Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION INDUSTRY (SUPERVISION) AMENDMENT REGULATIONS 2004 (NO. 9) 2004 NO. 249

EXPLANATORY STATEMENT

STATUTORY RULES 2004 No. 249

Issued by authority of the Minister for Revenue and Assistant Treasurer

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9)

Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (the Act) provides, in part, 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.

The purpose of the Regulations is to make a technical correction to the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) to allow a 'complying' lifetime pension or a 'complying' lifetime annuity to be commuted in order to purchase a market linked income stream, and to correct a minor typographical error.

The market linked income stream was one of a number of measures announced by the Treasurer on 25 February 2004 as part of A more flexible and adaptable retirement income system. The measure extends 'complying' status to market linked income streams from 20 September 2004. 'Complying' income streams qualify for concessional tax and social security treatment. Regulations giving effect to the measure were considered by Executive Council on 24 June 2004 and gazetted on 25 June 2004.

Market linked income streams will be similar in most respects to existing 'complying' pensions and annuities, except that payments from a market linked income stream will not be guaranteed but will be influenced by changes in the market value of the underlying asset portfolio.

'Complying' pensions and annuities are generally non-commutable. However, the policy intention is that these products can be commuted where the proceeds from the commutation are transferred directly to the purchase of another 'complying' income stream. This facilitates competition between income stream providers and ensures that recipients are not locked in to a particular provider or type of 'complying' product once it has commenced.

As the SIS Regulations currently stand, a 'complying' lifetime income stream cannot be commuted in order to purchase a market linked income stream. The Regulations correct this deficiency to ensure that commutation of a lifetime income stream can occur for this purpose.

The Regulations also correct a minor typographical error in the SIS Regulations.

Details of the Regulations are set out in the Attachment.

The Regulations commence on 20 September 2004.

The Office of Regulation Review has advised that a Regulation Impact Statement (RIS) is not required to be included with the Regulations because the changes are of a minor or machinery of government nature and do not substantially alter existing arrangements.

ATTACHMENT

Details of the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 1)

Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 9).

Regulation 2 provides that the Regulations commence on 20 September 2004.

Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations).

Schedule 1 - Amendments

Item 1

The Regulations amend subregulation 1.03(1) to correct a typographical error in the definition of a market linked income stream.

Item 2

The Regulations amend subparagraph 1.05(2)(f)(iii) to ensure that a 'complying' lifetime annuity can be commuted where the eligible termination payment resulting from the commutation is transferred directly to the purchase of a market linked annuity or a market linked pension (paid from either a superannuation fund or a Retirement Savings Account institution).

Item 3

The Regulations amend subparagraph 1.06(2)(e)(iii) to ensure that a 'complying' lifetime pension can be commuted where the eligible termination payment resulting from the commutation is transferred directly to the purchase of a market linked annuity or a market linked pension (paid from either a superannuation fund or a Retirement Savings Account institution).


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