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FIRST HOME SAVER ACCOUNTS REGULATIONS 2008 (SLI NO 170 OF 2008)

EXPLANATORY STATEMENT Select Legislative Instrument 2008 No. 170

 

Issued by authority of the Minister for Superannuation and Corporate Law

First Home Saver Accounts Act 2008

First Home Saver Accounts Regulations 2008

Subsection 131(1) of the First Home Saver Accounts Act 2008 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

During the 2007 federal election campaign, the Government announced the proposed introduction of First Home Saver Accounts (FHSAs). The Act was passed through Parliament on 18 June 2008 and received Royal Assent on 25 June 2008. The FHSAs will use incentives, such as Government co-contributions, to increase the savings of first home buyers.

The Act provides for the establishment of FHSAs, the payment of Government contributions into the accounts, and the prudential management of the accounts. The First Home Saver Accounts Regulations 2008 (the Regulations) are the core regulations considered essential to the operation of the Act.

The Regulations supplement the regulatory requirements in the Act in relation to FHSA providers that are trustees. These include conditions of authorisation, the circumstances in which providers must give information to the Regulator and additional matters the Court may take into account in disqualification proceedings. The Regulations also apply specific regulations from the Superannuation Industry (Supervision) Regulations 1994 to FHSA providers that are trustees, as these regulations are an essential part of the regulatory framework created under Division 2 of Part 7 of the Act (which applies specific provisions of the Superannuation Industry (Supervision) Act 1993 to FHSA providers that are trustees).

Details of the Regulations are set out in the Attachment.

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.

The Government has consulted the Australian Prudential Regulation Authority, the Australian Taxation Office and industry representatives through a Technical Reference Group in making these regulations.

ATTACHMENT

 

Details of the First Home Saver Accounts Regulations 2008

Part 1 - Preliminary

Regulation 1 – Name of Regulations

This regulation provides that the title of the Regulations is the First Home Saver Accounts Regulations 2008.

Regulation 2 – Commencement

This regulation provides for the Regulations to commence on the day after they are registered.

Regulation 3 – Definitions

This regulation provides definitions of several phrases: ‘the Act’ is taken to mean the First Home Saver Accounts Act 2008, ‘the SIS Act’ is taken to mean the Superannuation Industry (Supervision) Act 1993, and ‘the SIS Regulations’ is taken to mean the Superannuation Industry (Supervision) Regulations 1994.

The term ‘address for contact’ for a person is the address the person has given the Commissioner of Taxation under regulation 11; or the address given by the person in substitution for that address; or the address of the person as set out in any record in the custody of the Commissioner of Taxation.

The term ‘charge’ will be defined to include a mortgage, lien or other encumbrance.

Part 2 – Application of the Superannuation Industry (Supervision) Regulations 1994 to First Home Saver Account providers etc.

The First Home Saver Accounts Act 2008 (the Act) provides a separate prudential regulatory framework for FHSA trusts and trustees of registrable superannuation entities that are authorised to operate FHSA trusts, rather than regulating them under the Superannuation Industry (Supervision) Act 1993 (the SIS Act). This is because FHSAs are not a superannuation product, and the sole purpose test (as defined by section 62 of the SIS Act) that applies to superannuation funds prevents trustees from offering FHSAs from within their superannuation entities.

Division 2 of Part 7 of the Act creates a prudential regulatory framework for FHSA trusts operated by trustees that are authorised under the FHSA Bill 2008. It does this by applying the relevant parts of the SIS Act regulatory framework to FHSAs, the FHSA trusts, their trustees and holders of FHSAs issued by trustees. As the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) give effect to the SIS Act, several of the regulations included in the SIS Regulations are required to apply for FHSA purposes.


Regulation 4 – Application of the Superannuation Industry (Supervision) Regulations 1994

Regulation 4 provides the basic application provision which establishes application rules in relation to the requirements, functions and obligations that apply to trustees of FHSA trusts (FHSA trustee), FHSA trusts, an interest in an FHSA trust and holder of such an interest.

The application rules apply to the regulations mentioned in Schedule 1 in the following way:

 

                The first application rule ensures that all obligations, functions and requirements that apply to trustees of public offer superannuation funds will apply in the same way to trustees of FHSA trusts (subregulation 4(a));

 

                The second application rule ensures that all obligations, functions and requirements that apply in relation to a public offer superannuation fund will apply in the same way to an FHSA trust (subregulation 4(b));

 

                The third application rule ensures that all obligations, functions and requirements that apply in relation to members of superannuation funds will apply in the same way in relation to holders of FHSAs issued by trustees (subregulation 4(c)); and

 

                The fourth application rule ensures that all of the requirements that apply in the same way in relation to a superannuation interest will apply to an interest of an FHSA trust (subregulation 4(d)).

 

Trustees of First Home Saver Account trusts

 

Under the first application rule, all the obligations in the regulations mentioned in Schedule 1 that apply to a trustee of a public offer superannuation fund will apply to a FHSA trustee. Where an obligation applies to all trustees of regulated superannuation funds, this obligation will apply to an FHSA trustee, as trustees of public offer superannuation funds are a subset of all trustees of regulated superannuation funds. This is illustrated in Example 1.

 

Example 1

 

SIS regulation 11.04 prescribes information that is to be given to the Regulator. The regulation provides:

 

‘For the purposes of subsection 254(1) of the Act, the prescribed information in relation to the trustee of a regulated superannuation fund is: …’

As the term ‘regulated superannuation fund’ includes a public offer superannuation fund, this obligation will apply to trustees of an FHSA trust. Applying this rule, regulation 11.04 becomes:

 

‘For the purposes of subsection 254(1) of the Act, the prescribed information in relation to the FHSA trustee is:…’

 

When an obligation only applies to a trustee of a fund that is not a public offer superannuation fund – including a self managed superannuation fund, a non public offer superannuation fund and an exempt public sector superannuation fund – these obligations will not apply to an FHSA trustee. These provisions, subsections or paragraphs will be automatically excluded by this application rule, and no further rules are needed to deal with these cases (see Example 2).

 

Example 2

 

Subparagraph (b)(ii) of SIS regulation 11.04 provides the information that trustees that are individuals are required to give to the Regulator.

 

As trustees must be a body corporate to hold the appropriate class of Registrable Superannuation Entity (RSE) licence, this requirement does not apply to the trustee of a public offer superannuation fund. As such, this requirement will not apply to an FHSA trustee. Applying this rule, subparagraph (b)(ii) of SIS regulation 11.04 will be automatically excluded from the FHSA Regulations.

 

First Home Saver Account Trusts

 

Under the second application rule, all the obligations and requirements in the regulations mentioned in Schedule 1 that apply in relation to a public offer superannuation fund will apply in relation to FHSA trusts, and persons that have obligations, functions or powers in relation to FHSA trusts.

 

Where an obligation applies to all superannuation entities, this obligation will apply to FHSA trusts. This is because public offer superannuation funds are a subset of all superannuation entities. This is illustrated by Example 3.

 

Example 3

 

SIS regulation 8.02A provides the period in which an auditor must be appointed. Paragraph (a) provides

 

‘(a) for a registrable superannuation entity – as soon as practicable, but in any event, no later than the last day of each year of income;’

 

As the term ‘registrable superannuation entity’ includes a public offer superannuation fund, this requirement will apply to an FHSA trust. Applying this rule, paragraph (a) of regulation 8.02A becomes:

 

‘(a) for an FHSA trust -- as soon as practicable, but in any event, no later than the last day of each year of income;’

 

Where an obligation only applies in relation to funds other than a public offer superannuation fund — including a self-managed superannuation fund, a non public offer superannuation fund or an exempt public sector superannuation fund — these obligations will not apply in relation to an FHSA trust. These provisions, subsections or paragraphs will be automatically excluded by this application rule (see Example 4).

 

Example 4

 

Paragraph (b) of SIS regulation 8.02A provides the period for which an auditor must be appointed to a self managed superannuation fund.

 

‘(b) for a self managed superannuation fund – as soon as practicable, but in any event, no later than 30 days before the date by which the auditor must give a report mentioned in subsection 35C(6) of the Act to the trustees of the fund’

 

As the term ‘self managed superannuation fund’ does not include a public offer superannuation fund, the requirement in paragraph (b) of Regulation 8.02A is not relevant for FHSA trusts and will be automatically excluded.

 

Holder of a First Home Saver Account

 

Under the third application rule, all the requirements in the regulations mentioned in Schedule 1 that apply in relation to members or beneficiaries of a public offer superannuation fund will apply in relation to holders of FHSAs.

 

Interest in a First Home Saver Account

 

Under the fourth application rule, all the requirements in the regulations mentioned in Schedule 1 that apply in relation to an interest in a public offer superannuation fund will apply in relation to an interest in an FHSA trust.

 

Regulation 5 – General modifications of applicable provisions of the Superannuation Industry (Supervision) Regulations 1994

Regulation 5 modifies references and concepts in the SIS Regulations listed in Schedule 1 so that they become references and concepts that are relevant for the First Home Saver Accounts Regulations 2008.

While the basic application provision applies the SIS Regulations requirements to the equivalent persons or entities under the FHSA Regulations, references within the SIS Regulations to requirements, functions or duties imposed by other sections of the SIS Act or by the SIS Regulations are not affected by the application provision, and so will still refer to the requirements, functions or duties under the SIS Act or the SIS Regulations.

For provisions of the SIS Regulations that apply in accordance with regulation 4, these modification rules will ensure these provisions apply correctly.

 

                The first modification rule ensures that references to ‘the Act’ become references to ‘the First Home Saver Accounts Act 2008’, or where the reference to ‘the Act’ is in relation to a specific section, subsection, paragraph or subparagraph of the SIS Act that has been applied to the First Home Saver Accounts Act 2008, it becomes a reference to ‘the Superannuation Industry (Supervision) Act 1993 as it applies to the First Home Saver Accounts Act 2008’.

 

                The second modification rule ensures that references to ‘these Regulations’ become references to ‘the First Home Saver Accounts Regulations 2008’.

 

                The third modification provision ensures that references to a calendar year become references to a financial year.

 

Reference to ‘the Act’

 

Without modification, references to ‘the Act’, as they apply under the basic application provision, will still refer to the SIS Act. As such, the first modification rule changes these references so that they refer to the ‘First Home Saver Accounts Act 2008’.

 

If the reference is to a specific section, subsection, paragraph or subparagraph of the SIS Act, the modification rule changes the reference so that it refers to ‘the Superannuation Industry (Supervision) Act 1993 as it applies to the First Home Saver Accounts Act 2008’.

 

Under this modification rule, all references to persons or entities performing their functions or duties under or in accordance with ‘the Act’ will refer to performance of functions or duties under or in accordance with the ‘First Home Saver Accounts Act 2008’. Likewise, all references to breaches of ‘this Act’ will refer to breaches of the ‘First Home Saver Accounts Act 2008’.

 

Reference to ‘these Regulations’

 

Without modification, references to ‘these Regulations’, as it is applied under the basic application provision, will still refer to the SIS Regulations. As such, the second modification rule changes these references to ‘the First Home Saver Accounts Regulations 2008.

 

Reference to ‘year of income’

 

Under the third modification rule, references to a ‘year of income’ in the SIS Regulations will be treated as references to a ‘financial year’, as this ensures trustees will comply with audit and accounting requirements, as well as requirements relating to in-house assets, in accordance with the financial year.

 


Part 3 – Requirements on FHSA providers

 

Regulation 6 – Covenants in the governing rules of an FHSA provider – prescribed information and documents

 

This regulation prescribes the information and documents to which an FHSA trustee must make available to a person who holds, or has recently held, an FHSA in accordance with paragraph 52(2)(h) of the SIS Act, as applied by Division 2 Part 7 of the Act.

 

The trustee is required to make available to a person who holds, or has recently held, an FHSA information that the person reasonably requires for the purposes of:

 

                understanding the main features;

 

                making an informed decision about the management and financial conditions;

 

                making an informed judgment about the investment performance; and

 

                understanding the particular investments;

 

of the FHSA trust or each of the investment options offered by the provider.

 

However, some documents do not have to be given to such a person. These exceptions include internal working documents, documents containing personal or commercially sensitive information, or documents that the provider is obliged to keep confidential.

 

This regulation applies instead of directly applying regulation 4.01 of the SIS Regulations. Regulation 4.01 imposes information provision requirements for superannuation trustees by reference to section 1017C of the Corporations Act 2001 (the Corporations Act), which refers to superannuation entities. Regulation 6 clarifies how the requirements under section 1017C of the Corporations Act apply to FHSAs.

 

Regulation 7 – Condition on authorisation – notifying APRA of changes of details

 

Regulation 7 provides that it is a condition of authorisation that an FHSA provider give written notice to APRA of any changes in the name of the provider, postal, registered or contact address of the provider, or the contact details of any contact person required to be included in the approved application form, within 28 days of the change occurring.

 

An incoming provider who replaces another trustee of an FHSA trust must also give written notice to APRA that it has commenced as the trustee of the FHSA trust as soon as practicable after making the decision, or in any case, no later than 5 days after the change has occurred. In addition, if a provider decides to wind up an FHSA trust, the provider must give written notice to APRA as soon as practicable after making the decision and before the winding up is commenced.

 

This regulation is modelled on, and is consistent with, SIS regulation 11.07 and ensures that APRA is kept informed about changes to the status, trustee, and details of an FHSA provider to ensure that it can effectively regulate the entity.

 

Regulation 8 – Conditions on authorisation – disqualification of investment manager or custodian under SIS Act

 

Part 15 of the SIS Act allows the court to disqualify individuals on specified grounds. Bodies corporate can also become disqualified persons on specified grounds.

 

This regulation provides that an FHSA provider of an FHSA trust must not appoint, engage or allow a person to act as an investment manager or custodian of the trust if the person is disqualified under Part 15 of the SIS Act. If an FHSA provider becomes aware that a person disqualified under Part 15 of the SIS Act is acting as an investment manager or custodian, the FHSA provider must, as soon as practicable, remove the person or body corporate from the position of investment manager or custodian of the trust.

 

Investment managers and custodians have the same duties and responsibilities in relation to FHSA trusts as they do in relation to superannuation entities. Moreover, the provisions of the FHSA prudential regulation framework in relation to the disqualification of bodies corporate are consistent with the provisions of the superannuation prudential regulation framework in relation to such disqualifications. Therefore, it is appropriate to require trustees to ensure that bodies corporate that have become disqualified under the SIS Act are not permitted to be, or act as, the investment manager or custodian of an FHSA trust.

 

Regulation 9 – Condition on authorisation – charges over assets of funds

 

This regulation provides that it is a condition of authorisation for an RSE that is an FHSA provider that a trustee must not give a charge over, or in relation to, an asset of the fund.

 

That is, the trustee is not permitted to use fund assets as collateral for borrowings, increasing the safety of fund assets.

 

Regulation 10 – Condition on authorisation – restrictions on investments in provider or related body corporate

 

This regulation provides that it is a condition of authorisation for an RSE that is an FHSA provider that a trustee must not invest in the trustee itself or a related body corporate. However, investments in related bodies corporate are permitted if:

 

                in the case of a life insurance policy, the body corporate issuing the life insurance policy is a life insurance company;

 

                in the case of a deposit, the body corporate is an authorised deposit-taking institution (ADI);

 

                the investment is in a publicly available unit trust and the body corporate is the Responsible Entity of that trust; or

 

                in any other case if the related body corporate is an ADI or life insurance company and the investments in these related bodies corporate do not exceed 5% of the trust’s total assets.

 

This minimises the possibility of a trustee encountering conflicts of interest in relation to the investments of the fund.

 

Part 4 – Notices

 

The Commissioner of Taxation will have on record the addresses of individuals obtained under other Acts, in particular the Income Tax Assessment Act 1936 or Schedule 1 to the Taxation Administration Act 1953. Usually, an FHSA account holder will not have given their address to the Commissioner of Taxation under the FHSA Act. On opening an account, the account holder will have given their address to the FHSA provider, who will have provided it to the Australian Tax Office as part of annual reporting arrangements under Schedule 1 to the Taxation Administration Act 1953

During the course of business, the Commissioner of Taxation may need to provide notice to an account holder in relation to the Government contribution or the proposed recovery of a Government contribution. In order to serve this notice, the Commissioner of Taxation would (in most cases) need to use the address they obtained from the FHSA provider or from the individual’s income tax return.

Under regulation 3, the Commissioner of Taxation is permitted to use the address shown in any record the Commissioner has where:

             no address had been given under the Act or FHSA Regulations; or

 

             an address was given but the Commissioner of Taxation’s records show that the person has changed their address and has not given a new address to the Commissioner of Taxation.

 

Regulation 11 – Notification of address for contact

This regulation provides that a person may notify the Commissioner of Taxation of a contact address, either in physical, postal or electronic form, for the purposes of the Act.

Regulation 12 – Change of FHSA provider’s address

This regulation provides that where an FHSA provider changes their address, they must advise the Commissioner of Taxation of their new address within 28 days of the change.

This requirement is important to ensure that the Commissioner of Taxation has a current address for FHSA providers. As the Commissioner of Taxation is required or permitted to give notices to FHSA providers in a variety of circumstances under the Act, the current address of providers is necessary.

Regulation 13 – Giving notices under the Act

This regulation provides that where the Commissioner of Taxation gives a notice to a person or notifies a person of a matter under the Act, the notice may be given personally to the person, left at a physical address, delivered to a postal address, or sent to the person’s electronic address.

For a notice which is posted to a postal address, unless proved otherwise, the notice is taken to have been received by the person when the notice would ordinarily have arrived at the place it was sent.

For a notice which is delivered personally, left at a physical address or sent electronically, unless proved otherwise, the notice is taken to have been received when the notice is given, left or sent.

Part 5 – Miscellaneous

Regulation 14 – Disqualification by Federal Court – matters to take into account

This regulation provides that, for paragraph 126H(6)(a) of the SIS Act (as it applies to the Act), the Federal Court may take into account the individual’s conduct in relation to any superannuation entity or superannuation trustee when deciding whether to disqualify an individual.

The Court may take into account whether the individual has contravened a provision of the SIS Act; whether the individual is or has been a responsible officer of a body corporate that is or has been a disqualified person under Part 15 of the SIS Act; and whether the individual’s conduct in relation to FHSAs makes the individual otherwise not ‘fit and proper’.

The prudential regulation regime applying to FHSA trusts is consistent with the prudential regulation regime applying to superannuation entities in the relevant aspects. Moreover, holding an appropriate class of RSE licence is a precondition for a trustee being authorised as an FHSA provider. For these reasons, it is appropriate to allow the Court to take into account an individual’s conduct in relation to superannuation or compliance with the SIS Act, where these are relevant to the grounds for disqualifying an individual under the Act.

Regulation 15 – Names and signatures of Commissioner etc.

This regulation provides that judicial notice must be taken of the names and signatures of persons who are or were the Commissioner of Taxation, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner of Taxation. A notice or document given or produced for this Act that contains the written, printed or stamped name of a person mentioned above, is taken to have been signed by that person unless it is proved that the document was issued without that person’s authority.

Similar rules apply generally to legislation administered by the Commissioner of Taxation. They are included to ensure that people cannot unduly delay legal proceedings by requiring the Commissioner of Taxation to prove certain aspects of the process by which a document was made and signed. In particular, that a certain person held an office at the date the document was signed and that the signature is actually the signature of the officer in question.

It is still open to a person challenging the document to prove that it was issued without the particular officer’s authority. The rules do not affect the ability of the person to raise other legal issues about the document such as whether any preconditions for its issue existed.

Schedule 1 Provisions of the Superannuation Industry (Supervision) Regulations 1994 applied to First Home Saver Accounts, providers, etc.

Schedule 1 lists the provisions of the SIS Regulations that are applied to the FHSA Regulations. The regulations are applied as explained by the application provisions in regulations 4 and 5.

The listed regulations concern the following matters:

                regulation 1.03 would define terms used in the proposed Regulations;

                regulation 1.04 and Schedule 1AAA to the SIS regulations, which define the term approved auditor and prescribe the persons who may be approved auditors;

                regulation 1.04A provides that trustees may also notify the Commissioner of Taxation in relation to being or becoming a regulated superannuation entity;

                regulations 3.04A and 3.10 prescribes matters in relation to the removal of the trustee and payment of commission and brokerage;

                regulations 5.01 and 6.29 would establish requirements for the transfer or rollover of interests in an FHSA trust;

                regulations 8.02A, 8.03 and 8.04 establish financial reporting requirements for FHSA trusts;

                Division 9.2 (other than regulation 9.03) define when FHSA trusts are taken to be in an ‘unsatisfactory financial position’;

                regulations 11.01, 11.03, 11.04 and 11.06A prescribe the types of information that FHSA trustees must give to APRA and the Commissioner of Taxation;

                regulation 13.19 prescribes minimum capital requirements for custodians of FHSA trusts;

                regulation 13.20 and Schedule 3 to the SIS Regulations, which prescribe the requirements for winding up and dissolution of FHSA trusts;

                regulations 13.21 and 13.22 prescribes matters relating to the supervision and operation of FHSA trusts, including reports and examinations made during investigations;

                Division 13.3 (other than regulation 13.22B) establishes limits in relation to FHSA trusts holding in-house assets; and

                Division 13.5 which establishes the procedures for review and reconsideration of certain decisions of the Regulators.


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