (15) omits subclause 60(3) from the RSA Bill which required an RSA provider to hold certain money on trust.

28.	The requirement to hold moneys, intended to be deposits, on an interim trust basis is inconsistent with the depositor-creditor relationship that underlines the usual commercial practices of deposit-taking institutions which will be RSA providers. 

29.	In order to minimise administrative disruption to these commercial practices, and avoid imposing an artificial trust concept on the existing legal arrangements, the subclause will be deleted.

Clause 60 - RSA provider to comply with requirements of the regulations in relation to certain money

30.	Amendment (16) amends subclause 60(4) of the RSA Bill to remove the reference to money being held on trust (refer amendment (15)).  Instead, the amendment will provide that the RSA provider is to comply with the requirements of the regulations in relation to how the money is to be held and dealt with.

Clause 60 - RSA provider to comply with requirements of the regulations in relation to certain money

31.	Amendment (17) amends the penalty provision in subclause 60(5) to remove the reference to subclause 60(3), and is necessary as a result of the amendment made by amendment (15).

Clause 81 - Payment of unclaimed money to Commissioner of Taxation

32.	Amendment (18) inserts a definition of amount of unclaimed money specified in statement for the purposes of clarifying the meaning of a component in the formula for calculating the amount of unclaimed money that an RSA provider must pay to the Commissioner of Taxation.

Clause 134 - RSA provider must request person becoming holder of an RSA to quote tax file number

33.	Amendment (19) amends clause 134 of the RSA Bill by extending the required time in which an RSA provider must request that a person quote his or her tax file number to the RSA provider.  

34.	The required time is extended from 7 to 30 days after the day on which the person becomes a holder.  This is consistent with the amendment being made by the Taxation Laws Amendment Bill (No 4) 1996 to the equivalent provision in subsection 299G(2) of the Superannuation Industry (Supervision) Act 1993.

Clause 181 - Commissioner may direct RSA institutions not to accept employer contributions

35.	Amendment (20) amends clause 181 of the RSA Bill to insert a requirement that the relevant prudential regulator (if any) must be consulted before the Commissioner issues a written notice directing an RSA institution not to accept any contributions made to RSAs by a specified employer.

36.	Consultation with the relevant prudential regulator will enable the Commissioner to be appraised of any potential systemic consequences of directing an RSA institution not to accept any contributions made to RSAs by a specified employer.  It will also clearly signal to the market that the issuing of such a direction is not indicative of prudential failings, but only of the institution’s internal compliance capabilities in respect of RSAs.

37.	The Commissioner is both the prudential and functional regulator of life insurance companies and therefore technically cannot consult with himself.  As such, the Commissioner will only be required to consult when issuing a direction where there is a relevant prescribed regulatory agency.

Clause 181 - Commissioner may direct RSA institutions not to accept employer contributions

38.	Amendment (21) amends the note in subclause 181(6) of the RSA Bill to remove the reference to some amounts being held in trust.  The amended note will indicate that some amounts that are given to an RSA provider will not be accepted as a contribution but must be held and dealt with in the manner prescribed by the regulations.

39.	This amendment is necessary as a result of amendments made to clause 60.