The Federal Government's Temporary Residents' Superannuation Legislation Amendment Bill 2008 (Bill) passed through the House of Representatives on 23 October 2008 and will now move to the Senate.
The Bill is in response to the Federal Government's concern at the growing amount of superannuation which has been identified as lost over the last decade and aims to fulfil the following policy objectives:
- To ensure that superannuation concessions are well targeted at individuals who will retire in Australia; and
- To reduce the number of lost superannuation accounts1.
The Bill mainly amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) and makes some minor amendments to the Taxation Administration Act 1953 and the Income Assessment Act 1997. It will have some effect on superannuation fund administration but may lessen this burden over the long term.
Overview of changes
Currently, the S(UMLM) Act requires superannuation providers to report and pay the superannuation of a member to the Commissioner of Taxation as unclaimed money where certain conditions relating to the member are met – generally this is where the member has reached the age of 65 or has died and the provider is unable to contact the person entitled to receive the benefit of the money.2
The Bill makes amendments to the S(UMLM) Act and the other Acts so that when temporary visa holders leave Australia without taking their superannuation with them, relevant amounts are reportable and payable to the Commissioner of Taxation (Commissioner) as unclaimed superannuation. These unclaimed amounts can be claimed back from the Commissioner at any later stage.3
The new system
The new system will:
- Include the superannuation of a person who was previously a holder of a temporary visa, where at least six months have passed since the person's temporary visa has expired and they have left Australia as unclaimed superannuation;
- Require superannuation providers that hold such unclaimed superannuation for departed temporary visa holders to pay these amounts to the Commissioner; and
- Allow departed temporary visa holders to recover any amounts paid to the Commissioner as unclaimed superannuation where certain conditions have been satisfied (subject to the departing Australia superannuation payment (DASP) withholding tax).4
How the new system will work
The Commissioner is required to give a written notice to a superannuation provider if the Commissioner is satisfied that:
- There are reasonable grounds to believe that the person has a superannuation interest in the fund;
- The person was a holder of a temporary visa that has now expired;
- The person has since left Australia;
- At least six months have passed since the visa expired and the person left Australia; and
- The person is not a holder of a current temporary visa or permanent visa, is not an Australian or New Zealand citizen and has not made a valid application for a permanent visa that has not been finally determined under the Migration Act 1958.5
Upon receiving a written notice from the Commissioner, the superannuation provider must give the Commissioner a statement of information relevant to the person's superannuation interest in the fund and/or the administration of any relevant obligations. The precise nature of the information required to be given in the statement should be outlined in the Commissioner's written notice. The statement will need to be given to the Commissioner by the end of the next scheduled statement day after the notice is given or if there is less than 28 days before the next scheduled statement day, the following scheduled statement day. Scheduled statement days will be outlined in the Commissioner's written notice.
At the same time as the statement is given, the superannuation provider must pay to the Commissioner the amount that would have been payable to the person identified in the notice if that person could and had requested payment in connection with their departure from Australia less the following amounts:
- The amount (if any) that is payable to the person where the provider is required or permitted to pay the amount under the Superannuation (Industry) Supervision Regulations 1994 or the Retirement Savings Accounts Regulations 1997. (This is where the person has met a condition of release under these regulations which requires or permits the amount to be paid in respect of the person and there is a requirement on the provider to pay that amount.);
- The amount (if any) paid by the provider because the person has actually died;
- The amount (if any) of the person's superannuation interest that supports a superannuation income stream; and
- Any other amounts stipulated in the regulations (these are not yet defined).
If the superannuation provider fails to pay the required amount to the Commissioner in the required time it may be fined a maximum of 100 penalty units for an individual (currently $11,000) and up to $55,000 for a corporation.
If a person whose interest in a superannuation fund has been paid to the Commissioner under the provisions of the Bill, they may, at any time in the future, claim their interest back from the Commissioner directly.
Effect on superannuation fund administration
The Bill will increase the administrative workload of a superannuation fund as the superannuation provider will have to provide notices and payments to the Commissioner where they previously did not have to. The ATO has estimated the implementation costs for superannuation providers at $33,333 per superannuation provider and annual costs at $2,508 per superannuation provider6. Superannuation funds will benefit, however, from the reduction in the number of small and lost accounts that they need to manage.
1 Explanatory memorandum, pp 53-54.
2 Ibid., p 8.
5 Explanatory memorandum, pp 14-15.
6 Explanatory memorandum, pp 60-61.