Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS (AMENDMENT) 1998 NO. 108

STATUTORY RULES 1998 NO. 108

Issued by the authority of the Treasurer

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Regulations (Amendment)

Section 353 of the Superannuation Industry (Supervision) Act 1993 (the Act) provides that the Governor-General may make Regulations for the purposes of the Act.

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.

The purpose of the Regulations is to overcome temporary situations, arising as a result of the demutualisation of life insurance companies, whereby certain superannuation funds would otherwise be required to comply with more onerous requirements (relating to member reporting and preparation of financial statements) than intended.

Regulations 3 and 4 insert an additional exception in regulation 2.31 and subregulation 8.01(3) respectively of the Principal Regulations.

Regulation 2.31 of the Principal Regulations provides that paragraphs 2.29(1)(e), (f) and (g) of the Principal Regulations (ie, annual fund information in relation to audited accounts, statement of assets and details of certain investments) do not apply to funds from which the benefits paid to each individual member are wholly determined by reference to policies of life assurance. The amendment by regulation 3 provides that, where this exception does not apply only because shares in the life insurance company issuing the policies were acquired because the company was demutualised, then the exception will apply if the benefits paid to each individual member would otherwise be wholly determined by reference to policies of life assurance and the shares have been held for no longer than 18 months from the date of acquisition.

Subregulation 8.01(3) of the Principal Regulations provides that the requirement to prepare a statement of financial position and an operating statement under paragraphs 112(1)(a) and (b) of the Act does not apply to funds from which the benefits paid to each individual member are wholly determined by reference to policies of life assurance. The policy rationale for this exception is to avoid duplication between the requirements of the superannuation supervisory regime and those under the life insurance supervisory regime whereby financial statements must be prepared for the statutory funds in which the policies are held.

The amendment by regulation 4 provides that, where this exception does not apply only because shares in the life insurance company issuing the policies were acquired because the company was demutualised, then the exception will apply if the benefits paid to each individual member would otherwise be wholly determined by reference to policies of life assurance and the shares have been held for no longer than 18 months from the date of acquisition.

The amendments provided by regulations 3 and 4 are necessary because a superannuation fund in which benefits were wholly determined by reference to a life assurance policy could, when a life insurance company demutualises, have investments in both life assurance policies and shares in the demutualised life insurance company (through no voluntary action on the part of the trustee). While regulation 2.31 and subregulation 8.01(3) of the Principal Regulations would previously have provided such funds with an exemption from paragraphs 2.29(1)(e), (f) and (g) of the Principal Regulations and paragraphs 112(1)(a) and (b) of the Act respectively, without the amendments, these funds would have to comply with those provisions.

The amendments in regulations 3 and 4 provide that the shares be held for no longer than 18 months from the date of acquisition. This means that funds who wish to take advantage of the exceptions on an ongoing basis will need to sell the relevant shares and use the cash to invest back into additional life policies in keeping with the original policy rationale for the exception.

The Regulations commence on gazettal.