Treasury Laws Amendment (2018 Measures No.4) Bill 2018 contains a raft of different measures relating to compliance with superannuation guarantee obligations and reversionary transition to Retirement Income Streams (TRISs).
It was introduced into Parliament in late March and entered the Senate in June. It was passed by Senate yesterday.
However, the Senate made minor amendments to the bill, which were mostly additions to the list of deductible gift receipts under schedule 10, which the House of Representatives has not yet passed.
With the final sitting for both houses now over, the bill won’t be passed till next year.
Under the current law, if the recipient of a reversionary TRIS dies, the TRIS can only revert to a dependent beneficiary if the beneficiary satisfies one of the relevant conditions of release, the explanatory memorandum materials explain.
“This outcome arises because of the interaction between the specific ‘retirement phase’ definition that applies to TRISs and the requirement in regulation 6.21 of the SIS Regs that death benefits can only be paid through a superannuation income stream that is in the retirement phase,” the explanatory memorandum stated.
In some cases, this has the potential to cause adverse estate planning outcomes and even breaches where the beneficiary hasn’t met one of the conditions of release. The SMSF industry consequently lobbied extensively on the issue.
The bill modifies the rules that determine when a TRIS is in retirement phase by ensuring that a reversionary TRIS can always be paid to a reversionary beneficiary, irrespective of whether they have satisfied a condition of release.
“This means that TRISs that are paid to a reversionary beneficiary are subject to the general retirement phase definition in subsection 307-80(1), which simply requires that a superannuation benefit is paid,” the explanatory memorandum explained.
The change will allow a reversionary TRIS to be paid to a dependent beneficiary rather than having to be commuted and a new income stream started from the deceased member’s underlying superannuation interests. This approach is consistent with the treatment of other superannuation income streams, which do not require the reversionary beneficiary to satisfy a condition of release.
The explanatory memorandum stated that the amendment largely applies from 1 July 2017, which will mean that any payments of TRISs to reversionary beneficiaries that have occurred since 1 July 2017 do not result in a contravention of the requirement in regulation 6.21 of the SIS Regulations.
The bill also provides the ATO with access to new enforcement and collection provisions, including strengthened arrangements for director penalty notices.
The bill allows the commissioner to issue directions to pay unpaid superannuation guarantee and undertake superannuation guarantee education courses to employers who have failed their superannuation guarantee obligations.
It also allows the commissioner to disclose more information about superannuation guarantee non-compliance to affected employees.