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OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1992 NO.224
EXPLANATORY STATEMENTStatutory Rules 1992 No. 224
Subject - Occupational Superannuation Standards Act 1987
Occupational Superannuation Standards Regulations (Amendment)
1. BACKGROUND
The Occupational Superannuation Standards Act 1987 (the Act) provides operating standards and other relevant conditions with which superannuation funds, approved deposit funds and pooled superannuation trusts are required to comply in order to be eligible for taxation concessions under the Income Tax Assessment Act 1936.
Section 22 of the Act provides that the Governor-General may make regulations for the purposes of the Act.
Section 7 of the Act provides that the Regulations may prescribe standards applicable to the operation of superannuation funds, and which among other things relate to the disclosure of information to members.
Regulations made to date prescribe the operational standards with which funds and trusts must comply. They are called the Occupational Superannuation Standards Regulations (the Principal Regulations).
These Regulations amend the Principal Regulations to give effect to a number of new initiatives announced by the then Treasurer in the 1991 Budget, by prescribing a number of new operational standards concerning the disclosure of information to members.
The main purpose of the amendment is to introduce operational standards which;
(i) make the trustees and managers of superannuation funds more accountable to fund members by providing information on the investment strategy, earnings and costs of the fund; and
(ii) provide better information to members of superannuation funds about the operation of their fund so that they may be able to better evaluate the fund's performance.
The amendment also rearranges the prescription of existing operational standards concerning the disclosure of information to members so as to make the prescribed standards both existing and new more easily readable.
The Principal Regulations previously prescribed as an operational standard, that superannuation funds give certain information to members. Those operational standards continue and are primarily concerned with the provision of benefit entitlement information to members. The new regulations will give effect to additional reporting requirements which provide members with information on the financial condition, accounts, administration, and investment objectives of the fund.
The then Treasurer's announcement in the 1991 Budget, and this amendment which flows from it, take into account and follow extensive consultation between the Insurance and Superannuation Commission (ISC), the superannuation industry and consumer bodies. The amendment reflects a number of variations to the proposals originally announced by the then Treasurer. The need for these variations became apparent in the process of consultation leading to the drafting of the proposed amendment.
2. OVERVIEW
The remainder of the Statement provides an overview of the effect of the amendment. Each of the provisions of the amendment is described in detail in the Attachment to the Statement.
2.1 COVERAGE
The information disclosure requirements which currently apply to all funds will continue to apply.
The new additional requirements are an operational standard for funds which have more than 4 members and which do not rely entirely on the terms of policies of life insurance to define the entitlements of members. A life insurance policy has the same meaning as it does under the Life Insurance Act 1945. This means that superannuation arrangements which are marketed by life insurance companies, often referred to as personal superannuation funds for employed or self employed people, and master trust arrangements provided by life insurance companies for use by individual employers as a destination for their contributions on behalf of employees, are, if invested entirely in life insurance policies, exempt from this operational standard. There may be other superannuation funds with more than 4 members which, by this definition, are also exempt.
The reason for this exemption is that for many years the activity of life insurance companies has been closely monitored by the ISC as a requirement for the provision of a licence to operate as a life insurance company, and an aspect of that supervision is the publication of Circulars to Life Insurance Companies by the ISC setting out guidelines for life company activity which life companies have agreed to abide with. In recent years these Circulars have included guidelines on the provision of information to prospective and actual beneficiaries of life insurance policies. It is important to avoid as far as possible the duplication of operational standards requirements for superannuation funds and the requirements of the life company supervisory process.
With that in mind the new additional disclosure requirement will, for the time being, be advised to life insurance companies by the usual means of a Circular which will provide guidance on the provision, by the life company itself, of the required new information to all the members of such funds.
This arrangement will be kept under review and will be subject to further consideration in the light of the experience of members, and developments in the prudential supervision of superannuation generally.
In short, while funds whose members' entitlements are wholly defined by life insurance policies are to meet the new additional requirements, they are not at present subject to those particular aspects of the operational standards prescribed by the Regulations.
The more than 4 members threshold for coverage is determined on the basis of the number of members at the commencement of the period in respect of which a written advice is being provided.
2.2 SUPERANNUATION FUNDS, AND SUB-PLANS WITHIN SUPERANNUATION FUNDS
The Regulations address the issue of sub-plans that exist within many superannuation arrangements. Such arrangements often take the form of a master trust deed to which individual employers sign a deed of adherence but in so doing create a sub-plan of the fund with a managing body with varying degrees of independence from the trustee in the management and investment of the assets arising from the contributions made on behalf of that employer's employees.
The 1991 Budget announcement recognised the existence of sub-plans by referring to them in respect to some of the items of additional information proposed to be provided.
The Regulations define a sub-plan for the purposes of Division 2, ie for the purpose of the disclosure requirements. The Regulations go on to say that a reference in Division 2 to a superannuation fund in relation to members includes a reference to a sub-plan relating to members.
These provisions mean that the information required to be given to members by the Regulations is to be given in respect of the sub-plan to which the member belongs unless that information is no different from that information in relation to the fund as a whole. There is, however, a specific requirement in the Regulations for information about sub-plans where they exist. It is at paragraph 18H(3)(q).
2.3 IMMEDIATE ACTION AFTER 30 JUNE 1992
The requirements that funds have to comply with immediately after 30 June 1992 concern information to be given to prospective members and to members when they leave, information which must be provided to or made available to members who request it, and information about proposals by the fund to return money to employers.
These requirements were referred to in the then Treasurer's announcement in the 1991 Budget. However it is also accepted that not all were expressed in definitive terms at that time, and the date of gazettal of these amendments means that funds have not had the benefit of any lead time to prepare their administration for the precise detail of the new legislation. The Insurance and Superannuation Commissioner (the Commissioner) would consider requests for an exercise of his discretion in respect of the 1992/93 year of income to treat a fund as meeting the proposed operational standards in the event of reasonable difficulties in meeting these requirements in the early stages of the 1992/93 year. He would take into consideration the efforts made by funds to meet the operational standards in the period since the 1991 Budget announcement and the administrative problems in doing so.
The immediate effects of the amendments are as follows:
2.3.a Prospective members.
The requirement for funds to give information to new and to prospective members is prescribed as part of Regulation 18E.
All superannuation funds have to date been required to provide written advice to new members about their entitlements. From 1 July 1992 certain superannuation funds have to provide this information and additional information to people who are about to join.
Funds which do not have an employer sponsor, ie whose governing rules do not require a contribution from an employer on behalf of members, are from 1 July 1992 to provide this information to people whom they believe may become members, prior to them joining the fund.
All such funds have to provide those people (prospective members) with written advice of;
• any benefits that would be provided to that person as a consequence of their membership;
• the conditions relating to those benefits; and
• the method of determining the entitlement of such a member to those benefits.
Funds with more than 4 members have to obtain a written declaration from the prospective member, before he or she becomes a member, that this advice has been given.
Funds with more than 4 members which are not employer sponsored and have accounts for individual members are also to advise prospective members about the rate at which fund earnings have been credited to relevant member accounts for the previous three reporting periods (in the case of unitised arrangements, unit price movements can be used). If differing reporting periods are used for individual members, it may be necessary to use a notional rate of net earnings allotted to relevant member accounts but the notional rate should realistically reflect the rate which would apply to the particular person when he or she is a member.
Some funds with more than 4 members also have to provide prospective members with some additional information. These are funds;
• which are not employer sponsored; and
• which are excluded from the prospectus requirements of the Corporations Law; and
• where members' entitlements are not determined solely by the terms of life insurance policies.
These funds have to give such people the following;
• the name and address of the controlling company or sponsoring organisation of the fund;
• the name and address of the ultimate owner of the corporate trustee (if it is different from the above);
• the names and addresses of any administration managers or other appointments made by the trustees in conjunction with the operation of the fund;
• a summary of the key features of the operation of the fund; and
• the manner in which the value of the account will be determined on termination.
In due course, but obviously not until such annual advices have been prepared for fund members, funds with more than 4 members which are not employer sponsored also have to provide prospective members with a copy of the annual written notice about the funds accounts, administration and investment objectives which was last issued in accordance with Regulation 18H.
The Regulations define a prospective member as a person who is not a member but who the trustees believe may become a member. The Regulations do not define what it means to believe that a person will become a member. This provision will be interpreted to mean that the person has applied in writing to become a member. Consequently, it would seem desirable that application forms now include, or be accompanied by. the required written advices and material and include the declaration required from the applicant.
Funds which have an employer sponsor have a choice as to whether they advise people before they become members, or as soon as practicable after they become members. In either case they have to provide the same written advice (ie the information to be given to all funds and the additional information for funds with more than 4 members, for both new and prospective members). other than the special requirement for non employer sponsored funds which are excluded from the prospectus requirements of the Corporations Law.
2.3.b Terminating members.
The requirement for information for terminating members is prescribed by Regulation 18F.
The previous requirement to give members certain information when they leave a fund is now extended to include that, where members are unable to represent themselves and have a legal personal representative, this information can be given to the legal personal representative. Also the information to be provided about the person's death benefit is changed as set out in the following paragraph.
The trustees still need to provide the information that is currently required but, rather than simply advise the amount of any current death benefit they now have to advise;
• the amount or method of calculation of the leaving member's death benefit the day before the member leaves the fund;
• that the amount of the death benefit may change on leaving the fund;
• the name and address of a person that the leaving member can contact to get more information about the death benefit.
2.3.c Information to members on request.
With the amendment this requirement is now prescribed in Subdivision E of Division 2 of the Regulations, as Regulations 18L, 18M, 18N and 18P.
All funds were previously required to provide, not more than once a year, certain information if requested by a member. This continues to be a requirement. However, from 1 July 1992 the method of providing this information to members has been expanded and is set out in the paragraph below.
From 1 July 1992, the trustees of funds with more than 4 members are required to satisfy themselves that when the fund is requested by a member to provide certain other documents, these are provided within 28 days of the request. The documents are;
• the latest audited accounts of the fund which include the auditor's report; and/or
• the provisions of the governing rules of the fund relevant to the member which are requested or, if no specific provisions were included in a request for the governing rules, those provisions which affect the entitlements or rights of that member.
The fund does not have to respond to a request for the same document more than once a year.
The existing requirement, and the additional requirement for funds with more than 4 members, are both taken to have been met if the document or documents requested are;
• mailed to the member by the trustee; or
• that the trustees are reasonably satisfied that another person has given the member the information, and that the person signs a declaration saying that they have given the member the information and give the declaration to the trustees of the fund; or
• that the documents are available for reading at a place within 25 kilometres of the workplace or residence of the member. This place should provide suitable facilities to inspect or copy the information during business hours.
2.3.d Return of money to the employer.
Included in the then Treasurer's announcement was a statement that appropriate arrangements would be developed for the provision of information to members in advance of any repatriation of surplus moneys from a superannuation fund to a sponsoring employer. The following requirement, prescribed by subregulation 18E(5), applies to multi member funds from 1 July 1992;
• the trustee is required to give the members of the fund written advice at least three months in advance of any payment (other than fund expenses paid by the employer and subsequently reimbursed) from the fund to the sponsoring employer.
• in addition, if the governing rules of the fund are to be altered in such a way as to increase the entitlement of a member who is also the employer or an associate of the employer, that proposal must also be advised to fund members at least three months before the change is to take effect.
2.4 REGULAR WRITTEN ADVICE TO MEMBERS.
2.4.a Regular written information which is member specific.
The amended Regulations now provide a requirement for all superannuation funds to give each member certain minimum information about their personal entitlements from the fund (from here on referred to as "member specific information"), as a written statement in respect of consecutive periods of their membership none of which exceeds 12 months. Most funds will probably choose to provide this information in respect of 12 month periods but the option remains to report on shorter periods either on a regular basis, or occasionally, eg during the process of introducing new reporting periods. The first period is to begin on or after 1 July 1992 and no later than 30 June 1993 and there must be no subsequent time periods which go unreported to the member.
The initial members of newly established funds are to receive their first member specific information for a period during which the fund commenced or for a period whose commencement coincides with the commencement of the fund.
New members when they join existing funds are to receive their first member specific information for a period during which they joined the fund or for a period whose commencement coincides with the day that they join the fund.
The member specific information required to be given by all funds is simply the information which has been required to be given annually to members to date. The content of the written advice is now prescribed by Regulation 18G, specifically by subregulation 18G(2).
2.4.b Additional member specific information to be reported by multi member funds.
There is one new item of member specific information to be provided by funds with more than 4 members. If such a fund maintains an account in the name of the member it must now also advise the member of the amount of any fees, charges or other expenses which were deducted in the reporting period from the amount in the member's account.
2.4.c Annual information which is fund specific.
The requirement for additional annual written information to members announced in the then Treasurer's 1991 Budget statement generally relates to information about the administration, accounts, and investment policies of funds (from here on referred to as "fund specific information").
A written advice about these matters is be given to its members by a fund with more than 4 members. The advice is to be in respect of each year of income of the fund commencing with the year of income beginning on 1 July 1992 or the Tax Office approved substituted accounting period which is substituted for that year.
The new fund specific information is prescribed by Regulation 18H, and specifically in subregulation 18H(3).
2.4.d Method of providing the regular written advice, either member specific or fund specific.
The method by which the regular information, both member specific and fund specific, is to be given to members, is prescribed by Regulation 18J.
The trustee of the fund is responsible for ensuring that the written statements are sent to each member of the fund. This does not preclude the trustee from delegating this responsibility to someone else, but the Regulations prescribe that if this is done, the other person or body must make a declaration to the trustee, in respect of each statement which is prepared, that members have been given the statement in accordance with the requirement. This declaration is a declaration made for a purpose in connection with a taxation law and is thereby subject to the Tax Administration Act 1953.
Trustees who do rely on other persons, such as the employer of members, to distribute the regular written statements, must understand the importance that the Government places on the regular receipt by members of the required information in accordance with the Regulations.
The written statements may be posted to the member's address or sent by other electronic means provided that in so doing the recipient can convert that to a written statement and that there is some way of confirming receipt. If the statement is returned by the postal service as an undeliverable item, the trustee need not send further written advice until a member's whereabouts are re-established. The Regulations do not as yet require any particular action by fund trustees to relocate members, but reasonable efforts should be made by complying funds to maintain an accurate record of member addresses.
Trustees have to ensure that details of any material change in a matter set out in the written statements or in a document attached to a statement are also advised in writing to the members who got the statement, unless the change occurs so close to the time that the next regular statement is to be sent to members that it could be advised in the latter statement without seriously disadvantaging the relevant members. Subregulation 18J(3) prescribes this requirement.
The member specific advice and the fund specific advice for any period or year of income can each be given as one or more written statements, or can be combined and given as one or more written statements. It is probable that most funds will either combine the member specific information and the fund specific information into one written statement, or will send the member specific information to each member in a statement which refers to the period between the anniversary dates of his or her membership, and the fund specific information in another single statement which refers to the fund's year of income.
If these advices are not combined and are given as separate and single written statements, each must be sent as soon as practicable after the end of the period or year of income to which it refers and not more than 6 months after the end of that period or year.
If these advices are not combined and either of them is given in two or more written statements these statements must be sent as soon as practicable and by such date that none of the information in any of the statements is sent more than 6 months after the period to which it refers. However if some of the information has been provided during the period to which it refers, the remaining information which refers to that period may be provided up to 9 months after the end of that period.
If these advices are combined as one statement, it must be sent to members as soon as practicable and by such date that none of the information is sent more than 6 months after the end of the period to which it refers.
If these advices are combined and issued as more than one statement. all of which contain both member specific and fund specific information, these statements must be sent as soon as practicable and all the statements must be sent by such date that none of the information in any of the statements is sent more than 6 months after the period to which it refers. However if some of the information has been provided during the period to which it refers. the remaining information which refers to that period may be provided up to 9 months after the end of that period.
If some but not all of the information which refers to a particular period or year of income is in a written statement, the statement must include advice as to when the rest of that information will be sent and where copies of any such information already sent can be obtained.
2.4.e Who is to be regularly sent written information?
Member specific information is to be sent to each person who is a member of the fund at the end of the reporting period to which it refers whether they have since left the fund or not.
Fund specific information is to be sent by funds which have more than 4 members. It is to be sent to each person who is a member of the fund when the written advice is prepared. Persons who are receiving a pension from the fund, or persons who still have an entitlement from the fund although no contributions have been received from them or on their behalf during the year of income, will not have to be given fund specific information, but must be advised in writing at least once each year of income that this information will be sent to them on request.
2.4.f Particular aspects of the proposed requirement to disclose fund specific information.
The provisions of Regulation 18H are generally self explanatory and are described in detail later in this statement. However the following notes may assist in better understanding this requirement.
The Budget announcement included that the report should contain a statement whether it is the trustee's intention to operate the fund as a complying superannuation fund and, if so, a statement that they have no reason to believe the fund will not be accepted as a complying superannuation fund or, if that is not the case, a statement of the reasons why it may not be or has not been accepted as a complying superannuation fund. This requirement is prescribed and extended by paragraphs 18H(3)(b), (c) and (d), and 18J(2)(c). The requirement is that this advice also be provided in respect of the year of income to which the report refers and the two years of income that preceded it, and is to include whether the fund is to, or has, lodged an annual return with the Commissioner for the earlier two years, and the detail of any notices received from the Commissioner for those years.
Paragraph 18H(3)(e) prescribes that written information be given to members about the accounts of the fund. The Budget announcement included that, where the accounts of the fund have not been audited at the time that the fund specific advice is given to members consideration would be given to requiring abridged financial information drawn from the unaudited accounts to be included, provided that any material variations to this information or any qualifications in an auditor's report received subsequent to the issue of the notice is also provided to the members. The Regulations now require this, by prescribing that trustees report any qualification that the auditor has advised has been made or is likely to be made, (sub-subparagraph 18H(3)(e)(ii)(B)), and subsequently report any material change in the advice or in documents making up part of the report (paragraph 18J(3)).
The Budget announcement included that if at the accounts balancing date the value included in the balance sheet of any single investment, or the combined value of all investments in the same or associated entities, exceeds 10 per cent of the total value of the fund or sub-plan assets, the written advice is to include a description of all such investments by the trustee or by a fund manager on behalf of the trustee, and their values. An investment in a pooled arrangement would be considered a single investment. The Treasurer has since approved that the threshold is to be reduced to 5 per cent and this requirement is included in the Regulations at paragraphs 18H(3)(g) and (h).
The Budget announcement included that the written advice contain a statement of the fund or sub-plan investment objectives and the policy and strategy being used to meet those objectives. This statement is to include;
• details of the classes of assets (along the lines of those shown on the ISC Annual Return Form) in which the fund or sub-plan was invested and details of the total assets of the fund or sub-plan at the last balance date and the immediately preceding balance date, subdivided to show the amount or proportion represented by each of those classes of assets; and
• an outline of any futures, options or other derivative mechanism strategies relevant to fund or sub-plan assets.
The above requirement is prescribed by paragraph 18H(3)(f)and by paragraphs 18H(3)(i) and (j). In respect of derivative mechanism strategies, the statement is to include the funds objectives in using them, the policy in place to achieve those objectives during the year of income to which the statement refers, and an assessment of the likely effect of that policy on the value of the assets at the end of that year.
The Budget announcement included that the written advice contain a summary of governing rule provisions, or the fund's policy, with respect to fees and charges applicable to accounts (whether active or dormant) including;
• initial or establishment charges;
• continuing management, administrative or service charges (including fees levied against fund earnings); and
• termination charges.
This requirement is imposed by paragraph 18H(m) and fund trustees will have to include at least the above categories of fees and charges in respect of both active and dormant accounts in order to meet this requirement.
The Budget announcement included that the written advice given by master trust and similar arrangements was to include some information additional to that provided by other funds. This was;
• the name and address of the company controlling or sponsoring the master trust fund; and
• the identity of any relevant sub-plan.
Paragraph 18H(3)(r) of the Regulations requires all funds to provide the name and address of the person or body having authority to manage, or participate in the management of the fund, not being the trustee of the fund or an employer sponsor. This means that the trustee in a master trust arrangement has to disclose the name and address of any company which ultimately controls the activity of the trustee, and, through the trustee, the investment management of the fund.
The identity of the sub-plan, if any, affecting the particular member is to be included in the member specific advice, as a consequence of paragraph 18G(2)(a). The Regulations commenced on 1 July 1992.
ATTACHMENT
DETAILS OF THE REGULATIONS TO AMEND THE OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS
DETAILS OF THE REGULATIONS
Details of the regulations are as follow:
Subregulation 1.1 shows the date of commencement of the proposed amendment, which is 1 July 1992.
Subregulation 2.1 provides that the Occupational Superannuation Standards Regulations are amended as per these Regulations.
Subregulation 3.1 amends subregulation 3(1) to insert a definition of "superannuation fund conditions".
Subregulation 4.1 creates Divisions in Part II of the existing regulations, with the title of Division 1 being "General".
Subregulation 5.1 amends the preamble of existing subregulation 17(1) to reflect the removal of disclosure of information as a matter dealt with by that subregulation.
Subregulation 5.2 deletes from subregulation 17(1) the existing paragraphs 17(1)(e), (f), (g), (h) and (i) concerning disclosure of information.
Subregulation 5.3 deletes from regulation 17 existing regulations 17(4) and (5).
Subregulation 6.1 provides a title of "Information on fund management" for Division 2 and also creates Subdivision A with the title "Preliminary".
Subregulation 18C(1) defines a number of terms used in the regulations. These terms include:
• "body" - means an unincorporated body;
• "business hours" - when referring to a place means from 9.00 am to 5.00 pm on any day other than a weekend or a public holiday in that place;
• "multi-member fund" - means a superannuation fund with more than 4 members at the commencement of the fund's year of income, or reporting period, and where the benefits of members are not totally defined by life insurance policies. Life insurance companies will be requested by Circulars of the Insurance and Superannuation Commission to ensure that the members of superannuation funds, where all members' entitlements are defined by life insurance policies, are provided with the same additional information required by these regulations.
• "reporting period" - means a period not exceeding 12 months, in the case where a fund commenced operation before 1 July 1993, that starts during the period from 1 July 1992 to 30 June 1993, and in the case of any other fund, a period not exceeding 12 months that starts at or before the end of the previous period, which is a period starting on or after 1 July 1992.
• "sub-plan" - in relation to a member or members of a superannuation fund, means the fund operations that relate to the contributions made by or on behalf of that member or those members, but not all the members of the fund.
Subregulation 18C(2) prescribes that a reference to a superannuation fund in this Division when referring to a member or members of the fund, include a reference relating to the sub-plan of the member.
Subregulation 18C(3) provides that a reference in Division 2 to a report to a member of a superannuation fund in respect of a reporting period of the fund is a reference to report in respect of the reporting period relating to the member.
Subregulation 18C(4) provides that any reference in Division 2 to a person or a body having authority to manage, or participate in the management of, a superannuation fund is a reference to a person or body having authority to direct the operations of the fund or a person or body having authority to direct a person or body on the operations of the fund.
Subregulation 18D(1) provides that the standards set out in Division 2 are prescribed.
Subregulation AD(2) provides that a reporting period of a superannuation fund must not begin after the end of the preceding reporting period of the fund. This provision means that there must be no periods of time in respect of which the information prescribed by the proposed regulation 18G is not provided to members.
Subregulation 18D(3) provides that the trustees of a superannuation fund must keep, and retain, records concerning the operation of the fund in accordance to a reporting period, or reporting periods, so as to reflect records on which reports in Division 2 are based.
Subregulation 18E(1) defines a number of terms. These terms include:
• "controlling interest" - means a person holds an interest in a company or an interest in another company that enables that person to control the composition of the board, or control the casting of more than half the votes at a general meeting, or control more than half of the issued share capital.
• "prospective member" - means a person who is not a member but who the trustees believe may become a member of the fund in a year of income.
• "relative" - means the parent, grandparent, brother, sister, uncle, aunt, cousin, nephew, niece, direct descendant or adopted child of the employer or of the employer's spouse and the spouse of the employer or any other person mentioned above.
Paragraph 18E(2)(a) provides that when governing rules of a fund are changed the trustees of that fund must advise, in writing, the members who are affected by the change, as soon as practicable, as to how and why the change to the governing rules were made and how it would affect their entitlements or rights.
Paragraph 18E(2)(b) provides that the trustees of a fund, where the employer does not make contributions on the member's behalf, must provide prospective members with information in writing on any benefits that the prospective member would be entitled to under the fund's governing rules on becoming a member, the conditions that relate to those benefits and how an entitlement would be determined on those benefits, before the prospective member joins the fund.
Paragraph 18E(2)(c) provides that funds, where the employer makes contributions on a member's behalf, must provide the same information to the member as in paragraph 18E(2)(b) before, or as soon as practicable. after they join the fund.
Paragraph 18E(3)(a) provides that the trustees of multi-member funds must give fund pensioners and persons who have deferred benefits with the fund, at least once in each year of income of the fund. advice that a copy of the latest report which contains information provided under subregulation 18H(2) and any related notice under subregulation 18J(3) will be sent to them on their request.
Paragraph 18E(3)(b) provides that the trustees of a multi-member fund must get a declaration from a prospective member that they have been given the information under paragraph 18E(2)(b).
Paragraph 18E(3)(c) provides that the trustees of multi-member funds must give a prospective member, before they become a member. a copy of the latest report under subregulation 18H(2) and any related notice under subregulation 18J(3). However, if the fund is a fund where the employer makes contributions on the members' behalf then they must give members a copy of the latest report under subregulation 18H(2) and any related notice under subregulation 18J(3) before or as soon as practicable after they become a member.
Paragraph 18E(3)(d) provides that the trustees of a multi-member fund where the employer makes no contributions on behalf of members, that is not a defined benefit fund or is a defined benefit fund which keeps accumulation accounts in the names of members, must give a prospective member a written statement covering the 3 previous years of income of the fund on the rate that net earnings were allotted to the accounts of members in the class of members to which the prospective member would belong, in respect of those years, or, if earnings were not allotted to members in respect of the years of income of the fund (eg if earnings were allotted to individual members in respect of other periods such as between membership anniversary dates), the notional rate of allotment of net earnings to member's accounts for those years of income.
Paragraph 18E(3)(e) provides that the trustees of a multi-member fund where the employer makes contributions on the member's behalf, that is not a defined benefit fund or is a defined benefit fund which keeps accumulation accounts in the member's names, will provide the member before or as soon as practicable after they join the fund with the written statement prescribed by subparagraphs 18E(3)(d)(iii) and (iv).
Paragraph 18E(2)(f) provides that the trustees of a multi-member fund, other than a fund where the employer makes contributions on behalf of the member, and where the fund is not subject to the prospectus provisions of the Corporations Law, must give to a prospective member certain information. This information includes;
• the name and address of any person or body that has the authority to direct the operations of the fund or to direct a person or body that has the authority to direct the operations of the fund;
• the names and addresses of any managers or any other appointments made by the trustees of the fund for the operation of the fund and the nature of any relationship the appointed person and any trustee of the fund and any other person appointed by the trustees also;
• a summary of the key features of the operation of the fund; and
• the manner in which the value of the member's account will be determined on the member's termination.
This regulation will provide additional information for persons before they join a personal superannuation fund.
Subregulation 18E(4) prescribes that the standard which provides information to new or prospective members may be satisfied by this information being given to new or prospective members by another person, other than a trustee of the fund. If that person gives the information to the new or prospective members and then gives the trustees of the fund a declaration to that effect the standard will be taken to have been met.
Subregulation 18E(5) provides that the trustees of a multi-member fund, to which the employer makes contributions on a member's behalf, must give each member written advice, 3 months in advance, of any payment (other than the reimbursement of expenses incurred on the fund's behalf) from the fund to the employer and of any change made to the governing rules of the fund to increase the benefit of any member of the fund that would have the same effect of making a payment from the fund to the employer or to a member who is an associate of the employer. For the purposes of this regulation, subregulation 18E(6) provides that an associate is a relative of the employer, or where the member or a relative of the member holds a controlling interest in the employer company.
Regulation 18F provides that the trustees of a fund must, when a person ceases to be a member, advise in writing the person or a legal personal representative of the person on a number of matters. These matters include:
(a) the amount of the person's entitlement. This must also show the amounts that are to be preserved, by the governing rules of the fund and to satisfy the superannuation fund conditions;
(b) the method of determining the member's entitlement;
(c) if the person ceases to be a member for reasons other than their death then:
• the amount of person's death benefit, or if that is not available, the method of calculating such a benefit, the day before the person ceases to be a member;
• that the amount of the person's death benefit may change as a result of the person ceasing to be a member; and
• the name of the person or body that holds or held the death cover of the member and an appropriate contact during business hours;
(d) if the person ceases to be a member for reasons other than their death, disablement or retirement, information similar to that contained in regular reports to members under subparagraphs 18G(2)(b)(i), (ii), (iii), (iv), (v) and (vi) and paragraphs (c), (d) and (e) should be provided. The report should be prepared for a period that commences on the first day of the reporting period and ends on the day the person ceased being a member; and
(e) if the person's old reasonable benefit multiple (RBM) is greater than the base RBM then advise the member's old RBM.
Subregulation 18G(1) provides that the trustees of a fund must report to all persons who were members of the fund on the last day of the reporting period.
Paragraph 18G(2)(a) provides that the report must contain the name of the fund and any sub-plan relevant to the member and if the sub-plan is managed by a person or body who is not a trustee of the fund the name of that person or body.
Paragraph 18G(2)(b) provides that the report to the member must contain:
(i) the amount of benefits vested in the member at the start of the reporting period;
(ii) the amount of benefits vested in the member at the end of the reporting period:
(iii) the method of determining the amount of benefits vested in the member at the end of the reporting period;
(iv) the amount of the benefits vested in the member that is required to be preserved, by the governing rules of the fund and to satisfy the superannuation fund conditions on their withdrawal from the fund;
(v) the amount of the contributions made by the member during the reporting period;
(vi) the amount of net earnings allotted to the member's account or the rate they were allotted or both;
(vii) the amount of any current death benefit for the member or the method used to determine the amount of current death benefit;
in the case where the benefits vested in the member are calculated on contributions plus earnings on those contributions or calculated on contributions.
Paragraph 18G(2)(c) provides that if the amount of benefits vested in the member on the member's withdrawal from the fund is based on an endowment or whole of life policy then the report to the member must contain:
• the sum assured; and
• any bonuses that have been accrued to the member at or before the end of the reporting period; and
• contributions made by the member in the period.
Paragraph 18G(2)(d) provides that if the amount of benefits vested in a member on their withdrawal from the fund is defined by the member's annual rate of salary as at withdrawal or before withdrawal, or the member's salary is weighted over a period of employment before withdrawal then the report to the member must contain the details contained in proposed subparagraphs (b)(i), (ii), (iii), (iv), (v) and (vii).
Paragraph 18G(2)(e) provides that the report to a member of a multimember fund must also contain the amount of any fees, charges or other expenses deducted from the member's account during the reporting period.
Subregulation 18G(3) provides that if the report to the member sets out the amount of net earnings allotted to a member's account but did not for the previous report or if it sets out the rate of net earnings allotted to a member's account but did not for the previous report, then the trustees of the fund must state the reasons for the change, except where the report to which the report relates sets out both the rate and amount of net earnings allotted to the member. Subregulation 18H(1) defines three terms. These terms are:
• "abridged financial information" - means information that is obtained from the accounts of a multi-member fund and is then set out in accordance with a prescribed Schedule.
• "relative" - means the parent, grandparent, brother, sister, uncle, aunt, cousin, nephew, niece, direct descendant or adopted child of that member or person or of their spouse or the spouse of the member or person or any other person referred to above.
• "year of income" - in relation to a multi-member fund means a year of income beginning on or after 1 July 1992.
Subregulation 18H(2) provides that the trustees of a multi-member fund must report to all persons who were members of the fund, on the last day of the period until which the fund is required to have provided all members with a copy of the report, or until the fund has provided a copy of the report to all members, whichever happens the first, as referred to in subregulation 18J(4).
Paragraph 18H(3)(a) provides that the report must contain the name of the fund. Paragraph 18H(3)(b) provides that the report must contain a statement for the year to which the notice relates and the 2 previous years of income to the effect that the trustees believe that the fund operates in accordance with the superannuation fund conditions and that the Commissioner would be or is satisfied that the fund is operating in accordance with the conditions.
Paragraph 18H(3)(c) provides that if there is no statement as per paragraph 18H(3)(b), that the trustees of the fund must make a statement for each year to say that the fund will not, or may not, satisfy the superannuation fund conditions and then state any action that they are taking, or propose to take, to have the fund satisfy the superannuation fund conditions.
Paragraph 18H(3)(d) provides that the report must contain a statement for the year of income to which the report relates and the 2 previous years of income which sets out whether the trustees have lodged or intend to lodge an annual return for the fund, whether the fund has received a notice from the Commissioner on whether the fund has satisfied the superannuation fund conditions, and set out the contents of any notice received from the Commissioner.
Paragraph 18H(3)(e) provides that the report must contain a statement on the accounts of the fund for the year of income to which the report relates. Attached to this statement should be the audited accounts of the fund and the auditor's report for that year; or if the accounts have not been audited, or have been audited but have not, or are not to be distributed to members, the attachment must contain abridged financial information drawn from the accounts of the fund, any qualification that is likely to be made or has been made by the auditor and when the audit is likely to be, or was completed, and advice as to when the audited accounts and auditor's report will be sent to members or when they will be available to members on request.
Paragraph 18H(3)(f) provides that the report must show, from the audited accounts or abridged financial information, the assets of the fund in subdivisions as follow (as set out in subregulation 18K(1)):
(a) Commonwealth, State or Territory securities or securities in a public authority of the Commonwealth, State or Territory;
(b) securities issued by a foreign government or by a public authority of a foreign government;
(c) any fixed securities not mentioned in (a) or (b);
(d) loans secured by a mortgage, not referred to in (c);
(e) real property, not referred to in (d);
(f) shares in a body incorporated in Australia which are traded on a securities exchange;
(g) shares in a body incorporated in Australia which are not traded on a securities exchange;
(h) shares in a body incorporated in a foreign country which are traded on a securities exchange;
(i) shares in a body incorporated in a foreign country which are not traded on a securities exchange;
(j) life policy;
(k) cash or an interest-bearing deposit not described elsewhere;
(1) pooled superannuation trust;
(m) unit trust, other than a pooled superannuation trust; and
(n) any other assets.
The report must include either the value of each subdivision or each subdivision as a percentage of the total assets in the year to which the report relates and the previous year.
Paragraph 18H(3)(g) provides that the report must contain, where the value of particular assets in comparison to total assets exceeds 5 per cent of total assets, a description of the particular assets and their percentage of total assets. The values or percentages of assets should be drawn from either the audited accounts or the abridged financial information.
Paragraph 18H(3)(h) provides that the report must Contain the value and a description of a group of assets if:
• a single person or body has authority to manage those assets or participate in their management either directly or as a relative of another person who has an interest in them, or as a member of a body which has an interest in them; and
• that person is not the fund's trustee, or fund's manager, or one of the other people or bodies described by subregulation 18K(2); and
• the value of the assets exceeds 5 per cent of the total value of the fund's assets.
The value of assets for the purposes of this provision is the value that they have been given for the purpose of the fund accounts.
Paragraph 18H(3)(i) provides that the report must contain a statement regarding the trustees' investment objectives for the fund and the trustees' policy that will be employed to achieve those investment objectives.
Paragraph 18H(3)(j) provides that the report must contain a statement of the objectives of the trustees at the commencement of the year that involves financial instruments (see subregulation 18K(3)) commonly known as futures contracts, forward contracts, interest rate swap contracts, currency swap contracts, forward exchange rate contracts, forward interest rate contracts or an instrument where a right or an option in respect of a contract, referred to above, may be exercised, for the purpose of managing fluctuations in fund earnings and asset values. The report must also contain the policy employed by the trustees to achieve those objectives and the year to which the policy relates and an assessment by the trustees of the likely effect of their policy on the fund earnings and asset values in the year to which that policy relates.
Paragraph 18H(3)(k) provides that the report must contain a statement of the way in which the net earnings of the fund are allotted to the members' accounts and the way in which the fund's reserves are determined, for funds which are not defined benefit funds or are defined benefit funds with accumulation accounts in respect of members.
Paragraph 18H(3)(1) provides that the report must contain a statement of the total earnings of the fund for the year to which the report relates and the previous two years of income.
Paragraph 18H(3)(m) provides that the report must contain a statement of the governing rules of the fund in relation to how administrative and other costs on the operation of the fund are deducted from members' accounts, the deduction of fees, charges and other expenses from those accounts and a summary of the trustee's or any fund manager's policy in relation to administering those rules.
Paragraph 18H(3)(n) provides that the report must contain, in the case of a fund where the employer of a member contributes to the fund on the member's behalf, a statement to say that to the best of the trustees' knowledge any contribution that is due and payable to the fund, or within the range recommended by the latest actuarial investigation, has been paid. If the contributions have not been paid there should also be a statement made on any action taken by the trustees to have the contribution paid.
Paragraph 18H(3)(o) provides that the report must contain the name of any person, other than the trustee of the fund, and the nature of the relationship between the person, and trustee, employer sponsor of the fund and any other person appointed by the trustees of the fund, who has been appointed to manage or participate in the management of the fund.
Paragraph 18H(3)(p) provides that the report must contain the name of any trustees, and how each trustee was appointed, during the year of income.
Paragraph 18H(3)(q) provides that the report must contain the name of any person or each member of any group of persons, managing a sub-plan during the year of income, and how each person or group of persons was appointed.
Paragraph 18H(3)(r) provides that the report must contain the name and address of the person or body, other than a trustee or an employer sponsor, which has the authority to manage, or participate in the management of the fund.
Paragraph 18H(3)(s) provides that the report must contain the name of a person as a fund contact for enquiries about the fund and the place where the person may be contacted during business hours.
Paragraph 18H(3)(t) provides that the report must contain advice from the trustees of the fund that they must make available to a fund member on their request a document or documents contained in regulation 18L and 18M.
Paragraph 18H(3)(u) provides that the report must contain any information, other than that already stated in the report, that the members of a multi-member fund would reasonably require to make an informed judgment on the management and the performance of the fund.
Subregulation 18H(4) provides that the trustees of a fund are not obliged to include in the report matters described in paragraph 18H(3)(h) if it is reasonable to expect that trustee or fund managers would not have been aware of those particulars at the time of preparing the report.
Subregulation 18H(5) provides that a statement of the abridged financial information must be expressed in the nearest whole dollar (see Schedule 8).
Subregulation 18J(1) provides that in this regulation the word 'report' means a report mentioned in regulation 18G or 18H.
Paragraph 18J(2)(a) provides that a report must set out the particulars of the report in 1 or more written statements.
Paragraph 18J(2)(b) provides that if the particulars of the report are set out in more than 1 written statement and all of the particulars are not included in each statement, the trustees must include in each statement advice that this statement does not set out all the particulars, any particulars not set out are set out in an earlier or will be set out in a later statement, and about when and where copies of all statements will be available during business hours.
Paragraph 18J(2)(c) provides that the report must include a statement by the trustees of the fund concerning the trustees' belief that the fund has satisfied the superannuation fund conditions from the start of the period following the year of income to which the report relates until the report was completed.
Paragraph 18J(2)(d) provides that the report must be given to each member of the fund in accordance with subregulation 18J(4).
Subregulation 18J(3) provides that the trustees of a fund must give each member of the fund notice in writing of any material change in a matter set out in a report or a document required to be attached to a statement that is included in a report. This should happen unless it is not practicable to give notice before the next report is required to be given to the member.
Paragraph 18J(4)(a) provides that the trustees of a fund who are reporting to members must, if the details of a report are set out in 1 statement in respect of a reporting period or year of income to which the report relates, give the report to members as soon as practicable, but no later than 6 months after the end of the period or year.
Paragraph 18J(4)(b) provides that the trustees of a fund who are reporting to a member must, if the details of a report are set out in more than 1 statement, but none of the statements are given to the member in the reporting period or year of income to which the report relates, give each report to the member as soon as practicable, but not later than 6 months after the end of that period or year.
Paragraph 18J(4)(c) provides that the trustees of a fund who are reporting to a member must, if the details of a report are set out in more than 1 statement and 1 or more but not all of the statements are given to members in the reporting period or year of income to which the notice relates, give any remaining statement to the member as soon as practicable, but not later than 9 months after the end of the period or year, subject to proposed paragraph 18J(4)(d).
Proposed paragraph 18J(4)(d) provides that the trustees of a fund who are reporting to a member must, if a statement that is part of a report sets out details required by both proposed regulations 18G and 18H in a report, give the statement to the member as soon as practicable, but not later than 6 months after whichever comes first, the end of the reporting period or the end of the year of income.
Subregulation 18J(5) provides that, subject to subregulation 18J(6), a standard that is specified in subregulations 18J(2) and (3) will be met by the trustees of the fund satisfying one of the methods given below:
(a) give a copy of a report or notice from subregulations 18J(2) and 18J(3) to each member or send a copy of a report or notice from subregulations 18J(2) and 18J(3) to each member of the fund by telecommunication;
(b) where a member's whereabouts are unknown to the trustees of the fund, the trustees must make reasonable efforts to give the member a copy of a report or notice;
(c) the trustees are satisfied that another person has given or sent a copy of the report or notice to the member, or has made reasonable efforts to give a copy of a report or a notice to a member, and has made a written declaration to that effect to the trustees.
Subregulation 18J(6) provides that reasonable efforts have been made to deliver a copy of a report or a notice if:
(a) a copy of a report or notice for the previous reporting period or year of income was posted to the member at the member's last known address and is subsequently returned undelivered; and
(b) the trustees are not informed of another address of the member.
Subregulation 18K(1) provides the subdivisions of assets for paragraph 18H(3)(f) and they are as follows:
(a) Commonwealth, State or Territory securities or securities in a public authority of the Commonwealth, State or Territory;
(b) securities issued by a foreign government or by a public authority of a foreign government;
(c) any fixed securities not mentioned in (a) or (b);
(d) loans secured by a mortgage, not referred to in (c);
(e) real property, not referred to in (d);
(f) shares in a body incorporated in Australia which are traded on a securities exchange;
(g) shares in a body incorporated in Australia which are not traded on a securities exchange;
(h) shares in a body incorporated in a foreign country which are traded on a securities exchange;
(i) shares in a body incorporated in a foreign country which are not traded on a securities exchange;
(j) life policy;
(k) cash or an interest-bearing deposit not described elsewhere;
(1) pooled superannuation trust;
(m) unit trust, other than a pooled superannuation trust; and
(n) any other assets.
Subregulation 18K(2) prescribes those persons or bodies which, if they hold an interest in a group of assets of a particular fund, should nonetheless not be considered a person or body that is a person or body for the purposes of subparagraph 18H(3)(h)(iii), and therefore their interest should not trigger a requirement for the fund trustee to report on that group of assets if it represents 5 per cent or more of the fund.
Subregulations 18K(3) and 18K(4) define the financial instruments for the purposes of paragraph 18H(3)(j)(i). The instruments are commonly known as: futures contracts, forward contracts, interest rate swap contracts, currency swap contracts, forward exchange rate contracts, forward interest rate contracts or an instrument by which a right or an option may be exercised on a contract referred to above. An instrument by which a right or an option may be exercised includes any agreement, arrangement or understanding.
Subregulation 18L(1) provides that a member of any fund may request certain information from the trustees of the fund and the trustees must disclose this information within 28 days after receiving the member's request.
Subregulation 18L(2) provides that a member making a request for certain information must provide their postal address.
Subregulation 18L(3) sets out certain information that the trustees of the fund must make available. The information includes a copy of returns, certificates and notices as per sections 12 and 13 of the Act, a copy of the auditor's report, and a copy or extract from statements contained in actuarial reports.
Subregulation 18M(1) provides that a member of a multi-member fund may request certain information from the trustees of the fund and the trustees must disclose this information within 28 days after receiving the member's request.
Subregulation 18M(2) provides that a member making a request for certain information must provide their postal address.
Subregulation 18M(3) sets out certain information that the trustees of a multi-member fund must make available. The information includes a copy of the latest audited accounts of the fund and the auditor's report, and the provisions of the governing rules that the member specified that are of relevance to the member or if the member specifies no provisions the trustees should provide all the provisions that are relevant to the member.
Regulation 18N provides that the requirements of subregulations 18L(3) or 18M(3) will be taken to have been met if one of the following methods of providing the information to the member has been met:
• the information is sent to the member at their postal address;
• if another person gives the member the information, the other person makes a declaration to the trustees saying that it has been given to the member;
• for information requested under regulation 18M(3), provide a place where the information can be viewed by the member within 25 kilometres of the member's residence if the member is not gainfully employed, or within 25 kilometres of the member's workplace if the member is gainfully employed. This place should also provide suitable facilities to inspect and take copies of the information during business hours.
Regulation 18P provides that if the trustees of the fund have provided the information requested by a member once in a year of income, they do not have to provide the information again in that year.
Schedule 8 provides multi-member funds with a description of the matters which need to be included in information that must be disclosed to members when abridged financial information is provided to fund members under paragraph 18H(3)(e).