Commonwealth Numbered Regulations - Explanatory Statements
[Index] [Search] [Download] [Related Items] [Help]
SUPERANNUATION INDUSTRY (SUPERVISION) AMENDMENT REGULATION 2013 (NO. 3) (SLI NO 105 OF 2013)
EXPLANATORY STATEMENT
Select Legislative Instrument 2013 No. 105
Issued by authority of the Minister for Financial Services and Superannuation
Superannuation Industry (Supervision) Act 1993
Superannuation
Industry (Supervision) Amendment Regulation
2013 (No. 3)
Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the SIS Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the SIS Act.
Section 312-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that Division 312 of that Act, together with the SIS Regulations, implements the Arrangement between the Governments of Australia and New Zealand for Trans-Tasman Retirement Savings Portability (the Arrangement).
On 16 July 2009, the Arrangement was signed by the Australian Treasurer and the New Zealand Minister of Finance. The Arrangement establishes a scheme to enable Australians and New Zealanders to transfer their retirement savings when they move between Australia and New Zealand, while preserving the integrity of the retirement savings systems of both countries.
The purpose of the Regulation is to prescribe the details of the trans-Tasman retirement savings portability scheme.
The current superannuation laws do not allow Australian and New Zealand citizens living in Australia, who leave Australia indefinitely, to either withdraw their superannuation benefits on their departure prior to reaching Australian preservation age (between 55 and 60, depending on the individual's date of birth), or to move their benefits to a superannuation fund in the other country.
The scheme assists Australians and New Zealanders to streamline their financial affairs when they cross the Tasman, consolidate their retirement savings in their country of residence and avoid paying unnecessary fees and charges on multiple accounts held in the two countries.
Details of the amendments are set out in the Attachment.
The SIS Act specifies no conditions that need to be met before the power to make the Regulation may be exercised.
The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulation commences on the day the Arrangement between the Australian and New Zealand Governments on Trans-Tasman Retirement Savings Portability comes into force. The Arrangement comes into force after the Governments have informed each other that their respective constitutional or legislative changes necessary to give effect to the Arrangement have been made. The Regulation fulfils this obligation.
Public consultation on the draft regulation was conducted through the Department of the Treasury website between 15 May and 21 May 2013. Nine submissions were received.
Authority: Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993
ATTACHMENT
Details of the Superannuation Industry (Supervision) Amendment Regulation 2013 (No. 3)
Section 1 specifies that the name of the Regulation is the Superannuation Industry (Supervision) Amendment Regulation 2013 (No. 3).
Section 2 provides that the Regulation commences on the day the Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability, signed at Brisbane on 16 July 2009, comes into force for Australia.
Section 3 provides that the Regulation is made under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Section 4 provides that each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.
Schedule 1 Amendments
Item 1 inserts Part 12A into the SIS Regulations.
Part 12A of the SIS Regulations prescribes the operating details of the trans-Tasman retirement savings portability scheme.
The scheme is given effect by section 312-5 of the ITAA 1997.
The Arrangement
Australians and New Zealanders may travel freely across the Tasman Sea and can live and work in either country. New Zealanders living in Australia can contribute to Australian superannuation funds, while Australians living in New Zealand can contribute to KiwiSaver schemes.
On 16 July 2009, the Australian Treasurer and the New Zealand Minister of Finance signed an Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability (the Arrangement). The Arrangement establishes a scheme to enable Australians and New Zealanders to transfer their retirement savings when they move between Australia and New Zealand, while preserving the integrity of the retirement savings systems of both countries.
The operating details of the scheme are outlined in the Arrangement and include:
• individuals may move their retirement savings between an Australian complying superannuation fund and a New Zealand KiwiSaver scheme;
• Australian retirement savings from an Australian untaxed source, or an Australian defined benefit scheme, cannot be transferred to a KiwiSaver scheme;
• the portability arrangements are voluntary for individuals to transfer their retirement savings, and are also voluntary for funds or schemes to accept transferred retirement savings;
• transferred retirement savings are generally subject to the superannuation and tax rules of the host country, with limited and specified exceptions (see below);
• transferred savings must be separately identifiable within the account established in the host country, to allow the application of certain source country rules;
• any decrements to retirement savings balances are first applied to host country retirement savings, before being applied to retirement savings transferred from the source country; and
• New Zealand-sourced retirement savings transferred to Australia are subject to Australia's non-concessional contributions cap arrangements on their initial entry into the Australian superannuation system.
Under the Arrangement, New Zealand-sourced retirement savings held in Australian superannuation funds:
• may only be transferred to and held in complying superannuation funds that are regulated by the Australian Prudential Regulation Authority (APRA);
• may not be transferred to or held in self managed superannuation funds;
• may not be transferred to a third country; and
• may not be accessed under the conditions of release for retirement or attaining preservation age, as defined in the SIS Regulations, but must be preserved until the member reaches the qualification age for New Zealand superannuation;
- the qualification age is defined in the New Zealand Superannuation and Retirement Income Act 2001, and is currently age 65.
Australian-sourced retirement savings held in KiwiSaver schemes:
• may not be withdrawn to purchase a first home;
• may be accessed when the individual reaches age 60 and satisfies the Australian definition of retirement at that age; and
• may not be transferred to a third country.
The scheme is intended to apply to individuals who migrate between the two countries and intend to stay indefinitely or permanently in the host country.
For example, individuals with retirement savings in an Australian superannuation fund are able to transfer their benefits to a New Zealand KiwiSaver scheme when they move to New Zealand. Similarly, individuals in New Zealand who hold retirement savings in a KiwiSaver scheme are able to transfer those savings to an Australian superannuation fund when they move to Australia.
For the purposes of this Explanatory Memorandum, 'retirement savings' refers to savings held in a KiwiSaver scheme or an Australian complying superannuation fund, including individual, employer and government contributions.
'Source country' means the country in which an individual's retirement savings were first held. 'Host country' means the country to which an individual's retirement savings are transferred.
Structure of Part 12A
Part 12A is divided into four Divisions.
Division 1 sets out the purpose of Part 12A, relevant definitions and the payments, interests and superannuation entities to which the trans-Tasman retirement savings portability scheme applies.
Division 2 provides that New Zealand-sourced amounts in Australian superannuation funds are subject to the preliminary matters of Part 1, the benefit protection standards of Part 5, the payments standards of Part 6 and the contribution and benefit accrual standards of Part 7 of the SIS Regulations. The application of these Parts to New Zealand-sourced amounts is modified to the extent necessary to implement the Arrangement.
Division 3 contains regulations about the payment of benefits in Australian superannuation funds to KiwiSaver schemes.
Division 4 prescribes the conditions of release for New Zealand-sourced amounts in Australian superannuation funds.
Division 1 - General
Purpose of Part 12A
Regulation 12A.01 sets out the purpose of Part 12A.
The purpose of Part 12A is to implement the Arrangement between the Governments of Australia and New Zealand for trans-Tasman retirement savings portability, signed in 2009.
Part 12A applies from the day the Arrangement comes into force for Australia.
The Arrangement comes into force on the first day of the second month following the month in which the two Governments have exchanged notes informing each other that their respective constitutional or legislative matters necessary to give effect to the Arrangement have been fulfilled. The Minister will announce when the Arrangement comes into force for Australia by notice in the Gazette.
Note 1 to the regulation indicates that the Arrangement does not cover all complying superannuation funds.
Note 2 to the regulation outlines the payments to which Part 12A applies.
Note 3 to the regulation refers to Division 312 of the ITAA 1997, which provides for the taxation treatment of retirement savings transferred under the scheme.
Definitions
Regulation 12A.02 prescribes the relevant definitions for the scheme.
The 'Arrangement' means the agreement signed by the two Governments in 2009 to establish the trans-Tasman retirement savings portability scheme.
'KiwiSaver scheme' and 'KiwiSaver scheme provider' are defined in subsection 995-1(1)
of the ITAA 1997 and have the meanings given by the
KiwiSaver Act 2006 of New
Zealand. KiwiSaver schemes were established in New Zealand in 2007 to
help scheme members save for their retirement.
An 'Australian-sourced amount' is an amount first held in a complying superannuation fund, subsequently paid to a KiwiSaver scheme under the scheme and identified as such by the provider of the receiving KiwiSaver scheme.
The Note to the definition indicates that an Australian-sourced amount retains that status if it is subsequently repaid from a KiwiSaver scheme to a complying superannuation fund (either the same fund in which it was originally accrued or a different fund).
Similarly, a 'New Zealand-sourced amount' is an amount first held in a KiwiSaver scheme, subsequently paid to a complying superannuation fund under the scheme and identified as such by the receiving fund's trustee.
The separate identification of source country amounts in the host country fund or scheme is required by the Arrangement to allow the source country's rules to be applied to the retirement savings that are transferred to the host country in certain circumstances.
A 'returning New Zealand-sourced amount' is a New Zealand-sourced amount that was paid from a complying superannuation fund to a KiwiSaver scheme, and later received again by a complying superannuation fund. The returning New Zealand-sourced amount may be received by the same fund which held the New Zealand-sourced amount the first time, or by a different fund which receives the returning New Zealand-sourced amount the second (or subsequent) time. .
The effect of this definition is that a returning New Zealand-sourced amount is always a New Zealand-sourced amount as defined. A New Zealand-sourced amount becomes a 'returning New Zealand-sourced amount' when it re-enters the Australian superannuation system for the second (or subsequent) time.
Note 1 to the definition indicates that a New Zealand-sourced amount retains that status if it is subsequently repaid from a complying superannuation scheme to KiwiSaver scheme (either the same scheme in which it was originally accrued or a different scheme).
Note 2 to the definition indicates that retirement savings may move between Australia and New Zealand more than once.
A 'tax free component of an Australian-sourced amount' is an Australian-sourced amount that previously formed part of the tax free component of the member's former superannuation benefits in a complying superannuation fund before being paid to a KiwiSaver scheme.
Superannuation entities, payments and interests
Regulation 12A.03 prescribes the payments, interests and superannuation entities that are included in, or excluded from, the scheme, consistent with the terms of the Arrangement.
Part 12A applies to payments made between an Australian complying superannuation fund and a New Zealand KiwiSaver scheme (subregulation 12A.03(1)(a)).
A complying superannuation fund is defined in section 42 of the SIS Act, and a KiwiSaver scheme is defined in section 995-1(1) of the ITAA 1997.
Part 12A also applies to payments made between complying superannuation funds under the portability provisions (Division 6.5 of the SIS Regulations) where the payment includes a New Zealand-sourced amount (subregulation 12A.03(1)(b)), and to cases where the member's interest includes a New Zealand-sourced amount but the payment to another complying superannuation fund does not include the New Zealand-sourced amount (subregulation 12A.03(1)(c)).
Part 12A does not apply to payments from KiwiSaver schemes to Australian superannuation entities that are not complying superannuation funds, for example, retirement savings accounts or approved deposit funds, as these entities have not been included in the Arrangement. Similarly, Part 12A does not apply to payments from Australian complying superannuation funds to New Zealand retirement savings entities other than KiwiSaver schemes.
Certain interests and Australian superannuation entities are excluded from the scheme (subregulation 12A.03(2)). The scheme does not apply to:
• a defined benefit interest in a defined benefit fund;
• an unfunded public sector superannuation scheme; or
• a self managed superannuation fund.
Certain payments are also excluded from the scheme (subregulation 12A.03(3)). The scheme does not apply to:
• payments that contain an element untaxed in the fund; or
• benefits that are being paid as a pension.
The effect of subregulations 12A.03(2) and (3) is that, broadly, superannuation benefits held in an accumulation interest in a complying superannuation fund may be paid to a KiwiSaver scheme.
Members of entities, or with interests, that are excluded from the scheme and who wish to move their retirement savings to a KiwiSaver scheme may, subject to the rules of the entity, roll over or transfer their benefits to a complying superannuation fund that is included in the scheme before moving them to a KiwiSaver scheme.
Some defined benefit funds permit their members to hold an accumulation interest in connection with their defined benefit interest in the fund. This regulation does not prevent the member from moving their accumulation interest in a defined benefit fund to a KiwiSaver scheme, subject to the fund rules.
This regulation does not prevent members currently receiving a pension from commuting the pension, subject to the fund rules, and then moving their benefits to a KiwiSaver scheme.
Division 2 - New Zealand-sourced amounts
Regulation 12A.04 prescribes that Division 2 applies to a New Zealand-sourced amount received by a complying superannuation fund from a KiwiSaver scheme, and to the treatment of the New Zealand-sourced amount held in a complying superannuation fund.
Under the regulations of Division 2, a New Zealand-sourced amount in a complying superannuation fund are generally subject to the following Parts of the SIS Regulations, as modified by Part 12A:
• preliminary matters in Part 1;
• the benefit protection standards of Part 5;
• the payments standards of Part 6; and
• the contribution and benefit accrual standards of Part 7.
Division 2 is consistent with the terms of the Arrangement, which provides that retirement savings transferred between Australia and New Zealand are generally subject to the rules of the host country, with limited and specified exceptions.
The Explanatory Memorandum explains the regulations of Division 2 in the following order:
• amounts received from a KiwiSaver scheme (Regulation 12A.08);
• treatment of a New Zealand sourced-amount held in a complying superannuation fund (Regulations 12A.06); and
• payment of benefits from a complying superannuation fund (Regulation 12A.07).
Amounts received from a KiwiSaver scheme
Regulation 12A.08 prescribes that the contribution and benefit accrual standards of Part 7 of the SIS Regulations, as affected by these subregulations, apply in relation to a request to a complying superannuation fund to receive an amount from a KiwiSaver scheme.
Under the Arrangement, it is voluntary for a KiwiSaver scheme member who migrates to Australia to move their retirement savings to a complying superannuation fund, and for a complying superannuation fund to accept a contribution from a KiwiSaver scheme.
A KiwiSaver scheme member who chooses to contribute their retirement savings to a complying superannuation fund may first wish to confirm with the receiving fund that their contribution will be accepted before moving their savings.
The member may also wish to consider, or seek advice about, the consequences of moving their benefits to a complying superannuation fund.
For income tax purposes, an amount received from a KiwiSaver scheme is a non-concessional contribution (subsection 312-10(1) of the ITAA 1997) and is subject to the non-concessional contributions cap arrangements on its initial entry into the Australian superannuation system, consistent with the terms of the Arrangement.
A New Zealand-sourced amount in a complying superannuation fund is generally subject to Australian superannuation and tax rules, consistent with the terms of the Arrangement. For income tax purposes, earnings on a New Zealand-sourced amount are taxed at Australian rates and are included in the taxable component.
It is expected that the New Zealand-sourced amount would generally remain a fixed amount in the fund, subject to any reductions in certain circumstances or withdrawals on meeting a condition of release.
Contribution and benefit accrual standards
The contribution and benefit accrual standards of Part 7 of the SIS Regulations, as affected by these subregulations, apply in relation to a request to a complying superannuation fund to receive an amount from a KiwiSaver scheme (subregulation 12A.08(1)).
The effect of this subregulation is that Regulation 7.04 of the SIS Regulations applies to an amount received by a complying superannuation fund from a KiwiSaver scheme. That is, the receiving trustee may accept the amount only in accordance with regulation 7.04 of the SIS Regulations.
Regulation 7.04 prescribes conditions for accepting contributions, including:
• the member must satisfy the age and work tests;
- a member aged under 65 is not subject to the work test and may contribute up to a maximum of three times the amount of the non-concessional contributions cap, currently $450,000;
- a member aged 65 or over is subject to the work test and may contribute up to a maximum of the non-concessional contributions cap, currently $150,000;
• the member's Australian tax file number (TFN) must be quoted to the fund; and
• the contribution must not exceed the non-concessional contributions cap applicable to the member.
If the member does not satisfy the age and work tests, or does not provide their TFN to the fund, the fund must return the contribution to the entity or person that paid the amount.
The treatment of an amount received from a KiwiSaver scheme is consistent with the treatment of contributions from Australian members and from members of foreign superannuation funds.
If the amount received from the KiwiSaver scheme exceeds the relevant non concessional contributions cap (depending on the member's age), the fund must return the whole amount to the KiwiSaver scheme (subregulation 12A.08(6)). This provision provides consistency with New Zealand law, which does not permit the partial transfer of retirement savings from a KiwiSaver scheme to a complying superannuation fund.
Additional information
In addition to the information that may be required under Part 7 of the SIS Regulations, a trustee of the receiving complying superannuation fund may request additional information before accepting an amount from a KiwiSaver scheme (subregulation 12A.08(2)).
Details about the New Zealand-sourced amount, any returning New Zealand-sourced amount and any Australian-sourced amount included in the contribution may be requested under subparagraph 12A.08(2)(a)(i). In most cases the contribution would be expected to consist wholly of a New Zealand-sourced amount.
As retirement savings may move between Australia and New Zealand on multiple occasions, it is likely that retirement savings moved more than once will contain both Australian-sourced and New Zealand-sourced amounts. The information that may be requested under subparagraphs 12A.08(2)(a)(ii) - (iii) relates to an Australian sourced amount included in the contribution, and includes:
• the amount of any tax free component of an Australian-sourced amount; and
• any amounts that were restricted non-preserved benefits or unrestricted non-preserved benefits included in the Australian-sourced amount.
The additional information that may be requested under these subparagraphs is consistent with subsections 312-10(3) and (6) of the ITAA 1997 and ensures appropriate tax treatment for an Australian-sourced amount and a returning New Zealand-sourced amount re-entering the Australian superannuation system.
On their re-entry into the Australian superannuation system:
• an Australian-sourced amount and a returning New Zealand-sourced amount are disregarded for the purposes of the excess non-concessional contributions tax (Subdivision 292-C of the ITAA 1997);
• a tax free component of an Australian-sourced amount will retain that status; and
• restricted non-preserved benefits or unrestricted non-preserved benefits of an Australian-sourced amount will retain their status.
The trustee may also request any other information that is reasonably required to accept the amount from the KiwiSaver scheme (subparagraph 12A.08(2)(a)(iv)).
The additional information may be provided to the receiving trustee by either the KiwiSaver scheme provider or by the member (paragraph 12A.08(2)(b)). The information may be obtained from the statement originally provided to the KiwiSaver scheme provider and the member when the Australian-sourced amount or the New Zealand-sourced amount was previously paid to the KiwiSaver scheme provider. The statement was provided under section 390-12 of the ITAA 1997.
Where the additional information is provided, it must be given to the receiving trustee at or before the time the trustee decides to accepts the amount from the KiwiSaver scheme (paragraph 12A.08(2)(c)).
The receiving trustee may accept the amount from the KiwiSaver scheme without the additional information. Consequently, if the contribution includes an Australian-sourced amount or a returning New Zealand-sourced amount and the information is not provided, the entire amount is treated as a non-concessional contribution for the purposes of the excess non-concessional contributions tax, an Australian-sourced amount is included in the taxable component of the member's interest and is treated as a preserved benefit.
Separate identification of New Zealand-sourced amount
A trustee of a complying superannuation fund must administer a member's benefits that include a New Zealand-sourced amount in a way that allows the trustee to separately identify the New Zealand-sourced amount at all times (subregulation 12A.08(3)).
The effect of this subregulation is the trustee of the receiving fund must be able to separately identify the New Zealand-sourced amount when it is first received by the fund from the KiwiSaver scheme, and maintain that separate identification while the New Zealand-sourced amount is held in the fund.
This subregulation is consistent with the terms of the Arrangement, which provide that transferred retirement savings must be separately identifiable within the account established in the host country, to allow the application of certain source country rules.
The same obligation to separately identify a New Zealand-sourced amount held in a complying superannuation fund also applies under the benefit protection standards (subregulation 12A.06(3)) and the payment standards (subregulation 12A.07(4)).
No obligation to receive amount
A trustee of a complying superannuation fund is not required, in any circumstances, to accept an amount from a KiwiSaver scheme (paragraph 12A.08(4)).
This is consistent with the terms of the Arrangement, which provide that it is voluntary for providers as to whether they will accept transferred retirement savings. This applies to funds receiving a New Zealand-sourced amount directly from a KiwiSaver scheme, as well as to funds receiving a New Zealand-sourced amount from another complying superannuation fund.
Contributions to a MySuper product from a KiwiSaver scheme
Paragraphs 29TC(1)(f) and 29TC(3)(a) of the SIS Act, taken together, permit the governing rules of a superannuation fund to place limitations on the source or kind of contributions to a MySuper product, if those limitations are of a prescribed kind.
An exposure draft of regulations for the purposes of these provisions has indicated that the SIS Regulations would be amended to allow funds to limit contributions that are transfers from a foreign superannuation fund. This is designed to ensure consistency with other legislative arrangements under which funds can choose not to accept transfers from certain foreign superannuation funds.
Contributions
Paragraph 12A.08(5) clarifies that an amount received by a complying superannuation fund from a KiwiSaver scheme is treated as a contribution and as a member contribution as defined in the SIS Regulations.
A returning New-Zealand sourced amount or an Australian-sourced amount received by a complying superannuation fund from a KiwiSaver scheme is not treated as a fund-capped contribution (subregulation 12A.08(7)). The effect of this subregulation is that where the trustee has received details of these amounts from the member or transferring provider, they are disregarded for the purposes of the excess non-concessional contributions tax, consistent with subsection 312-10(3) of the ITAA 1997.
Treatment of a New Zealand-sourced amount in a complying superannuation fund
Regulation 12A.05 prescribes that the preliminary matters of Part 1 of the SIS Regulations apply in relation to a New Zealand-sourced amount received by a complying superannuation fund from a KiwiSaver scheme. The application of Part 1 is modified to the extent necessary to implement the Arrangement.
Part 1 of the SIS Regulations includes definitions used in the SIS Regulations.
Benefit protection standards
Regulation 12A.06 prescribes that the benefit protection standards of Part 5 of the SIS Regulations, as affected by these subregulations, apply in relation to a New Zealand-sourced amount received by a complying superannuation fund, and to the treatment of a New Zealand-sourced amount held in a complying superannuation fund (subregulation 12A.06(1)).
The standards apply regardless of whether the New Zealand-sourced amount was received directly from a KiwiSaver scheme, or was received after being rolled over or transferred from another complying superannuation fund.
Reduction of amount of benefits
Subregulation 12A.06(2) applies where a member's benefits that include a New Zealand-sourced amount are reduced. For example, a member's benefits may be reduced under Part 5 of the SIS Regulations by costs charged by the fund against the member's benefits, or by investment losses debited from the member's benefits.
The effect of this subregulation is any reduction in the member's benefits must first be charged against the member's Australian savings. If the Australian savings are insufficient, the remainder is then charged against the New Zealand sourced amount.
The same obligation to reduce a member's benefits by first charging the amount against the member's Australian savings also applies to reductions in a member's benefits under the payment standards (subregulation 12A.07(7)).
Subregulations 12A.06(2) and 12A.07(7) are consistent with the terms of the Arrangement, which provide that any decrements to retirement savings balances are first applied to host country retirement savings, before being applied to retirement savings received from the source country.
Separate identification of a New Zealand-sourced amount
A trustee of a complying superannuation fund must be able to separately identify a New Zealand-sourced amount held in the fund at all times (subregulation 12A.06(3)).
Minimum benefit
A New Zealand-sourced amount in a complying superannuation fund is treated as a minimum benefit in the same way as other amounts in the fund are treated as minimum benefits (subregulation 12A.06(4)).
Payment of benefits from a complying superannuation fund
Regulation 12A.07 prescribes that the payment standards of Part 6 of the SIS Regulations, as affected by these subregulations, apply in relation to the payment of an amount from a complying superannuation fund.
Payment standards
The payment standards of Part 6 of the SIS Regulations apply in relation to the payment of an amount from a complying superannuation fund in two circumstances (subregulation 12A.07(1)):
• the rollover or transfer of a New Zealand-sourced amount to another complying superannuation fund (portability); and
• the payment of an amount from a complying superannuation fund to a KiwiSaver scheme.
Portability
Paragraph 12A.07(1)(a) applies to a New Zealand-sourced amount rolled over or transferred between complying superannuation funds.
The effect of this paragraph is that the portability provisions of Division 6.5 of the SIS Regulations apply to a New Zealand-sourced amount. A member may request the rollover or transfer of their benefit that includes a New Zealand-sourced amount from one complying superannuation fund to another complying superannuation fund.
This paragraph is consistent with the terms of the Arrangement, which provide that transferred retirement savings are generally subject to host country rules.
No payments to self managed superannuation funds
The rollover or transfer of a New Zealand-sourced amount from a complying superannuation fund to a self managed superannuation fund is not permitted (subregulation 12A.07(2)).
Subregulation 12A.07(2) is consistent with the terms of the Arrangement, which provide that New Zealand-sourced retirement savings may not be transferred to, or held in, Australian self managed superannuation funds.
The prohibition on rollovers or transfers of a New Zealand-sourced amount to a self managed superannuation fund is a specified exception where source country rules apply to retirement savings held in the host country. It aligns the treatment of New Zealand-sourced retirement savings held in Australia with their treatment in New Zealand.
No obligation to receive amount
A trustee of a complying superannuation fund is not required, in any circumstances, to receive a New Zealand-sourced amount that is rolled over or transferred from another complying superannuation fund (paragraph 12A.07(3)).
This subregulation is consistent with the terms of the Arrangement, which provide that it is voluntary for providers as to whether they will accept transferred retirement savings. This applies to funds receiving a New Zealand-sourced amount from another complying superannuation fund, as well as to funds receiving a New Zealand-sourced amount directly from a KiwiSaver scheme.
The trustee of the transferring fund may refuse to roll over or transfer a member's benefits that include a New Zealand-sourced amount if the trustee of the receiving fund will not accept the New Zealand-sourced amount, under paragraph 6.35(1)(a) of the SIS Regulations.
In this situation, the member may either roll over or transfer part of their benefits (i.e. amounts other than the New Zealand-sourced amount), or roll over or transfer the whole of their benefits to a complying superannuation fund which will accept the New Zealand-sourced amount.
Application of data and payment regulations
The superannuation data and payment matters prescribed in regulations 6.32 to 6.34 of the SIS Regulations apply to a member's request to roll over or transfer their benefits between regulated superannuation funds. As a KiwiSaver scheme is not a regulated superannuation fund, the data and payment standards do not apply to amounts received by a complying superannuation fund from a KiwiSaver scheme, or to payments from a complying superannuation fund to a KiwiSaver scheme.
The data and payment matters do, however, apply to member requests to roll over or transfer benefits that include a New Zealand-sourced amount between complying superannuation funds. The trustee of the transferring fund must rollover or transfer the amount within 30 business days under subregulation 6.34A(3), if the rollover or transfer of benefits that include a New Zealand-sourced amount cannot be made in the standard timeframe of three business days.
Separate identification of a New Zealand-sourced amount
A trustee of a complying superannuation fund which receives a New Zealand-sourced amount that is rolled over or transferred from another complying superannuation fund must be able to separately identify the New Zealand-sourced amount at all times (subregulation 12A.07(4)).
Payment of an amount to a KiwiSaver scheme
Paragraph 12A.07(1)(b) applies to an amount to be paid from a complying superannuation fund to a KiwiSaver scheme. The effect of this paragraph is to permit the payment of a member's benefits to a KiwiSaver scheme. The operating details of making the payment are dealt with under Division 3 of Part 12A.
Condition of release
Subregulation 12A.07(5),together with item 113A of Schedule 1, introduces a condition of release for the payment of an amount from a complying superannuation fund to a KiwiSaver scheme. Under Part 6 of the SIS Regulations, a member's preserved benefits may only be cashed on meeting a condition of release.
Under this subregulation:
• payment of an amount from a complying superannuation fund to a KiwiSaver scheme satisfies a condition of release;
• the amount is to be paid as a single lump sum that is at least the amount of the member's withdrawal benefit in the fund (paragraph 12A.07(5)(a)); or
• if the fund receives any further contributions, rollovers or transfers after making the first payment, they are to be paid in a way that ensures the amount is cashed (subparagraph 12A.07(5)(b)(i)); and
• the member is not required to make an additional application to the fund (subparagraph 12A.07(5)(b)(ii)).
This subregulation is consistent with the condition of release for departing temporary residents.
Division 6.7 (spouse contributions-splitting amounts)
Division 6.7 of the SIS Regulations, which permits a member of a superannuation fund to split certain contributions with their spouse, does not apply to a New Zealand-sourced amount (subregulation 12A.07(6)).
Consequently, a New Zealand-sourced amount cannot be split with a member's spouse under this Division, consistent with the regulations that prevent the splitting of a lump sum paid from a foreign superannuation fund (paragraph 6.41(2)(c) of the SIS Regulations).
Reduction of amount of benefits
Subregulation 12A.07(7) applies where a member's benefits that include a New Zealand-sourced amount are reduced. For example, a member's benefits may be reduced under Part 6 of the SIS Regulations if the member satisfies a condition of release with a cashing restriction, such as release of benefits on compassionate grounds.
The effect of this regulation is any reduction in the member's benefits must be first charged against the member's Australian savings. If the Australian savings are insufficient, the remainder is then charged against the New Zealand sourced amount.
Subregulation 12A.07(7) is consistent with the terms of the Arrangement, which provide that any decrements to retirement savings balances are first applied to host country retirement savings, before being applied to retirement savings received from the source country.
Preserved benefits
A New Zealand-sourced amount received by a complying superannuation fund is treated as a preserved benefit in the same way as other amounts in the fund are treated as preserved benefits (subregulation 12A.07(8)).
This subregulation applies whether the New Zealand-sourced amount is received directly from a KiwiSaver scheme or is included in benefits rolled over or transferred from another complying superannuation fund. That is, a member's preserved benefits in a fund include the New Zealand-sourced amount.
Other matters
The Arrangement specifies that New Zealand retirement savings held in an Australian complying superannuation fund may not be transferred to a third country. As the SIS Regulations do not permit the transfer of benefits to any other country, a regulation to prevent the transfer of a New Zealand-sourced amount is not required.
The Arrangement also specifies that a New Zealand-sourced amount held in a complying superannuation fund may not be withdrawn to purchase a first home in Australia. As the SIS Regulations do not permit a withdrawal of benefits to purchase a home, a regulation to prevent the withdrawal of a New Zealand-sourced amount for this purpose is not required.
Division 3 - Payment of amount to a KiwiSaver scheme
Regulation 12A.09 prescribes that Division 3 applies to a payment made by a complying superannuation fund to a KiwiSaver scheme.
Under the Arrangement, it is voluntary for a member of a complying superannuation fund who immigrates to New Zealand to move their retirement savings to a KiwiSaver scheme, and for a KiwiSaver scheme to accept the benefits from the complying superannuation fund.
A fund member who chooses to move their benefits to a KiwiSaver scheme may first wish to confirm with the receiving scheme that their benefits will be accepted before moving their savings.
The member may also wish to consider, or seek advice about, the consequences of moving their benefits from a complying superannuation fund to a KiwiSaver scheme. Such consequences could include exit fees charged by the transferring fund, loss of insurance entitlements, and different tax rates applying to retirement savings in the KiwiSaver scheme.
Payment
Subregulation 12A.10(1) prescribes that the application of the SIS Regulations is modified to the extent necessary to ensure that the Regulations do not prevent the payment of an amount from a complying superannuation fund to a KiwiSaver scheme under this regulation.
Generally, where a member has requested the payment of their withdrawal benefits to a KiwiSaver scheme and the trustee is satisfied about certain matters, the trustee must pay the amount to the KiwiSaver scheme in accordance with these regulations. This is consistent with New Zealand legislation.
Payment of the whole of withdrawal benefit
The trustee of the complying superannuation fund must pay the whole of the member's withdrawal benefit to the KiwiSaver scheme. Payment of part of the member's withdrawal benefit to the KiwiSaver is not permitted in any circumstances (regulation 12A.10(2)).
This subregulation supports Australians who move to New Zealand to consolidate their retirement savings in their country of residence, and avoid paying fees and charges on multiple accounts in two countries. It is also consistent with New Zealand legislation that requires a KiwiSaver member to pay the whole of their retirement savings to a complying superannuation scheme on their emigration to Australia.
Information before payment can be made
A trustee of a complying superannuation fund must not pay an amount to a KiwiSaver scheme, unless the trustee is satisfied about certain matters (subregulation 12A.10(3)). As the member's benefits are leaving the Australian superannuation system and are being sent overseas, it is important the trustee is satisfied that all requirements have been met.
The trustee must be satisfied that:
• the member has emigrated permanently to New Zealand;
• the trustee has received from the member a statutory declaration stating the member has permanently emigrated to New Zealand, and proof of residence at an address in New Zealand;
• the member has requested and consented to the payment of the whole of their withdrawal benefits to a KiwiSaver scheme;
• the member has opened a KiwiSaver scheme account;
• the member has given the trustee the KiwiSaver scheme's name and account number to which the benefits are to be paid; and
• the KiwiSaver scheme provider will accept the payment.
Paragraphs 12A.10(3)(a)-(b) are intended to ensure that only benefits of members who intend to remain permanently or indefinitely in New Zealand are paid to a KiwiSaver scheme. The regulations do not apply to benefits of individuals on holidays, backpackers or on short-term stays in New Zealand. However, the regulations are not intended to prevent individuals from returning to Australia at some time in the future should their circumstances change.
An effect of these paragraphs is the member must have migrated to New Zealand before the payment of their benefits to a KiwiSaver scheme. A member's benefits cannot be paid to a KiwiSaver scheme before they have left Australia, consistent with KiwiSaver scheme rules.
Paragraph 12A.10(3)(c) requires the member to have requested and consented to the payment of their benefits to a KiwiSaver scheme before the benefits are paid.
The trustee may require the verification of documents, other evidence or information by oath or statutory declaration (subregulation 12A.10(4)).
The trustee must pay the member's benefits to the KiwiSaver scheme no later than 30 days after being satisfied about all of the matters prescribed in subregulation 12A.10(3).
KiwiSaver scheme membership
Paragraphs 12A.10(3)(d)-(f) require the trustee to be satisfied that the member has opened a KiwiSaver scheme account, the trustee has received the scheme and account details necessary to make the payment and the KiwiSaver scheme provider will accept the payment.
The KiwiSaver Act 2006 sets out who is eligible to be a KiwiSaver scheme member. Membership of a KiwiSaver scheme is voluntary. An individual can join a KiwiSaver scheme if the individual:
• is entitled to live in New Zealand indefinitely; and
• is below the qualification age for New Zealand superannuation, currently 65; and
• is personally present in New Zealand at the time of enrolment in the scheme.
Broadly, Australian citizens and Australian permanent residents are entitled to live in New Zealand indefinitely and can become members of a KiwiSaver scheme. Individuals who hold temporary, visitor or student permits cannot join a KiwiSaver scheme.
Enrolment in a KiwiSaver scheme is automatic on commencing permanent employment in New Zealand, although a member may opt out. Individuals who are not employed may opt in. Individuals employed on a temporary contract for less than 28 days cannot join a KiwiSaver scheme.
Division 4 Conditions of release of benefits
Regulation 12A.11 prescribes that Division 4 applies in relation to a New Zealand-sourced amount in a complying superannuation fund. Division 4 prescribes the conditions of release that apply to a New Zealand-sourced amount in a complying superannuation fund.
Conditions of release
Regulation 12A.12 prescribes that Schedule 1 to the SIS Regulations, as affected by this regulation, applies to a New Zealand-sourced amount held in a complying superannuation fund in the same way it applies to other amounts in the fund (subregulation 12A.12(1)).
The effect of this subregulation is that the conditions of release listed in Schedule 1 to the SIS Regulations generally apply to a New Zealand-sourced amount held in a complying superannuation fund in the same way they apply to other amounts in the fund, with some exceptions.
For example, members may withdraw a New Zealand-sourced amount on meeting a condition of release such as death, terminal medical condition, permanent incapacity or on compassionate grounds (items 102, 102A, 103 and 107 of Schedule 1 to the SIS Regulations respectively).
Some conditions of release will not apply to a New Zealand-sourced amount due to the operation of the SIS Regulations or of other legislation. For example, New Zealand citizens are excluded from the condition of release for departing temporary residents under regulation 6.20A of the SIS Regulations (item 103A of Schedule 1 to the SIS Regulations).
Paragraph 12A.12(2)(a) provides that a New Zealand-sourced amount cannot be withdrawn when the member satisfies the condition of release for retirement (item 101 of Schedule 1 to the SIS Regulations )or when the member attains preservation age (currently between 55 and 60 years of age, depending on the member's date of birth) (item 110 of Schedule 1 to the SIS Regulations).
Paragraph 12A.12(2)(b) prescribes that item 106 of the Schedule applies to a New Zealand-sourced amount as if the specified age were the qualification age for New Zealand superannuation.
The qualification age for New Zealand superannuation is currently age 65 and is specified in the New Zealand Superannuation and Retirement Income Act 2001.
The condition of release in paragraph 12A.12(2)(b) is a specified exception where source country rules apply to retirement savings held in the host country. It aligns the treatment of New Zealand-sourced retirement savings held in Australia with their treatment in New Zealand.
The effect of subregulation 12A.12(2) is that a member of a complying superannuation fund may not withdraw a New Zealand-sourced amount on retirement or on reaching preservation age, as defined in the SIS Regulations. They may withdraw the New Zealand-sourced amount on reaching age 65, the qualification age for New Zealand superannuation. This subregulation is consistent with the terms of the Arrangement.
Consequently, a non-member spouse who receives a New Zealand-sourced amount under the Family Law Act 1975 cannot withdraw the New Zealand-sourced amount on retirement or on reaching preservation age. The non-members spouse may withdraw the New Zealand-sourced amount on reaching age 65, the qualification age for New Zealand superannuation.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Superannuation Industry (Supervision) Amendment Regulation 2013 (No. 3)
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
The Legislative Instrument amends the Superannuation Industry (Supervision) Regulations 1994 to implement an Arrangement that allows individuals to move their retirement savings between Australia and New Zealand.
On 16 July 2009, the Governments of Australia and New Zealand signed an Arrangement on Trans-Tasman Retirement Savings Portability (the Arrangement). The Arrangement establishes a scheme to enable Australians and New Zealanders to transfer their retirement savings when they move between Australia and New Zealand, while preserving the integrity of the retirement savings systems of both countries.
The Arrangement is intended to enhance the development of a seamless trans-Tasman labour market and supports progress towards a single economic market, to which the two Governments are jointly committed through the Australia New Zealand Closer Economic Relations Trade Agreement.
Key features of the Arrangement include:
• individuals may transfer their retirement savings between certain superannuation funds and schemes in Australia and New Zealand;
• the transfer of retirement savings is voluntary for members, and for funds to accept the transferred savings;
• transferred savings are generally subject to the superannuation and taxation rules of the host country, with limited and specified exceptions; and
• New Zealand retirement savings transferred to Australian superannuation funds are subject to the non-concessional contributions cap on their initial entry into the Australian superannuation system.
The Legislative Instrument implements the superannuation treatment of the retirement savings transferred under the Arrangement.
Human rights implications
This Legislative Instrument engages the following human rights:
• right to freedom of movement;
• right to work and rights at work;
• prohibition on interference with privacy; and
• right to equality and non-discrimination.
Right to freedom of movement
The Legislative Instrument engages and promotes the right to freedom of movement in Article 12 of the International Covenant on Civil and Political Rights.
The Legislative Instrument removes an impediment to labour mobility between Australia and New Zealand. The impediment is the current inability of individuals to transfer their retirement savings when they move between Australia and New Zealand, resulting in those individuals holding retirement savings accounts in two countries.
Right to work and rights at work
The Legislative Instrument engages and promotes the right to work and rights at work in Articles 6(1) and 7 of the International Covenant on Economic, Social and Cultural Rights.
The Legislative Instrument enhances the movement of labour between Australia and New Zealand by helping individuals to streamline and consolidate their retirement savings in their country of residence.
Right to equality and non-discrimination
The Legislative Instrument engages and promotes the right to equality and non-discrimination in Article 2(2) of the International Covenant on Economic, Social and Cultural Rights and Article 26 of the International Covenant on Civil and Political Rights.
Retirement savings from foreign superannuation funds may be transferred into the Australian superannuation system. However, there are no provisions in the superannuation legislation to allow Australian and New Zealand citizens and permanent residents who emigrate to transfer their benefits to a foreign superannuation fund.
The Legislative Instrument allows Australian and New Zealand citizens and permanent residents of Australia to transfer their superannuation benefits between certain Australian and New Zealand funds and schemes.
As noted above, the Arrangement is intended to enhance the development of a seamless trans-Tasman labour market and supports progress towards a single economic market, to which the two Governments are jointly committed through the Australia New Zealand Closer Economic Relations Trade Agreement.
Prohibition on interference with privacy
The Legislative Instrument engages and may impose limitations on the prohibition on interference with privacy in Article 17 of the International Covenant on Civil and Political Rights.
As part of the transfer process, the Legislative Instrument permits the receiving trustee of an Australian complying superannuation fund to collect additional personal information from individuals transferring their retirement savings from a KiwiSaver scheme into the fund. This information may include details relating to the member's benefits previously held in an Australian superannuation fund, such as contributions to the fund and the tax components of the benefits.
The trustee is not required to collect this additional information and may accept the contribution without it. However, the information facilitates the transfer process and ensures concessional tax treatment for an Australian-sourced amount and a returning New Zealand-sourced amount re-entering the Australian superannuation system.
The information is held in the fund and is not disclosed to another fund unless the benefits are rolled over or transferred to another complying superannuation fund, or paid to a KiwiSaver scheme.
The Legislative Instrument also requires the transferring trustee to collect additional personal information from individuals transferring their benefits from an Australian complying superannuation fund to a KiwiSaver scheme. The information includes details about the member's emigration and residence in New Zealand, and the necessary details of the KiwiSaver scheme account to which the benefits are to be paid. The trustee must have received this information and be satisfied about the matters prescribed in the Legislative Instrument before paying the member's benefits to a KiwiSaver scheme.
The collection of this additional information is necessary and is made for the primary purpose of facilitating the transfer of the member's benefits to the receiving KiwiSaver scheme. Without this information the transfer of the member's benefits could not occur.
This information may be disclosed by the transferring trustee to the receiving KiwiSaver scheme provider as part of the transfer process.
This additional information provides some integrity to the transfer process and is intended to ensure that only benefits of members who genuinely immigrate to New Zealand are paid to a KiwiSaver scheme. As the member's benefits are leaving the Australian superannuation system and are being sent overseas, it is essential that the trustee is satisfied that all requirements have been met.
The transfer of retirement savings between Australia and New Zealand is voluntary for fund and scheme members. A member who may be concerned about the collection or disclosure of information may choose not to transfer their benefits and preserve them in the source country.
Superannuation fund trustees are subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the Superannuation Industry (Supervision) Act 1993, the Privacy Act 1988, the National Privacy Principles under the Privacy Act and the governing rules of the fund in respect of the collection and disclosure of personal information.
The disclosure of information to the receiving KiwiSaver scheme complies with National Privacy Principle 9:
• the member has consented to the disclosure of information necessary to transfer their benefits to a KiwiSaver scheme;
• the disclosure is necessary to complete the transfer of the member's benefits to the receiving KiwiSaver scheme; and
• the KiwiSaver scheme is subject to the New Zealand Privacy Act 1993 and it's Information Privacy Principles which govern the collection, use, disclosure, storage and access to personal information. The New Zealand Act and its Principles are substantially similar to the Australian National Privacy Principles.
Therefore any limitation that may be imposed on the prohibition on interference with privacy is based on a legitimate objective and is reasonable, necessary and proportionate to achieving that objective.
Conclusion
This Legislative Instrument is compatible with human rights as it promotes the right to freedom of movement, the right to work and rights at work and the right to equality and non-discrimination. To the extent that the Legislative Instrument may limit the prohibition on interference with privacy, those limitations are reasonable and proportionate.
Minister for Financial Services and Superannuation, the Hon Bill Shorten MP
AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback