Commonwealth Numbered Regulations - Explanatory Statements

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RETIREMENT SAVINGS ACCOUNTS AMENDMENT REGULATIONS 2002 (NO. 4) 2002 NO. 149

STATUTORY RULES 2002 No. 149

Issued by the Authority of the Minister for revenue and Assistant Treasurer

Retirement Savings Accounts Act 1997

Retirement Savings Accounts Amendment Regulations 2002 (No. 4)

Subsection 200(1) of the Retirement Savings Accounts Act 1997 (the RSA Act) provides that the Governor General may make regulations prescribing matters required or permitted by the RSA Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the RSA Act.

The Act allows banks, building societies, credit unions and life insurance companies to provide superannuation without a trust structure in the form of a Retirement Savings Account (RSA).

The purpose of the Regulations is to amend the Retirement Savings Accounts Regulations 1997 to implement the Government's superannuation election commitments relating to child superannuation accounts, superannuation from the Baby Bonus and continuing superannuation contributions to age 75.

The election commitments, which were announced in A Better Superannuation System and confirmed in the 2002-03 Budget, are to:

•       allow parents, grandparents, other relations and friends to make superannuation contributions on behalf of a child of up to $3,000 per child per three year period;

•       allow recipients of the Baby Bonus to contribute the Baby Bonus, as well as any other amount, to superannuation, even if they have never worked before; and

•       allow working people aged over 70 but less than 75 to make personal contributions to superannuation.

The Regulations will:

•       introduce transitional disclosure requirements that must be satisfied by RSA institutions before issuing child accounts. The provisions would apply to an RSA institution only if it is not subject to the operation of the Financial Services Reform Act 2001 disclosure provisions during the 2-year transitional period;

•       amend the compulsory cashing requirement for RSA holders aged over 70 but less than 75 to ensure that the superannuation benefits of these RSA holders must only be cashed if they are no longer working part-time (at least 10 hours per week); and

•       ensure that an RSA institution can accept contributions in respect of children and recipients of the Baby Bonus and can accept personal contributions from working members aged over 70 but less than 75.

EXPLANATION OF PROVISIONS

Regulation 1 - Name of Regulations

This clause is a formal provision specifying the mode of citation of the Regulations.

Regulation 2 - Commencement

The Regulations will commence on 1 July 2002.

Regulation 3 - Amendment of Retirement Savings Accounts Regulations 1997

This clause provides that the Retirement Savings Accounts Regulations 1997 (the RSA Regulations) are amended as set out in Schedule 1.

SCHEDULE 1 - AMENDMENTS

Item 1 - Defintions

Regulation 1.03 (1) of the RSA Regulations defines the terms used in the Regulations. Item 1 defines child account as an Retirement Savings Account (RSA) product issued as a result of accepting child contributions and child contributions as contributions made under paragraph 5.03(1)(d).

Item 2 - Part 2A child accounts

Item 2 inserts a new part, Part 2A, into the RSA Regulations. The purpose of Part 2A is to:

•       prescribe who can make decisions in relation to a child account; and

•       introduce transitional disclosure requirements that must be satisfied by regulated superannuation funds before issuing child accounts.

The standards set out in Part 2A are operating standards for the purposes of subsection 38(1) of the RSA Act. [Reg 2A.01].

Child is defined for the purposes of Part 2A as an individual who is under the age of 18. [Reg 2A.02]

Decisions about accounts

The amendments prescribe that the child's legal personal representative or, if the child does not have a legal personal representative, the child's parent or guardian, must make any decisions in relation to child accounts. This ensures that an appropriate adult will make decisions regarding the child account, such as whether to transfer the balance to another fund. The operation of accounts opened by employers for employees under the age of 18 will be unaffected by this requirement.

Once the child reaches age 16 the parent or guardian can notify the fund that the child will make any decisions regarding the account. This allows, for example, working children over 16 years of age to take responsibility for their superannuation account if their parent or guardian agrees. [Reg 2A.03]

Transitional arrangements - disclosure

Part 2A provides disclosure provisions for RSA institutions which are not subject to the disclosure provisions contained in the Financial Services Reform Act 2001. These regulations will only apply during the 2-year transitional period for financial products under section 1438 of the Corporations Act 2001. [Reg 2A.04]

The terms eligible application, FSR commencement and old RSA Act are defined for the purposes of Division 2 of Part 2A. An eligible application in relation to the issue of a child account is an application that meets the requirements of regulation 2A.05 (explained below). FSR commencement has the meaning given by section 1410 of the Corporations Act 2001. Old RSA Act is the RSA Act as in force immediately before the FSR commencement. [Reg 2A.05]

An eligible application in relation to a child account must comply with the application requirements under section 51 of the old RSA Act. The person making the application must have received the additional information and documents (if any) that would have been received by the applicant under paragraph 51(2)(c) of the old RSA Act. The application must include evidence of the consent of the child's legal personal representative, or if the child does not have a legal personal representative, the child's parent or guardian and the name and address of that person. The application must also include the name, address and date of birth of the child. [Reg 2A.06]

An RSA institution must not issue a child account to a person unless the child account is issued as a result of an eligible application made by that person. [Reg 2A.07]

ITEM 3 - COMPULSORY CASHING OF BENEFITS

Regulation 4.24 provides that benefits in an RSA must be cashed or rolled over for immediate cashing as soon as practicable after certain events. Item 3 amends the compulsory cashing standards to align the treatment of RSA holders aged 70 but less than 75 with that of RSA holders aged 65 but less than 70. As a result, compulsory cashing will only apply to the benefits of an RSA holder aged 70 but less than 75 (other than post-65 employer-financed benefits) if the RSA holder is no longer gainfully employed for at least ten hours each week. The current compulsory cashing standards applying to members over the age of 75 are maintained.

ITEMS 4 TO 8 - CONTRIBUTION STANDARDS

Items 4 to 8 amend the contribution standards to ensure that an RSA institution can accept contributions in respect of children and from recipients of the Baby Bonus and that they can accept personal contributions from working members aged 70 but less than 75.

Items 4 to 6 allow an RSA institution to accept contributions made in respect of a child and a recipient of the Baby Bonus.

A child cannot make child contributions on their own behalf. Additionally, contributions made by, or on behalf of, an employer of a child are not child contributions. An RSA institution may only accept child contributions up to a maximum amount of $3,000 in each 3 year period. The first three year period begins on the date that the first child contribution is made in respect of the child.

An RSA institution may accept contributions in respect of a recipient of the Baby Bonus, that is, a person who is entitled to a first child tax offset under Subdivision 61-I of the Income Tax Assessment Act 1997. Contributions can only be accepted under paragraph 5.03(1)(e) if they are made within 1 year after the person was notified by the Commissioner of Taxation that they are entitled to the Baby Bonus.

Item 7 provides that an RSA institution may accept contributions in respect of a member who is aged 70 but less than 75 only if the contributions are personal contributions, in addition to mandated employer contributions as currently provided. Personal contributions are contributions made by the member for their own benefit. The current contribution standards applying to members over the age of 75 are maintained.

Item 8 defines child for the purposes of regulation 5.03 as an individual who is under the age of 18.