Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS (AMENDMENT) 1995 NO. 430

EXPLANATORY STATEMENT

STATUTORY RULES 1995 No. 430

Issued by the authority of the Treasurer

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Regulations (Amendment)

The Superannuation Industry (Supervision) Act 1993 (the Act) and the Superannuation Industry (Supervision) Regulations (the Principal Regulations) provide for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision by the Insurance and Superannuation Commissioner.

Section 353 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.

These regulations amend the Principal Regulations to:

•       Make consequential amendments to the Principal Regulations which are necessary as a result of the Superannuation Industry (Supervision) Legislation Amendment Act 1995 (the SIS Amendment Act) and Taxation Laws Amendment Act (No. 2) 1995. These are of a minor technical nature and include regulations 4, 5, and 6; and

•       allow fellows of the National Tax and Accountants Association Ltd to be approved auditors of excluded superannuation funds (superannuation funds with less than 5 members). This adds to the body of professional accounting organisations entitled to perform audits on excluded superannuation funds. The amendment is contained in regulations 3 and 7; and

•       require auditors of superannuation entities, other than excluded superannuation funds, to be either an Auditor-General or both a registered auditor under the Corporations Law and a member or fellow of a specified professional accounting organisation. This tightens the criteria for persons who want to be an auditor of a superannuation entity (other than an excluded superannuation fund). Previously if an auditor was not an Auditor-General, it was sufficient if they were solely a registered auditor under the Corporations Law. This will require these auditors to abide by the professional standards of these organisations in dealing with superannuation entities. This amendment is contained in regulations 3 and 7; and

The regulations are described in detail in the attachment

Regulations 4, and 5 commence on the same day as the related amendments made by the SIS Amendment Act The remainder of the Regulations commence on gazettal.

ATTACHMENT

Superannuation Industry (Supervision) Regulations (Amendment)

Regulation 1 - Commencement

Subregulation 1.1 provides that regulation 4 commences on the same day as item 13 of Schedule 4 of the Superannuation Industry (Supervision) Legislation Amendment Act 1995 (the SIS Amendment Act).

Subregulation 1.2 provides that regulation 5 commences on the same day as item 42 of Schedule 4 of the SIS Amendment Act.

The remainder of the Regulations commence on gazettal.

Regulation 2 - Amendment

Regulation 2 provides that the Superannuation Industry (Supervision) Regulations (the Principal Regulations) are amended as set out in these Regulations

Regulation 3 - Regulation 1.04 (Section 10 of the Act - prescribed matters)

Paragraphs 1.04(2)(a) and 1.04(2)(b) of the Principal Regulations determine what types of persons will be considered 'approved auditors' for the purposes of the Act and Principal Regulations.

Currently paragraph 1.04(2)(a) provides that to be an 'approved auditor' of an excluded superannuation fund (a superannuation fund with less than 5 members) a person has to be either registered under the Corporations Law, an Auditor-General or associated (in the relevant manner) with a specified accounting organisation listed in sub-paragraphs 1.04(2)(a)(i) and (ii). The amendments being made by regulation 3 will, when read together with the new Schedule 1AAA inserted by regulation 7, mean that the National Tax and Accountants Association Ltd will now be among the specified accounting organisations. Persons who are fellows of that organisation will be able to be approved auditors' of excluded superannuation funds.

Currently paragraph 1.04(2)(b) provides that to be an 'approved auditor' of a superannuation entity other than an excluded superannuation fund a person has to be either registered under the Corporations Law or an Auditor General. The amendments being made by regulation 3 will mean that it will no longer be sufficient for a person to solely be a registered auditor under the Corporations Law. Instead they will have to be both registered under the Corporations Law and associated (in the manner specified) with one of the professional accounting organisations listed in new Schedule 1AAA (which is inserted by regulation 7).

The amendment is being made as the Corporations Law does not specifically require a registered auditor to continue to be a member of a professional organisation. Therefore an auditor may not be required to conform with the professional standards prescribed by these organisations. By requiring them to also be a member of one of the specified organisations they are obliged to follow these professional standards. It also means that the auditor is subject to the relevant organisation's quality assurance and disciplinary processes.

Regulation 4 - Regulation 3.01 (Public offer superannuation fund - prescribed persons)

The SIS Amendment Act inserted a new section 18A into the Act (refer item 13 of Schedule 4 of the SIS Amendment Act).

Section 18A exempts certain excluded superannuation funds from being public offer superannuation funds. Under section 18A, an excluded superannuation fund will not be regarded as a public offer superannuation fund if, among other things, all members of the fund are members of a "prescribed class" (paragraph 18A(2)(e) of the Act).

The definition of 'prescribed class' in existing Principal Regulation 3.01 is also appropriate for the purposes of paragraph 18A(2)(e). Accordingly, regulation 4 amends regulation 3.01 of the Principal Regulations so that the 'prescribed class' for the purposes of paragraph 18A(2)(e) is the prescribed class referred to in Principal Regulation 3.01.

Regulation 5 - Regulation 8,03 (Audit certificate)

Item 42 of Schedule 4 of the SIS Amendment Act amends section 113 of the SIS Act. Section 113 requires the trustee of a superannuation entity to put into place arrangements to have the entity's accounts audited within a 'prescribed period'. Auditors must also give the report to the trustee within this prescribed period.

'Prescribed period' is currently defined in regulation 8.03 of the Principal Regulations. The SIS Amendment Act rewrites section 113 (refer item 42 of Schedule 4) by referring to 'prescribed period' in subsection 113(1), rather than subsection 113(4) as was previously the case, and referring to an auditor's 'report' rather than 'certificate'. Accordingly regulation 5 amends Principal Regulation 8.03 to ensure the cross-reference in that regulation is changed to subsection 113 (1) and references are made to 'reports' not 'certificates'.

Regulation 6 - Regulation 12.08 (Date before which applications are made)

Regulation 6 amends regulation 12.08 of the Principal Regulations to provide the Commissioner with the flexibility to specify, for a particular fund, a date by which an application for a pre 1 July funding credit must be made. Previously this flexibility did not exist and trustees had to 31 March 1995 to lodge their application. Trustees who did not make applications by 31 March 1995 will now be able to have their applications considered (applications made before this date continue to be valid). This will only be the case if they can justify to the Commissioner that because of particular circumstances affecting their fund it is warranted that the Commissioner specify a date later than 31 March 1995 as the date by which an application may be made. The Commissioner will only use this power to accept applications made after 31 March 1995 if it is clearly justified in the particular circumstances.

Regulation 7 - New Schedule 1AAA

Regulation 7 inserts, for the purposes of Principal Regulation 1.04 (as amended by regulation 3), new Schedule 1AAA into the Principal Regulations. Schedule 1AAA sets out the manner of association with relevant professional organisations that an auditor must have to meet the requirements of new subparagraph 1.04(2)(a)(ii) and new sub-sub-paragraph 1.04(2)(bf)(i)(B), both of which are inserted by regulation 3.

Regulation 7 effectively moves the organisations which were referred to in subparagraphs 1.04(2)(a)(ii) and (iii) of the existing Principal Regulations into Schedule 1AAA. However, schedule 1AAA also includes the National Tax and Accountants Association Ltd among the relevant organisations and thus allows fellows of that organisation to be the approved auditor of an excluded superannuation fund.


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