Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FIRST HOME SAVER ACCOUNTS BILL 2008
Income tax (first home saver accounts misuse tax) bill 2008
FIRST HOME SAVER ACCOUNTS (CONSEQUENTIAL AMENDMENTS)
BILL 2008
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Opening and making contributions 9
Chapter 2 Payments from a First Home Saver Account 35
Chapter 3 Government contributions to First Home Saver Accounts 49
Chapter 4 Offering First Home Saver Accounts 61
Chapter 5 Prudential regulation of First Home Saver Account providers
73
Chapter 6 Taxation 105
Chapter 7 Financial services licensing, conduct, advice and disclosure
127
Chapter 8 Administration and other issues 135
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ABN |Australian Business |
| |Number |
|ADIs |authorised deposit-taking|
| |institutions |
|APRA |Australian Prudential |
| |Regulation Authority |
|APRA Act |Australian Prudential |
| |Regulation Authority Act |
| |1998 |
|ASIC |Australian Securities and|
| |Investment Commission |
|ASIC Act |Australian Securities and|
| |Investments Commission |
| |Act 2001 |
|CGT |capital gains tax |
|Commissioner |Commissioner of Taxation |
|Corporations Act |Corporations Act 2001 |
|Corporations Regulations |Corporations Regulations |
| |2001 |
|FHOG |First Home Owner Grant |
|FHSA |First Home Saver Accounts|
|FHSA (Consequential |First Home Saver Accounts|
|Amendments) Bill 2008 |(Consequential |
| |Amendments) Bill 2008 |
|FHSA Bill 2008 |First Home Savers Account|
| |Bill 2008 |
|Income Tax (FHSA Misuse |Income Tax (First Home |
|Tax) Bill 2008 |Saver Accounts Misuse |
| |Tax) Bill 2008 |
|ITAA 1936 |Income Tax Assessment Act|
| |1936 |
|ITAA 1997 |Income Tax Assessment Act|
| |1997 |
|PAYG |pay as you go |
|RSE |registrable |
| |superannuation entity |
|SIS Act |Superannuation Industry |
| |(Supervision) Act 1993 |
|SIS Regulations |Superannuation Industry |
| |(Supervision) Regulations|
| |1994 |
|TAA 1953 |Taxation Administration |
| |Act 1953 |
|virtual PST |virtual pooled |
| |superannuation trust |
General outline and financial impact
First Home Saver Accounts
The First Home Saver Accounts Bill 2008 (FHSA Bill 2008) and
supporting Bills implement the Government's election commitment to
introduce First Home Saver Accounts (FHSAs).
Overview of arrangements
The Government is introducing FHSAs to provide a simple, tax
effective way for Australians to save for the purchase of their
first home in which to live, through a combination of low taxes and
Government contributions.
The legislation for FHSAs is contained in three Bills:
. the main Bill is the FHSA Bill 2008, which establishes
FHSAs, governs their operation, provides for the payment
of Government contributions for account holders, and
provides for the prudential regulation of account
providers;
. the First Home Saver Accounts (Consequential Amendments)
Bill 2008 (FHSA (Consequential Amendments) Bill 2008),
which contains consequential amendments to other
Commonwealth laws, chiefly the taxation and corporations
law; and
. the Income Tax (First Home Saver Accounts Misuse Tax) Bill
2008 (Income Tax (FHSA Misuse Tax) Bill 2008), which
imposes the misuse tax to clawback benefits obtained by an
account holder who improperly uses the accounts.
Chapter 1 outlines the key concepts and definitions which apply to
FHSAs. It also outlines who can open an account and the
arrangements for making contributions into accounts. To be
eligible to open an account, an individual must:
. be aged at least 18 and under 65;
. have not previously owned a home in Australia in which
they have lived; and
. provide their tax file number (TFN) to the provider and
meet standard proof-of-identity requirements.
For contributions:
. there are no restrictions on who can make a contribution
into an FHSA;
. all contributions must be made from post-tax income; and
. there is an overall account balance cap of $75,000
(indexed).
Chapter 2 outlines the circumstances and processes necessary for
money to be paid from an FHSA. As a general rule, in order to
access money to purchase a first home, personal contributions of at
least $1,000 must have been made in respect of the FHSA holder in
each of at least four financial years. Individuals are able to
contribute the balance of their account to superannuation at any
time.
The rules described in Chapter 2 limit the circumstance in which
FHSAs can be accessed. The primary reason for accessing money in a
FHSA is to purchase a first home in Australia in which to live.
Funds can also be accessed:
. as a contribution to superannuation;
. as a transfer to another FHSA;
. when the individual reaches age 60; and
. in other limited specified circumstances.
Chapter 3 outlines the Government contribution arrangements. In
general, the Government contribution is applied to up to $5,000
(indexed) of personal contributions into an account in a financial
year. The rate of the Government contribution is 17 per cent for
all individuals.
Chapter 4 outlines the obligations of FHSA providers before they
may offer FHSAs. Authorised deposit-taking institutions (ADIs) and
life insurance companies are required to notify the Australian
Prudential Regulation Authority (APRA) before offering FHSAs.
Trustees who hold the appropriate class of registrable
superannuation entity (RSE) licence are eligible to seek
authorisation as an FHSA provider.
Chapter 5 outlines the prudential regulation framework that applies
to FHSA providers. A new prudential framework applies to RSE
licensees that are authorised to provide FHSAs and FHSA trusts
which is broadly consistent with the prudential framework that
applies to public offer superannuation funds and their trustees.
APRA will be able to make prudential standards in relation to
authorised trustees and FHSA trusts.
Additional investment management requirements apply to FHSAs
offered by authorised RSE licensees and life insurance companies
that offer FHSAs as investment-linked life policies.
Otherwise, FHSA providers that are ADIs and life insurance
companies are prudentially regulated under the Banking Act 1959 and
Life Insurance Act 1995.
Chapter 6 outlines the tax treatment of FHSAs, which is set out in
the FHSA (Consequential Amendments) Bill 2008 and the Income Tax
(FHSA Misuse Tax) Bill 2008. The following taxation arrangements
apply:
. individual contributions to FHSAs are not taxed as they
will be made from post-tax income;
. Government contributions are not taxed;
. withdrawals to purchase a first home are not taxed;
. other withdrawals are generally not taxed.
In addition, earnings on FHSAs are taxed to the account provider at
the statutory rate of 15 per cent rather than to the individual
account holder. Broadly, this applies in the following way:
. the trustee of an FHSA trust is liable to pay tax at 15
per cent on the taxable income of the trust;
. an ADI calculates an FHSA component of taxable income on a
similar basis to a retirement savings account, which is
taxed at 15 per cent; and
. a life insurance company calculates (using the virtual
pooled superannuation trust method) a class of taxable
income for their FHSA and superannuation activities to be
taxed at 15 per cent.
Chapter 6 also describes the FHSA misuse tax, which applies to
clawback benefits obtained by individual account holders who
improperly use the accounts. In general, an FHSA holder is subject
to the misuse tax if FHSA money is paid to the FHSA holder to
purchase a first home and:
. they were not eligible to open an account;
. they became ineligible and failed to notify the FHSA
provider;
. they did not use the money to purchase or build a first
home; or
. they failed the occupancy rules.
The tax does not apply if the money is transferred to
superannuation, even if the FHSA holder fails one or more of these
conditions.
Chapter 7 outlines how the relevant provisions of the Corporations
Act 2001 (Corporations Act) and the Australian Securities and
Investments Commission Act 2001 (ASIC Act) in relation to financial
services licensing, conduct, advice and disclosure apply to FHSAs.
The necessary amendments are in the FHSA (Consequential Amendments)
Bill 2008. They ensure that FHSAs are:
. accompanied by appropriate disclosure documents (including
a product disclosure statement and periodic statements);
. not subject to unnecessary regulation;
. subject to a mandatory cooling-off period; and
. treated the same under the Corporations Act, regardless of
the issuing entity and the legal nature of the accounts.
Chapter 8 outlines administration and other requirements, including
the provider's legal responsibilities in relation to TFNs; secrecy
provisions and reporting of information to the Parliament.
Date of effect: The main Bill and amendments formally commence on
the day after the date of Royal Assent. However, practical effect
is in relation to FHSAs, which can only be opened or issued on or
after 1 October 2008.
Proposal announced: FHSAs were announced in the 2007 Federal
election campaign. On 4 February 2008, the Treasurer and the
Minister for Housing announced that the Government had formally
approved the establishment of FHSAs. A detailed proposal was
released for public consultation on 8 February 2008 in First Home
Saver Accounts - Outline of proposed arrangements. The
Government's final decisions were announced as part of the 2008-09
Budget on 13 May 2008 in Press Release No. 040 issued by the
Treasurer.
Financial impact: The amendments in the FHSA Bill 2008 and
supporting Bills will have a fiscal cost of around $1.2 billion
over five years (including administration costs).
Impact on fiscal balance
|2007-08 |2008-09 |2009-10 |2010-11 |2011-12 |
|-$2.7m |-$156m |-$241m |-$341m |-$438m |
Compliance cost impact: There are likely to be medium
implementation costs for providers who choose to offer FHSA.
However, the design of the initiative as reflected in the law has
sought to minimise compliance costs for account providers.
Chapter 1
Opening and making contributions
Outline of chapter
1. Parts 1 and 2 of the main Bill provide for the general operation of
the First Home Saver Accounts Bill 2008 (FHSA Bill 2008) and key
concepts and definitions. Division 1 of Part 3 outlines the
eligibility rules for opening and issuing First Home Saver Accounts
(FHSAs) and Division 2 of Part 3 outlines the rules for making
contributions into accounts.
2. This chapter outlines the key concepts and definitions that apply
throughout the FHSA Bill 2008 including: the definition of an FHSA;
what it means to provide an FHSA; and what a qualifying interest in
a dwelling is. Other definitions are dealt with in the discussion
of the provisions to which they relate.
3. This chapter also outlines the eligibility and contribution rules
for FHSAs including:
. the rules for opening, issuing or holding an FHSA; and
. the rules relating to contributions into an FHSA including
the account balance cap and limits on when contributions
can be paid into an FHSA.
Context
4. FHSAs are designed to assist aspiring first home buyers achieve the
goal of owning their first home in which to live by providing a tax
effective way to save. The Government provides benefits to first
home buyers using FHSAs through a Government contribution paid
directly into the account and the taxation of earnings on accounts
at a low rate.
5. To achieve the objective of assisting aspiring first home buyers,
it is necessary to ensure that these benefits are only provided to
individuals who are saving for a first home in which to live. This
is achieved by requiring individuals to satisfy certain eligibility
criteria to open or be issued with and hold an FHSA.
. A uniform set of criteria is used to determine an
individual's eligibility to open an FHSA. These criteria
are similar, but not identical, to those used by the
States and Territories to assess eligibility for the First
Home Owner Grant (FHOG).
. Unlike the FHOG, eligibility to open an FHSA is determined
on an individual basis and is not affected by the
eligibility of an individual's partner. This means that
an FHSA can only be held by an individual, not jointly.
The FHOG arrangements will remain in place.
6. In addition, to ensure that the assistance provided to first home
buyers is targeted appropriately, there are limitations on the
amount that can be saved in FHSAs and other restrictions on
contributions that can be made into accounts.
Summary of new law
Eligibility to open an First Home Saver Account
7. Before being able to open an FHSA, an individual must satisfy
certain eligibility criteria. They must be aged 18 and over and
under 65 years and open the account for themselves (where the
individual is incapacitated, their legal personal representative
may open an account for them).
8. As the accounts are to be used to assist individuals to save for
their first home, the applicant must never have previously owned a
dwelling that has been their main residence. This test is based on
the individual and does not take into account whether a current or
former partner has previously owned a home.
9. To help individuals and the Commissioner of Taxation (Commissioner)
track FHSAs, the individual must provide their tax file number
(TFN) to their FHSA provider. This helps to ensure that
individuals only open one account and assists the Commissioner in
paying Government contributions (outlined in Chapter 3).
10. To ensure the integrity of the eligibility requirements, the
Commissioner will undertake compliance work to ensure that
individuals who open an FHSA are eligible and that only one account
is opened by each individual. Penalties may apply to individuals
and/or FHSA providers for breaching the eligibility requirements,
including criminal penalties in certain circumstances.
Contributions to a First Home Saver Account
11. There are no restrictions on who can make a contribution into an
FHSA, however, all contributions must be made from post-tax
amounts.
12. To ensure that the taxation incentives are appropriately targeted,
there is an overall account balance cap of $75,000. This cap is
indexed annually in $5,000 increments.
13. A Government contribution is also paid to an FHSA where personal
contributions are made to an FHSA during the financial year. The
details of the Government contribution are discussed in Chapter 3.
Detailed explanation of new law
Key concepts and definitions
First Home Saver Accounts
14. FHSAs can only be opened or issued after 1 October 2008.
[Subsection 8(b)]
15. An FHSA can only be offered by certain prudentially regulated
financial institutions: authorised deposit taking institutions
(ADIs); life insurance companies (including friendly societies);
and registrable superannuation entity (RSE) licensees which can
provide public offer superannuation funds and are authorised to
offer FHSAs.
. Trustees of other superannuation funds, including
self managed superannuation funds, non public offer funds
and exempt public sector superannuation funds, are not
able to offer FHSAs as they are not subject to the same
level of prudential regulation as trustees of public offer
superannuation funds.
. In addition, managed investment schemes and other
investment vehicles that are not prudentially regulated
are not able to offer FHSAs. Chapter 4 outlines in
further detail the requirements for offering FHSAs and
Chapter 5 outlines the prudential requirements applying to
FHSA providers.
16. As FHSAs can be offered by three different types of institutions,
the legal nature of an FHSA will differ depending on the type of
institution offering it. An FHSA offered by an ADI will be a
deposit account, those offered by a life insurance company will be
a policy, and those offered by RSE licensees will be beneficial
interests in a trust. This affects the definitions of an FHSA and
the meaning of 'hold' and 'FHSA holder' and the definition of
'provide' and 'FHSA provider'.
Authorised deposit-taking institutions
17. An ADI is a body corporate that is an ADI under the Banking Act
1959. This includes banks, building societies and credit unions.
[Section 18]
18. An account is an FHSA if contributions are received by an ADI to an
account described as an FHSA. [Subparagraph 8(c)(i)]
19. If provided by an ADI, an individual holds an FHSA if the account
is opened in their name. The individual is therefore the
FHSA holder. [Paragraph 9(1)(a) and subsection 9(2)]
20. If an ADI accepts or has accepted contributions to an FHSA it
provides the FHSA. The ADI is therefore the FHSA provider.
[Paragraph 10(1)(a) and subsection 10(2)]
Life insurance companies
21. A life insurance company is a company registered under the Life
Insurance Act 1995. This includes friendly societies. [Section
18]
22. A life policy is an FHSA if the FHSA policy is issued by a life
insurance company and it is described as an FHSA [subparagraph
8(c)(ii)].
. The terms 'policy' and 'life policy' are defined in the
Life Insurance Act 1995 [section 18].
23. If issued by a life insurance company, an individual holds an FHSA
if the individual owns the FHSA policy. The individual is the FHSA
holder [paragraph 9(1)(b) and subsection 9(2)].
. The term 'owner' is described in the Life Insurance Act
1995 [section 18].
24. If a life insurance company provides an FHSA policy it provides an
FHSA. The life insurance company is therefore the FHSA provider.
[Paragraph 10(1)(b) and subsection 10(2)]
Authorised trustees
25. A beneficial interest in a trust is an FHSA if it is provided by a
trustee authorised as an FHSA provider and the interest is
described as an FHSA [subparagraph 8(c)(iii)].
. A trustee may apply to receive authorisation as an FHSA
provider under section 92 [section 18].
26. If provided by a trustee, an individual holds an FHSA if the
individual holds the beneficial interest in the FHSA trust. The
individual is therefore the FHSA holder. [Paragraph 9(1)(c) and
subsection 9(2)]
27. If a trustee provides a beneficial interest in an FHSA trust it
provides an FHSA. The trustee is therefore the FHSA provider.
[Paragraph 10(1)(c) and subsection 10(2)]
28. The trust which is provided by a trustee authorised as an FHSA
provider is defined as an FHSA trust. [Section 18]
First Home Saver Account contributions
29. A contribution is defined as a contribution of money. It includes
a deposit into an account held at an ADI and a payment of a premium
to a life insurance company. [Section 18]
30. There are no restrictions on who can make a contribution into an
FHSA; however, all contributions must be made from post-tax
amounts.
. As with other payroll deductions, an employer is still
able to remit post-tax contributions on behalf of an
employee to an FHSA.
31. To assist the Commissioner administer the accounts, FHSA
contributions are grouped into two categories:
. Government contributions; and
. personal FHSA contributions.
Government contributions
32. The Commissioner pays a Government contribution to an FHSA where
personal FHSA contributions are made to an individual's FHSA during
the financial year and the individual is an Australian resident for
taxation purposes for at least part of that year. This Government
contribution is applied to the first $5,000 (indexed) of personal
FHSA contributions made in the year.
33. Accordingly, a Government contribution (Government contribution)
for an individual is a contribution or amount paid by the
Commissioner for that individual under the FHSA Bill 2008
[subsection 11(1)].
. Chapter 3 outlines when a Government contribution is
payable.
Personal First Home Saver Account contributions
34. The FHSA Bill 2008 also defines what contributions are taken into
account when the Commissioner calculates an individual's Government
contribution.
35. To ensure that the Government contribution is only paid on
contributions to the FHSA system, a personal FHSA contribution does
not include:
. a Government contribution [subsection 11(2)];
. a contribution of an FHSA balance as a transfer from a
previous FHSA for the individual under section 35
[paragraph 11(3)(a)];
. a contribution under a family law obligation
[paragraph 11(3)(b)]:
- family law obligation means a court order under the
Family Law Act 1975 or a financial agreement made under
Part VIIIA of the Family Law Act 1975 that is binding
because of section 90G of that Act [section 18 ];
. a re-contribution of an amount previously paid from an
FHSA to satisfy the FHSA payment conditions under
subsection 17(3) [paragraph 11(3)(c)]; and
. a contribution refunded to the individual under the
Corporations Act on the grounds of [paragraph 11(3)(d)]:
- an unsolicited offer, under subsection 992A(4)
[paragraph 11(3)(d)];
- a defective product disclosure document, under
section 1016F [paragraph 11(3)(d)]; or
- exercise of the cooling-off period, under section 1019B
[paragraph 11(3)(d)].
36. A personal FHSA contribution includes a contribution which is made
for the benefit of the individual. For example, a contribution
made by an individual's partner or employer into their FHSA.
Qualifying interest in a dwelling
37. The concept of qualifying interest in a dwelling is directed at
ensuring that FHSAs are used to assist aspiring first home buyers
to purchase a first home in which to live. To achieve this, the
term is used for two purposes in the Bill.
. It forms part of the eligibility requirements to open an
FHSA, as an individual must not hold and have never held a
qualifying interest in a dwelling that is or was the
individual's main residence [paragraph 15(1)(c)].
. It forms part of the payment conditions enabling the use
of money from an FHSA to acquire a qualifying interest in
a dwelling that will become the individual's main
residence [paragraph 32(1)(b) and subsection 17(1)]. This
is outlined in further detail in Chapter 2.
38. If an individual is the legal owner of the dwelling, they hold a
qualifying interest in the dwelling. An individual will hold a
qualifying interest in the dwelling if they hold the interest alone
or with others, for example, under a joint tenancy. [Subsection
12(1)]
Legal Owner
39. An individual holds an interest if they are the legal owner; that
is, if their name is recorded on the title register as the owner of
the property. This is commonly referred to as freehold ownership.
40. Persons can also hold such an interest if they:
. have an estate in fee simple;
. have a perpetual lease of the land granted by the
Commonwealth or the State;
. have a lease or licence granted by the Commonwealth, a
State or Territory that may be converted into an estate in
fee simple under the terms of the lease or licence;
. have title to a dwelling under a long-term Crown lease,
such as in the Australian Capital Territory;
. are the registered proprietor of a flat or home unit that
is part of a strata plan; or
. have a legal life estate in the land (rather than a mere
equitable life estate in the land);
41. A person is considered to be the owner even if a financial
institution or someone else holds a mortgage over the property.
42. A qualifying interest in a dwelling includes, but is not limited to
where the individual has a Crown lease, or a licence granted by the
Commonwealth, a State or Territory, over the land which the
dwelling is on and that lease or licence gives the individual
reasonable security of tenure [subsection 12(2)].
. The term Crown lease is defined in section 124-580 of the
Income Tax Assessment Act 1997 (ITAA 1997) as a lease of
land granted by the Crown under an Australian law (other
than the common law) or a similar lease granted under a
foreign law.
43. A qualifying interest in a dwelling also includes, but is not
limited to where a person:
. holds an equity of redemption in respect of the dwelling;
. is the legal owner of a share in a company that owns land
on which a flat or home unit is erected and that share
gives them a right to occupy the flat or home unit; or
. holds a right to occupy a dwelling in an aged care
facility or retirement village.
[Subsection 12(3)]
44. The regulations may also specify circumstances where an individual
holds a qualifying interest in a dwelling. [Subsection 12(4)]
45. An individual first holds a qualifying interest in a dwelling when
they acquire the dwelling. This is relevant to deciding whether
the FHSA eligibility requirements in paragraph 15(1)(c) are
satisfied. [Subsection 12(6)]
Fixed to land
46. If the dwelling is not fixed to land (or in circumstances specified
in the proposed regulations) an individual is not considered to
hold a qualifying interest in a dwelling. [Subsection 12(5)]
47. A boat, caravan or mobile home, is not a qualifying interest in a
dwelling unless it is fixed to land which the individual owns.
. The phase 'fixed to land' adopts the property law concept
of fixtures.
. If a dwelling is or was a moveable dwelling but has become
so attached to the land that it forms a part of the land,
it will be a fixture, and therefore legal ownership of the
land may constitute the holding of a qualifying interest
in a dwelling. If, however, the moveable dwelling is not
so attached, ownership of it will not be treated as a
qualifying interest in a dwelling.
1.
Bailey is constructing a dwelling. He will acquire a
qualifying interest in the dwelling when he starts to hold
the qualifying interest in the dwelling; that is, when
construction of the dwelling has been completed.
Dwelling
48. Dwelling has its ordinary meaning. This includes a unit of
accommodation that is fixed to the land such as:
. a house, flat, unit, apartment or townhouse; or
. a demountable dwelling or re-locatable home where it is
fixed to land.
Main Residence
49. Under the eligibility criteria in section 15 and the FHSA payment
conditions in section 17, the dwelling being acquired must become
the main residence of the FHSA holder. A payment can only satisfy
these conditions if an amount equal to the payment is used to
acquire a dwelling that becomes the account holder's main residence
for the requisite minimum period of time.
50. An individual's main residence has its ordinary meaning. Factors
which may be relevant include:
. whether the individual and/or their family is living in
the dwelling;
. whether they keep personal belongings at the dwelling;
. whether mail is delivered to the dwelling; and
. whether the dwelling address is on the electoral roll
against the name of the individual.
[Subsection 13(1)]
51. The regulations may also specify whether a dwelling is or is not an
individual's main residence for the purposes of the FHSA Bill 2008.
[Subsections 13(2) and (3)]
1.
Rod lives in a rented house and also rents an apartment
where he stays for short holidays. The house is where Rod
spends most of his time. It is also his mailing address and
his address on the electoral roll. The apartment is not
Rod's main residence - even for the short periods he stays
there.
Rod wishes to purchase the apartment but still live mainly
in his rental home. Rod cannot use his FHSA balance to make
a payment to purchase a holiday home as it will not be his
main residence.
Eligibility rules
First Home Saver Account eligibility requirements
52. To ensure FHSAs are used to save towards the purchase of a first
home, to be eligible to open, be issued with, or hold an FHSA, an
individual must satisfy certain FHSA eligibility requirements.
Personal requirements
53. As FHSAs are intended for adults saving for a first home, the
individual must be aged at least 18 years [paragraphs 15(1)(a) and
(b)].
. The individual must apply to open or be issued with an
FHSA personally. For example, an employer is not able to
open an FHSA on behalf of an employee or a trustee is not
able to open an FHSA for a beneficiary unless the
beneficiary is incapacitated.
. Where an individual is incapacitated, their 'legal
personal representative' as defined in the ITAA 1997 may
open an account for them.
54. The individual must not open or be issued with an FHSA prior to
reaching 18 years of age. If an FHSA provider inadvertently opens
or issues them with an FHSA, they will not become eligible to open,
be issued with, or hold an FHSA when they reach 18 years of age.
[Paragraphs 15(1)(a) and (b)]
55. FHSA funds not used to purchase a first home must be transferred to
superannuation. As an individual who is 65 years of age must
satisfy a work test to make a contribution to superannuation, an
individual must be under 65 years of age to open an account.
[Paragraph 15(1)(b)]
56. Payments can only be made from an FHSA to purchase a first home if
personal contributions of at least $1,000 have been made in respect
of the FHSA holder in each of at least four financial years
[subparagraph 32(1)(c)(i)].
. This will have implications for individuals who open or
are issued with an FHSA close to 65 years of age as they
will need to satisfy this requirement in order to receive
a payment to acquire a qualifying interest in a home. If
they cannot satisfy this requirement, they will be
required to contribute their savings to superannuation
[paragraphs 15(1)(b) and (c)].
57. An individual must not hold and have never held a qualifying
interest in a dwelling that is or was the individual's main
residence. [Paragraph 15(1)(c)]
First Home Saver Account requirements
58. To ensure that individuals can generally only access the benefits
offered by FHSAs once and cannot access multiple Government
contributions or avoid the account balance cap, the individual must
have only held one FHSA at a time or temporarily held two FHSAs at
the same time to allow them to transfer an FHSA balance to a new
FHSA [paragraphs 15(1)(a) and (e)].
. This transfer is provided for under section 35 of the
FHSA Bill 2008.
59. The individual must have never held an FHSA that was closed unless
it was closed as:
. an FHSA home acquisition payment was made from the FHSA
and that payment met the FHSA payment conditions under
subsection 17(3), as it is being re-contributed to an
FHSA:
- FHSA home acquisition payments are made under section 32
of the FHSA Bill 2008;
. an initial FHSA contribution to an FHSA was refunded to
the individual under the Corporations Act on the grounds
of:
- an unsolicited offer, under subsection 992A(4);
- a defective product disclosure document, under
section 1016F; or
- the exercise of the cooling-off period, under
section 1019B.
[Paragraph 15(1)(f) and subsection 15(2)]
60. Individuals do not have any specific obligations under the
FHSA Bill 2008 to enable them to open an FHSA.
. However if they do not provide an FHSA provider with all
of the information it requires, they are not able to open,
be issued with, or hold an FHSA.
. If individuals make false statements about their
eligibility to open, be issued with, or hold an FHSA, or
deliberately open more than one FHSA, penalties apply.
These penalties are necessary to ensure the integrity of
the FHSA system and to ensure that the taxation incentives
provided through FHSAs are targeted appropriately.
61. When an individual makes a statement to an FHSA provider, they are
taken to have made a statement to a taxation officer under
subsection 8J(9) of the Taxation Administration Act 1953 (TAA
1953).
62. If an individual makes a false or misleading statement in the FHSA
application, they commit an offence under section 8K of the
TAA 1953 (for making a false or misleading statement) or section 8N
of the TAA 1953 (for recklessly making a false or misleading
statement).
Obligations of the First Home Saver Account provider in opening or issuing
a First Home Saver Account
63. FHSA providers have an obligation to ensure that an individual
applying to open, be issued with, or hold an FHSA provides the
required information to satisfy the eligibility criteria. These
requirements are in addition to any requirements stipulated under
other laws, such as the Anti-Money Laundering and Counter-Terrorism
Financing Act 2006.
64. To open or issue an FHSA, an FHSA provider must ensure that an
individual has completed an application in the approved form which
states that they satisfy all of the FHSA eligibility requirements
[paragraph 19(1)(a) and subparagraph 19(1)(b)(i)].
. Approved forms are discussed in further detail in Chapter
8.
. This includes, but is not limited to, an approved form
issued by the Commissioner under section 388-50 in
Schedule 1 to the TAA 1953 [section 55].
. The FHSA provider is only able to open or issue an FHSA
where the FHSA is for a single individual. That is, joint
FHSAs are not permitted as two people cannot hold, own or
have a beneficial interest in the same FHSA.
65. To ensure that only one account is opened per individual:
. if the individual already has an FHSA, the application
must state that the individual will transfer the old FHSA
balance to the new FHSA for the individual. This is under
section 35 of the FHSA Bill 2008; or
. if the individual previously held an FHSA which was
closed, the application must state that the individual is
opening the new FHSA to receive a re-contribution of an
amount previously paid from an FHSA to satisfy the FHSA
payment conditions under subsection 17(3).
- The individual must still meet the FHSA eligibility
requirements to re-contribute the payment. That is, not
have acquired a qualifying interest in a dwelling which
is their main residence.
- Their previous FHSA contributions were refunded to the
individual under the Corporations Act on the grounds of:
an unsolicited offer under subsection 992A(4); a
defective product disclosure document under section
1016F; or the exercise of a cooling-off period under
section 1019B.
[Subparagraphs 19(1)(b)(ii) and (iii)]
1.
Annika received a payment from her FHSA in June 2015 which
she used to place a deposit on a home. Her FHSA was closed.
In July 2015, Annika was notified by the home owners that
they no longer wished to sell the property and the deposit
was refunded to her.
Annika wishes to continue to save for a home and would like
to re-contribute the refunded deposit to an FHSA. As her
original FHSA is closed, Annika will be able to open a new
FHSA within six months to continue saving.
66. In addition, to ensure that only one account is opened for each
individual, an FHSA provider must also check the individual has
quoted their TFN in connection with the operation of the FHSA Bill
2008 and the Superannuation Acts [paragraph 19(1)(c)].
. The TFN quotation arrangements are outlined in Part 5 of
the FHSA Bill 2008 and regulate the quotation use and
storage of an individual's TFN. This is outlined in
Chapter 8.
67. An FHSA provider commits an offence if they open or issue an FHSA
where the individual has not completed an application in the
approved form (which states they are eligible) and quoted their
TFN. The penalty is up to 100 penalty units. [Subsection 19(2)]
68. If an FHSA provider fails to comply with these obligations, the
FHSA created is still valid. [Subsection 19(3)]
Ceasing to be eligible to hold an First Home Saver Account
69. It is important to ensure that, once opened or issued, an FHSA is
only held by an individual who is saving to purchase a first home.
An individual ceases to be eligible to have an FHSA if they acquire
a qualifying interest in a dwelling that is their main residence or
once they turn 65 years of age.
70. If an FHSA holder fails to meet the FHSA eligibility requirements,
they must notify the FHSA provider in the approved form within
30 days. [Subsections 20(1) and (2)]
Implications of becoming ineligible for an account
71. Once an individual becomes ineligible to hold an FHSA, the account
must be closed and generally the balance must be transferred to
superannuation. However, where the individual is 60 years or over,
the individual may elect to receive a payment from the FHSA
directly. This is a permitted purpose for a payment out of an FHSA
and is discussed in further detail in Chapter 2.
72. As a result, when notifying the FHSA provider, an FHSA holder must
either:
. state they are 60 years or over and would like to receive
a payment from the FHSA directly; or
. authorise the FHSA provider to contribute the savings in
the FHSA to their interest in a complying superannuation
plan:
- a 'complying superannuation plan' is defined in the
ITAA 1997 [section 18].
[Subsection 20(4)]
73. If an FHSA holder fails to comply with these requirements, there
may be consequences under the TAA 1953.
. The FHSA holder is liable for an administrative penalty
under section 286-75 of Schedule 1 to the TAA 1953.
. The FHSA holder may also commit an offence for failure to
comply with requirements set out under a taxation law
under section 8C of the TAA 1953.
[Subsection 20(1), Note]
Exceptions to the requirements
74. An individual is not required to notify the FHSA provider if they
close their FHSA within 30 days of becoming ineligible or if the
funds in the account are paid out under section 32 within 30 days
to acquire a qualifying interest in a home. [Subsection 20(3)]
1.
Judy acquires a qualifying interest in a dwelling on 15
August 2010 by using a deposit bond and loan from MT Bank
Ltd. She moves into the dwelling on 17 August 2010 and it
becomes her main residence. From that date she becomes
ineligible to hold the account.
On 25 August 2010, Judy applies to her FHSA provider, the WT
Life Insurance Company (WT Life), for a payment for the
purpose of repaying the deposit bond. As this is within 30
days of becoming ineligible, she is not required to notify
WT Life.
Revoking a notice
75. If an FHSA holder subsequently realises that they do satisfy the
account criteria they may revoke the notice.
76. However, the notice cannot be revoked if:
. it has been more than 30 days since the original notice
was provided; or
. the FHSA has been closed by the FHSA provider under
paragraph 22(2)(b).
- If the FHSA provider has already made a direct payment
to the FHSA holder or contributed the FHSA to
superannuation but the FHSA is still open, the notice
can also not be revoked as it would be administratively
difficult to unwind the transaction.
[Subsection 20(5]
1.
On 15 February 2011, Aidan inherits a home from his great
grandmother's estate. On 20 February 2011, he notifies his
FHSA provider, RDR Bank Limited that he no longer satisfies
the eligibility criteria. On 27 March 2011, RDR Bank
Limited contributes the savings in his FHSA to his
superannuation fund (the JR Superannuation Fund) and closes
his account.
On 30 March 2011, Aidan realises that, as he has not and
never intends to live in the home, he still satisfies the
account criteria and notifies RDR Bank Limited that he
revokes the notice. Although Aidan has revoked the notice,
as the savings have already been contributed to the JR
Superannuation Fund, the revocation has no effect.
The Commissioner believes that the eligibility criteria have not been met
77. As part of compliance activities, the Commissioner conducts checks
to ensure that individuals are eligible to hold an FHSA.
78. If the Commissioner believes that an FHSA holder did not satisfy
the eligibility criteria when the FHSA was opened or issued or that
the FHSA holder no longer satisfies the eligibility criteria, the
Commissioner is required to notify the FHSA provider.
[Subsection 21(1)]
79. The notice must explain that the FHSA provider must:
. contribute the savings in the FHSA to superannuation and
close the FHSA under section 22;
. not pay contributions to the FHSA under section 26; and
. not pay amounts from the FHSA under sections 31, 32 and
35.
[Subsection 21(3)]
80. The Commissioner must also give the FHSA holder a copy of this
notice. This allows the FHSA holder an opportunity to respond to
the notice if they believe they meet the eligibility criteria.
[Subsection 21(2)]
81. The conditions for opening an FHSA require an individual to quote
their TFN. If an FHSA holder has quoted an invalid TFN, the
Commissioner may give a notice under section 67 that the
Commissioner is not satisfied the individual has a TFN. This
notice must also explain the effects of sections 22, 26, 32 and 35.
[Paragraph 113-B(1)(a), Note]
82. If the Commissioner subsequently believes that an FHSA holder did
satisfy the conditions for opening an FHSA when the FHSA was opened
or issued and continues to satisfy the eligibility criteria, the
Commissioner must revoke the notice unless:
. it has been more than 30 days since the original notice
was provided; or
. the FHSA has been closed by the FHSA provider under
paragraph 22(2)(b).
[Subsection 21(4)]
83. If the Commissioner revokes the notice, the Commissioner must also
notify the FHSA holder so that they are aware that the Commissioner
no longer believes they do not satisfy the eligibility criteria.
[Subsection 21(5)]
Inactive First Home Saver Accounts
84. To ensure that FHSAs are held only by individuals who are eligible
to hold an FHSA, an FHSA may become inactive if certain events
occur.
85. An FHSA becomes inactive if an FHSA provider has received a notice
(which has not been revoked):
. from the FHSA holder, under subsection 20(1), that they do
not meet the eligibility criteria;
. from the Commissioner, under subsection 21(1), that the
FHSA holder did not satisfy the eligibility criteria when
the FHSA was opened or issued or holds (or previously
held) a qualifying interest in a dwelling which is their
main residence; or
. from the Commissioner, under subsection 67(2), that the
TFN quoted by the FHSA holder is invalid and the
Commissioner is not satisfied they have a TFN.
[Subsection 23(1)]
86. An FHSA also becomes inactive if:
. the FHSA holder makes a home acquisition payment under
section 32, or a payment directly to the FHSA holder under
section 33, and the FHSA balance is nil;
. the FHSA holder turns 65 years of age; or
. the FHSA was opened or issued under
subparagraph 19(1)(b)(ii) as the FHSA holder was
transferring FHSA savings from another FHSA, and the
transferred savings were not received within 44 days of
opening or issuing the new FHSA.
[Subsections 23(2) to (4)]
Closing an inactive First Home Saver Account
Closing a First Home Saver Account
87. Where an FHSA has become inactive, the FHSA provider must either:
. make a payment to the FHSA holder directly (if the FHSA
holder is 60 years or over and has authorised the
payment); or
. otherwise contribute the FHSA balance to superannuation;
and
. close the FHSA.
[Subsection 22(2)]
88. If the FHSA provider contributes the FHSA to superannuation, the
FHSA provider must make the contribution:
. to the FHSA holder's nominated own interest in a complying
superannuation plan; or
. if no nominated fund exists, to the FHSA provider's
default superannuation plan.
[Subsection 22(3)]
89. The timeframe within which the FHSA must be closed differs
depending on the reason for the account being inactive.
90. If an FHSA is inactive because the FHSA provider has received a
notice that the FHSA has become inactive under subsection 23(1) the
FHSA provider must allow 30 days for the notice to be revoked. If
the notice is not revoked, the provider must close an individual's
FHSA 14 days after the end of the 30-day waiting period.
[Paragraph 22(1)(a)]
1.
An FHSA provider receives a notice on 1 November 2010 that
the FHSA holder does not meet the account criteria under
subsection 21(1). The FHSA provider must not pay
contributions or make payments until 30 November 2010 to
give the Commissioner an opportunity to revoke the notice.
The FHSA provider then has until 15 December 2010 (14 days
after the end of the waiting period) to make a payment (if
the FHSA holder is over 60 and authorises the payment) or
contribute the FHSA to superannuation and close the account.
This allows the FHSA provider a total of 44 days from 1
November 2010 to satisfy its obligations.
91. In all other circumstances an FHSA provider must close an inactive
FHSA 14 days after:
. a payment being made under subsection 23(2);
. the FHSA holder reaching 65 years of age under
subsection 23(3); or
. a transfer not being received 44 days after the FHSA was
opened or issued under subsection 23(4).
[Paragraph 22(1)(b)]
92. An FHSA provider commits an offence if the FHSA provider fails to
close the FHSA in accordance with its obligations. The penalty is
up to 100 penalty units. [Subsection 22(4)]
93. If an FHSA provider fails to close the FHSA in accordance with its
obligations, any contribution paid or payment made is still valid.
[Subsection 22(5)]
Default superannuation plan
94. As an FHSA provider may be required to contribute the balance of an
FHSA to superannuation to enable it to close an FHSA, it must
specify a default superannuation plan in which to make the payment
if the FHSA holder has not nominated a plan.
95. All FHSA providers are required to nominate in writing a default
superannuation plan. This is a complying superannuation plan to
which it will make payments under paragraph 22(3)(b) [subsection
24(1)].
. It is intended that the FHSA provider will be required to
disclose this default superannuation plan to the FHSA
holder when an FHSA is opened or issued.
96. If the FHSA needs to change its default superannuation plan as the
plan ceases to be a complying superannuation plan, the FHSA
provider must nominate another default superannuation plan in
writing [subsection 24(1)].
. It is intended that the FHSA provider will be required to
disclose this new default superannuation plan to the FHSA
holder when this occurs.
. The FHSA provider may also change its default
superannuation plan at other times by making a written
nomination stating the new default superannuation plan.
It is also intended that the FHSA provider notify the FHSA
holder when this occurs.
97. An FHSA provider commits an offence if it fails to comply with its
obligations to nominate a default superannuation plan. The penalty
is up to 100 penalty units. [Subsection 24(2)]
Contributions
98. To ensure that the assistance provided to first home buyers is
targeted appropriately, there are limitations on the amount that
can be saved in an FHSA and other restrictions on contributions
that can be made to an FHSA.
99. Generally, an FHSA provider must not allow an amount to be
contributed to an FHSA where the account holder is aged 65 or over,
the FHSA is inactive or the account balance cap has been or will be
breached.
An account holder aged 65 or over
100. An FHSA holder is not eligible to hold an FHSA once they turn
65 years of age, and under section 22 an FHSA provider is required
to close an FHSA within 14 days of the FHSA holder turning age 65.
101. If an FHSA holder is aged 65 years or over and the FHSA is still
open, the FHSA provider must not allow any contributions, personal
or Government, to be paid to the FHSA [subsection 25(1)].
. If an FHSA holder is eligible to receive a Government
contribution it may be paid by the Commissioner directly
to the FHSA holder [section 41].
Inactive First Home Saver Account
102. An FHSA provider must not pay any contributions to an inactive
FHSA. [Subsection 26(1)]
Breach of the account balance cap
103. In order to ensure that the FHSA taxation incentives are targeted
appropriately, there is an overall account balance cap on all
FHSAs.
Account balance cap
104. In the 2008-09 financial year the account balance cap is $75,000.
This cap will be indexed in $5,000 increments under section 30
[section 29].
. The financial year means the financial year as defined in
the ITAA 1997 [section 18].
Breach of account balance cap - limit on contributions
105. An FHSA provider can only allow a limited range of contributions to
be made to an FHSA if the FHSA balance is over the account balance
cap or the contribution would cause the FHSA balance to exceed the
account balance cap. Other amounts contributed to an FHSA are not
allowed in these circumstances. [Subsection 27(1)]
106. In these circumstances, an FHSA provider may only allow the
following contributions to be paid to the FHSA:
. a Government contribution defined under subsection 11(1);
. a contribution of an FHSA balance transferred to a new
FHSA for the individual FHSAs under paragraph 11(3)(a); or
. a re-contribution of an amount under paragraph 11(3)(c) as
it was an amount previously paid from an FHSA to satisfy
the FHSA payment conditions subsection 17(3).
[Paragraph 27(1)(b)]
1.
Megan's account balance is $70,000. On 1 May 2010, Megan
makes a contribution of $5,000 to her FHSA. If the account
balance cap is $75,000, the contribution does not exceeded
the account balance cap.
Megan is entitled to a Government contribution of $780 on
her $5,000 contribution. Her FHSA provider will be able to
pay the Government contribution to her FHSA as, although it
will cause her FHSA balance to exceed $75,000, the payment
of a Government contribution does not cause her to exceed
the account balance cap.
Breach of the account balance cap - return of contributions
107. If an FHSA provider receives a contribution which would cause the
FHSA balance to exceed the account balance cap, it is not necessary
for the whole amount of the contribution to be rejected or
returned. The amount in excess of the account balance cap may be
rejected or returned. [Paragraph 27(1)(b), Note]
1.
Michael has an account balance of $73,000. On 1 November
2010 he makes a $3,000 personal FHSA contribution to his
FHSA. If the account balance cap is $75,000 and the entire
contribution is paid to his FHSA, it will exceed the account
balance cap.
The account balance cap is only exceeded if the FHSA balance
exceeds $75,000. The FHSA provider is not able to pay the
entire contribution to his account; however, to ensure
Michael's FHSA does not exceed the account balance cap it
may either:
. return the entire $3,000 to him so that his account balance
remains at $73,000; or
. return $1,000 to him (the amount which exceeds the account
balance cap) so that his account balance does not exceed the
account balance cap of $75,000.
Breach of the account balance cap - timing
108. If the account balance of an FHSA exceeds the account balance cap,
an FHSA holder is in breach of the account balance cap from that
time onwards [subsection 28(1)].
. If the account balance of an FHSA subsequently falls below
the account balance cap, an FHSA holder will have still
breached the cap from the time it was originally breached.
1.
On 28 April 2009, Steven makes a contribution to his FHSA
and his balance reaches $75,000. On 15 August 2009,
Steven's FHSA provider pays earnings of $1,000 to his FHSA
and his account balance is $76,000. If the account balance
cap is $75,000, Steven's FHSA will have breached the account
balance cap on 15 August 2009.
On 1 November 2009, Steven's FHSA suffers an investment loss
of $1,500 and his account balance falls to $74,500. As
Steven breached the cap on 15 August 2009, Steven's FHSA
provider is still only able to pay a limited range of
contributions to his FHSA, despite the fact his actual
account balance is below the current account balance cap.
Breach of the account balance cap - re-contribution
109. If an individual is making a re-contribution of an amount
previously paid from an FHSA to satisfy the FHSA payment conditions
under subsection 17(3), they will not have breached the account
balance cap even if the re-contributed amount is above the current
account balance cap.
. If the re-contributed amount is above the current account
balance cap, an FHSA provider is only able to pay limited
contributions to the FHSA as the FHSA exceeds the current
account balance cap.
. If the re-contributed amount is not above the current
account balance cap, an FHSA will have not breached the
account balance cap from the time the new FHSA is opened,
until the time when the new FHSA balance exceeds the new
account balance cap.
. If the account balance cap has increased since the FHSA
holder received a payment from the original FHSA, they
will not have breached the cap in the new FHSA until the
account balance in the new account breaches the cap.
[Subsections 28(2) and (3)]
1.
In June 2009, the balance of Elise's FHSA is $75,000. In
July 2009, her account is credited with $500 of earnings.
If the account balance cap is $75,000, the FHSA provider
will only be able to pay a limited range of contributions to
her FHSA.
In December 2009, Elise withdraws the balance of her FHSA,
now $75,500, to purchase a home. The sale of the home falls
through in July 2010.
In July 2010, Elise applies to her FHSA provider to open a
new FHSA as she failed to purchase a home and would like to
continue saving. Assuming the account balance cap has
increased to $80,000, Elise is able to contribute the full
$75,500. She will not have breached the account balance cap
until her account balance exceeds $80,000.
Breach of account balance cap - family law obligations
110. If a payment is made from an FHSA under a family law obligation
under paragraph 31(1)(c) and, after this payment is made the FHSA
balance is less than the account balance cap in that year, the FHSA
holder will have not breached the account balance cap from the time
the payment is made, until such time as the FHSA balance exceeds
the account balance cap. [Subsections 28(4) and (5)]
Indexation of account balance cap
111. To ensure that the account balance cap is aligned with an
individual's ability to save, the account balance cap is indexed
annually to full-time average weekly ordinary time earnings.
112. The account balance cap is indexed annually, by multiplying the
account balance cap for the 2008-09 financial year by its
indexation factor. The result is rounded down to the nearest
$5,000, to ensure that the cap remains in round figures [subsection
30(1)].
. The indexation factor is the proportional change in full-
time adult average weekly ordinary time earnings from the
middle month of the December quarter 2007 to the middle
month of the December quarter just before the relevant
financial year. The indexation factor is calculated to
four decimal places and rounded to three decimal places
[subsections 30(3) and (4)].
113. The amount cannot be reduced by indexation; that is, it is not
indexed if the indexation factor is less than one. [Subsection
30(2)]
1.
If the indexation calculation increases the threshold to
$80,500, the indexed amount is rounded down to $80,000.
Penalties
114. An FHSA provider must only pay limited contributions to an FHSA
where:
. the holder is 65 years or over;
. the FHSA is inactive; or
. the account balance cap has been breached.
[Sections 25 to 27]
115. If the FHSA provider allows another type of contribution to an
FHSA, but returns the contribution within 30 days of receipt, the
provider will not contravene these requirements. [Subsections
25(2), 26(2) and 27(2)]
116. An FHSA provider commits an offence if it allows an amount to be
contributed to an FHSA in these circumstances. The penalty is up
to 100 penalty units. [Subsections 25(3), 26(3) and 27(3)]
117. If an FHSA provider fails to comply with its obligations to not
allow a contribution in these circumstances, the contribution is
still valid. [Subsections 25(4), 26(4) and 27(4)]
Chapter 2
Payments from a First Home Saver Account
Outline of chapter
118. Division 3 of Part 3 of the main Bill provides for the
circumstances in which money may be paid from a First Home Saver
Account (FHSA).
119. This chapter outlines those circumstances and the processes that
must be followed by FHSA providers and holders in relation to
payments.
120. In this chapter, payment refers to any money leaving the FHSA,
withdrawal refers to money being paid from an FHSA to the
individual, transfer refers to movement between two FHSAs (similar
to portability in superannuation) and contributions to
superannuation refers to money being contributed from an FHSA to
superannuation.
Summary of new law
121. As FHSAs are intended to encourage saving for a first home, the
circumstances in which FHSAs can be accessed will be limited to
ensure the tax concessions and Government contributions provided to
these accounts are used for the intended purpose.
122. The main ways money can be paid from an FHSA are:
. for the purchase of a first home in Australia (see
paragraphs 2.23 to 2.40);
. by being contributed to superannuation (see paragraphs
2.44 to 2.50);
. by being transferred to another FHSA (see paragraphs 2.51
to 2.56); and
. when the individual reaches age 60 (see paragraphs 2.41 to
2.43).
123. There are a number of other situations in which money can be paid
from an FHSA. These include:
. where the account holder dies;
. under a family law obligation;
. for a payment of fees to the account provider;
. for a payment in respect of overpayments of Government
contributions;
. for the return of contributions which should not have been
accepted by the provider; and
. under certain consumer protection provisions in the
Corporations Act 2001 (Corporations Act).
124. The payment rules in the main Bill do not override the Bankruptcy
Act 1966. This means account providers are not prevented from
paying the trustee in bankruptcy an amount from an individual's
FHSA.
Purchase of a first home
125. In order to withdraw money from their FHSA, an individual under age
60 must request a payment and declare the payment will meet the
payment conditions outlined in subsection 17(1). That is, the
money will be used in acquiring a qualifying interest in a
dwelling, and that that dwelling will become the individual's main
residence.
126. In addition, personal contributions of at least $1,000 must have
been made in respect of the FHSA holder in each of at least four
financial years. However, if an account cannot receive further
contributions under section 27 because it has breached the account
balance cap, the requirement is that the account holder has had an
account open in at least four financial years.
127. If the individual is acquiring a qualifying interest together with
another individual, or group of individuals, the four-year rule
only needs to be met by one of the people acquiring an interest.
Transfer to another First Home Saver Account
128. Individuals are permitted to move between account providers.
129. To transfer from their existing FHSA provider to another, an
individual will need to make an application to either their current
provider, or their new provider.
130. Account providers will be required to act on this transfer request
within 30 days.
Contributing to superannuation
131. Individuals can contribute the balance of their FHSA to
superannuation at any time. This recognises that an individual's
circumstances may change, and that they may no longer wish to save
for a first home.
132. To contribute their FHSA to superannuation, an individual will need
to make an application to their FHSA provider. Account providers
will be required to act on a request to contribute to
superannuation within 30 days.
133. In addition, where an individual is no longer eligible to have an
account, the account must be closed and the balance contributed to
superannuation.
Detailed explanation of new law
General rules on making payments from First Home Saver Accounts
134. FHSA providers can make payments from an FHSA only:
. for the account holder acquiring a qualifying interest in
a first home in Australia (under section 32);
. after the account holder has reached age 60 (under
section 33);
. upon the death of the account holder;
. as a contribution to superannuation (under subsection
22(2) and section 34);
. as a transfer to another FHSA (under section 35);
. to return contributions which should not have been
accepted (subsections 25(2), 26(2) and 27(2));
. to fulfil an obligation under certain consumer protection
provisions in the Corporations Act;
. under a family law obligation;
. to collect fees; and
. to pay an amount owing to the Commonwealth in respect of
overpayments of the Government contribution.
[Section 31]
135. However, as the payment rules in the main Bill do not override the
Bankruptcy Act 1966, account providers are not prevented from
paying the trustee in bankruptcy an amount from an individual's
FHSA. [Section 128]
136. An FHSA provider who makes payments from an FHSA in other
circumstances commits an offence (see paragraph 2.64 for more
detail) and a penalty of up to 100 penalty units applies. However,
a contravention does not affect the validity of a payment.
[Subsections 31(2) and (3)]
Payment of entire balance
137. In most cases when money is paid from an FHSA, the entire balance
must be paid. This requirement is discussed in more detail under
the relevant payment provisions.
138. The exceptions to the requirement recognise legitimate
circumstances where a partial payment from an FHSA should be
allowed. These are:
. under a family law obligation;
. a payment of fees from the FHSA; and
. a repayment of overpaid Government contributions.
139. As the payment rules in the main Bill do not override the
Bankruptcy Act 1966, account providers will not be prevented from
paying the trustee in bankruptcy an amount less than an
individual's entire balance. [Section 128]
Purchase of a first home
140. To withdraw money from their FHSA to purchase a first home, an
individual must make an application in the approved form to their
FHSA provider requesting that an amount be paid. This is known as
a home acquisition payment. [Section 14 and paragraph 32(1)(a)]
141. The approved form rules permit the Commissioner of Taxation
(Commissioner) to identify the information necessary for account
holders to give to their provider. To assist the Commissioner with
compliance activity, it is intended this will include information
identifying the home proposed to be acquired.
142. Providers are unable make a home acquisition payment where the
account is inactive. An inactive account indicates there may be
problems with the eligibility of the account holder to have the
account, and therefore it is not appropriate to allow money to
leave the account. See Chapter 1 for a description of inactive
accounts. [Paragraph 32(1)(e)]
143. The FHSA holder must have declared in the application that the
payment will meet the payment conditions set down in
subsection 17(1). That is, the money will be used to acquire a
qualifying interest in a dwelling, and that that dwelling will
become the individual's main residence. [Paragraph 32(1)(b)]
In acquiring a home
144. The payment conditions specify an amount equal to the payment must
be used in acquiring a qualifying interest in a dwelling within six
months of the payment being made from the FHSA. The dwelling must
be in Australia (this includes the Territories of Christmas Island
and Cocos (Keeling) Island) or Norfolk Island. [Paragraph
17(1)(a)]
145. As money is fungible, the words 'an amount equal to the payment' in
the payment conditions ensure money withdrawn from an FHSA does not
need to be tracked to ensure it is used in acquiring a qualifying
interest in a home. It is sufficient for an amount equal to the
amount withdrawn to be used.
146. The words 'in acquiring' are designed to cover a range of
situations where individuals acquire an interest in a dwelling.
The following examples demonstrate where a payment will and will
not be used in acquiring a qualifying interest in a dwelling.
1.
Andrew wishes to purchase his first home. After finding the
perfect home, he wishes to use the money in his FHSA for the
deposit.
Andrew can withdraw his money, because using the money to
pay the deposit is using it 'in acquiring a qualifying
interest in a dwelling'.
2.
Daniel, a builder, wants to withdraw money from his FHSA to
purchase a block of land on which he will build his home.
Daniel can withdraw his money because using the money to
purchase the block of land is using it 'in acquiring a
qualifying interest in a dwelling'. In this case,
purchasing land is part of the process of acquiring an
interest in a dwelling.
See paragraph 2.31 and Example 2.6 for other conditions
relating to the purchase of land.
3.
Anna, Daniel's next door neighbour, already owns a vacant
block of land on which she wishes to have Daniel build her
first home.
Anna can withdraw her money, as using the money to pay
Daniel to build the home will be using it 'in acquiring a
qualifying interest in a dwelling'.
4.
Rahul is currently renting an apartment in which he lives,
and he also owns an investment property. He would like to
move into his investment property, but wants to renovate it
first.
He will be unable to withdraw the money from his FHSA to pay
for the renovations, because as he already owns the
property, he is not using the money 'in acquiring a
qualifying interest in a dwelling'.
147. The funds from an FHSA may be withdrawn to purchase or construct a
home even if, under the same contract or arrangement, other
dwellings are being purchased or constructed that will not be the
person's main residence.
1.
Lian engages a developer and enters into a contract for them
to build three townhouses on a block of land she owns. Lian
will use the money in her FHSA to help fund the cost of one
of the units, which she will occupy as her main residence.
As she satisfies the other eligibility conditions for the
withdrawal of the money in her FHSA, Lian can withdraw the
money to pay the developer.
148. When money is being withdrawn for the purchase of land, or a
dwelling which is not complete, the construction must be completed
within a reasonable period after the withdrawal. This ensures that
the individual cannot defeat the occupancy rules by delaying the
completion of their home. [Paragraph 17(1)(c)]
1.
Following Example 2.2, Daniel withdraws his money to
commence building his home. However, due to severe weather
conditions, construction takes longer than usual.
As the delay was caused by the weather, it is reasonable for
the construction to have taken longer than usual, and
therefore Daniel will meet the payment conditions.
Occupancy rules
149. In order to meet the payment conditions, the dwelling must be the
individual's main residence for six continuous months, starting
within a designated period. [Paragraph 17(1)(b)]
150. For a dwelling that is complete when the payment is made, the
designated period starts when the person acquires the dwelling.
For a dwelling that is not complete when the payment is made, the
period starts when the construction is complete. Whether a
dwelling is complete is a matter of evidence and a building
completion certificate (eg, a certificate of occupancy) would be
relevant (and normally sufficient) evidence. The period ends 12
months after the period starts or at a later time that the
Commissioner considers reasonable in the circumstances.
[Subsection 17(2)]
1.
Joshua wishes to use his FHSA to purchase a house by the
beach. He intends to use it as a holiday house for one week
a year, and rent it out for the remainder.
Joshua will not be able to use his FHSA, as the house would
not be his main residence for six continuous months.
151. See Chapter 1 for more detail on the definition of 'main
residence'.
Recontribution
152. If an individual would otherwise fail the payment conditions, they
will be treated as having satisfied them, if, within six months of
the payment, the individual contributes to an FHSA an amount equal
to the payment or, a lesser amount that is reasonable in the
circumstances. [Subsection 17(3)]
1.
Andrew withdraws $20,000 from his FHSA to purchase the home
in Example 2.1. However, the vendor withdraws the home from
sale after Andrew has incurred $4,000 in legal costs as part
of his expenses to acquire the home. To satisfy the payment
conditions, Andrew must either acquire another home within
six months or return $16,000 to an FHSA. Contributing
$16,000 to a new FHSA (as opposed to the $20,000 he
withdrew) will be reasonable in the circumstances because of
the $4,000 he spent on legal fees.
Four-year rule
153. A payment cannot be made from an FHSA to purchase a first home
unless personal contributions of at least $1,000 have been made in
respect of the FHSA holder in each of at least four financial
years. However, if an account cannot receive further contributions
under section 27 because it has breached the account balance cap,
the requirement is that the account holder has had an account open
in at least four financial years. Account providers will need to
verify that this condition has been met. [Subparagraphs
32(1)(c)(i) and (ii)]
154. Alternatively, if the individual is acquiring a qualifying interest
together with another individual, or group of individuals, the four-
year rule only needs to be met by one of the people acquiring an
interest. The individual will need to declare this is the case.
[Subparagraph 32(1)(c)(iii)]
1.
Adrian and Vinita are purchasing their first home together.
Adrian has been in the workforce longer than Vinita, and has
made contributions of $8,000 in seven separate financial
years. Vinita however, has only had her account open for
one year.
To withdraw her money, Vinita must declare that she is
purchasing her home with Adrian, and that Adrian has made
contributions of at least $1,000 in four or more financial
years.
For Adrian to withdraw his money, his provider must verify
the four-year rule has been met.
155. The main Bill allows for regulations to be made specifying other
requirements that need to be met. [Paragraph 32(1)(d)]
156. A home acquisition payment will generally be the entire balance of
the FHSA. Where this is not the case, the account will become
inactive, and the balance must either be contributed to
superannuation, or if the account holder is over age 60, paid
directly to them. See Chapter 1 for a description of inactive
accounts. [Section 23]
157. A payment under this section will be tax free. [Schedule 1, item
31, First Home Saver Accounts (Consequential Amendments) Bill 2008
(FHSA (Consequential Amendments) Bill 2008), subsection 345-50(2)
of the Income Tax Assessment Act 1997 (ITAA 1997)]
Age 60
158. Account holders who have reached age 60 may request, at any time,
that their FHSA be paid to them. The request must be in the
approved form. [Paragraphs 33(1)(a) and (b)]
159. Consistent with the treatment of superannuation for individuals
aged 60 and over, a payment under this section will be tax free.
[Schedule 1, item 31, FHSA (Consequential Amendments) Bill 2008,
subsection 345-50(2) of the ITAA 1997]
160. Payments at age 60 will generally be the entire balance of the
FHSA. Where this is not the case, the account will become
inactive, and the balance must be contributed to superannuation.
See Chapter 1 for a description of inactive accounts. [Section 23]
Contributions to superannuation from a First Home Saver Account
161. At any time, an account holder may request, in the approved form,
that the entire balance of their FHSA be contributed to a complying
superannuation plan. Requiring the entire balance to be
contributed prevents individuals from periodically contributing
money to superannuation to avoid reaching the account balance cap.
[Paragraphs 34(1)(a) and (b)]
162. Complying superannuation plan has the same meaning as in the ITAA
1997 and means a complying superannuation fund, a complying
approved deposit fund, a retirement savings account or a public
sector superannuation scheme. [Section 18]
163. The contribution must be to a superannuation interest held by the
account holder, unless there is a family law obligation which
requires the FHSA to be contributed to another individual's
superannuation interest (see paragraphs 2.57 and 2.58 for an
explanation of family law obligations). [Paragraph 34(1)(a) and
subparagraph 31(1)(c)(i)]
164. Contributions to superannuation from an FHSA will be treated as non-
concessional contributions in the hands of the receiving
superannuation fund as they will not be included in the fund's
assessable income (see Chapter 7 for more detail). [Schedule 1,
item 24, FHSA (Consequential Amendments) Bill 2008, section 295-171
of the ITAA 1997]
165. However, amounts contributed from an FHSA will not be eligible for
the superannuation co-contribution as the money within the account
may already have attracted a Government contribution and/or been
concessionally taxed. [Schedule 3, item 37, FHSA (Consequential
Amendments) Bill 2008, paragraph 7(1)(v) of the Superannuation
(Government Co-contribution) for Low Income Earners Act 2003]
166. As they are required to contribute the amount to a complying
superannuation plan, providers will need to confirm that the
superannuation plan nominated by the account holder is a complying
plan.
167. Providers making contributions to superannuation will be required
to provide the superannuation provider with a statement in relation
to the payment. This statement will be required to be in the
approved form. See Chapter 8 for more detail. [Schedule 1,
item 65, FHSA (Consequential Amendments) Bill 2008, section 391-10
of the Taxation Administration Act 1953 (TAA 1953)]
Transfer to another First Home Saver Account
168. An account holder may request, at any time, that the entire balance
of their FHSA be transferred to another FHSA provider. The request
must be in the approved form. Requiring the whole balance to be
transferred ensures individuals do not have two FHSAs open at the
same time. [Paragraphs 35(1)(a) and (b)]
169. Providers are unable to make a transfer where the account is
inactive. [Paragraph 35(1)(c)]
170. The transfer must be to another FHSA held by the account holder,
unless there is a family law obligation which requires the FHSA to
be transferred to another individual's FHSA (see paragraphs 2.57
and 2.58 for an explanation of family law obligations).
[Paragraph 35(1)(a) and subparagraph 31(1)(c)(ii)]
171. These provisions allow an account holder to give the transfer
request to their prospective FHSA provider and have the prospective
provider arrange the transfer (on the account holder's behalf)
directly with the old provider. That is, the words 'an FHSA holder
requests the FHSA provider' cover the holder making the request of
their existing provider via their prospective provider.
172. An amount transferred from one FHSA to another FHSA will not be a
personal contribution and will not be subject to the prohibition on
accepting contributions once the account balance has reached the
account balance cap. This recognises that FHSA balances can grow
above the account balance cap due to interest/earnings and
Government contributions and that this should not prevent account
holders changing providers. [Paragraph 11(3)(a) and subparagraph
27(1)(b)(ii)]
173. Providers making transfers to another FHSA will need to ensure that
it is a valid FHSA and will be required to provide the other
provider with a statement in relation to the payment. This
statement will be required to be in the approved form. See Chapter
8 for more detail. [Schedule 1, item 65, FHSA (Consequential
Amendments) Bill 2008, section 391-10 of the TAA 1953]
Other payments
Family law
174. As FHSAs are intended to be used to purchase a first home,
generally funds cannot be paid directly to an account holder's
spouse or ex-spouse under a family law obligation. However, the
balance of the FHSA can be split under a family law obligation and
transferred to an FHSA, or contributed to a superannuation
interest, of the account holder's spouse or ex-spouse. The amount
transferred or contributed may be the whole or part of the balance
of the FHSA. Where the account holder's spouse or ex-spouse is
over age 60, the amount may be paid directly to them.
[Paragraph 31(1)(c)]
175. A family law obligation is either a court order under the Family
Law Act 1975, or a financial agreement under Part VIIIA of that
Act, which is binding because of section 90G of that Act. [Section
18]
Return of the product under the Corporations Act 2001
176. The Corporations Act allows individuals to return a financial
product and have their money repaid in certain circumstances.
Because this Bill would otherwise override these circumstances by
limiting when an account provider can make a payment, provision has
been made to allow account holders to have their money paid from
their FHSAs in accordance with specified provisions in the
Corporations Act.
177. The situations where an account holder will be able to access their
money are:
. where there has been unsolicited offer of an FHSA
(subsection 992A(4) of the Corporations Act);
. where the product disclosure statement was defective
(section 1016F of the Corporations Act); and
. within 14 days of opening the account (section 1019B of
the Corporations Act). Section 19A of the Corporations
Act is to be amended to include FHSAs within the cooling-
off requirements [Schedule 2, item 14 of the
FHSA (Consequential Amendments) Bill 2008].
[Subparagraph 31(1)(d)(ii)]
Death
178. Account providers will be able to release money on the death of an
account holder. The FHSA will form part of the deceased's estate
in the same way as other assets and will not be taxable in the
hands of the beneficiary. [Paragraph 31(1)(e)]
Bankruptcy
179. The Bankruptcy Act 1966 makes provision for the division of
property on bankruptcy. As contributions to FHSAs are all
voluntary, the payment rules in this Bill will not override
anything in that Act. This means that the trustee in bankruptcy
will be able to access the funds in an FHSA. This differs from the
treatment of superannuation for bankruptcy purposes. [Section 128]
Timing of payments and offences
180. Upon receiving an application for the release of funds for the
purchase of a first home, at age 60, to contribute to
superannuation or transfer to another FHSA, the provider must make
the payment as soon as is practicable, and in any event within 30
days of the application having been made. A provider who fails to
comply with this payment rule commits an offence and a penalty of
up to 100 penalty units applies. However, a contravention does not
affect the validity of a payment. [Subsections 32(2) to (4),
subsections 33(2) to (4), subsections 34(2) to (4) and
subsections 35(2) to (4)]
181. The offence provisions in Division 3 of Part 3 of this Bill do not
specify which fault elements apply. Under section 5.6 of the
Criminal Code Act 1995, where an offence provision does not specify
a fault element, the fault element will be:
. for a physical element that consists of conduct -
intention; and
. for a physical element that consists of circumstances or a
result - recklessness.
Chapter 3
Government contributions to First Home Saver Accounts
Outline of chapter
182. Part 4 of the main Bill provides for the Government to pay annual
First Home Saver Account (FHSA) contributions to supplement the
personal contributions of individuals. This chapter covers:
. the eligibility of individuals to receive a Government
contribution and the amount of the contribution to which
they are entitled;
. the method of payment of the Government contribution and
the mechanisms for correcting late payments and
underpayments, and recovering overpayments; and
. the administration of contribution arrangements by the
Commissioner of Taxation (Commissioner), including the
review of the Commissioner's decisions.
Context
183. The Government is providing assistance to first home buyers through
FHSAs in two ways: Government contributions based on personal
contributions to FHSAs and low tax on earnings. Chapter 6 outlines
the arrangements for the taxation of earnings.
184. The Government contribution is 17 per cent of up to $5,000
(indexed) of personal contributions made to an FHSA during the year
and is usually paid directly into individual FHSAs by the
Commissioner.
Summary of new law
185. A Government contribution is payable for an individual for a
financial year on personal contributions of up to $5,000 (indexed)
made during the year, and is paid at a rate of 17 per cent.
186. The Commissioner determines that Government contributions are
payable and pays them into FHSAs. The Commissioner must pay a
Government contribution no later than 60 days of receiving both the
income tax return of the individual for the financial year in which
the personal contributions were made (or notice in the approved
form that they are not required to lodge a tax return for the
financial year) and the FHSA contributions statement from the
individual's FHSA provider.
187. The Commissioner usually only pays Government contributions into
the FHSA held by the individual. However, the Commissioner also
has the power to pay Government contributions directly to the
individual (or their legal personal representative), or their
superannuation provider (eg, if the individual has elected or been
compelled to contribute their FHSA balance to superannuation).
188. The Commissioner compensates individuals for the late payment or
underpayment of their Government contributions through paying
additional amounts as Government contributions. Similarly, the
Commissioner has various powers to recover overpayments of
Government contributions from an individual (or their legal
personal representative), or their FHSA or superannuation provider.
Detailed explanation of new law
Government contributions
189. A Government contribution (Government contribution) for an
individual is a contribution or amount paid by the Commissioner for
that individual under the main Bill. [Subsection 11(1)]
Eligibility for a Government contribution
190. A Government contribution is payable for an individual for a
financial year where the following criteria are satisfied.
. During the financial year, personal contributions are made
to the FHSA. Individual contributions that are not
eligible for a Government contribution are discussed in
paragraph 3.12.
. The individual lodges an income tax return in relation to
the financial year, or notifies the Commissioner in the
approved form that they are not required to lodge a tax
return in relation to the financial year.
. The tax return or notice states that the individual has
met the residency requirements outlined in the Income Tax
Assessment Act 1936 (ITAA 1936) for at least part of the
income year corresponding to the financial year.
. The individual actually satisfies the residency
requirements for at least part of the income year
corresponding to the financial year.
191. The Commissioner is able to rely on the individual's return or
notice that states they meet the residency requirements in
determining that a Government contribution is payable. However, if
the statement is incorrect, there is an overpayment and the
Commissioner may take action to recover the Government contribution
paid (see paragraphs 3.37 to 3.50). [Sections 36 and 37]
192. For the individual's income tax return (or notice) and the
provider's FHSA contributions statement to be in the approved form,
they must be complete.
Individual contributions ineligible for a Government contribution
193. A Government contribution is not paid to an FHSA for a financial
year for individual contributions made in the following
circumstances.
. Where under a family law obligation, an amount is
transferred to the FHSA of a spouse or ex-spouse.
. If an individual transfers their FHSA balance from one
FHSA provider to another under the FHSA portability
provisions.
. Where an individual re-contributes an amount previously
paid from their FHSA to purchase a home where the home is
not purchased or the occupancy requirements are not met.
Such a re-contribution is permitted within six months of
the payment being made.
. Where a contribution is refunded to an individual under
the Corporations Act on the grounds of:
- an unsolicited offer, under subsection 992A(4);
- a defective product disclosure document, under
section 1016F; or
- in exercising the cooling-off period, under section
1019B.
[Subsection 11(3)]
Amount of the Government contribution
194. The first step in working out the Government contribution payable
is to total the personal contributions made during the financial
year to an FHSA held by an individual. Only the first $5,000
(indexed) is considered; any excess is disregarded. The law refers
to the personal contributions considered as the covered
contributions. [Subsections 38(1) and (2)]
195. The amount of the Government contribution is the covered
contributions multiplied by 17 per cent. [Subsection 38(3)]
Rounding rules
196. If an individual is entitled to a Government contribution for a
financial year but the amount would otherwise be less than $20, the
contribution is rounded up to $20. Other Government contribution
amounts that are not whole dollar amounts are rounded up to the
nearest dollar. [Subsections 38(4) and (5)]
Government contribution threshold
197. For the 2008-09 financial year, Government contributions are paid
on the first $5,000 contributed to an individual's FHSA each year.
The amount of the threshold is indexed annually, by multiplying the
threshold for the 2008-09 financial year by its indexation factor.
The result is rounded down to the nearest $500, to ensure that the
contribution threshold remains in round figures [section 39 and
subsection 40(1)].
. The indexation factor is the proportional change in full-
time adult average weekly ordinary time earnings from the
middle month of the December quarter 2007 to the middle
month of the December quarter just before the relevant
financial year. The indexation factor is calculated to
four decimal places and rounded to three decimal places
[subsections 40(3) to (5)].
198. The amount cannot be reduced by indexation; that is, it is not
indexed if the indexation factor is less than one.
[Subsection 40(2)]
1.
If the indexation calculation increases the threshold to
$5,900, the indexed amount is rounded down to $5,500.
Payment of a Government contribution
199. The Commissioner must determine that a Government contribution is
payable for an individual for a financial year if the Commissioner
is satisfied that the Government contribution is payable for that
financial year. [Subsection 41(1)]
200. The Government superannuation co-contribution also relies on the
Commissioner making determinations. The proposed machinery rules
for Government contributions are generally similar to those for the
superannuation co-contribution. This assists the Australian
Taxation Office in implementing administrative arrangements for
Government contributions and assists industry in complying with the
machinery rules.
Determination of eligibility for a Government contribution
201. In deciding whether to make a determination under section 41, the
Commissioner may have regard to:
. the income tax return lodged for the individual for the
relevant financial year, or a notice in the approved form
advising the Commissioner that the individual is not
required to lodge an income tax return in respect of the
financial year in which the personal contributions were
made. This information is used to determine whether an
individual meets the residency requirements;
. the information about the personal contributions made in
respect of the individual, contained in FHSA contributions
statements given to the Commissioner by FHSA providers;
and
. other information which may assist in determining the
individual's eligibility to receive a Government
contribution for the financial year. For example, if the
Commissioner received information that indicates that the
individual was not an Australian resident at any time
during the income year, the Commissioner may determine
that a Government contribution is not payable.
[Subsection 41(2)]
202. If the Commissioner makes a determination that a Government
contribution is payable to the individual for the financial year,
the Commissioner must also determine where the Government
contribution is to be directed.
203. The Commissioner usually only pays Government contributions into
the individual's FHSA. However, the Commissioner also has the
power to pay Government contributions directly to the individual
(eg, if the individual has closed their account to buy or build
their first home in which to live), their legal personal
representative (eg, if the individual has passed away), or the
individual's superannuation provider (eg, if the individual has
elected or been compelled to contribute their FHSA balance to
superannuation). [Subsection 41(3)]
Notification of payment
204. If the Commissioner pays a Government contribution to the FHSA or
superannuation account of an individual, the Commissioner must
notify the individual and either the FHSA or superannuation
provider (as appropriate) when the payment is made. If the
Commissioner pays a Government contribution directly to the
individual or their legal personal representative, the Commissioner
must notify the individual or their representative when the payment
is made. [Section 45]
Payment date for Government contributions
205. The Commissioner must pay the Government contribution on or before
the payment date for that contribution. The payment date is the
60th day after the Commissioner has received both the income tax
return of the individual (or notice in the approved form advising
that they are not required to complete an income tax return for the
financial year), and the FHSA contributions statement from the FHSA
provider. [Section 42]
Returning Government contributions
206. If the Commissioner has paid a Government contribution for an
individual to their FHSA or superannuation provider, and the
provider is unable to credit the contribution to the individual's
account within 28 days of receipt, the provider must repay the
contribution to the Commonwealth. The provider must also advise
the Commissioner of the repayment in the approved form when the
amount is repaid. A common case is where the provider is unable to
credit the amount because the individual has closed their FHSA and
moved to a different provider.
207. General collection and recovery provisions in Part 4-15 of Schedule
1 to the Taxation Administration Act 1953 apply to the liability to
repay the Government contribution. The provider may incur a
general interest charge if they fail to repay the Government
contribution within 28 days and an administrative penalty if they
fail to notify of the repayment.
. The general interest charge is calculated seven days after
the provider becomes liable to repay the amount. The
charge is applied daily until both the unpaid amount and
any outstanding general interest charges applied to the
unpaid amount are repaid.
[Section 43, subsections 52(1), (3) and (4)]
208. Paragraphs 3.25 and 3.26 also apply in respect of returning
underpaid amounts to the Commonwealth. [Section 47, subsections
52(1), (3) and (4)]
Late payment of Government contributions
209. To compensate the individual for receiving their Government
contribution late, the amount of a Government contribution is
increased by an interest amount if it is paid late in certain
circumstances. That is, if the Commissioner does not pay the
amount of a Government contribution that the individual is entitled
to receive on or before the payment date for that contribution (as
outlined in paragraph 3.24), interest is calculated and paid on the
Government contribution.
210. The purpose of this provision is to make any interest payable part
of the actual Government contribution. Therefore, interest payable
on a Government contribution is treated for all purposes in the
same manner as the Government contribution itself (eg, for taxation
purposes).
211. The increase in the Government contribution by any interest payable
is calculated:
. on the amount of the Government contribution that remains
unpaid on the payment date (which in most of these cases
is the whole amount);
. for the period from the payment date for the Government
contribution until the day on which it is paid (in full);
and
. on a daily basis using the average yield 90-day Bank
Accepted Bill rate.
[Section 44]
Underpayments of Government contributions
212. An underpayment occurs when the Commissioner pays an amount of a
Government contribution and is satisfied that the amount paid is
less than the correct amount. This may be the result of the FHSA
provider under-reporting the level of personal contributions made
to an individual's FHSA during the financial year. The underpaid
amount is the amount by which the correct amount exceeds the amount
paid.
213. If an underpaid amount exists, the Commissioner must determine that
this underpaid amount is to be paid in respect of the
individual for the financial year; that is, the Commissioner must
make a determination in respect of the underpayment.
214. The Commissioner is required to correct the underpayment by the
payment date as specified in paragraph 3.24, and credit the
underpaid amount to either:
. the individual's FHSA or superannuation provider;
. the individual; or
. the individual's legal personal representative, as
outlined in paragraph 3.22.
[Subsections 46(1) to (4)]
1.
In the 2008-09 financial year, Dorothy makes personal
contributions of $5,000. TGG Bank provides the Commissioner
with Dorothy's contribution information for the year, but
incorrectly reports her personal contributions as $1,000
instead of $5,000.
Based on Dorothy's contribution information provided by TGG
Bank, the Commissioner pays a Government contribution of
$170 into Dorothy's account. As Dorothy is actually
entitled to receive a Government contribution of $850, her
contribution has been underpaid by $680.
Late payment of underpaid amounts
215. The amount of a Government contribution is increased by an interest
amount if the underpaid amount is not paid on or before the payment
date for that amount, as outlined in paragraph 3.30.
[Subsections 46(5) and (6) and 48(1)]
216. The increase in the Government contribution by any interest payable
on underpaid amounts is to be calculated:
. on the underpaid amount that remains unpaid on the payment
date;
. for the period from the payment date for the underpaid
amount until the day on which that amount is paid (in
full); and
. on a daily basis using the average yield 90-day Bank
Accepted Bill rate.
[Subsection 48(2)]
Small underpayments
217. Where the Commissioner makes a determination in relation to an
underpaid amount of less than $5 and that amount is to be paid by
cheque to the individual or their legal personal representative,
the amount is increased to $5. This avoids very small cheque
amounts being sent to recipients. [Section 49]
Overpayments of Government contributions
218. An overpayment of a Government contribution occurs if the
Commissioner pays an amount of a Government contribution for an
individual for an income year, and either no Government
contribution was payable, or the amount paid was greater than the
amount that should have been paid. This may be the result of the
FHSA provider overstating the level of personal contributions made
to the individual's account during the financial year.
[Subsection 50(1)]
. Where an FHSA misuse payment is made, Government
contributions are recovered through the FHSA misuse tax,
rather than the overpayment provisions discussed in
paragraphs 3.37 to 3.50 (see separate discussion in
Chapter 6 - Taxation).
219. The amount overpaid is the whole of the amount already paid if no
Government contribution was payable, or the amount by which the
amount paid exceeds the correct amount of Government contribution
payable. [Subsection 50(2)]
220. The Commissioner may take action to recover an overpayment and has
several methods of recovery subject to certain conditions being
satisfied. [Subsection 50(3)]
221. These alternatives are necessary because contributions may have
been paid to entities other than the individual (or their legal
personal representative); for example, to their FHSA or
superannuation provider.
Recovery from a future Government contribution payable to an
individual
222. The Commissioner may deduct the whole or part of the amount
overpaid from any future Government contribution payable for an
individual. To do this, there must be a future Government
contribution payable (including Government contributions payable
but not yet paid) from which the Commissioner is able to deduct the
amount overpaid, with the difference then being paid. Where
available, this would be the most straightforward method of
recovery for the Commissioner. Under this method, the Commissioner
must notify the individual within 28 days of the deduction being
made. [Subsections 50(3), (5) and (6)]
Recovery from an individual (or their legal personal
representative)
223. Where the Commissioner has paid a Government contribution directly
to the individual (or their legal personal representative), the
Commissioner may recover the whole or part of the amount overpaid
directly from the individual (or their representative). Under this
method, the Commissioner must give the individual (or their
representative) written notice of the proposed recovery and at
least 28 days in which to pay the amount. [Subsections 50(3) and
(5)]
224. Where the individual (or their representative) fails to pay the
amount within 28 days, a general interest charge may be applied.
The general interest charge is calculated 28 days after the
individual becomes liable to repay the amount. The charge is
applied daily until both the unpaid amount and any outstanding
general interest charges applied to the unpaid amount are repaid.
[Subsections 52(2) and (3), paragraph 52(4)(b)]
225. The Commissioner may decide to withdraw the notice in certain
circumstances, where the Commissioner considers it is appropriate
to do so. This may include consideration of the circumstances that
led to the overpayment and the circumstances in which the
individual finds themselves at the time the Commissioner is seeking
recovery. [Subsection 50(4)]
Recovery from a First Home Saver Account or superannuation provider
226. The Commissioner may recover the whole or part of the amount
overpaid from an FHSA provider to whom either the Commissioner has
paid the Government contribution for the individual, or another
FHSA provider if the FHSA balance has been transferred. The amount
is a debt due by the FHSA provider to the Commonwealth.
[Subsections 50(3) and (5)]
227. The Commissioner may not seek recovery of an overpayment from an
FHSA provider for an individual for whom (when the notice is given
by the Commissioner to the FHSA provider) the provider no longer
holds an FHSA on behalf of the individual.
228. As outlined in paragraph 3.43, where the FHSA provider fails to pay
the amount within 28 days, a general interest charge may be
applied. The general interest charge is calculated 28 days after
the provider becomes liable to repay the amount. The charge is
applied daily until both the unpaid amount and any outstanding
general interest charges applied to the unpaid amount are repaid.
[Subsections 52(2) and (3), paragraph 52(4)(b)]
229. As outlined in paragraph 3.44, the Commissioner may decide to
withdraw the notice in certain circumstances, where the
Commissioner considers it is appropriate to do so. [Subsection
50(4)]
230. The recovery arrangements described in paragraphs 3.45 to 3.48 also
apply in respect of a superannuation provider into which FHSA
savings are transferred.
Small overpayments
231. If the Commissioner makes a determination in relation to an
overpaid amount and that amount is less than $100 (or a different
amount specified in the regulations), then the Government
contribution is increased by the overpaid amount. [Section 51]
Administration
Review of decisions
232. Any individual affected by a decision may ask the Commissioner for
a review of that decision. The Commissioner will then arrange for
an independent review to be undertaken and either affirms, varies
or sets aside and substitutes a new decision. In that process, the
Commissioner may arrange for an authorised review officer to
undertake the review.
233. The Commissioner must authorise taxation officers to be authorised
review officers. [Sections 71 and 72]
234. A review applicant may at any time withdraw the application and if
this occurs the application is taken to have never been made. This
withdrawal may be done in writing or another manner as approved by
the Commissioner. [Section 73]
235. These review rules are essentially the same as those that apply
under the Superannuation (Government Co-contribution for Low Income
Earners) Act 2003.
236. Where the Commissioner raises an assessment of FHSA misuse tax, the
objection and review rules for income tax assessments apply (see
discussion in Chapter 6 - Taxation).
237. Chapter 4
Offering First Home Saver Accounts
Outline of chapter
238. Division 1 of Part 7 of the main Bill outlines the requirements for
providers offering First Home Saver Accounts (FHSAs).
239. This chapter explains what FHSA providers must do before they
offer, or invite to offer, FHSAs. Providers that are authorised
deposit-taking institutions (ADIs) and life insurance companies are
required to notify the Australian Prudential Regulation Authority
(APRA), while trustees must be authorised by APRA before they are
permitted to offer FHSAs.
240. Consequential amendments ensure that the APRA will have functions
and powers in relation to FHSA providers, and can cancel a
trustee's registrable superannuation entity (RSE) licence where the
trustee's authorisation as an FHSA provider has been cancelled on
grounds of breach or non-compliance.
Context
241. As noted in Chapter 1, FHSAs can only be offered by certain
prudentially regulated financial institutions: ADIs; life
insurance companies (including friendly societies); and RSE
licensees (trustees) which operate public offer entities and are
authorised to offer FHSAs.
. Trustees of other superannuation entities, including self
managed superannuation funds, non public offer funds and
exempt public sector superannuation funds, will not be
able to offer FHSAs as they are not subject to the same
level of prudential regulation as trustees of public offer
entities.
. In addition, managed investment schemes and other
investment vehicles that are not prudentially regulated
will not be able to offer FHSAs.
242. The legal nature of an FHSA will differ depending on the
institution that offers it. FHSAs offered by an ADI will be an
account to which the ADI accepts deposits, those offered by a life
insurance company will be a life policy and those offered by
trustees will be a beneficial interest in a trust. This affects
the requirements that providers must meet before offering FHSAs.
243. APRA will have administrative responsibility for these requirements
as well as the prudential requirements in Division 2 of Part 7
(outlined in Chapter 5), subject to any provisions that will be
administered by the Australian Securities and Investments
Commission (ASIC).
Summary of new law
244. Before ADIs and life insurance companies offer FHSAs, they must
give notice to APRA.
245. Trustees must be authorised by APRA before offering FHSAs, because
FHSAs are a new non-superannuation product. Trustees with public
offer, extended public offer and acting trustee RSE licences will
be able to apply for authorisation.
246. Trustees will be required to satisfy APRA that they can continue to
comply with the relevant prudential requirements in relation to
their RSE licence as well as under the FHSA Bill 2008. This means
they will be required to satisfy specific requirements relating to
their risk management strategy and ensure that their capital
requirements also apply in respect of their FHSA activities, but
will not be required to create a new risk management strategy or
obtain extra capital.
247. Once authorised, trustees will be required to offer FHSAs out of a
separate trust from their superannuation fund, as the sole purpose
test that applies to superannuation funds prevents trustees from
offering FHSAs from within their superannuation funds.
248. Merits review will apply to APRA decisions in relation to
authorisation. These will be consistent with the reviewability of
APRA's decisions in relation to RSE licensing.
249. APRA can cancel the trustee's RSE licence on the grounds that APRA
has cancelled the trustee's FHSA authorisation because of a breach
or failure to comply with conditions imposed on the authorisation.
250. Consequential amendments are made to the Australian Prudential
Regulation Authority Act 1998 (APRA Act) to give APRA functions and
powers in relation to FHSA providers. These amendments also allow
APRA to receive protected information and protected documents in
relation to the FHSA Bill 2008, and to share information with the
Commissioner of Taxation (Commissioner) and ASIC in relation to the
administration of the FHSA Bill 2008.
Detailed explanation of new law
Authorised deposit-taking institutions and life insurers to give notice
251. ADIs and life insurers are required to give notice to APRA before
they offer FHSAs. [Section 123]
252. The prudential supervision of FHSAs offered by ADIs and life
insurance companies is outlined in Chapter 5.
Registrable superannuation entity licensees to be authorised
253. As FHSAs are a new, non-superannuation product, trustees will be
required to obtain authorisation from APRA before offering FHSAs.
Authorisation aims to control entry into the FHSA industry and
ensure that trustees meet minimum fitness and propriety
requirements and have the necessary risk management systems and
resources to offer this product.
254. The significance of the authorisation process is that the trustee
of an FHSA trust must not issue or offer FHSAs unless the trustee
is authorised by APRA under the FHSA Bill 2008. Trustees who offer
FHSAs without authorisation are liable to a penalty. [Section 110]
Who can apply for authorisation
255. A trustee who has a class of licence that would enable the trustee
to be, or act as, the trustee of a public offer superannuation fund
will be able to apply for authorisation. These include:
. a public offer entity licence as established by
subsection 29B(2) of the Superannuation Industry
(Supervision) Act 1993 (SIS Act);
. an extended public offer entity licence prescribed by
regulation 3A.03 of the Superannuation Industry
(Supervision) Regulations 1994 (SIS Regulations); or
. an acting trustee licence prescribed in regulation 3A.03A
of the SIS Regulations.
[Subsection 89(1)]
256. The threshold requirements ensure that only trustees who have
gained approval to operate public offer superannuation entities, by
demonstrating that they have the requisite experience and
resources, will be able to be authorised to offer FHSAs.
Process for applying for authorisation
257. Sections 89 to 91 establish the processes for applying for
authorisation as an FHSA provider. Section 89 establishes the
requirements for applications and the requirements for notifying
certain changes to pending applications. This process is broadly
based on the process for applying for a RSE licence under the SIS
Act.
258. An application must be in the approved form, contain the
information required by the approved form and be accompanied by the
required application fee, if any is prescribed. [Subsection 89(2)]
259. In considering an application, APRA:
. can request additional information from a body corporate
or a group of individual trustees that has applied for an
RSE licence;
. must specify a reasonable time for complying with the
request;
. can deem an application as having been withdrawn if the
applicant does not provide the requested information
within the specified time and does not have a reasonable
excuse for not doing so; and
. must take all reasonable steps to inform the applicant if
it treats an application as having been withdrawn.
[Section 90]
260. APRA will have 30 days to decide applications, with discretion to
extend this period by a further 14 days. If APRA does not make a
decision by the end of the period, it is taken to have refused the
application. [Section 91]
Granting authorisation
261. APRA must grant an authorisation to a trustee if it has no reason
to believe that the applicant would fail to comply with the FHSA
Bill 2008, FHSA prudential standards that apply to the trustee and
FHSA regulations, or any conditions imposed on the authorisation if
authorisation was granted. [Section 92]
262. APRA must also be satisfied that the applicant is a constitutional
corporation that holds an appropriate class of RSE licence. That
is, the applicant must hold a public offer, extended public offer
or acting trustee RSE licence. [Paragraph 92(1)(d)]
263. The application must comply with the requirements set out in
section 89.
Risk management
264. APRA must be satisfied that the risk management strategy for the
applicant takes into account the trustee's additional FHSA business
as required by paragraph 29H(1)(b) of the SIS Act. Paragraph
29H(1)(b) of the SIS Act requires the risk management strategy of
the trustee to set out reasonable measures and procedures that
apply to identify, monitor and manage a range of risks that may
arise in respect of the operations of the RSE licensee as well as
all its other activities, or proposed activities, to the extent
that they are relevant to its activities, or proposed activities,
as an RSE licensee. As operating an FHSA trust and offering FHSAs
could have a significant impact on the trustee's resources, this
new activity is relevant for the trustee's activities as an RSE
licensee and must be reflected in the trustee's risk management
strategy.
Capital requirements
265. Trustees are required to satisfy capital requirements, by holding
capital or having approved arrangements in respect of their
superannuation activities before being granted a public offer,
extended public offer or acting trustee RSE licence. Section 93
requires trustees to ensure that the capital held in respect of
their superannuation activities also covers their FHSA activities,
but trustees will not be required to obtain extra capital.
[Subsection 93(1)]
266. An applicant satisfies this provision if:
. it satisfies the requirement in subsection 29DA(2) of the
SIS Act and regulation 3A.04 of the SIS Regulations to
hold $5 million in net tangible assets. As a result, the
applicant's capital held under the SIS Act would be
available in respect of its activities as a trustee of
FHSA trusts;
. it satisfies the requirement to have an approved guarantee
of at least $5 million (subsection 29DA(3) of the SIS Act
and the prescribed amount in regulation 3A.04 of the
SIS Regulations), and the approved guarantee also applies
in respect of each FHSA trust of which the trustee is, or
is proposing to become, the trustee. The trustee would be
required to amend its deed of approved guarantee to ensure
that the guarantee is also given in respect of its
activities as a trustee of FHSA trusts;
. the sum of its net tangible assets and approved guarantee
is at least $5 million (subsection 29DA(4) of the SIS Act
and the prescribed amount in regulation 3A.04 of the
SIS Regulations), and the approved guarantee also applies
in respect of each FHSA trust of which the trustee is, or
is proposing to become, the trustee. The trustee would be
required to amend its deed of approved guarantee to ensure
that the guarantee is also given in respect of its
activities as a trustee of FHSA trusts; or
. it already complies with requirements given by APRA in
relation to capital, and agrees to comply with new
requirements given by APRA in relation to the custody of
the assets of each FHSA trust of which it is, or is
proposing to become, the trustee. In addition to the
written requirements under subsection 29DA(5) of the SIS
Act in relation to the custody of superannuation fund
assets, the trustee will also be required to comply with
written requirements in relation to the custody of FHSA
trust assets.
[Subsections 93(2) to (5)]
Other
267. The trustee is required to quote its Australian Business Number
(ABN) on a range of documents unless it receives an exemption from
APRA. The trustee is also required to quote the ABN of the FHSA
trust on a range of documents unless it receives an exemption from
APRA. [Section 94]
Conditions imposed on authorisation
268. Conditions that are considered fundamental to ensuring the prudent
operation of all FHSA trusts are imposed on all authorisations.
Other conditions may also be specified in regulations, allowing
additional conditions to be imposed on all RSE licences in a timely
manner where necessary. [Section 97]
269. APRA has the power to impose additional conditions on a single
authorisation as long as those conditions are not inconsistent with
conditions that are imposed under section 97 [subsections 98(1) and
(2)]. This ensures that APRA is able to impose conditions on
individual authorisations, in particular where there may be a
specific prudential risk applying to that trustee or the FHSA trust
it manages. Failure to report significant breaches of conditions
on authorisation is an offence under section 111.
270. APRA must consult with ASIC where the RSE licensee also holds an
Australian Financial Services Licence and the imposition of a
condition may affect the RSE licensee's ability to provide
financial services. Consultation will help to ensure consistent
approaches to the regulation of RSE licensees who are also holders
of an Australian Financial Services Licence. However, failure by
APRA to consult with ASIC does not invalidate any additional
condition that is imposed. [Subsections 98(3) and (4)]
Compliance with conditions
271. APRA can direct an RSE licensee to comply with a licence condition
within a specified time where APRA has reasonable grounds to
believe that the RSE licensee has breached the licence condition.
[Section 99]
272. This power is significant, because while breaching an authorisation
condition does not directly result in a trustee committing an
offence, failure to comply with an APRA direction given under
section 99 may result in the trustee committing an offence under
section 112. Section 99 does not include a minimum timeframe for
complying with a request to give APRA some flexibility in setting
timeframes that are reasonable in the circumstances, given the
nature of the information that is being requested and the level of
prudential risk involved. APRA may also cancel an authorisation if
a trustee fails to comply with an authorisation condition.
[Section 107]
Varying conditions on authorisation
273. Trustees may apply to APRA for a variation or revocation of a
condition that has been imposed on an authorisation by APRA.
[Section 100]
274. APRA can request additional information in respect of an
application made under section 100. This ensures that APRA is able
to obtain relevant information pertaining to the application.
[Section 101]
275. APRA has 30 days to decide an application to vary a condition on an
authorisation, but may extend this period by a further 14 days.
[Section 102]
276. APRA may vary or revoke a condition on authorisation on application
from the trustee in certain circumstances and, if it does so, it
must inform the applicant. APRA must also consult with ASIC in
certain circumstances. APRA is not required to vary or revoke any
condition of an authorisation in the terms requested by the trustee
in an application under section 100. [Section 103]
277. APRA may also vary or revoke an authorisation condition on its own
initiative as long as the variation or revocation is not
inconsistent with any condition imposed under section 97 or the
trustee's RSE licence. If the trustee is also the holder of an
Australian Financial Services Licence, APRA must consult with ASIC
in certain circumstances. [Section 104]
278. APRA must notify trustees of its decisions in respect of variations
or revocations. [Section 105]
Cancellation of authorisation
279. APRA may cancel in writing authorisations where trustees:
. have requested that their authorisation be cancelled;
. are 'disqualified persons' under Part 15 of the SIS Act,
as it applies in Division 2, Part 7 of the FHSA Bill 2008.
(For details of how the SIS Act applies to FHSA trustees,
refer to Chapter 5);
. have breached, or APRA has reason to believe they will
breach, a condition imposed on the authorisation; or
. have failed to comply, or APRA has reason to believe they
will fail to comply, with a direction by APRA under
section 99.
[Section 107]
280. APRA must notify trustees of decisions to cancel authorisations.
[Subsection 107(3)]
281. APRA must also consult with ASIC in certain circumstances before
cancelling an authorisation and notify ASIC after it has cancelled
an authorisation. [Section 108]
282. APRA may allow an authorisation to continue in effect in respect of
specified provisions of the FHSA Bill 2008, FHSA prudential
standards and regulations, or any other law of the Commonwealth,
that it administers after the authorisation has been cancelled.
This ensures that trustees who have had their authorisation
cancelled can continue to perform certain specified duties in
respect of an FHSA trust, for example, processes associated with
winding-up an FHSA trust or transferring members' benefits under
the successor fund arrangements. [Section 109]
Offences
283. It is an offence for a person to be, or act as, a trustee of an
FHSA trust unless the person is an ADI, life insurance company, or
a trustee that holds an authorisation as an FHSA provider. In
addition, an ADI or life insurance company cannot offer FHSAs if
its authorisation under the Banking Act 1959 or registration under
the Life Insurance Act 1995 does not allow the entity to offer such
accounts or life policies. The penalty for breach of this
requirement is two years imprisonment and/or 120 penalty units.
[Section 110]
284. It is also an offence for a trustee to fail to notify APRA of
breaches of authorisation conditions that are, or are likely to be,
significant. This offence contains a significance test, consistent
with the test under the Banking Act 1959, the Life Insurance Act
1995 and the SIS Act. [Section 111]
285. The significance test takes into consideration a number of factors
to be used when judging if a breach is significant or not.
Significant breaches must be notified in writing and must be
reported as soon as practicable and in any event within 10 business
days.
286. Consistent with the SIS Act, this offence is a strict liability
offence punishable by 50 penalty units. These offences are ones of
strict liability because they are basic, objective requirements of
APRA's prudential supervision functions, and should be complied
with by all persons. Consistent with section 6.1 of the Criminal
Code Act 1995, this offence provision does not require proof of a
mental element.
287. In addition, it is an offence for a trustee to fail to comply with
a direction from APRA to comply with a condition on an
authorisation under section 99. This is a strict liability
offence, which carries a penalty of 60 penalty units. [Section
112]
288. This offence is a strict liability one because it is a basic,
objective requirement of APRA's prudential supervision of FHSA
providers that are trustees, and should be complied with by all
trustees. As the fundamental prudential requirements for trustees
who provide FHSAs are imposed as conditions on authorisation, it is
essential that trustees comply with APRA's directions to comply
with a condition of authorisation. Consistent with section 6.1 of
the Criminal Code Act 1995, this offence provision does not require
proof of a mental element.
289. Any contravention of these offence provisions does not affect the
validity of a transaction, such as the issue of an interest in an
FHSA trust. This protects the interests of members of an FHSA
trust where the trustee of that trust is in contravention of the
provisions. [Section 113]
Merits review of APRA decisions
290. APRA's decisions in relation to authorisation are subject to merits
review, where the equivalent decision in relation to the RSE
licensing process is also subject to merits review. The process
for seeking review is set out in section 75 and 76, and these are
modelled on sections 344 and 345 of the SIS Act. [Section 74]
Consequential amendments to the Superannuation Industry (Supervision) Act
1993
291. APRA may cancel a trustee's RSE licence where the trustee's
authorisation as an FHSA provider has been cancelled under
paragraphs 107(2)(b) to (f) of the FHSA Bill 2008. A trustee's
authorisation may be cancelled under these paragraphs where the
trustee has breached, or may breach, conditions on authorisation or
has failed, or may fail, to comply with a direction to comply with
conditions on authorisation. These are breaches of fundamental
requirements of the prudential framework. [Schedule 3, item 38,
FHSA (Consequential Amendments) Bill 2008]
292. Where APRA cancels a trustee's authorisation as an FHSA provider
following a request from the trustee, under paragraph 107(2)(a), it
would not be a ground to cancel the trustee's RSE licence as such a
cancellations would not result from the trustee breaching
fundamental prudential requirements.
Consequential amendments to the APRA Act
293. APRA has responsibility for the prudential supervision of FHSA
providers and has responsibility for the administration of the
relevant parts of the FHSA Bill 2008. [Schedule 3, items 5 to 9,
FHSA (Consequential Amendments) Bill 2008]
294. A reference to the 'First Home Saver Accounts Act 2008' is inserted
into the definition of 'prudential regulation framework law' in
subsection 3(1) of the APRA Act. The term 'prudential regulation
framework law' is the list of laws under which APRA takes its
functions and powers. Inserting the 'First Home Saver Accounts Act
2008' into this list gives APRA functions and powers for
administering the provisions of the FHSA Bill 2008 relating to
prudential regulation. The definition is also required for the
purposes of APRA's advisory powers and the secrecy provisions
contained within section 56 of the APRA Act. [Schedule 3, item 5,
FHSA (Consequential Amendments) Bill 2008]
295. The term 'FHSA provider' is inserted into the definition of 'body
regulated by APRA' in subsection 3(2) of the APRA Act. Although
ADIs and life insurers are already in this definition, and trustees
are included in the definition in their capacity as trustees of
superannuation entities, this definition clarifies that these
entities in their capacity as FHSA providers are also prudentially
regulated by APRA. [Schedule 3, item 6, FHSA (Consequential
Amendments) Bill 2008]
296. Section 56 of the APRA Act is amended to refer to the FHSA Bill
2008. Section 56 protects information and documents given to APRA
(apart from those already made public from other sources) from
being disclosed without authorisation, while allowing for efficient
and effective information exchange between APRA and other
regulators. [Schedule 3, items 8 and 9, FHSA (Consequential
Amendments) Bill 2008]
297. These amendments enable APRA to gather protected information and
protected documents under the FHSA Bill 2008, and to share
information with regulatory agencies such as the Australian
Securities and Investments Commission, and any other regulatory
agencies prescribed in the regulations, to assist these agencies to
perform their duties and functions. It also imposes appropriate
confidentiality requirements on such information.
298. These amendments insert new paragraphs in the definitions of
'protected document' and 'protected information' in subsection
56(1) of the APRA Act. Documents produced under, or for the
purposes of administering, a provision of the FHSA Bill 2008 which
is administered by the Commissioner is a 'protected document' and
'protected information'. These amendments ensure that where the
Commissioner gives documents or information to APRA in the course
of administering the FHSA Bill 2008, such documents or information
are protected by the confidentiality requirements under section 56
of the APRA Act and cannot be disclosed except in specified
circumstances and subject to any conditions that may be imposed
under this section.
Chapter 5
Prudential regulation of First Home Saver Account providers
Outline of chapter
299. The main Bill provides the regulatory framework for First Home
Saver Accounts (FHSAs) offered by authorised deposit-taking
institutions (ADIs), life insurance companies and registrable
superannuation entity (RSE) licensees that are authorised to offer
FHSAs (trustees).
300. ADIs and life insurance companies are already subject to prudential
supervision under the Banking Act 1959 and the Life Insurance
Act 1995 respectively. Consequential amendments to the Banking
Act 1959, the Life Insurance Act 1995 and the Australian Prudential
Regulation Authority Act 1998 (APRA Act) ensure that the Australian
Prudential Regulation Authority (APRA) can administer, monitor and
enforce these entities' FHSA activities.
301. Division 2 of Part 7 creates a prudential regulatory framework for
FHSA trusts operated by trustees that are authorised under the
First Home Saver Accounts Bill 2008 (FHSA Bill 2008). It does this
by applying the relevant parts of the SIS Act regulatory framework
to FHSAs, FHSA trusts, their trustees and holders of FHSAs issued
by trustees. APRA also has the power to make prudential standards
in relation to FHSA trusts and trustees.
302. Additional investment management requirements apply to FHSAs
offered as investment-linked products by life insurance companies
and trustees. These requirements reflect the differences in the
purpose and nature of FHSAs from the products generally offered by
life insurance companies and trustees.
Context
303. The FSHA Bill 2008 provides a prudential regulatory framework for
FHSA trusts and trustees that are authorised to operate these
trusts, rather than regulating them directly under the
Superannuation Industry (Supervision) Act 1993 (SIS Act). This is
because FHSAs are not a superannuation product, and the sole
purpose test that applies to superannuation funds prevents trustees
from offering FHSAs from within their superannuation entities.
304. The requirement for a separate trust also preserves the integrity
of Australians' retirement savings by preventing cross-
contamination and cross-subsidisation of FHSAs by superannuation -
where the funds of superannuation members (many of whom will be
ineligible to open an FHSA) are used to fund the start-up and
operating costs of FHSAs. Similarly, FHSA trusts cannot invest
through pooled superannuation trusts and cannot pay benefits into
eligible rollover funds.
305. The (SIS Act) creates a prudential regulatory framework for RSE
licensees and superannuation funds, and deals with matters
including duties and obligations for trustees, responsible officers
of trustees, auditors, actuaries, custodians and investment
managers of superannuation funds. The SIS Act also provides APRA
with powers and functions in relation to the prudential supervision
of superannuation funds and trustees.
306. Division 2 of Part 7 applies the SIS Act prudential regulatory
framework to FHSA trusts, where it is appropriate to do so, to
ensure regulatory consistency for the trustees' FHSA activities and
superannuation activities.
307. Unlike under the SIS Act framework, APRA will have the power under
the FHSA Bill 2008 to make prudential standards in relation to FHSA
trusts and trustees, thereby enabling prudential standards to apply
consistently to all FHSA providers where this is necessary.
308. As FHSAs have a different purpose and nature from superannuation
products and life policies that are usually offered by trustees and
life insurance companies, and FHSA holders are likely to have a
shorter investment horizon, additional investment management
requirements apply to FHSAs offered by trustees and as investment-
linked life policies.
Summary of new law
309. The FHSA business of ADIs and life insurance companies will be
supervised under the prudential framework in the Banking Act 1959
and the Life Insurance Act 1995 respectively.
310. However, life insurance companies that offer FHSAs as investment-
linked contracts will be subject to additional investment
management requirements that take into account the purpose and
nature of FHSAs. These requirements are consistent with those that
apply to trustees that offer FHSAs.
311. The FSHA Bill 2008 provides a prudential regulatory framework for
FHSA trusts and trustees that are authorised to operate these
trusts, rather than regulating them directly under the SIS Act.
312. Relevant parts of the SIS Act are applied by reference, in
accordance with the application provisions, under Division 2 of
Part 7 of the FHSA Bill 2008. This Division also excludes any
provisions of the SIS Act that are not relevant to FHSA trusts and
trustees, and modifies the application of particular provisions of
the SIS Act to ensure the regulatory framework applies correctly.
313. These provisions ensure that FHSA trusts, trustees, and persons who
have duties, functions and powers in relation to these entities
will be subject to a prudential regulation framework that is
consistent with the framework applying to superannuation funds and
their trustees, where appropriate, while still reflecting the
differences between these two products.
314. Unlike under the SIS Act framework, APRA will have the power under
the FHSA Bill 2008 to make prudential standards in relation to FHSA
trusts and trustees, thereby enabling prudential standards to apply
consistently to all FHSA providers where this is necessary.
Detailed explanation of new law
First Home Saver Account providers that are ADIs
315. FHSA providers that are ADIs are already prudentially regulated
under the Banking Act 1959. Section 8 establishes that FHSAs may
be offered as accounts by ADIs, which ensures that the prudential
framework under the Banking Act 1959 will apply to FHSAs. ADIs may
offer FHSAs if they are not prevented from doing so by any
condition imposed on their authorisation under section 9 of the
Banking Act 1959. [Section 110]
316. FHSA providers that are ADIs can transfer their FHSA business to
other ADIs under the Banking Act 1959 and the Financial Sector
(Business Transfer and Group Restructure) Act 1999.
Amendments to the Banking Act 1959
317. To ensure that APRA has appropriate supervisory and enforcement
powers in relation to ADIs' FHSA activities, the First Home Saver
Accounts (Consequential Amendments) Bill 2008 (FHSA (Consequential
Amendments) Bill 2008) makes consequential amendments to the
Banking Act 1959. These amendments give APRA the ability to take
action under the Banking Act 1959 where an FHSA provider that is an
ADI has, or may have, breached a prudential requirement under the
FHSA Bill 2008.
318. Enabling APRA to enforce requirements that apply to FHSA providers
that are ADIs under the Banking Act 1959 rather than the FHSA Bill
2008 ensures that ADIs are subject to a consistent monitoring and
enforcement regime and minimises compliance costs. For prudential
requirements applying to FHSA providers that are ADIs, see Division
3 of Part 7 of the FHSA Bill 2008.
319. APRA is able to issue a direction under section 11CA of the Banking
Act 1959, in respect of an FHSA provider that is an ADI, where
specified triggers relating to the FHSA Bill 2008 are satisfied.
. Where an FHSA provider that is an ADI has contravened the
FHSA Bill 2008, APRA can issue one of the directions
listed in subsection 11CA(2) of the Banking Act 1959
[Schedule 3, item 10, FHSA ( Consequential Amendments)
Bill 2008, paragraph 11CA(1)(a) of the Banking Act 1959].
. Where an FHSA provider that is an ADI is likely to
contravene the FHSA Bill 2008, and the contravention is
likely to give rise to a prudential risk, APRA can issue
one of the directions listed in subsection 11CA(2) of the
Banking Act 1959 [Schedule 3, item 11, FHSA (Consequential
Amendments) Bill 2008, paragraph 11CA(1)(c) of the Banking
Act 1959].
320. APRA can issue a direction to comply with all or part of the FHSA
Bill 2008 under paragraph 11CA(2)(aa) of the Banking Act 1959,
where one of the triggers in subsection 11CA(1) is satisfied. All
other directions in subsection 11CA(2) can also be issued to an
FHSA provider that is an ADI, where these directions are relevant
to the ADI's FHSA activities, but no amendment is required as these
directions relate to the entirety of the ADI's business and are not
limited to matters arising under the Banking Act 1959. [Schedule
3, item 12, FHSA (Consequential Amendments) Bill 2008, subsection
11CA(2) of the Banking Act 1959]
321. APRA can accept an enforceable undertaking in connection with a
matter arising under the FHSA Bill 2008, if the matter is within
APRA's responsibility. Therefore, if APRA has a concern about an
FHSA provider that is an ADI, and the concern relates to a
prudential requirement under the FHSA Bill 2008, APRA can address
the concern by accepting an enforceable undertaking from the FHSA
provider. [Schedule 3, item 13, FHSA (Consequential Amendments)
Bill 2008, section 18A of the Banking Act 1959]
322. If APRA has the power to make a decision under the FHSA Bill 2008
in relation to an FHSA provider that is an ADI, and the decision is
subject to merits review, review of the decision is conducted in
accordance with Part 6 of the Banking Act 1959. This ensures a
consistent regime of review of APRA's decisions in relation to
ADIs. Currently, APRA does not have the power to make decisions in
relation to ADIs under the FHSA Bill 2008. [Schedule 3, item 14,
FHSA (Consequential Amendments) Bill 2008, section 51A, Banking Act
1959]
323. ADIs are required to report significant breaches of the FHSA
(Consequential Amendments) Bill 2008 to APRA. [Schedule 3, item
15, FHSA (Consequential Amendments) Bill 2008, section 62A of the
Banking Act 1959]
First Home Saver Account providers that are life insurance companies
324. FHSA providers that are life insurance companies authorised under
the Life Insurance Act 1995 are already prudentially regulated
under that Act. Where life insurance companies offer FHSAs,
section 8 requires that they be offered as 'life policies', which
ensures that FHSAs will be a life policy as defined by section 9 of
the Life Insurance Act 1995 and therefore subject to the full
prudential framework under the Life Insurance Act 1995.
325. Life insurance companies may offer FHSAs if they are not prevented
from doing so by any condition on their registration imposed under
section 22 of the Life Insurance Act 1995. [Section 110]
326. In addition, under the FHSA Bill 2008, new investment management
requirements will apply to FHSAs that are offered by life insurance
companies as investment-linked contracts, within the meaning of
section 14 of the Life Insurance Act 1995. Details are set out in
paragraphs 1.28 and 1.29.
327. FHSA providers that are life insurance companies can transfer their
FHSA business to other life insurance companies under the Life
Insurance Act 1995 and the Financial Sector (Business Transfer and
Group Restructure) Act 1999.
Amendments to the Life Insurance Act 1995
328. The definitions of 'investment account' and 'investment-linked
account' in section 14 of the Life Insurance Act 1995 are amended
to clarify that an FHSA that is offered as an investment account or
investment-linked account can be withdrawn in accordance with the
requirements under section 31 of the FHSA Bill 2008. [Schedule 3,
items 16 to 19, FHSA (Consequential Amendments) Bill 2008]
329. The current definitions of an 'investment account' and 'investment-
linked account' require the account balance to be paid on 'a
specified date' or one of a number of specified dates (see
subparagraphs 14(2)(a)(ii) and 14(4)(b)(ii) of the Life Insurance
Act 1995). The amendments to section 14 clarify that an investment
account or an investment-linked account can also be a contract that
provides for the balance of the contract to be paid in accordance
with the release criteria under section 31 of the FHSA Bill 2008.
330. Auditors and actuaries will be able to give information relating to
FHSAs to APRA:
. where the auditor or actuary is required to give
information under sections 88 and 89 of the Life Insurance
Act 1995 relating to a contravention of the Life Insurance
Act 1995 or the FHSA Bill 2008 to APRA; and
. where an auditor or actuary may give information to APRA
under sections 88A and 98A of the Life Insurance Act 1995,
if the auditor or actuary considers the information may
assist APRA in performing its functions under the Life
Insurance Act 1995 or the FHSA Bill 2008.
[Schedule 3, items 20 and 21, FHSA (Consequential Amendments) Bill
2008, section 74, Life Insurance Act 1995]
331. APRA's monitoring and investigation powers under Part 7 of the Life
Insurance Act 1995 apply to the FHSA activities of FHSA providers
that are life insurance companies. [Schedule 3, items 22 and 23,
FHSA (Consequential Amendments) Bill 2008]
332. The effect of these amendments is to extend APRA's monitoring and
enforcement powers to prudential requirements that apply to life
insurance companies under the FHSA Bill 2008.
333. For example, APRA will be able to accept an enforceable undertaking
under section 133A in connection with a matter arising under the
FHSA Bill 2008. The triggers for issuing a show-cause notice under
section 136 are satisfied if APRA suspects an FHSA provider that is
a life insurance company has breached, or is likely to breach, a
prudential provision of the FHSA Bill 2008. APRA will also be able
to conduct an investigation in relation to a matter arising under
the FHSA Bill 2008, where the FHSA provider is a life insurance
company.
334. Prudential standards that apply to life insurance companies cannot
be inconsistent with the FHSA Bill 2008. [Schedule 3, item 24,
FHSA (Consequential Amendments) Bill 2008, section 230A, Life
Insurance Act 1995]
335. APRA can issue a direction under subsection 230B(2) of the Life
Insurance Act 1995 to comply with all or part of the Life Insurance
Act, in respect of an FHSA provider that is a life insurance
company, where:
. an FHSA provider that is a life insurance company has
contravened the FHSA Bill 2008; or
. an FHSA provider that is a life insurer is likely to
contravene, the FHSA Bill 2008 and the contravention is
likely to give rise to a prudential risk.
[Schedule 3, item 25, FHSA (Consequential Amendments) Bill 2008,
paragraphs 230B(1)(a) and (b), Life Insurance Act 1995]
336. APRA can issue a direction to comply with all or part of the FHSA
Bill 2008 under paragraph 230B(2)(a) of the Life Insurance
Act 1995, where one of the triggers in subsection 230B(1) is
satisfied. All other directions in subsection 230B(2) can also be
issued to an FHSA provider that is a life insurance company, where
these directions are relevant to the life insurance company's FHSA
activities, but no amendment is required as these directions relate
to the entirety of the life insurance company's business and are
not limited to matters arising under the Life Insurance Act 1995.
[Schedule 3, item 25, FHSA (Consequential Amendments) Bill 2008,
subsection 230B(2), Life Insurance Act 1995]
337. If APRA has the power to make a decision under the FHSA Bill 2008
in relation to an FHSA provider that is a life insurance company,
and the decision is subject to merits review, review of the
decision would be conducted in accordance with section 236 of the
Life Insurance Act 1995. This ensures a consistent regime of
review of APRA's decisions for life insurance companies.
Currently, APRA does not have the power to make decisions in
relation to life insurance companies under the FHSA Bill 2008.
[Schedule 3, items 26 and 27, FHSA (Consequential Amendments) Bill
2008]
First Home Saver Account providers that are trustees
338. The prudential supervision of trustees who are authorised under the
FHSA Bill 2008 as FHSA providers will be given effect through the
provisions in Division 2 of Part 7 and section 121.
Basic application provision
339. The basic application provision creates application rules in
relation to the requirements, functions and obligations that apply
to trustees of FHSA trusts, FHSA trusts, an interest in an FHSA
trust and holder of such an interest. [Section 114]
340. Subject to the exclusion and modification provisions in Division 2
of Part 7 [subsection 114(1)]:
. the first application rule ensures that all obligations,
functions and requirements that apply to trustees of
public offer superannuation funds will apply to trustees
of FHSA trusts [paragraph 114(2)(a)];
. the second application rule ensures that all obligations,
functions and requirements that apply in relation to a
public offer superannuation fund will apply in relation to
an FHSA trust [paragraph 114(2)(b)];
. the third application rule ensures that all obligations
that apply in relation to members of superannuation funds
will apply in relation to holders of FHSAs issued by
trustees [paragraph 114(2)(c)]; and
. the fourth application rule ensures that all the
requirements that apply in relation to a superannuation
interest will apply to an interest in an FHSA trust
[paragraph 114(2)(d)].
Trustees of First Home Saver Account trusts
341. Under the first application rule, all the obligations that apply to
a trustee that is a trustee of a public offer superannuation fund
will apply to a trustee of an FHSA trust (FHSA trustee), subject to
the exclusion and modification provisions. [Paragraph 114(2)(a)]
342. Where an obligation applies to all trustees of regulated
superannuation funds or trustees of a public offer entity, this
obligation will apply to an FHSA trustee.
1.
Section 35A imposes accounting and record keeping
obligations on trustees of 'all superannuation entities'.
Paragraph 35A(1)(a) provides:
'(1) Each trustee of a superannuation entity must ensure
that:
(a) accounting records that correctly record and explain
the transactions and financial position of the entity are
kept;'
As the term 'superannuation entities' includes a 'public
offer superannuation fund', this obligation will apply to
trustees of an FHSA trust. Applying this rule, paragraph
35A(1)(a) becomes:
(1) [The] FHSA trustee must ensure that:
(a) accounting records that correctly record and explain
the transactions and financial position of the [FHSA
trust] are kept.
2.
Section 133 allows APRA to suspend or remove trustees if
specified triggers are satisfied. Subsection 133(1)
provides:
'(1) The Regulator may suspend or remove a trustee of a
superannuation entity if:'
Again, as the term 'superannuation entities' includes a
'public offer superannuation fund', this obligation will
apply to trustees of an FHSA trust. Applying this rule,
subsection 133(1) becomes:
(1) The Regulator may suspend or remove an FHSA trustee if:
3.
Section 154 imposes on trustees certain limitations on the
payment of commission and brokerage. Subsection 154(1)
provides:
'(1) The trustee of a public offer entity must comply with
the requirements of the regulations in relation to the
payment of commission or brokerage in respect of:'
[...]
(2) The trustee is guilty of an offence if the trustee
contravenes subsection (1).
As the term 'public offer entity' includes a 'public offer
superannuation fund', this requirement will apply to a
trustee of an FHSA trust. Applying this rule, section 154
becomes:
(1) The FHSA trustee must comply with the requirements of
the regulations in relation to the payment of commission or
brokerage in respect of:
[...]
(2) The FHSA trustee is guilty of an offence if the trustee
contravenes subsection (1).
343. Where an obligation only applies to a trustee of a fund that is not
a public offer superannuation fund - including a self managed
superannuation fund, a non public offer superannuation fund and an
exempt public sector superannuation fund - these obligations will
not apply to an FHSA trustee. These provisions, subsections or
paragraphs will be automatically excluded by this application rule,
and no further rules are needed to deal with these cases.
1.
Paragraph 35A(1)(c) requires trustees of self managed
superannuation funds to keep accounting records and audit
the fund in specific ways. These requirements do not apply
to a trustee of a public offer superannuation fund, and so
will be automatically excluded by the basic application
provision.
Applying this rule, subsection 35A(1) will contain these
requirements:
(1) [The] FHSA trustee must ensure that:
(a) accounting records that correctly record and explain
the transactions and financial position of the [FHSA
trust] are kept; and
(b) the accounts of the [FHSA trust] are kept in a way
that enables the preparation of reporting documents
referred to in section 13 of the Financial Sector
(Collection of Data) Act 2001; and
(d) the accounting records of the [FHSA trust] are kept in
a way that enables those accounts, statements and returns
to be conveniently and properly audited in accordance with
this Act.
2.
Section 104A requires trustees of self managed
superannuation funds to sign a declaration.
As this requirement does not apply to the trustee of a
public offer superannuation fund, this requirement will not
apply to an FHSA trustee. Applying this rule, section 104A
will be automatically excluded.
First Home Saver Account trusts
344. Under the second application rule, all the obligations and
requirements that apply in relation to a public offer
superannuation fund will apply in relation to FHSA trusts, and
persons that have obligations, functions or powers in relation to
FHSA trusts. [Paragraph 114(2)(b)]
345. Where an obligation applies to all superannuation entities, this
obligation will apply to FHSA trusts.
1.
Section 52 inserts certain provisions into the governing
rules of all 'superannuation entities'. Subsection 52(1)
provides:
'(1) If the governing rules of a superannuation entity do
not contain covenants to the effect of the covenants set out
in subsection (2), those governing rules are taken to
contain covenants to that effect.'
As the term 'superannuation entities' includes a 'public
offer superannuation fund, this requirement will apply to an
FHSA trust. Applying this rule, subsection 52(1) becomes:
(1) If the governing rules of an FHSA trust do not contain
covenants to the effect of the covenants set out in
subsection (2), those governing rules are taken to contain
covenants to that effect.
2.
Section 129 requires approved auditors and actuaries of a
superannuation entity to report certain breaches to APRA.
Subsection 129(1) provides:
'(1) This section applies to a person in relation to a
superannuation entity if:
(a) the person forms the opinion that it is likely that a
contravention of any of the following may have occurred,
may be occurring, or may occur, in relation to the
entity:'
As the term 'superannuation entity' includes a 'public offer
superannuation fund', this obligation will apply to auditors
and actuaries of FHSA trusts. Applying this rule,
subsection 129(1) becomes:
(1) This section applies to a person in relation to an FHSA
trust if:
(a) the person forms the opinion that it is likely that a
contravention of any of the following may have occurred,
may be occurring, or may occur, in relation to the FHSA
trust:
3.
Section 257 enables APRA to require the trustee to appoint a
person to investigate the financial circumstances of the
fund. Subsection 257(1) provides, in part:
'(1) APRA may, by written notice given to a trustee of a
superannuation entity, require the trustee, or the trustees,
of the entity to appoint an individual, or a committee of
individuals, to:
(a) carry out an investigation of the whole or a
specified part of the financial position of the entity as
at a specified time or in relation to a specified period;'
As the term 'entity' in paragraph (a) includes a 'public
offer superannuation fund', APRA's power to require an
investigation would apply in relation to the financial
position of the FHSA trust. Applying this rule, subsection
257(1) will provide, in part:
(1) APRA may, by written notice given to an FHSA trustee,
require the trustee to appoint an individual, or a committee
of individuals, to:
(a) carry out an investigation of the whole or a
specified part of the financial position of the FHSA trust
as at a specified time or in relation to a specified
period;
346. Where an obligation only applies in relation to funds other than a
public offer superannuation fund - including a self managed
superannuation fund, a non public offer superannuation fund or an
exempt public sector superannuation fund - these obligations will
not apply in relation to an FHSA trust. These provisions,
subsections or paragraphs will be automatically excluded by this
application rule.
1.
Section 129 requires the auditor or actuary of a
superannuation fund to provide information to the Regulator
in specified ways, if the person forms the opinion that a
breach may have occurred, may be occurring, or may occur.
Subsection 129(3) provides, in part:
'(3) Subject to subsection (3A), the person must,
immediately after forming the opinion:
(a) tell a trustee of the entity about the matter in
writing; and
(b) if the superannuation entity is not a self managed
superannuation fund [...] - tell the Regulator about the
matter in writing; and
(c) if the superannuation entity is a self managed
superannuation fund [...] - tell the Regulator about the
matter in the approved form.'
As the term 'self managed superannuation fund' does not
include a 'public offer superannuation fund', the
requirement in paragraph (c) is not relevant for FHSA trusts
and will be automatically excluded. Applying this rule,
subsection 129(3) becomes:
(3) Subject to subsection (3A), the person must, immediately
after forming the opinion:
(a) tell an FHSA trustee about the matter in writing; and
(b) tell the Regulator about the matter in writing;
Holder of a First Home Saver Account
347. Under the third application rule, all the requirements that apply
in relation to members or beneficiaries of public offer
superannuation funds will apply in relation to holders of FHSAs.
[Paragraph 114(2)(c)]
1.
Section 105 requires trustees of regulated superannuation
funds to keep members and beneficiaries reports for at least
10 years. Members and beneficiaries reports are defined as
a report given:
(b)(i) in the case of a regulated superannuation fund-to all
members of the fund, or to all members included in a
particular class of members;
By applying this rule, the requirements relating to members
of a superannuation fund will be a requirement relating to
holders of an FHSA. The definition of a 'member or
beneficiary report' becomes a report given:
(b)(i) in the case of an FHSA trust-to all FHSA holders, or
to all FHSA holders included in a particular class of FHSA
holders;
Interest in a First Home Saver Account trust
348. Under the fourth application rule, all the requirements that apply
in relation to an interest in a public offer superannuation fund
will apply in relation to an interest in an FHSA trust. [Paragraph
114(2)(d)]
1.
Section 152 prohibits the issuing of an interest in a public
offer entity unless the trustee and the fund satisfy certain
criteria. Subsection 152(1) applies to conduct including:
(a) issuing superannuation interests in a public offer
entity;
By applying this rule, the requirements relating to issuing
'superannuation interests' will apply to the issue of an
interest in an FHSA trust. Subsection 152(1) will apply to
conduct including:
(a) issuing interests in an FHSA trust;
Disapplication provision
349. Section 115 disapplies particular sections of the SIS Act so that
these sections do not apply in the FHSA Bill 2008.
350. Some provisions of the SIS Act should not be applied to FHSAs,
because the concepts, regulations or procedures in those provisions
are only relevant under the superannuation framework.
351. For some other matters, such as trustees' obligations in relation
to FHSA holders' tax file numbers (TFNs), the FHSA Bill 2008
contains specific rules which would overlap with SIS Act rules. In
relation to other matters, such as investments in instalment
warrants, the Government has determined that the current rules in
the superannuation regulation framework should not apply to FHSA
trusts.
352. Where these sections would otherwise be 'caught' by the basic
application provision, section 115 is used to disapply these
sections from the prudential framework that is applied to FHSAs.
Where these sections are automatically excluded under the basic
application rule, because they do not apply to a public offer
superannuation fund or a trustee of such funds, there is no need to
also disapply these concepts or requirements using section 115.
353. The provisions of the SIS Act that will not apply are as follows.
|Provisions of the |Explanation |
|Superannuation | |
|Industry | |
|(Supervision) Act | |
|1993 that will not| |
|apply | |
|Sections 1 to 4 |Matters that are dealt with |
|[paragraph 115(a)]|under these sections are dealt |
| |with by Part 1 of the FHSA Bill |
| |2008. |
|Section 10A |This section defines |
|[paragraph 115(a)]|interdependency for the purposes|
| |of determining release of |
| |superannuation benefits. As |
| |there is no early release of |
| |FHSA benefits unless the |
| |benefits are first transferred |
| |to superannuation, this |
| |definition is not necessary. To|
| |avoid confusion or unintended |
| |consequences, this section will |
| |not apply. |
|Parts 2A and 2B |Parts 2A and 2B relate to |
|[paragraph 115(b)]|licensing of trustees and |
| |registration of superannuation |
| |entities respectively. |
| |Trustees are separately |
| |authorised under Division 1, |
| |Part 7 of the FHSA Bill 2008, |
| |after already having met the |
| |requirements of Part 2A of the |
| |SIS Act. Therefore, Part 2A is |
| |not necessary. |
| |Trustees are not required to |
| |register their FHSA trusts, |
| |therefore Part 2B will not apply|
| |(trustees are required to notify|
| |APRA when they establish a new |
| |trust under subsection 254(1) of|
| |the SIS Act, as it applies under|
| |the FHSA Bill 2008). |
|Part 3 [paragraph|Part 3 relates to operating |
|115(b)] |standards. APRA will have the |
| |power to create prudential |
| |standards that apply to FHSA |
| |trusts and their trustees. To |
| |avoid duplication and |
| |complexity, there will be no |
| |operating standards under the |
| |FHSA Bill 2008. |
|Part 5 [paragraph|Part 5 relates to complying fund|
|115(c)] |status. There will be no |
| |requirement for FHSA trusts to |
| |maintain a complying fund |
| |status. |
|Section 54 |Section 54 relates to approved |
|[paragraph 115(d)]|deposit funds and is not |
| |relevant for FHSA trusts. |
|Section 55A and |Section 55A and subsection |
|subsection 59(1A) |59(1A) relate to cashing out |
|[paragraph 115(d)]|benefits after a member's death.|
| |It is intended that general |
| |trust law and estate law will |
| |govern the payment of benefits |
| |after a member's death, rather |
| |than make specific rules on this|
| |issue. As such section 55A and |
| |subsection 59(1A) will not |
| |apply. |
|Part 7 (except for|Some provisions in Part 7 will |
|sections 65 and |not apply. This is because |
|66, subsections |these provisions of Part 7 |
|67(1), (2), (3) |relate to |
|and (7) and |superannuation-specific |
|section 68) |requirements, and these are not |
|[paragraph 115(e)]|relevant for FHSAs. |
| |Only sections 65 and 66, |
| |subsections 67(1), (2), (3) and |
| |(7) and section 68 will apply. |
| |Section 65 prohibits lending to |
| |members of the fund. |
| |Section 66 prohibits trustees |
| |from acquiring certain assets |
| |from members of the fund. |
| |Section 67 prohibits trustees |
| |from borrowing, subject to |
| |certain exceptions. The |
| |exception relating to instalment|
| |warrants, in subsection 67(4A), |
| |will not apply as FHSA trustees |
| |will not be permitted to invest |
| |in instalment warrants. |
| |Section 68 prohibits victimising|
| |trustees that are trustees of |
| |employer-sponsored funds. If a |
| |trustee of an FHSA trust is also|
| |trustee of an employer-sponsored|
| |fund, it is still necessary to |
| |protect the trustee from |
| |victimisation under the FHSA |
| |Bill 2008. |
|Part 8 (except for|Some provisions of Part 8, which|
|sections 69, 70B, |relates to in-house assets, will|
|70C, 70D, 70E, |not apply to FHSA trusts. The |
|71D, 71E, 73, 75, |provisions that will not apply |
|83, 84 and 85; and|are historical or transitional |
|section 71) |provisions, and have no current |
|However, |application. As such, these |
|paragraph 71(1)(c)|'spent' provisions have been |
|will not apply |disapplied. |
|[paragraph 115(f)]|All other relevant provisions of|
| |Part 8 will apply, as these |
| |provisions establish the |
| |prohibition against acquiring |
| |in-house assets and certain |
| |exemptions from this |
| |prohibition. |
| |For example, section 71 defines |
| |in-house assets, section 75 |
| |provides the formula for |
| |calculating the level of |
| |in-house assets and section 83 |
| |establishes the maximum level of|
| |new in-house assets that a fund |
| |can hold. These provisions are |
| |relevant where an FHSA trust |
| |holds an asset that would be an |
| |in-house asset. |
| |Paragraph 71(1)(c) will not |
| |apply, as it relates to |
| |superannuation funds investing |
| |through pooled superannuation |
| |trusts. As an FHSA trust is not|
| |a superannuation fund, trustees |
| |of FHSA trusts will not be able |
| |to invest through pooled |
| |superannuation trusts. To avoid|
| |doubt, this paragraph will not |
| |apply to FHSA trusts. |
|Part 9 [paragraph|Part 9, which establishes equal |
|115(g)] |representation rules for |
| |trustees of employer-sponsored |
| |fund, will not apply. If an |
| |FHSA trustee is also a trustee |
| |of an employer-sponsored fund, |
| |the rules under Part 9 would |
| |already apply under the SIS Act,|
| |and it is not necessary to |
| |replicate these rules under the |
| |FHSA Bill 2008. |
|Parts 10 and 11 |Part 10, containing provisions |
|[paragraph 115(g)]|that only apply to approved |
| |deposit funds, and Part 11, |
| |containing provisions that only |
| |apply to pooled superannuation |
| |trusts, will not apply. Neither|
| |Part is relevant for FHSA |
| |trusts. |
|Sections 104, 107,|Section 104 imposes the |
|108 of Part 12 and|requirement to maintain records |
|sections 117 and |of change of trustees. Sections|
|118 of Part 14 |107 and 108 establish rules for |
|[paragraph 115(h)]|appointing member |
| |representatives and independent |
| |directors to trustees of |
| |employer-sponsored funds. |
| |Section 118 requires all |
| |individuals who are appointed as|
| |a trustee to consent to the |
| |appointment. |
| |As these requirements already |
| |apply to trustees under the SIS |
| |Act, there is no need to |
| |replicate these requirements |
| |under the FHSA Bill 2008. |
| |Section 117 establishes when |
| |amounts may be paid out of an |
| |employer-sponsored fund to an |
| |employer-sponsor. As FHSA |
| |trusts will not have employer |
| |sponsors, this section is not |
| |relevant for FHSA trusts. |
|Parts 24 and 24A |Part 24 establishes a facility |
|[paragraph 115(i)]|for superannuation funds to pay |
| |benefits to eligible rollover |
| |funds. As FHSAs are not |
| |superannuation products, |
| |eligible rollover funds will not|
| |be able to accept payment of |
| |benefit from an FHSA trust |
| |without breaching the sole |
| |purpose test. |
| |Part 24A establishes |
| |transitional arrangements for |
| |payment into eligible rollover |
| |funds and has no meaning in |
| |relation to FHSA trusts. |
|Part 24B |Part 24B establishes a |
|[paragraph 115(i)]|regulatory framework for small |
| |APRA funds, and has no meaning |
| |in relation to FHSA trusts that |
| |are subject to the same |
| |regulatory framework as public |
| |offer superannuation funds. |
|Part 25A |Part 25A, which contains |
|[paragraph 115(i)]|provisions in relation to TFNs, |
| |will not apply because the FHSA |
| |Bill 2008 applies common |
| |requirements relating to TFNs to|
| |all FHSA providers. |
|Sections 337A, |Section 337A requires trustees |
|342, 349, 349A and|to give effect to arbitration |
|353 of Part 30 |agreements. |
|[paragraph 115(j)]|Section 342 creates transitional|
| |arrangements for pre-1998 |
| |funding credits and debits. |
| |Section 349 provides that 'this |
| |Act and regulations' are subject|
| |to superannuation orders, which |
| |allow the Government to recover |
| |superannuation benefits where an|
| |individual has been charged with|
| |a fraud offence. |
| |These sections are not relevant |
| |for FHSAs. |
| |Section 349A establishes that |
| |superannuation benefits are |
| |subject to the Bankruptcy Act |
| |1966, and section 353 enables |
| |the Governor-General to make |
| |regulations under 'this Act'. |
| |As the FHSA Bill 2008 already |
| |contains provisions that allows |
| |payment out of FHSAs in |
| |accordance with the Bankruptcy |
| |Act 1966 and allows the |
| |Governor-General |
| |regulation-making powers, these |
| |provisions are not necessary. |
|Part 32 |Part 32 creates transitional |
|[paragraph 115(k)]|arrangements in relation to |
| |TFNs, which is not relevant for |
| |FHSAs opened on or after 2008. |
Modification provision
354. Section 116 modifies references and concepts in the SIS Act so that
they become references and concepts that are relevant for the FHSA
Bill 2008.
355. While the basic application provision applies the SIS Act
requirements to the equivalent persons or entities under the FHSA
Bill 2008, references within the SIS Act to requirements, functions
or duties imposed by other sections of the SIS Act or by the
Superannuation Industry (Supervision) Regulations 1994 (SIS
Regulations) are not affected by the application provision, and so
will still refer to the requirements, functions or duties under the
SIS Act or the SIS Regulations.
356. For provisions of the SIS Act that apply in accordance with
sections 114 and 115, these modification rules will ensure these
provisions apply correctly. In the following paragraphs and
examples, the term 'FHSA Act' is used to explain how the
modification rules would operate if the FHSA Bill 2008 is passed
and comes into force. Likewise, the term 'FHSA Regulations' is
used to explain how the modification rules would operate in
relation to the regulations that are proposed to be made under the
FHSA Bill 2008, if the FHSA Bill 2008 is passed and comes into
force.
. The first modification rule ensures that references to the
SIS Act become references to the 'FHSA Act'
[paragraph 116(a)].
. The second modification rule ensures that references to
the SIS Regulations become references to the 'FHSA
Regulations' [paragraph 116(b)].
. The third modification rule ensures that references to a
calendar year become references to a financial year
[paragraph 116(c)].
357. In addition, APRA will have the power to make prudential standards
in relation to the FHSA trusts [sections 121 and 122]. Some
modification rules ensure that prudential standards are reflected
in the regulatory framework, and breaches of prudential standards
will be enforceable under the regulatory framework.
. The fourth modification rule ensures that breaches of
prudential standards will be enforced in the same way as
breaches of the 'FHSA Act' [paragraph 116(d)];
. The fifth modification rule ensures that conduct
(including functions and powers) that are required or
authorised by, or otherwise performed in connection with,
the prudential standards are treated in the same way as
conduct (including functions and powers) that are required
or authorised by, or otherwise performed in connection
with the 'FHSA Act' [paragraph 116(e)].
References to 'this Act'
358. Without modification, references to 'this Act', as they apply under
the basic application provision, will still refer to the SIS Act.
As such, the first modification rule changes these references so
that they refer to the 'FHSA Act'. [Paragraph 116(a)]
359. Under this modification rule, all references to persons or entities
performing their functions or duties under or in accordance with
'this Act' will refer to performance of functions or duties under
or in accordance with the 'FHSA Act'. Likewise, all references to
breaches of 'this Act' will refer to breaches of the 'FHSA Act'.
1.
Section 35A requires trustees to keep accounts of the fund
in specific ways. Paragraph 35A(1)(d) requires trustees to
ensure that:
(d) the accounting records of the FHSA trust are kept in a
way that enables those accounts, statements and returns to
be conveniently and properly audited in accordance with this
Act.
Without modification, the reference 'this Act' still refers
to the SIS Act. By applying this modification rule, 'this
Act' will refer to the 'FHSA Act' and paragraph 35A(1)(d)
will require trustees to ensure that:
(d) the accounting records of the FHSA trust are kept in a
way that enables those accounts, statements and returns to
be conveniently and properly audited in accordance with the
'FHSA Act'.
2.
Section 131A allows the Regulator to refer matters to
professional associations of auditors or actuaries, where
specific triggers are met. Paragraph 131A(1)(d) allows the
Regulator to refer matters where the Regulator is of the
opinion that the approved auditor or actuary:
(d) is otherwise not a fit and proper person to be an
approved auditor or an actuary for the purposes of this Act.
By applying this modification rule, the reference 'this Act'
will become a reference to the 'FHSA Act' and paragraph
131A(1)(d) will allow the Regulator to refer matters where
the Regulator is of the opinion that the approved auditor or
actuary:
(d) is otherwise not a fit and proper person to be an
approved auditor or an actuary for the purposes of the 'FHSA
Act'.
References to 'the Regulations'
360. Without modification, references to 'the regulations', as it is
applied under the basic application provision, will still refer to
the SIS Regulations. As such, the second modification rule changes
these references so that they refer to the 'FHSA Regulations'.
[Paragraph 116(b)]
1.
Section 301 provides a definition of 'SIS officer' as:
a person exercising powers or performing functions under or
in relation to this Act or the regulations.
By applying the first and second modification rules, 'this
Act' will become a reference to the 'FHSA Act' and 'the
regulations' will become a reference to 'FHSA Regulations'.
The definition will become:
a person exercising powers or performing functions under or
in relation to the 'FHSA Act' or the 'FHSA Regulations'.
Also refer to the fourth and fifth modification rules.
Reference to 'year of income'
361. Under the third modification rule, references to a 'year of income'
in the SIS Act will be treated as references to a 'financial year',
as this ensures trustees will comply with audit and accounting
requirements, as well as requirements relating to in-house assets,
in accordance with the financial year. [Paragraph 116(c)]
Other modification rules
362. The fourth and fifth modification rules relate to APRA's power to
determine prudential standards that apply to trustees that are FHSA
providers. [Paragraphs 116(d) and (e)]
363. APRA's power to make prudential standards in relation to FHSA
trusts and trustees, and the modifications that ensure the
prudential standards become part of the regulatory framework for
FHSA trusts and trustees, are explained below.
Prudential standards in relation to trustees and related modifications
364. APRA will have the power to make prudential standards in relation
to FHSA trusts [section 121]. This enables APRA to apply
consistent prudential standards to FHSA providers, where necessary.
Prudential standards made under this Division would only apply to
the FHSA trusts operated by an FHSA provider and not to their
superannuation entities.
365. Prudential standards assist to improve the clarity and certainty of
prudential regulation by providing additional detail on prudential
matters set out in the enabling legislation. Currently, standards
complement and reinforce the prudential requirements set out in the
Banking Act 1959, Insurance Act 1973 and Life Insurance Act 1995 by
specifying how the regulatory framework is intended to operate in
practice and APRA's expectations in overseeing that framework.
Standards enable key minimum requirements to be articulated at a
level of detail that would not be appropriate within principles-
based, enabling legislation.
366. Standards introduce greater flexibility into the prudential
framework as they can be more readily adjusted over time to respond
to developments in both domestic and international conditions,
industry best practice and broader structural changes in the
market. This enhances the effectiveness of prudential regulation
by ensuring that regulation remains relevant over time.
367. APRA will have the flexibility to make, vary or revoke prudential
standards that apply to a single trustee that is an FHSA provider,
a class of trustees that are FHSA providers or all trustees that
are FHSA providers. This flexibility allows APRA to make
discretionary decisions under its prudential standards, including
discretions to approve, impose, adjust or exclude specific
prudential requirements in relation to one or more specified
trustees that are FHSA providers. [Subsections 121(1), (2) and
(4)]
368. A prudential standard must be consistent with the 'FHSA Act', the
'FHSA Regulations' and the Financial Sector (Collection of Data)
Act 2001. [Subsection 121(3)]
369. Generally, prudential standards that do not apply to one or more
specified trustees are legislative instruments, and are therefore
subject to the requirements of the Legislative Instruments Act
2003. This Act requires prudential standards that are legislative
instruments to be registered on the Federal Register of Legislative
Instruments. [Subsection 121(8)]
370. However, a standard, variation or revocation of the standard that
applies to one or more specified trustees is not a legislative
instrument for the purposes of section 5 of the Legislative
Instruments Act 2003. This is because it is an administrative
decision that applies the law to an entity and not to a class of
entities, it does not create an exemption from the requirements of
the Legislative Instruments Act 2003. [Subsection 121(7)]
371. APRAs decisions in relation to a standard, variation or revocation
of the standard that applies to one or more specified trustees that
are FHSA providers are subject to merits review. [Section 74]
372. The modification rules in sections 116 and 117 modify the
prudential framework that applies to trustees that are FHSA
providers, by specifying how the new prudential standards will
apply to these trustees and how breaches of these prudential
standards will be enforced. These are explained below.
'conduct (including an omission) that is inconsistent with the
prudential standards'
373. Under the fourth modification rule in section 116, a breach of
prudential standards made under section 121 will be enforced in the
same way as a breach of the FHSA Bill 2008. Other conduct contrary
to prudential standards will also be treated in the same way as
conduct contrary to the FHSA Bill 2008. [Paragraph 116(d)]
374. This modification rule ensures that if a person fails to fulfil any
functions or duties imposed under the prudential standards, or
breaches a requirement in the prudential standards, the failure or
breach can be enforced in the same way as breaches of the FHSA Bill
2008. In effect, all provisions that refer to breaches of the
'FHSA Act' or circumstances inconsistent with the 'FHSA Act' will
refer to breaches of the 'FHSA Act' and prudential standards, or
circumstances inconsistent with the 'FHSA Act' and prudential
standards.
1.
Paragraph 131A(1)(a) enables the Regulator to refer matters
to professional associations where the Regulator is of the
opinion that the approved auditor or actuary has failed to
carry out or perform adequately and properly:
(i) the duties of an auditor or an actuary under this Act
or the regulations;
Applying this modification rule, if a person failed to
perform their functions under the prudential standards, it
would be treated in the same way as a breach of the 'FHSA
Act'. In effect, paragraph 131(1)(a) would allow the
Regulator to refer matters where the Regulator is of the
opinion that an approved auditor or actuary has failed to
carry out or perform adequately and properly:
(i) the duties of an auditor or an actuary under the 'FHSA
Act', the prudential standards or the 'FHSA Regulations';
'conduct (including an omission) that is required or authorised by,
or otherwise performed in connection with, the prudential
standards'
375. Under the fifth modification rule, functions, obligations and
powers imposed by prudential standards will apply to persons and
entities in the same way as functions, obligations and powers
imposed by the FHSA Bill 2008. Likewise, where a prudential
standard authorises or permits particular conduct, this will apply
as though the conduct is authorised or permitted by the FHSA Bill
2008.
376. The concept 'conduct (including an omission) that is required or
authorised by, or otherwise performed in connection with, the
prudential standards' is a broad one, which includes all provisions
that refer to persons or entities' functions, duties and powers.
It includes provisions that enable (but do not require) a person to
take action, such as:
. an auditor or actuary may report certain information to
APRA under section 130 of the SIS Act;
. APRA may accept enforceable undertakings in connection
with a matter that is related to APRA's functions and
powers under section 262A of the SIS Act; and
. a person or an entity that takes action in accordance with
the prudential standards, the entity would not be liable
in civil proceedings under section 341 of the SIS Act and
section 127 of the FHSA Bill 2008.
Additional references to prudential standards
377. Other provisions of the SIS Act, when applied to FHSAs, should also
refer to prudential standards. Section 117 makes the following
modifications to the SIS Act.
378. The first modification inserts a reference to 'prudential
standards' in paragraph 130A(a), so that the section will
relevantly read, the auditor or actuary of an FHSA trust may give
to the Regulator information about the FHSA trust or a trustee of
the FHSA trust obtained in the course of, or in connection with,
the performance by the person of audit or actuarial functions under
the 'FHSA Act' and the prudential standards. [Subsection 117(2)]
379. The second modification inserts a new paragraph 133(1)(d),
referring to the prudential standards, so that the section will
relevantly read, the Regulator may suspend or remove a trustee of
an FHSA trust, if the trustee has breached a prudential standard or
the trustee's authorisation as an FHSA provider has been cancelled.
[Subsection 117(3)]
380. The third modification inserts a new paragraph 135(1)(ca),
referring to the prudential standards, so that the section will
relevantly read, the Regulator may determine the terms and
conditions of the appointment of the acting trustee, despite
anything in the prudential standards. [Subsection 117(4)]
381. The fourth modification inserts a reference to 'prudential
standards' in paragraph 139(b), so that the section will relevantly
read, while a person is acting as a trustee under Part 17 of the
SIS Act (as it applies in the 'FHSA Act'), the entity's governing
rules, the 'FHSA Act', the prudential standards, the 'FHSA
Regulations' and any other law apply in relation to the person as
if the person were the trustee. [Subsection 117(5)]
382. The fifth modification inserts a reference to 'prudential
standards' in subsection 320(1), so that the section will
relevantly read, the Regulator may intervene in any proceeding
relating to a matter arising under the 'FHSA Act' or the prudential
standards. [Subsection 117(6)]
383. The last modification inserts a reference to 'prudential standards'
in section 341, so that the section will relevantly read, a person
is not liable in civil action or civil proceedings in relation to
an act done in fulfilment of an obligation imposed by the 'FHSA
Act', the prudential standards or the 'FHSA Regulations'.
[Subsection 117(7)]
Capital requirements for custodians
384. Section 118 modifies the capital requirement for custodians of FHSA
trusts, to ensure that the custodian's approved guarantee can also
cover their activities as custodian of FHSA trusts. This mirrors
the modifications to trustee's capital requirements in subsections
93(3) and (4).
385. A custodian would satisfy its capital requirements under
paragraph 123(1)(b) of the SIS Act (as it applies under subsection
114(2)) if it has an approved guarantee of $5 million [Regulation
13.19 of the SIS Regulations] and the trustee of the FHSA trust is
also entitled to the benefit of the approved guarantee in relation
to the custodian's FHSA activities.
386. In effect, the custodian would be required to amend its deed of
approved guarantee to ensure that the guarantee also applies to its
activities as a custodian of FHSA trusts, but is not required to
obtain an additional amount under its approved guarantee.
[Subsection 114(2) and section 118]
Transfer of First Home Saver Account trusts
387. Section 119 modifies the transfer of fund (or successor fund)
mechanism under the SIS Act, as it applies under subsection 114(2).
388. An FHSA trust cannot be transferred to an approved deposit fund,
because an FHSA is not a superannuation product. [Subsection
114(2) and paragraph 119(b)]
389. The receiving FHSA trust must have a trustee that is also an
authorised FHSA provider. [Subsection 114(2) and paragraph 119(c)]
Other aspects of the prudential regulation framework for trustees
390. Some other aspects of the prudential framework for FHSA trustees
are explained below.
Civil penalty provisions and criminal offences
391. Part 21 of the SIS Act, and criminal offences in the SIS Act, apply
to FHSA trusts and their trustees in accordance with the basic
application rules in section 114 and modification rules in
section 116.
392. If these provisions are not automatically excluded by the rules in
section 114 or disapplied by section 115, they would continue to be
a civil penalty provision or a provision carrying a criminal
offence in relation to the FHSA Bill 2008.
393. In effect, a contravention civil penalty provisions would entail
the consequences of breaching a civil penalty provision under Part
21 of the SIS Act, as it applies in the FHSA Bill 2008; and
trustees and other persons can commit an offence if they breach a
provision of the SIS Act, as it applies in the FHSA Bill 2008, and
the provision carries an offence.
Review of decisions
394. The definition of 'reviewable decision' and review procedures in
sections 10, 344 and 355 of the SIS Act apply to FHSA trusts and
their trustees, in accordance with the basic application rules in
section 114 and the modification rules in section 116. As such, if
these provisions are not automatically excluded by section 114 or
disapplied by section 115, APRA continues to be able to make
decisions in relation to the FHSA Bill 2008 and these decisions
continue to be subject to review.
395. APRA's decisions in relation to authorisation and prudential
standards that apply to specified trustees are not listed in the
definition of 'reviewable decisions' in section 10 of the SIS Act.
These decisions are subject to review under Subdivision 4, Division
2A of Part 5. The review procedures for these decisions are
consistent with the review procedures under the SIS Act.
396. Arrangements for the review of decisions made by the Commissioner
of Taxation are outlined in Chapter 8.
Disqualification
397. Parts 15 and 16 of the SIS Act apply to trustees of FHSA trusts,
their responsible persons, as well as auditors, actuaries,
custodians and investment managers of FHSA trusts.
398. Individuals and bodies corporate may be disqualified under these
Parts, in accordance with the basic application rules in section
114 and the modification rules in section 116. These will be
disqualifications under the FHSA Bill 2008 rather than under the
SIS Act.
399. However, some disqualification criteria, in relation to personal or
corporate bankruptcy and conviction for an offence in respect of
dishonest conduct, will be common under the FHSA Bill 2008 and the
SIS Act. As such, an individual or body corporate disqualified
because of bankruptcy or conviction for such an offence will be
disqualified under both the FHSA Bill 2008 and the SIS Act.
400. A disqualification under the FHSA Bill 2008 carries consequences
for the disqualified person. For example, an individual commits an
offence if the individual acts as a responsible person of a
trustee, investment manager or custodian while disqualified
[section 126K of the SIS Act, as it applies under
subsection 114(2)]; where a trustee becomes a disqualified person,
APRA may cancel its authorisation as an FHSA provider [paragraph
107(2)(b)]; and a person that acts as the custodian or investment
manager of an FHSA trust while disqualified also commits an offence
[section 126 of the SIS Act, as it applies under subsection
114(2)].
Exemptions and modifications
401. Part 29 applies to FHSA trusts and their trustees, in accordance
with the basic application rules in section 114 and modification
rules in section 116. As such, APRA can determine exemptions and
modifications in relation to FHSA trusts and trustees under the
FHSA Bill 2008 independently of exemptions and modifications
determined under the SIS Act.
Reporting under the Financial Sector (Collection of Data) Act 2001
402. The Financial Sector (Collection of Data) Act 2001 requires an
entity that is a 'body regulated by APRA', within the meaning of
the APRA Act, to report data in accordance with the Financial
Sector (Collection of Data) Act 2001. ADIs and life insurance
companies are already bodies regulated by APRA within the meaning
of the APRA Act, and trustees of FHSA trusts are also defined as a
'body regulated by APRA' [Schedule 3, item 6, FHSA (Consequential
Amendments) Bill 2008]. As such, all FHSA providers will be
required to report data in accordance with reporting standards
determined under section 13 of the Financial Sector (Collection of
Data) Act 2001.
Investment management for investment-linked First Home Saver Accounts
403. Investment-linked FHSAs differ from other investment-linked
products generally offered by trustees and life insurance
companies. FHSAs are likely to be much shorter term investment
products and have less predictable withdrawal patterns. In
addition, given that the purpose of FHSAs is to save for a first
home, account holders are likely to have a greater aversion to risk
and lower tolerance for capital losses, relative to superannuation
and life insurance customers.
404. Principles-based investment rules will apply to investment-linked
FHSAs to ensure that FHSA investments reflect the purpose and
nature of the accounts. These rules will not apply to accounts
that are offered by banks, building societies and credit unions as
these must be capital-guaranteed and do not carry the same risks as
investment-linked accounts.
First Home Saver Accounts offered by trustees
405. The investment rules established under paragraph 52(2)(f) of the
SIS Act apply by reference to FHSA trusts operated by trustees in
accordance with subsection 114(2) [subsection 120(1)]. Additional
investment rules have also been imposed to reflect the purpose and
nature of FHSAs.
406. The investment rules require that the investment strategy has
regard to the entire circumstances of the entity. The trustee must
have regard to the risk of capital loss, the likely return from the
underlying investments, the liquidity requirements, and the ability
to discharge financial liabilities.
407. As FHSAs can be withdrawn within four financial years after
opening, they are likely to be much shorter term investment
products than superannuation. Unlike most superannuation accounts,
FHSAs will generally be less able to recover financial losses
caused by short-term market fluctuations prior to the savings being
withdrawn for a first home deposit. A new covenant, subparagraph
52(2)(f)(v), is inserted into the SIS Act covenants as they apply
to trustees in the FHSA Bill 2008, requiring investment strategies
to have regard to the risk of capital loss given the relatively
shorter term investment horizon of FHSAs as reflected in the FHSA
payment rules. [Subsection 120(3)]
408. In having regard to the risk of capital losses, these requirements
should not prevent trustees from formulating investment strategies
that may be suited to individuals with a longer investment horizon
than the minimum contemplated by the payment rules, provided that
strategies take into account the possibility that savings could be
withdrawn once the minimum requirements are met.
Investment choice
409. Providers may develop more than one investment option and allow
FHSA holders to choose between options. Providers offering FHSA
holders a choice between different investment options must
formulate an investment strategy for each option, in place of a
single strategy for the entity [subsection 120(2)], that separately
complies with subparagraphs 52(2)(f)(i) to (v) of the SIS Act as it
applies under subsection 114(2) [subsection 120(4)]. As a
consequence of these amendments, subsection 52(4) of the SIS Act
becomes redundant and is omitted [subsection 120(5)].
410. FHSA holders may choose between investment options formulated by
the FHSA provider in accordance with the investment rules. Where
an FHSA holder directs the trustee to adopt a particular investment
option for the FHSA holder's investments, the trustee is exempted
from the requirement not to be subject to direction.
[Subsection 120(7)]
411. In accordance with section 55 of the SIS Act, the trustee has a
defence to an action for loss or damage suffered by a person as a
result of an investment made by the trustee, if the investment is
made in accordance with paragraph 52(2)(f) of the SIS Act. For
FHSAs this defence is extended to loss or damage suffered by a
person as a result of an investment made by the trustee, if the
investment is made in accordance with paragraph 52(2)(fa) of the
SIS Act as it applies under subsection 114(2). [Subsection 120(6)]
Accounts offered by life insurance companies
412. Further investment rules will apply to FHSAs that are offered as
investment-linked life policies in addition to those already in
place for statutory funds under the Life Insurance Act 1995.
[Section 124]
413. These additional investment rules apply only to life policies that
are offered as investment-linked contracts, within the meaning of
section 14 of the Life Insurance Act 1995 [subsection 124(1)].
Balances of FHSAs offered as investment account policies, by
definition, cannot reduce in value otherwise than by amounts
withdrawn by the account holder or by charges payable under the
contract. Accordingly, they are not subject to additional
investment rules due to their low risk nature.
414. Providers of investment-linked life policies must have regard to
the diversification of the class or group of assets underlying the
policies [paragraph 124(2)(a)]. Consideration of diversification
both within and among asset classes is important to manage the
investment risk associated with investment-linked accounts.
415. Investment-linked life policies are required to have particular
regard to the risk of capital loss given the relatively shorter
term investment horizon of FHSAs. [Subparagraph 124(2)(b)(i)]
416. The liquidity of the class or group of assets underlying investment-
linked life policies is required to have regard to the
unpredictability in cash flow of FHSAs. [Subparagraph
124(2)(b)(ii)]
417. If an investment-linked life policy allows an account holder to
choose between different investment options, each option must
conform with the additional investment rules specified in section
124. [Subsection 124(3)]
Protection of small balances
418. FHSA providers are required to ensure that fees do not exceed
investment earnings in any given year for accounts that have small
balances.
419. The provisions are modelled on the 'member protection' rules that
protect small superannuation balances from being eroded by fees and
charges outlined in the SIS Regulations.
420. If an FHSA balance is less than $1,000 an FHSA provider must not
make a payment of fees if that payment would exceed the total
earnings for that FHSA for the period. [Subsection 125(1)]
421. An FHSA provider is not required to limit fees if the:
. FHSA holder consents in writing;
. the fees are calculated based on the FHSA holder's units
in an FHSA trust; or
. the FHSA is an FHSA policy issued by a life insurance
company.
[Subsection 125(2)]
422. An FHSA provider is also not required to limit fees for the period
if the fees are apportioned based on the FHSA provider's total:
. earnings for all FHSAs it provides; or
. balances for all FHSAs it provides.
[Subsection 125(3)]
423. FHSA providers are not able to avoid the small balance rules by
delaying fees until a subsequent period. For example, by charging
fees in a later period where the FHSA balance will have increased
to above $1,000.
424. An FHSA provider commits an offence if it fails to comply with
these requirements. The penalty is up to 100 penalty units.
[Subsection 125(1)]
425. If an FHSA provider fails to comply with these rules, the fees paid
are still valid. [Subsection 125(4)]
Chapter 6
Taxation
Outline of chapter
426. Schedule 1 to the First Home Saver Accounts (Consequential
Amendments) Bill 2008 (FHSA (Consequential Amendments) Bill 2008)
amends the Income Tax Assessment Act 1936 (ITAA 1936), the Income
Tax Assessment Act 1997 (ITAA 1997), the Taxation Administration
Act 1953 (TAA 1953) and the Income Tax Rates Act 1986 to establish
the tax treatment of First Home Saver Accounts (FHSAs), which has
the following main features:
. individual contributions to FHSAs are not taxed because
they can only be made out of post-tax income;
. Government contributions into accounts are not taxed;
. earnings on FHSAs are taxed to the account provider at the
statutory rate of 15 per cent rather than to the
individual account holders at their marginal income tax
rates; and
. withdrawals to purchase a first home are not taxed and
other withdrawals are generally not taxed.
427. There is also a tax, called the FHSA misuse tax, which applies to
clawback benefits obtained by individual account holders who
improperly use the accounts. The tax is imposed by the Income Tax
(First Home Saver Accounts Misuse Tax) Bill 2008 (Income Tax (FHSA
Misuse Tax) Bill 2008).
Context
428. Under the existing law, where an individual invests money while
saving for a first home, the earnings on the investments are
normally assessable income of the individual investor and
consequently taxed according to the normal rate scale applying to
the individual. The amounts that an individual puts in (or
contributes) to an investment such as a bank account are, under
ordinary income tax principles, normally capital in character and
not deductible. Similarly, the amounts that an individual
withdraws from a mere investment are also normally capital receipts
and, therefore, not assessable income.
429. The Government proposes that earnings on FHSAs be taxed in a
similar way to the earnings of superannuation funds. The earnings
of superannuation funds are generally taxed to the trustee of the
fund at a rate of 15 per cent. Authorised deposit-taking
institutions (ADIs) and life companies are currently taxed on a
similar basis to superannuation funds on their superannuation or
retirement savings account business.
Current taxation of authorised deposit-taking institutions and life
companies
430. ADIs do not currently conduct superannuation business but may
provide retirement savings accounts, which are accounts that
provide benefits on retirement or death and that are treated, for
various purposes, similarly to superannuation funds. The earnings
on the retirement savings accounts that ADIs offer are taxed in a
special way that has the object of treating retirement savings
account activities similarly to those of superannuation funds. The
retirement savings account earnings are calculated separately from
earnings from standard activities and taxed to the ADI, instead of
the retirement savings account holder, at 15 per cent.
431. The superannuation activities of life insurance companies are taxed
under special provisions that have the object of treating those
activities in a broadly comparable way to those of superannuation
funds. The complying superannuation class of taxable income is
calculated separately and taxed at 15 per cent. The special
provisions segregate the assets of the superannuation business from
the other business of the life insurance company through a feature
called the virtual pooled superannuation trust (virtual PST).
Summary of new law
432. Schedule 1 to the FHSA (Consequential Amendments) Bill 2008 sets
out the taxation treatment of FHSAs.
433. Individual contributions into accounts are only from post-tax
income and consequently are not taxed to the account provider. A
Government contribution for an individual account holder, is not
assessable income and is not exempt income.
434. The earnings on the account are not assessable income and are not
exempt income in the hands of the account holder. An amount
withdrawn from an FHSA to purchase a first home is also not
assessable income of the individual account holder. Finally, an
FHSA holder does not make any capital gain or loss from a capital
gains tax (CGT) event happening to their interest in the account.
435. The earnings on FHSAs are taxed to FHSA providers at 15 per cent.
For each of the three types of providers - trustees of FHSA trusts,
ADIs and life companies - this is done by applying broadly the same
rules that currently apply to superannuation or retirement savings
account activities.
436. Accordingly, the earnings of an FHSA trust are taxed similarly to
those of superannuation funds. The FHSA earnings of ADIs are taxed
like their earnings from retirement savings account activities.
The FHSA earnings of life companies are taxed like their
superannuation earnings, on a 'virtual PST' basis.
437. Where an account holder does not meet conditions of eligibility,
withdrawal or occupancy of the home they purchase, a misuse tax
applies to ensure that they do not improperly benefit from their
use of an FHSA. The tax claws back Government contributions paid
for their benefit. It also includes a component that is designed
to broadly neutralise the maximum benefit they may have obtained
from having the earnings of the FHSA taxed at 15 per cent instead
of at their own individual tax rates.
Detailed explanation of new law
Individual contributions into accounts
438. During the 2007 Federal election campaign it was proposed that
individuals would be able to contribute to FHSAs through 'salary
sacrifice'; that is, by making pre-tax contributions. After the
election the Government formally approved the establishment of
FHSAs. It also decided to deliver a streamlined up-front
Government contribution directly into accounts rather than through
a more complex system of salary sacrificing. (The Treasurer's and
Minister for Housing's joint Press Release No. 004 of
4 February 2008; and the Treasurer's Press Release No. 040 of
13 May 2008.)
439. All individual contributions are post-tax. That is, an individual
is not able to reduce their income tax by making contributions to
an FHSA through salary sacrificing arrangements.
440. No amendment of the income tax law is necessary to produce this
result. The constructive receipt rule in subsection 6-5(4) of the
ITAA 1997 is designed to ensure that if an amount is applied or
dealt with in any way on an entity's behalf or at an entity's
direction, the entity is taken to have received the amount
(ordinary principles of tax accounting are not limited by
subsection 6-5(4) and would ensure the same result). This
provision ensures that money paid to an individual's bank account
(at the individual's direction or on the individual's behalf) are
treated as received by the entity and therefore as ordinary income
if the money is a reward for employment. Similarly, if any money
was paid to an FHSA under a salary sacrifice agreement, they would
be treated as received by an entity and therefore as ordinary
income.
441. Nor is any amendment to the fringe benefits tax law necessary. The
definition of fringe benefit in subsection 136(1) of the Fringe
Benefits Tax Assessment Act 1986 excludes (in paragraph (f)) '...a
payment of salary or wages...'. The definition of salary or wages
includes a payment from which an amount must be withheld under
section 12-35 (payment to an employee) of Schedule 1 to the TAA
1953. The pay as you go (PAYG) withholding provisions include a
constructive payment provision (section 11-5) that corresponds to
the constructive receipt rules in Division 6 of the ITAA 1997. The
result is that an amount paid by an employer to an employee's FHSA
as a reward for employment would be subject to PAYG withholding and
not be a fringe benefit - even if it purported to be by way of
salary sacrifice.
442. Where the FHSA is a bank account or FHSA trust, individual
contributions are not assessable income in the hands of the account
provider. No amendment is needed to achieve this result. Under
ordinary principles the contributions are capital receipts.
443. For individual contributions where the FHSA is a life policy, the
existing law produces an equivalent result, so again no amendment
is needed. All premiums received by a life insurance company are
included in assessable income (paragraph 320-15(1)(a) of the ITAA
1997). In the case of policies held in the life insurance
company's virtual PST, this amount of assessable income is
allocated to the complying superannuation/FHSA class of taxable
income (paragraph 320-137(2)(a)). However, for investment-type
policies, a deduction is allowed for the capital component of the
premium. In the case of a policy that is held in the life
insurance company's virtual PST, the amount of the deduction is
equal to the amount of the premium that is transferred to the
virtual PST, less any risk component of that premium (section 320-
55). This deduction is allocated to the complying
superannuation/FHSA class of taxable income (paragraph 320-
137(4)(a)).
Government contributions
444. As explained in Chapter 3 - Government Contributions, the
Commissioner of Taxation (Commissioner) may pay a Government
contribution to an individual's FHSA, to their interest in a
complying superannuation plan, to the individual themselves or to
the individual's legal personal representative. In all these cases
the amount of the contribution is neither assessable income nor
exempt income of the individual. [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, item 31; subsection 345-50(3)
of the ITAA 1997]
445. Government contributions are also not assessable income of an FHSA
provider. No specific provision is needed to produce this outcome
because the contributions are not ordinary income of the account
provider.
Withdrawals
446. A payment from an FHSA is neither assessable income nor exempt
income of the individual account holder. The amount withdrawn is
essentially the accumulated capital of the account holder and,
therefore, not ordinary income. However, it is possible that the
amount could be assessable by virtue of a specific provision about
assessable income (eg section 26AH of the ITAA 1936, which is about
bonuses and other amounts received on certain short-term life
insurance policies). Consequently, a specific provision has been
included to ensure that a payment from an FHSA is non-assessable
non-exempt income. [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, item 31; subsection 345-50(2) of the ITAA
1997]
447. In some circumstances (eg, where the FHSA is in the form of an
interest in a trust), the withdrawal of money from an FHSA may
involve a CGT event. No capital gain or capital loss is brought to
account in those circumstances. To ensure that result, there is a
specific rule that any capital gain or loss which the holder of an
FHSA makes from a CGT event happening to the FHSA is disregarded.
[Schedule 1 to the FHSA (Consequential Amendments) Bill 2008, item
31; subsection 345-50(4) of the ITAA 1997]
448. However, if the account holder has used an FHSA to obtain benefits
to which they were not properly entitled and an amount is paid from
the FHSA to the account holder, an FHSA misuse tax may apply (see
discussion of the FHSA misuse tax later in this chapter).
Payment from a First Home Saver Account contributed to superannuation
449. A payment made from an FHSA as a contribution to a superannuation
fund is not assessable income of the recipient superannuation fund.
The amounts in an FHSA are all post-tax, so there is no
justification to include contributions from the FHSA in the
superannuation fund's assessable income. Also, any Government
contributions paid directly to a superannuation interest of the
holder in a superannuation fund are not assessable income of the
superannuation fund. [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, item 24; section 295-171 of the ITAA 1997]
450. A contribution from an FHSA to a superannuation fund is included in
an individual's non-concessional contributions (under section 292-
90 of the ITAA 1997). This follows automatically from excluding
the contributions from assessable income, so there is no need for
further amendment.
451. No deduction or tax offset is available to either the account
holder or the FHSA provider for a contribution from an FHSA to a
superannuation fund. The existing law may already achieve this
result without amendment, but Division 290 of the ITAA 1997
(contributions to superannuation funds) is amended to put the
matter beyond doubt. [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, item 22; paragraphs 290-5(d) and (e) of the
ITAA 1997]
452. Amounts contributed from FHSAs to superannuation funds are not
eligible for the superannuation co-contribution for low income
earners. These amounts may already have benefited from a
Government contribution, so it would not be appropriate for the
individual to receive another. The definition of eligible personal
superannuation contribution in the Superannuation (Government Co-
Contribution for Low Income Earners) Act 2003 is amended to exclude
a payment made from an FHSA as a contribution to a superannuation
fund and any Government contributions. [Schedule 3 to the FHSA
(Consequential Amendments) Bill 2008, item 37; section 7 of the
Superannuation (Government Co-Contribution for Low Income Earners)
Act 2003]
Earnings
453. Earnings on FHSAs are taxed to the account provider at the
statutory rate of 15 per cent rather than to individual account
holders at their marginal income tax rates. Accordingly, an amount
of earnings on an FHSA is not assessable income and is not exempt
income of the individual account holder. [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, item 31; subsection 345-50(1)
of the ITAA 1997]
454. Each of the three types of account providers (FHSA trusts, ADIs and
life companies) has their own set of rules about taxation of
earnings. The provisions tax the earnings of an FHSA trust
similarly to those of superannuation funds. The FHSA earnings of
ADIs are taxed like their earnings from retirement savings account
activities and the FHSA earnings of life companies are taxed like
their superannuation earnings, on a virtual PST basis.
First Home Saver Accounts trusts
455. The trustee of an FHSA trust is liable to pay income tax on the
taxable income of the trust. The tax payable is worked out under
the core income tax rules (section 4-10 of the ITAA 1997) making
two assumptions. [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, item 31; subsections 345-5(1) and (2) of the
ITAA 1997]
456. The first assumption is that the trust is an Australian resident.
Consequently, ordinary and statutory income from sources both
within and outside Australia are taken into account and any tax
offsets dependent on being an Australian resident are also taken
into account.
457. The second assumption is that the trust is liable to pay income tax
(under the main liability provision in section 4-1 of the ITAA
1997) for the financial year. Without this assumption it would be
doubtful that the core income tax rules could apply to work out the
tax payable by a trustee on the trust's taxable income - a specific
provision setting out how to work out the liability would be
needed. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; subsection 345-5(2) of the ITAA 1997]
458. This approach produces a similar result to the provisions for
superannuation entities but is more streamlined because, unlike
superannuation entities, there is only one component of taxable
income. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; subsections 345-5(2) and (3) of the ITAA 1997]
459. In working out the FHSA trust's assessable income and deductions it
is necessary to take into account the special rules for FHSA
trusts. The gross tax payable on the taxable income is worked out
by applying the applicable rate, currently 15 per cent. The total
tax offsets of the FHSA trust are subtracted from the gross tax
payable on the taxable income to give the tax payable by the
trustee. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; subsection 345-5(3) of the ITAA 1997]
460. There are far fewer special rules for FHSA trusts than there are
for superannuation funds. A major reason for this is that, unlike
superannuation funds, there are no assessable contributions to an
FHSA.
461. However, there is an important special rule, which also applies in
calculating the liability of the trustee of a superannuation
entity. The capital gains and losses provisions are to be the
primary code for calculating gains and losses on CGT assets owned
by the FHSA trust. There are the same specified exceptions from
the primary code as for superannuation entities, which include
foreign exchange gains or losses, bank deposits, securities and
loans. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; section 345-10 of the ITAA 1997]
462. A trustee of an FHSA trust is added to the list of entities in
section 9-1 of the ITAA 1997 that work out their liability to pay
income tax in a special way. [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, item 8; section 9-1 of the
ITAA 1997]
Relationship with other trust provisions
463. The trustee of an FHSA trust is not liable to pay tax under the
standard trust rules in Division 6 of Part III of the ITAA 1936.
Similarly, those standard trust rules do not apply to include
amounts in the assessable income of an account holder that is a
beneficiary of an FHSA trust. Also, the trust loss rules in
Schedule 2F to the ITAA 1936 do not apply to FHSA trusts.
[Schedule 1 to the FHSA (Consequential Amendments) Bill 2008, items
4 and 7; sections 95AA and 272-100 of Schedule 2F to the ITAA 1936]
CGT discount
464. Assets held by an FHSA trust are eligible for the CGT discount of
one third. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, items 10 and 11; section 115-100 of the ITAA 1997]
465. Where an FHSA trust is a shareholder in a listed investment company
it will obtain a similar benefit to the discount capital gain
(through a deduction). [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, items 12 to 16; section 115-280 of the ITAA
1997]
Dividend imputation
466. Subdivision 207-A outlines the effect of receiving a franked
dividend for most taxpayers (including complying superannuation
funds). If the Subdivision applies, the taxpayer must include the
amount of the franking credit in its assessable income and is
entitled to a tax offset equal to the amount of that franking
credit (section 207-20).
467. Subdivision 207-B outlines the effect of receiving a franked
dividend for most trusts (other than complying superannuation
funds) and partnerships. If the Subdivision applies, franking
credits essentially flow through to the partners of the partnership
or the beneficiary of the trust.
468. Subject to some specified exceptions, a tax offset available under
Division 207 is a refundable tax offset (section 67-25).
469. For an FHSA trust, amendments are necessary to ensure that
Subdivision 207-A applies and Subdivision 207-B does not. To
ensure that Subdivision 207-A applies, paragraph 207-15(2)(a) is
amended so that it covers the trustee of a trust that is an FHSA
trust. Paragraph 207-35(1)(c) and section 207-45 are amended so
Subdivision 207-B does not cover the trustee of a trust that is an
FHSA trust. [Schedule 1 to the FHSA (Consequential Amendments)
Bill 2008, items 19 to 21; paragraphs 207-15(2)(a) and 207-35(1)(c)
and section 207-45 of the ITAA 1997]
470. Section 67-25 operates appropriately to make a tax offset available
under Division 207, a refundable tax offset.
Income Tax Rates Act 1986
471. The Income Tax Rates Act 1986 is amended so that the taxable income
of the FHSA trust is taxed at 15 per cent. [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008; item 52, section 30 of the
Income Tax Rates Act 1986]
Other amendments for First Home Saver Account trusts
472. To ensure that FHSA trusts receive treatment similar to
superannuation funds, there are also amendments to:
. the pooled development fund provisions [Schedule 1 to the
FHSA (Consequential Amendments) Bill 2008, item 5; section
124ZM of the ITAA 1936];
. the tracing rules for tax losses of companies [Schedule 1
to the FHSA (Consequential Amendments) Bill 2008, items 17
and 18; section 166-245 of the ITAA 1997]; and
. the PAYG instalment provisions [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, items 58 to 61;
subsections 45-120(2), 45-290(2), 45-330(2) and 45-370(2)
in Schedule 1 to the TAA 1953].
Authorised deposit-taking institutions
473. FHSA activities of ADIs are to be taxed on a similar basis to
retirement savings account activities. The earnings on the
retirement savings accounts that ADIs offer are taxed in a special
way that has the object of treating retirement savings account
activities similarly to those of superannuation funds. The
retirement savings account earnings are calculated separately from
earnings from standard activities (the retirement savings account
component of taxable income) and taxed to the ADI, instead of the
retirement savings account holder, at 15 per cent.
474. Similarly, an ADI that is an FHSA provider needs to calculate an
FHSA component of taxable income, to be taxed at 15 per cent. The
FHSA component is a separate component from the retirement savings
account component, although both are taxed at 15 per cent.
475. For an ADI that is a retirement savings account provider the method
of working out the liability of the retirement savings account
provider is modified to include the working out of the FHSA
component (as well as the retirement savings account and standard
components). [Schedule 1 to the FHSA (Consequential Amendments)
Bill 2008, item 23; subsection 295-10(2) of the ITAA 1997]
476. For an ADI that is an FHSA provider but not a retirement savings
account provider, the income tax liability is worked out by
reference to its taxable income under the core provision of the
income tax law (Division 4 of the ITAA 1997). The ADI's taxable
income has two components, the FHSA component and standard
component of taxable income. The gross tax payable is calculated
by applying the applicable tax rates from the Income Tax Rates Act
1986. A 15 per cent rate is applied to the FHSA component and the
standard company tax rate (currently 30 per cent) applied to the
standard component. Finally the ADI's tax offsets are subtracted
from the gross tax payable to give the tax payable by the ADI.
[Schedule 1 to the FHSA (Consequential Amendments) Bill 2008, item
31; section 345-15 of the ITAA 1997]
Calculating the First Home Saver Account component
477. The method of calculating the FHSA component is similar to that for
calculating the retirement savings account component but is simpler
because there is no need to include any contributions in assessable
income (for FHSAs, contributions are not taxed to the provider
because there are only post-tax contributions). The object of this
method is to work out the net earnings of the FHSA account holders,
so that they can be taxed at the rate of 15 per cent. The
calculation of the liability of the ADI on its normal activities -
including investing the funds obtained from FHSAs - is done in the
normal way.
478. The first step in working out the FHSA component is to add up all
the earnings (normally interest) credited to the FHSAs provided by
the provider during the year. It is then necessary to calculate
total fees and then subtract them from the total earnings to give
the FHSA component. Total fees are intended to cover any fee or
charge that the account holder must pay the ADI on the FHSA,
whatever its description or form, but not to cover taxes. The
standard component is the remaining part to the provider's taxable
income. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; section 345-20 of the ITAA 1997]
479. The ADI's FHSA component cannot exceed its taxable income. If the
amount worked out would otherwise exceed the provider's taxable
income, the taxable income is equal to the FHSA component. Any
excess is treated as a tax loss of the ADI. An effect of this is
that the FHSA provider cannot offset losses against its FHSA
income. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; subsection 345-15(2) of the ITAA 1997]
480. Consistent with the retirement savings account approach, ADIs do
not get a CGT discount in relation to their FHSA activities. No
amendment is needed to achieve this result. The gains and losses
that ADIs make on investments in the ordinary course of their
banking business are on revenue account.
Income Tax Rates Act 1986
481. The Income Tax Rates Act 1986 is amended so that the FHSA component
is taxed at 15 per cent. [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, items 49 to 51; section 23 of the Income Tax
Rates Act 1986]
Life insurance companies
482. The FHSA earnings of life companies are to be taxed like their
superannuation earnings, on a virtual PST basis. There is one
virtual PST for both superannuation and FHSA business. Earnings
from both FHSA activities and superannuation activities are to be
taxed at 15 per cent. The major objective of the virtual PST is to
separate assets relating to the activities taxed at 15 per cent
from those taxed at normal company rates (currently 30 per cent).
483. This approach avoids having to create a separate virtual PST for
FHSA activities but requires significant amendments to Division 320
(life insurance companies) of the ITAA 1997. A separate virtual
PST for FHSA activities would have imposed high compliance costs on
life companies providing FHSAs. The approach does require numerous
changes in terminology in Division 320, including a change in the
name of the virtual PST (see detailed explanation under
Consequential amendments).
484. The substantive changes needed to various Subdivisions in Division
320 are described below. In Subdivision 320-E (No-TFN
contributions of life insurance companies that are retirement
savings account providers), Subdivision 320-H (Segregation of
assets) and Subdivision 320-I (Transfers of business), no
substantive changes are needed, only changes in terminology.
Subdivision 320-D - income tax, taxable income and tax loss of life
insurance companies
485. The central provisions for working out a life insurance company's
liability are in Subdivision 320-D. These still operate in the
same way. However, the complying superannuation class of taxable
income becomes a single composite class - complying
superannuation/FHSA class. This name reflects the two different
types of activities that are covered by the class.
Subdivision 320-F - virtual PST
486. The key concept underlying the operation of the virtual PST rules
in the current Subdivision 320-F is the definition of virtual PST
life insurance policy in subsection 995-1(1). That definition is
replaced by a new definition, complying superannuation/FHSA life
insurance policy, which includes a life insurance policy that is an
FHSA. This amendment allows a life insurance company to segregate
assets in its virtual PST (renamed as the complying
superannuation/FHSA asset pool) for the purpose of discharging FHSA
liabilities. [Schedule 7 to the FHSA (Consequential Amendments)
Bill 2008, item 28; subsection 320-170(6) of the ITAA 1997]
487. Another key concept in the current Subdivision 320-F is the concept
of virtual PST liabilities in section 320-190. This section
specifies the amount of liabilities that can be supported by
virtual PST assets. For most types of life insurance policies, the
amount of virtual PST liabilities is the current termination values
of those policies (as worked out by an actuary). The current
termination value is defined in subsection 995-1(1) by referring to
prudential standards. In practical terms, the current termination
value at a particular time is generally the amount standing in a
policy holder's account at that time, and therefore is appropriate
for FHSAs. The replacement of the definition of a 'virtual PST
life insurance policy' and the consequent expansion of the concept
of virtual PST allows section 320-190 to apply without substantive
amendment.
Subdivision 320-C - Deductions and capital losses
488. An FHSA policy does not have an insurance (risk) component - that
is, in the event of the policyholder's death, the amount payable to
the estate or beneficiary is limited to the balance in the FHSA.
Consequently, an amendment is necessary to ensure that no amount
relating to an FHSA policy is deductible under section 320-80 or
320-85, which specify the deductibility of certain amounts relating
to risk policies. This is achieved by amending paragraph 320-
80(2)(b) and subsection 320-85(2) to include a reference to an FHSA
policy. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, items 29 and 30; sections 320-80 and 320-85 ]
489. Otherwise, this Subdivision is able to continue to apply in the
same way, with necessary terminology changes.
Guide to Division 320
490. Two amendments are required to the Guide. First, the dot point
relating to the taxable income of the complying superannuation
class is modified to reflect the new term for the composite class
and to refer to FHSA business. Second, the dot point relating to
segregating assets that relate to complying superannuation business
is modified so that it also refers to assets that relate to FHSA
business.
CGT discount
491. Assets held in the virtual PST to meet FHSA liabilities are
eligible for the CGT discount of one third. No amendment is needed
to achieve this result. Paragraph 115-10(d) already accords a CGT
discount treatment to '...a *life insurance company in relation to
a *discount capital gain from a *CGT event in respect of a *CGT
asset that is a*virtual PST asset.'.
Income Tax Rates Act 1986
492. Amendments to paragraph 23A(b) of the Income Tax Rates Act 1986 are
needed to accurately describe the class of taxable income to be
taxed at 15 per cent.
Dividend imputation
493. Life companies are eligible for refundable imputation credits in
relation to their FHSA business and no amendments are needed to the
imputation provisions to achieve this result.
First Home Saver Accounts misuse tax
494. If an individual account holder improperly uses an FHSA and money
is paid from the FHSA to the individual for the purchase of a first
home, the individual is liable to pay a tax called the FHSA misuse
tax. [Schedule 1 to the FHSA (Consequential Amendments) Bill 2008,
item 31; section 345-100 of the ITAA 1997]
495. The Commissioner assesses the FHSA misuse tax. So, neither the
account holder nor the account provider is required to calculate
it.
Purpose of the tax
496. The purpose of the tax is to deter people from improperly using
FHSAs by ensuring that individuals do not benefit in those
circumstances. Individuals can obtain two main benefits from
improperly using an FHSA: Government contributions and a lower rate
of tax on earnings than their normal individual marginal rate(s).
The FHSA misuse tax is designed to:
. clawback all the Government contributions improperly
obtained; and
. neutralise the maximum benefit the individual may have
obtained from having earnings taxed at 15 per cent. This
can be greater than the actual benefit for an individual
on less than the top marginal tax rate.
497. Importantly, criminal or administrative penalties may also apply to
the individual subject to the FHSA misuse tax. For example, if an
individual made a false or misleading statement in applying to open
an account or to withdraw money from an account, they may commit an
offence or be liable to an administrative penalty under the TAA
1953. There is a range of offences under the Criminal Code that
could also apply.
Circumstances in which the tax applies
498. For the tax to apply, the account holder must withdraw money from
their FHSA on the basis that they are to use the money to purchase
a first home in Australia. The tax does not apply if the money is
transferred from the FHSA to superannuation, or paid in other
specified circumstances (eg, to another FHSA or because of family
law obligations). The rationale for the tax not applying to
transfers to superannuation is that if the individual had
originally made their contribution to superannuation by way of
salary sacrifice instead of to an FHSA they would, in most cases,
have obtained similar or greater benefits to that obtained under
the FHSA. [Schedule 1 to the FHSA (Consequential Amendments) Bill
2008, item 31; section 345-100]
499. Where there is a payment as described, the two types of improper
use that attract the tax are:
. failing eligibility conditions - in this case the payment
is called an FHSA ineligibility payment; and
. failing payment conditions - called FHSA payment
conditions, about the use of the payment or the occupancy
of the home purchased.
[Schedule 1 to the FHSA (Consequential Amendments) Bill 2008, item
31; section 345-100]
FHSA ineligibility payment
500. An individual account holder fails the eligibility conditions if
they are not eligible to open an account or if they become
ineligible and do not notify the account provider (and thus have
the money transferred to superannuation). The eligibility
conditions (discussed in Chapter 1) are that the individual be aged
at least 18 and under 65 years, not previously have owned their
home in Australia and (except in limited circumstances) never held
another FHSA. It is not intended that an individual fail the
eligibility conditions if, as part of the process of acquiring
their first home, they acquire a qualifying interest in a dwelling
and move into it shortly before receiving a payment from their
FHSA. [First Home Saver Accounts Bill 2008 (FHSA Bill 2008),
section 16]
FHSA payment conditions
501. The individual fails the FHSA payment conditions if, within
six months of the payment, the individual does not use an amount
equal to the payment in acquiring a qualifying interest in a
dwelling. The individual makes a declaration in the approved form
when withdrawing money about the purpose for which they will be
used. Under the approved form mechanism, the Commissioner has the
power to ask for evidence and further details about that usage. It
is not necessary to trace whether the actual payment is used to
acquire the home. [FHSA Bill 2008, section 17]
502. The individual also fails the FHSA payment conditions if they fail
to occupy the acquired dwelling as their main residence for a
continuous period of least six months starting within a designated
period. For a dwelling that is complete when the payment is made,
the designated period starts when the person acquires the dwelling
(see Chapter 1 for a discussion of when an individual acquires a
qualifying interest in a dwelling). For a dwelling that is not
complete when the payment is made, the period starts when the
construction is complete. Whether a dwelling is complete is a
matter of evidence and a building completion certificate (eg, a
certificate of occupancy) would be relevant (and normally
sufficient) evidence. [FHSA Bill 2008, section 17]
503. The period ends 12 months after the period starts or at a later
time that the Commissioner considers reasonable in the
circumstances. [FHSA Bill 2008, subsection 17(2)]
504. The individual also fails the FHSA payment conditions if they
withdrew the money to construct a dwelling and the construction is
not complete with a reasonable period after the payment is made.
This ensures that the individual cannot defeat the occupancy rules
by delaying the completion of their home. The FHSA payment
conditions are discussed in more detail in Chapter 2. [FHSA Bill
2008, subsection 17(1)]
Re-contributing an amount to an FHSA
505. An individual is treated as satisfying the FHSA payment conditions
even though they would otherwise fail the conditions if, within six
months of the payment, the individual contributes to an FHSA, an
amount equal to the payment or, if it is reasonable in the
circumstances, a lesser reasonable amount. In some circumstances
it would be reasonable for the individual not to re-contribute any
amount. In determining whether it is reasonable to pay a lesser
amount, it is necessary to have regard to:
. whether the failure to satisfy a condition was beyond the
individual's control;
. whether the failure was reasonably foreseeable;
. any previous failure by the individual; and
. any other relevant matter.
[FHSA Bill 2008, subsections 17(3) and (4)]
1.
Wendy is the holder of an FHSA and withdraws the balance and
uses the whole balance to purchases her first home. After
living in the home for two months Wendy is unexpectedly
transferred in her work to another city for a term of two
years. Although Wendy fails the occupancy condition, it is
reasonable in the circumstances that she contributes a nil
amount to an FHSA. So, she still satisfies the FHSA payment
conditions.
2.
Danny and Mary are a married couple who each has an FHSA.
They both withdraw the balance of their accounts to purchase
a first home jointly. After living in the home for four
months, the couple separate with Mary leaving the home
permanently. Although Mary fails the occupation condition,
it is reasonable in the circumstances that she contributes a
nil amount to an FHSA. So, she still satisfies the FHSA
payment conditions.
3.
Kate is the holder of an FHSA and orally agrees to purchase
a dwelling that she intends to live in. Kate withdraws the
balance of her account to pay as a deposit on the purchase.
However, before paying a deposit Kate changes her mind about
purchasing the house and uses the money to finance her
living expenses while she studies full-time at university.
She contributes no amount to an FHSA within six months of
the withdrawal. Kate has failed the FHSA payment conditions
and has not contributed (within the six months) an amount
equal to the payment (or a lesser amount reasonable in the
circumstances) to an FHSA. Consequently, she is liable to
pay the FHSA misuse tax.
4.
Kim withdraws $20,000 from her FHSA to purchase her first
home. The vendor withdraws the home from sale. Kim has
already incurred $4,000 in legal costs in attempting to
acquire the home. Six weeks after withdrawing the money,
Kim contributes $16,000 to an FHSA. In the circumstances,
it was reasonable for Kim to contribute an amount less than
$20,000, and $16,000 was a reasonable amount for her to
contribute. So, she satisfies the FHSA payment conditions
and is not liable to the misuse tax.
The amount of the tax
506. The FHSA misuse tax is designed to clawback all the Government
contributions improperly obtained and broadly to neutralise the
maximum benefit the individual may have obtained from having
earnings taxed at 15 per cent (ie, if they were on the top marginal
tax rate).
507. If the payment is an FHSA ineligibility payment (but satisfies the
FHSA payment conditions), the tax payable by the individual is the
sum of two components:
. the clawback tax amount, which approximates the maximum
earnings benefit of the individual to be taxed; and
. the sum of the non-recognised Government contributions
payable for the FHSA holder for a financial year that
begins before the payment was made.
[Subsection 5(1) of the Income Tax (FHSA Misuse Tax) Bill 2008)]
508. A Government contribution that is payable for a financial year is a
non-recognised Government contribution if the holder of the FHSA
did not satisfy the eligibility requirements for the FHSA
throughout that financial year. Thus, if an account holder becomes
ineligible part-way through a financial year (eg, because they
bought their first home in Australia), any Government contribution
that is payable for that financial year is a non-recognised
Government contribution and therefore subject to the misuse tax.
However, any Government contribution payable for an earlier year is
not affected. [Section 7 of the Income Tax (FHSA Misuse Tax)
Bill 2008]
509. The Income Tax (FHSA Misuse Tax) Bill 2008 was this approach
because reporting of personal FHSA contributions to the
Commissioner is to be for the whole financial year. On the basis
of that reporting the Commissioner would not know whether
particular contributions were made before or after the account
holder became ineligible.
510. If the payment fails the FHSA payment conditions (whether or not it
is an FHSA ineligibility payment), the tax payable by the
individual is similarly the sum of two components:
. the clawback tax amount; and
. the sum of all the Government contributions that the
account holder has obtained.
[Subsection 5(2) of the Income Tax (FHSA Misuse Tax) Bill 2008]
511. The difference between the two formulas is that where FHSA payment
conditions are failed, all the Government contributions are taxed
(and thus clawed back) whereas for an FHSA ineligibility payment
Government contributions are taxed (and clawed back) for those
years starting when the individual first failed the eligibility
requirements.
The clawback tax amount
512. The clawback tax amount is calculated by multiplying the earnings
component by the payment fraction and then multiplying by a
grossing-up factor. The final step is to multiply by a percentage.
[Section 6 of the Income Tax (FHSA Misuse Tax) Bill 2008]
513. The earnings component is designed to be a proxy for the
individual's earnings on the FHSA and is calculated by subtracting
from the balance of the FHSA the total of personal contributions,
Government contributions and contributions paid under a family law
order. To save compliance and administration costs, the earnings
component does not attempt to precisely calculate or trace
earnings. For example, it does not add fees charged to the
balance, which favours the individual being taxed. [Section 6 of
the Income Tax (FHSA Misuse Tax) Bill 2008]
514. In the usual case where the whole of the balance is paid to the
individual, the payment fraction is one. Otherwise, it is the
balance of the earnings component just before the payment is made
divided by the balance of the FHSA just before that time. [Section
6 of the Income Tax (FHSA Misuse Tax) Bill 2008]
515. Multiplying by the grossing-up factor reflects that the earnings
component has already been reduced by tax paid on FHSA earnings.
The grossing-up factor is 1 divided by (1-FHSA tax rate). The FHSA
tax rate is the tax payable on FHSA earnings, which is 15 per cent.
[Section 6 of the Income Tax (FHSA Misuse Tax) Bill 2008]
516. The percentage is the top marginal tax rate for Australian resident
individuals plus the Medicare levy less the FHSA tax rate. The
percentage represents the maximum tax rate advantage the individual
could have obtained by having their earnings taxed at the FHSA
earnings rate instead of individual rates. This is currently equal
to 31.5 per cent. [Section 6 of the Income Tax (FHSA Misuse Tax)
Bill 2008].
1.
Litsa opened her account while eligible to do so. However,
one year later, she purchased a house and moved into it
without notifying the account provider and closing her
account. Four years later, Litsa made a false declaration
to withdraw her entire account balance, and used it to buy
shoes and clothes.
Her final account balance was $15,000, her personal
contributions were $12,000, and total Government
contributions were $2,000.
As the payment to Litsa has failed the FHSA payment
conditions (although the payment is also an ineligibility
payment), the amount of the tax is equal to the sum of the
clawback tax amount plus the total of Government
contributions payable for a financial year that begins
before the payment was made.
In the formula for the clawback tax amount, the amount of
the payment is $15,000.
The 'earnings component' is the balance of the FHSA reduced
by personal and Government contributions and family law
payments paid to the account. In Litsa's case, this is
simply:
$15,000 ( $14,000 = $1,000
As Litsa withdrew the whole of her balance the 'payment
fraction' is 1.
The formula is then $1,000 × 1 × [100/(100 - 15)] =
$1,176.47.
This amount is then multiplied by the percentage, which is
currently 31.5 per cent.
So $1,176.47 × 31.5 per cent = $370.59, the clawback tax
amount.
The sum of Litsa's Government contributions is $2,000.
Litsa's total misuse tax is therefore $2,370.59.
Nature of the First Home Saver Account misuse tax
517. The FHSA misuse tax is an income tax, and is formally imposed in
respect of a payment from an FHSA to the individual account holder.
Consistent with the general nature of income tax, the tax is a tax
on a gain, being the gain made by the individual from the improper
use of the account. To ensure that the misuse tax is
constitutionally valid, the tax is imposed by a separate imposition
Bill called the Income Tax (FHSA Misuse Tax) Bill 2008. [Section 4
of the Income Tax (FHSA Misuse Tax) Bill 2008]
518. The Commissioner assesses the FHSA misuse tax; it is not self
assessed. The Commissioner's assessing power is in existing
section 169 of the ITAA 1936, which contains the power for the
Commissioner to assess income tax where the liability is calculated
on a basis other than taxable income. The definition of
'assessment' in subsection 6(1) of the ITAA 1936 is amended so that
it covers ascertaining the amount of FHSA misuse tax payable.
[Schedule 1 to the FHSA (Consequential Amendments) Bill 2008, item
2; subsection 6(1) of the ITAA 1936]
519. As the FHSA misuse tax liability is income tax assessed under
section 169, the standard rules in Part IV of the ITAA 1936
applying to assessments apply automatically. For example, the
rules about service of notice of assessment (section 174),
objections (section 175A), validity not affected by not following
procedures (section 175), conclusive evidence (section 177) and
amendment of assessments (section 170).
520. The due and payable date for the misuse tax is 21 days after the
Commissioner gives the individual notice of the assessment. The
general interest charge applies in the standard way if the
individual does not pay the assessed tax on time. [Schedule 1 to
the FHSA (Consequential Amendments) Bill 2008, item 31; sections
345-110 and 345-115]
521. Liability to pay the misuse tax is a tax-related liability within
the definition in section 255-1 of Schedule 1 to the TAA 1953,
allowing the generic tax collection and recovery rules to apply.
The non-operative list of tax-related liabilities in the generic
collection and recovery provisions is amended to include the FHSA
misuse tax. [Schedule 1 to the FHSA (Consequential Amendments)
Bill 2008, item 63; subsection 250-10(2) of Schedule 1 to the TAA
1953]
Consequential amendments
Income Tax Act 1986
522. The main imposition Act for income tax, the Income Tax Act 1986, is
amended to ensure that it does not cover the FHSA misuse tax, which
is imposed by the Income Tax (FHSA Misuse Tax) Bill 2008. The
trustee is taxed at the rate of 15 per cent rather than at the top
marginal rate, which usually applies where the trustee of a trust
estate is liable to pay the income tax. [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, item 1; subsection 5(2B) of
the Income Tax Act 1986]
Life insurance companies - terminology
523. As explained above, the FHSA earnings of life companies are to be
taxed like their superannuation earnings, on a virtual PST basis.
There is one virtual PST for both superannuation and FHSA business.
Earnings from both FHSA activities and complying superannuation
activities are to be taxed as a single class of taxable income at
15 per cent.
524. The extension of the virtual PST to cover FHSA business and the
creation of the 'composite' class of taxable income for complying
superannuation/FHSA activities require changes in terminology to
better reflect the new scope of the concepts. Accordingly:
. the virtual PST is renamed the complying superannuation/
FHSA asset pool [Schedule 5 to the FHSA Bill 2008, items 1
to 26];
. the complying superannuation class of taxable income is
renamed the complying superannuation/FHSA class
[Schedule 6 to the FHSA Bill 2008, items 1 to 21];
. references that incorporate the words 'virtual PST' as
part of a longer term (eg, virtual PST assets) are changed
by substituting 'complying superannuation/ FHSA' for
'virtual PST' [Schedule 4 to the FHSA Bill 2008, items 1
to 64]; and
. there are various other related consequential amendments
flowing from these changes in terminology (eg, to various
definitions and formulas) [Schedule 7 to the FHSA
Bill 2008, items 1 to 56].
Inclusion of definitions
525. The amendments to the taxation law discussed in this chapter have
necessitated the inclusion of various new definitions in the
taxation law and the amendment of some others. The substantive
effects of these changes are discussed in the course of this
chapter. The definitions included (or amended) are in the:
. ITAA 1936 [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, items 2 and 3; subsection 6(1) of
the ITAA 1936)];
. ITAA 1997 [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, items 32 to 44; subsection 995-1(1)
of the ITAA 1997]; and
. Income Tax Rates Act 1986 [Schedule 1 to the FHSA
(Consequential Amendments) Bill 2008, items 45 to 48;
subsection 3(1) of the Income Tax Rates Act 1986].
Amendment of checklists
526. The amendments to the taxation law discussed in this chapter have
necessitated the amendment of various checklists in the taxation
law. Some of the notable changes are discussed in the course of
this chapter. Other changes are in the:
. ITAA 1997 [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, item 9; section 11-55 of the ITAA
1997]; and
. TAA 1953 [Schedule 1 to the FHSA (Consequential
Amendments) Bill 2008, items 53, 54, 62 and 63; subsection
8AAB(5) and subsection 250-10(2) of Schedule 1 to the TAA
1953].
Chapter 7
Financial services licensing, conduct, advice and disclosure
Outline of chapter
527. Schedule 2 to the First Home Saver Accounts (Consequential
Amendments) Bill 2008 (FHSA (Consequential Amendments) Bill 2008)
amends the Corporations Act 2001 (Corporations Act) and the
Australian Securities and Investments Commission Act 2001 (ASIC
Act) to ensure that the financial services licensing, conduct,
advice and disclosure rules apply appropriately to First Home Saver
Accounts (FHSAs).
Context
528. The Corporations Act and the ASIC Act provide for the regulation of
financial products and services. The First Home Saver Accounts
Bill 2008 (FHSA Bill 2008) introduces a new kind of financial
product - FHSAs. FHSAs come within the existing general definition
of 'financial product' in section 763A of the Corporations Act.
Consequently, the licensing, conduct, advice and disclosure
provisions of the Corporations Act and the Corporations
Regulations 2001 will apply to FHSAs unless expressly modified by
legislation or regulations. In some cases the Corporations Act
applies differently to different kinds of financial products.
529. As noted in Chapter 1, FHSAs can have different legal forms
depending on the account provider offering them. They may be a
deposit account, a life policy or an interest in a trust. This can
have implications for the way the Corporations Act and the ASIC Act
apply to them. The amendments in Schedule 2 ensure that the
Corporations Act and the ASIC Act apply appropriately to FHSAs.
530. In addition to the amendments made to the Corporations Act and the
ASIC Act in the FHSA (Consequential Amendments) Bill 2008, a number
of other changes will be made to the Corporations Regulations 2001
to accommodate FHSAs. In particular, the Corporations
Regulations 2001 are to be amended to introduce shorter and simpler
product disclosure statements for FHSAs and to deal with the
financial services licensing requirements for trustees of public
offer superannuation funds. These amendments to the Corporations
Regulations 2001 will also ensure that existing trustees of public
offer superannuation funds will not need to seek a licence
variation to offer FHSAs.
Summary of new law
531. These amendments to the Corporations Act and the ASIC Act ensure
that FHSAs:
. are accompanied by appropriate disclosure documents
(including a product disclosure statement and periodic
statements);
. are not subject to unnecessary regulation;
. are subject to a mandatory cooling-off period; and
. are treated the same under the Corporations Act,
regardless of the issuing entity and the legal nature of
the accounts.
Detailed explanation of new law
532. While an FHSA is a 'financial product' under the general definition
in section 763A of the Corporations Act, in some cases the
provisions apply differently depending on the type of financial
product and there are also some provisions that apply only to
certain specified financial products. The amendments to the
Corporations Act and the ASIC Act clarify the way in which those
Acts apply to FHSAs.
Coverage of First Home Saver Accounts under the ASIC Act and the
Corporations Act 2001
533. As the financial services regulator, the Australian Securities and
Investments Commission (ASIC) is responsible for licensing and
monitoring financial services markets and businesses in Australia.
To enable ASIC to perform this role, under the ASIC Act, it is
given functions and powers under the corporations legislation
(section 11) and various other Acts related to financial products
and services (section 12A). This list has been amended to provide
that ASIC has functions and powers under the 'First Home Saver
Accounts Act 2008'. [Schedule 2 to the FHSA (Consequential
Amendments) Bill 2008, item 1; paragraph 12A(1)(h)]
534. ASIC will also be provided with the functions and powers conferred
on it by section 3 of the FHSA Bill 2008. Those functions and
powers include regulating when trustees can offer an interest in
the FHSA trust (ie, offer a FHSA), and requiring trustees to comply
with the prescribed rules in relation to commission and brokerage
payments, and rules on fair dealing when issuing or redeeming an
interest in an FHSA trust. [Part 1, Division 1, section 3 of the
FHSA Bill 2008]
First Home Saver Accounts are a financial product
535. The regulatory arrangements for financial services under the
Corporations Act and the ASIC Act rely on the definition of
'financial product' in those Acts. Although FHSAs come within the
general definitions of financial product in section 763A of the
Corporations Act and subsection 12BAA(1) of the ASIC Act, to avoid
any doubt, and to enable FHSAs to be regulated consistently under
the Acts, a definition of 'FHSA product' is inserted into sections
9 and 761A of the Corporations Act [Schedule 2 to the FHSA
(Consequential Amendments) Bill 2008, items 3 and 6; sections 9 and
761A], and FHSA products are included in the specific things that
are financial products in subsection 12BAA(7) of the ASIC Act
[Schedule 2 to the FHSA (Consequential Amendments) Bill 2008, item
2; paragraph 12BAA(7)(ga)] and section 764A of the Corporations Act
[Schedule 2 to the FHSA (Consequential Amendments) Bill 2008, item
9; paragraph 764A(1)(ha)].
First Home Saver Accounts are not managed investment schemes
536. As FHSAs will have a different legal nature depending on the type
of product provider, there is also the potential for FHSAs to fall
within other definitions in the Corporations Act that apply to
those different types of products.
537. In particular, FHSAs offered by public offer licensees could come
within the definition of 'managed investment scheme' in section 9
of the Corporations Act. The regulatory regime for managed
investment schemes as set out in Chapter 5C of the Corporations
Act is not intended to cover institutions which are regulated by
the Australian Prudential Regulation Authority (APRA). As all FHSA
providers will be regulated by APRA, all FHSAs are excluded from
the definition of 'managed investment scheme' in section 9 of the
Corporations Act. [Schedule 2 to the FHSA (Consequential
Amendments) Bill 2008, item 4; section 9, paragraph (ha) of the
definition of 'managed investment scheme']
First Home Saver Accounts are not a basic deposit product
538. It is arguable that FHSA provided by authorised deposit-taking
institutions (ADIs) could be regarded as coming within the
definition of 'basic deposit product' in section 761A of the
Corporations Act.
539. Issuers of basic deposit products are exempt from many of the
advice and disclosure obligations of the Corporations Act. As
regards disclosure, the issuer is not obliged to give the client a
financial services guide, a statement of advice or a product
disclosure statement (provided certain other information is given
to the client). Also, ASIC regards basic deposit products as 'Tier
2' (lower level) products for the purposes of its financial advice
training standards.
540. FHSAs have a number of features that are not normally associated
with basic deposit products such as eligibility and withdrawal
requirements, Government contributions and concessional taxation
treatment that make it inappropriate for them to be treated as
basic deposit products. There are also considerations of
competitive neutrality, as issuers of FHSAs which are not banks,
building societies or credit unions will not be subject to the same
exemptions.
541. To resolve any doubt, all FHSAs are expressly excluded from the
definition of 'basic deposit product'. [Schedule 2 to the FHSA
(Consequential Amendments) Bill 2008, item 5; section 761A,
paragraph (da) of the definition of 'basic deposit product']
Providing First Home Saver Accounts is not a custodial or
depository service
542. Sections 766A and 766E of the Corporations Act bring within the
definition of 'financial service' a custodial or depository
service. This category was included in the Act to capture certain
financial activities which would not otherwise come within the
definition of 'financial service'. Providing a custodial or
depository service occurs where, under an arrangement between the
provider and the client, a financial product, or a beneficial
interest in a financial product, is held by the provider in trust
for, and on behalf of, the client or another person nominated by
the client.
543. FHSAs provided by public offer licensees, as interests in a trust,
could potentially come within the definition of 'custodial or
depository service'. Given that FHSAs will be regulated under the
First Home Saver Accounts Bill 2008, and to avoid unnecessary cost
and compliance burdens, the provision of FHSAs (offered by public
offer licensees) is excluded from the meaning of 'providing a
custodial or depository service' (section 766E). [Schedule 2 to
the FHSA (Consequential Amendments) Bill 2008, item 10; paragraph
766E(3)(cb)]
Statement of advice requirements
544. Normally, when personal advice is given about a financial product
to a retail client, the person providing the advice must give the
client a statement of advice. (In the vast majority of cases, a
person will acquire an FHSA as a retail client.) However, there is
an exception, under section 946AA of the Corporations Act, for
advice about 'small investments'. The relevant conditions are:
. the total value of all investments in relation to which
the advice is provided does not exceed the 'threshold
amount' (currently $15,000); and
. the advice does not relate to a derivative, a general
insurance product or a life risk product, or to a
superannuation product or a retirement savings account
product unless the client already has an interest in the
product.
However, the providing entity must keep, and provide to the client,
a record of advice.
545. To avoid doubt, the section is amended to specify that the
providing entity does not have to give the client a statement of
advice where the advice relates to an FHSA product and the total
value of all investments in relation to which the advice is
provided does not exceed the 'threshold amount'. [Schedule 2 to
the FHSA (Consequential Amendments) Bill 2008, item 11; subsection
946AA(1A)]
Financial product disclosure
546. Generally a product disclosure statement is required to be given to
a person when a financial product is issued or sold and when
personal advice is given recommending a particular financial
product. The product disclosure statement content requirements for
FHSAs will be outlined in regulations made under the Corporations
Act. The circumstances in which a product disclosure statement
must be given in the Corporations Act will apply to FHSAs.
Meaning of 'issue of a financial product'
547. Section 761E of the Corporations Act defines when a financial
product is 'issued' to a person. Subsection 761E(3A) broadly
provides that further contributions to financial products that are
already held by the client are not an 'issue of a financial
product'.
548. There is some doubt that all FHSAs (especially those issued by
public offer licensees) are covered by the existing exclusions in
subsection 761E(3A). The provision is amended to ensure that all
FHSAs are treated the same, by:
. inserting a new item 2A into the table in subsection
761E(3) to specify when an FHSA product is issued
[Schedule 2 to the FHSA (Consequential Amendments) Bill
2008, item 7; subsection 761E(3), item 2A in the table];
and
. providing that a further contribution into an FHSA product
is not considered an issue of a financial product
[Schedule 2 to the FHSA (Consequential Amendments) Bill
2008, item 8; paragraph 761E(3A)(ba)].
Application forms to be included in or accompany product disclosure
statements
549. In general, an FHSA product only can be issued or sold in response
to an application form that is attached to or accompanies the
product disclosure statement. The Corporations Act does not
specify the requirements for an application form. For FHSAs, an
application to open an account will need to be made in a form
approved by the Commissioner of Taxation. [Part 3, Division 1,
section 5 of the FHSA Bill 2008]
550. Under section 1016A of the Corporations Act, a 'restricted issue'
or 'restricted sale' of an FHSA to a retail client may only be made
using an application form. (In practice, a 'restricted issue' or
'restricted sale' will cover most situations where a product is
sold or offered to a retail client.)
551. A 'relevant financial product' may only be issued or sold if the
client fills out an application form that is included with, or
accompanies, a product disclosure statement. Those products are
managed investments, superannuation, retirement savings accounts or
any other product specified in regulations which are made for the
purposes of the definition.
552. The definition of 'relevant financial product' is amended to
include an FHSA product. [Schedule 2 to the FHSA (Consequential
Amendments) Bill 2008, item 12; paragraph 1016A(1)(da)]
Periodic statements for retail clients
553. Account providers will be required to provide a periodic statement
to an FHSA holder who is a retail client.
554. Under section 1017D of the Corporations Act, issuers of financial
products that have an investment component are required to provide
periodic statements to each holder of such a product for each
reporting period during which the holder holds the product. The
list of products currently includes managed investments,
superannuation, retirement savings accounts, investment life
insurance products and deposit products.
555. The list of products in paragraph 1017D(1)(b) is amended to include
an FHSA product. [Schedule 2 to the FHSA (Consequential
Amendments) Bill 2008, item 13; subparagraph 1017D(1)(b)(iiia)]
Cooling-off periods
556. A 14 day cooling-off period will apply when an individual who is a
retail client opens an FHSA. The individual will be able to
withdraw the funds deposited and close the account within the
earlier of 14 days of receiving confirmation that the account has
been opened or five days after the account was opened. (See also
paragraph 5(3)(eb) of the FHSA Bill 2008.) They will not be
required to transfer the funds to another FHSA.
557. Sections 1019A and 1019B of the Corporations Act provide that
certain financial products are subject to a 14 day cooling-off
period. Those products are risk insurance products, investment
life insurance products, managed investment products,
superannuation products and retirement savings account products.
558. The list in paragraph 1019A(1)(a) is amended to include FHSA
products. [Schedule 2 to the FHSA (Consequential Amendments) Bill
2008, item 14; subparagraph 1019A(1)(a)(iiia)]
559. Chapter 8
Administration and other issues
Outline of chapter
560. Schedule 4 of the First Home Saver Accounts (Consequential
Amendments) Bill 2008 (FHSA (Consequential Amendments) Bill 2008)
amends:
. the Social Security Act 1991 and the Veterans'
Entitlements Act 1986 so that First Home Saver Accounts
(FHSAs) are not taken into account for the income and
assets tests that apply to various Commonwealth benefits;
. the Anti-Money Laundering and Counter-Terrorism Financing
Act 2006 so that Act applies to the provision of FHSAs
regardless of the type of entity providing the account;
and
. various other Commonwealth Acts to make changes
consequential upon the introduction of FHSAs.
561. Parts 5 and 6 of the First Home Saver Accounts Bill 2008 (FHSA Bill
2008) and Schedule 1 to the FHSA (Consequential Amendments) Bill
2008 establish administrative arrangements for FHSAs including:
. who administers various provisions;
. providing information to the Commissioner of Taxation
(Commissioner);
. rights of review of decisions;
. enforcement powers; and
. tax file numbers and secrecy rules to protect the
confidentiality of information provided.
Context
Significant amendments to other Commonwealth Acts
562. As is usual with the introduction of a significant new measure, the
enactment of the FHSA legislation necessitates consequential
amendment to other Commonwealth legislation to ensure that the new
legislation interacts with existing legislation as the Government
intends. In this case, significant amendments are required to:
. the Social Security Act 1991 and the Veterans'
Entitlements Act 1986; and
. the Anti-Money Laundering and Counter-Terrorism Financing
Act 2006.
Working out social security and veterans' entitlements
563. Currently, in working out a person's eligibility for social
security income support payments and veterans' entitlements, a
person's income and assets are assessed. The Government intends
that FHSAs are not to be taken into account in working out
entitlements.
Anti-Money Laundering and Counter Terrorism Financing Act 2006
564. The Government proposes that FHSA providers be required to comply
with the requirements in the Anti-Money Laundering and Counter-
Terrorism Financing Act 2006, including identifying customers when
opening an FHSA. This is to ensure consistency of regulation
across similar financial products which are already captured under
the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
565. For authorised deposit-taking institutions (ADIs) and life
insurance companies the requirements will be the same as those
currently applying to other products they provide. However, public
offer superannuation licensees are not currently required to comply
with the initial customer identification obligations (subsection
39(6) of the Anti-Money Laundering and Counter-Terrorism Financing
Act 2006).
Administration
566. Administrative arrangements are necessary to allow for the
effective operation and administration of FHSAs. Where possible,
the arrangements are designed to align with the operational
obligations that are currently imposed on entities that are
eligible to provide FHSAs. For example, the tax file number (TFN)
quotation arrangements that apply to FHSAs reflect the arrangements
of the superannuation system.
567. In addition, where possible, these arrangements have been designed
to mirror the existing administrative arrangements for similar laws
(eg, superannuation and taxation laws). For example, the use of
the general interest charge and approved forms.
568. Regulatory responsibility for administering the FHSA legislation is
divided along functional lines between the Commissioner, the
Australian Prudential Regulation Authority (APRA) and the
Australian Securities and Investments Commission (ASIC). This
division of responsibility is consistent with the Regulators'
respective current responsibilities.
Summary of new law
Important amendments to other Commonwealth Acts
Income and assets test for benefits
569. The income and assets tests under the Social Security Act 1991 and
Veterans' Entitlements Act 1986 are amended to ensure that FHSAs
are not taken into account in working out entitlements under those
Acts.
570. This has been achieved by amending the definitions of:
. 'return on a person's investments';
. 'financial investment';
. 'investment'; and
. 'designated private trust'.
Anti-Money Laundering and Counter-Terrorism Financing Act 2006
571. FHSA providers are required to comply with the requirements in the
Anti-Money Laundering and Counter-Terrorism Financing Act 2006,
including identifying customers when opening an FHSA, regardless of
the type of entity providing the FHSA.
Administration
Responsibility for administering the new law
572. The general administration of the FHSA Bill 2008 is divided between
the Commissioner, APRA and ASIC.
573. The Commissioner is responsible for the provisions about individual
transactions (opening accounts, contributions into accounts and
payments from accounts) and Government contributions. The
Commissioner also has administration of the relevant taxation law
(including the FHSA misuse tax).
574. APRA is responsible for the prudential regulation of FHSAs. In
particular, APRA is responsible for authorising Registrable
Superannuation Entity (RSE) licensees (trustees) as FHSA providers,
and is responsible for the prudential regulation of trustee
providers and FHSA trusts under Division 2, Part 7 of the FHSA Bill
2008. Division 2 of Part 7 of the FHSA Bill 2008 applies relevant
provisions of the Superannuation Industry (Supervision) Act 1993
(SIS Act) to FHSA providers that are trustees and FHSA trusts,
subject to any provisions of the SIS Act that is administered by
ASIC.
575. ASIC is responsible for the administration of provisions of the SIS
Act as they apply in Division 2 of Part 7 of the FHSA Bill 2008.
These provisions apply to FHSA providers that are trustees and FHSA
trusts, and establish when trustees may offer, issue and redeem an
interest in an FHSA trust, the circumstances in which trustees may
pay commission and brokerage, and requirements in relation to
members' or beneficiaries' reports.
Information and access to premises
576. The FHSA (Consequential Amendments) Bill 2008 contains information
gathering and access powers for the Commissioner in relation to
administration of the Government contribution. For FHSA matters
contained in the income tax law (eg, the FHSA misuse tax in the
Income Tax Assessment Act 1997 (ITAA 1997)) the Commissioner can
rely on the normal information gathering and access powers under
the income tax law.
577. The FHSA (Consequential Amendments) Bill 2008 also contains
reporting obligations for FHSA providers, requiring them to provide
the Commissioner with certain information relating to FHSAs they
provide. All FHSA providers are required to report data to APRA in
accordance with the Financial Sector (Collection of Data) Act 2001
(discussed in more detail in Chapter 5).
Rights of review of decisions
578. Decisions of the Commissioner in relation to Government
contributions are subject to merits-based review by an officer of
the Australian Taxation Office (ATO).
579. APRA's decisions relating to the authorisation of trustees as FHSA
providers, and decisions to make, vary or revoke prudential
standards that apply to specific trustees, are subject to merits
review by the Administrative Appeals Tribunal.
Secrecy and Tax File Numbers
580. The FHSA Bill 2008 contains secrecy provisions, to protect the
confidentiality of information received by the Regulators in
relation to an individual's FHSA received by the regulators. These
provisions have been modelled on the secrecy arrangements that
currently apply to the superannuation co-contribution for low
income earners. As such, to facilitate the effective
administration of the FHSA Bill 2008 and other related legislation,
specific disclosure of protected information are permitted. For
example, disclosing information necessary to perform duties under
the Bill.
. The privacy obligations of FHSA providers are regulated by
the Privacy Act 1988
581. The FHSA Bill 2008 also contains provisions that require an
individual to quote their TFN in order to open, be issued with or
hold an FHSA. This is explained in Chapter 1. These arrangements
are necessary to ensure that only one account is opened per
individual, and to assist the Commissioner in paying the Government
contribution. To ensure that this TFN information is used
appropriately, this Bill contains provisions which regulate the
quotation, use and storage of TFNs. These are modelled on the
arrangements which currently apply to superannuation.
Detailed explanation
Income and assets test for benefits
582. The income and assets tests under the Social Security Act 1991 and
Veterans' Entitlements Act 1986 are amended to ensure that FHSAs
are not taken into account in working out entitlements under those
Acts.
Social Security Act 1991
583. The value of an individual's FHSA is not taken into account when
calculating the value of a person's assets as the funds are not
readily accessible to the individual. This is because the funds in
an FHSA must be used to purchase a first home or contributed to
superannuation. [Schedule 3, item 35, FHSA (Consequential
Amendments) Bill 2008; paragraph 1118(1)(fa) of the Social Security
Act 1991]
584. The definition of 'investment' has been amended to define an
investment in an FHSA as having benefits in an FHSA, regardless of
whether the benefits are attributable to amounts contributed by the
FHSA holder. [Schedule 3, items 30, and 33, FHSA (Consequential
Amendments) Bill 2008; paragraph 9(1)(c) and subsection 9(9B) of
the Social Security Act 1991]
585. An investment in an FHSA has also been excluded from the definition
of 'financial investment', 'managed investments' and 'designated
private trust'. [Schedule 3, items 29, 32 and 36, FHSA
(Consequential Amendments) Bill 2008; subsection 9(1), paragraphs
9(1C)(cb) and 1207P(1)(d) of the Social Security Act 1991]
586. For the purposes of the Youth Allowance Rate Calculator at the end
of section 1067G of the Social Security Act 1991, 'trust' does not
include an FHSA. [Schedule 3, item 34, FHSA (Consequential
Amendments) Bill 2008; paragraph 10B(2)(ca) of the Social Security
Act 1991]
587. A return on an individual's investment in an FHSA has been excluded
from the definition of 'income'. 'Return' in relation to an FHSA,
means any increase in the value of the FHSA. [Schedule 3, items 28
and 31, FHSA (Consequential Amendments) Bill 2008;
paragraphs 8(8)(ba) and 9(1)(c) of the Social Security Act 1991]
Veterans' Entitlements Act 1986
588. The value of a person's FHSA is not taken into account when
calculating the value of a person's assets. The definition of
'investment' has been amended to define an investment in an FHSA as
having benefits in an FHSA, regardless of whether the benefits are
attributable to amounts contributed by the account holder.
[Schedule 3, items 41, 44 and 45, FHSA (Consequential Amendments)
Bill 2008; subsections 5J(1)(c) and 5J(6B) and paragraph 52(1)(faa)
of the Veterans' Entitlements Act 1986]
589. An investment in an FHSA has also been excluded from the definition
of financial investment, managed investments and designated private
trust. [Schedule 3, items 40, 43 and 46, FHSA (Consequential
Amendments) Bill 2008; subsection 5J(1), paragraphs 5J(1C)(cb) and
52ZZB(1)(d) of the Veterans' Entitlements Act 1986]
590. A return on a person's investment in an FHSA has been excluded from
the definition of 'income'. 'Return' in relation to an FHSA, means
any increase in the value of the FHSA. [Schedule 3, items 39 and
42, FHSA (Consequential Amendments) Bill 2008; paragraphs 5H(8)(ia)
and 5J(1)(aa)) of the Veterans' Entitlements Act 1986]
Anti-Money Laundering and Counter-Terrorism Financing Act 2006
591. FHSA providers are required to comply with the requirements in the
Anti-Money Laundering and Counter-Terrorism Financing Act 2006,
including identifying customers when opening an FHSA. This is to
ensure consistency of regulation across similar financial products,
such as deposit accounts, life insurance policies and
superannuation accounts, which are already captured under the Anti-
Money Laundering and Counter-Terrorism Financing Act 2006.
[Schedule 3 to the FHSA (Consequential Amendments) Bill 2008, items
1 to 4]
592. The amendments to the Anti-Money Laundering and Counter-Terrorism
Financing Act 2006 ensure that the acceptance of contributions to
the FHSA and the cashing out of an interest in an FHSA (either to
purchase a home, to transfer the balance to another FHSA provider
or to transfer the balance into superannuation) (to the FHSA
holder) are captured as a 'designated service'. Providers of a
'designated service' are a reporting entity under the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 and must,
amongst other things, carry out procedures to verify a customer's
identity before providing a designated service to a customer.
[Schedule 3 to the FHSA (Consequential Amendments) Bill 2008; items
1 to 4, sections 5 and 6 of the Anti-Money Laundering and Counter-
Terrorism Financing Act 2008]
593. Upfront customer identification requirements for FHSAs are
different to the Anti-Money Laundering and Counter-Terrorism
Financing Act 2006 obligations that trustees of superannuation
funds are currently required to comply with relation to
superannuation products. This reflects the higher money laundering
and terrorist financing risk associated with the shorter term of
FHSAs and their use for real estate purchases.
Administration
Responsibility for administering the new law
594. An FHSA is a financial product, offered by certain prudentially
regulated financial institutions, which provides incentives to save
through the taxation system. As a result, like superannuation, the
general administration of the FHSA Bill 2008 is divided between the
Commissioner, APRA and ASIC. [Section 3]
595. Depending on which institution administers the particular provision
being applied, the Regulator of the Bill will vary. [Section 18]
The Commissioner of Taxation
596. The Commissioner has the general administration of most of the
regulatory activities for FHSAs including: the eligibility rules
for opening, issuing and holding an FHSA; rules relating to
contributions to an FHSA; administration and payment of the
Government contribution; the taxation of earnings; payment rules;
the FHSA misuse tax; and TFNs. The Commissioner has the general
administration of:
. Part 3, which relates to eligibility, contribution and
payment rules;
. Part 4, which relates to Government contributions;
. Part 5, which relates to the administration of the FHSA
system, except where it relates to the review of certain
APRA decisions under Subdivision B of Division 4; and
. Part 6, which relates to enforcement activities.
[Subsection 3(1)]
Australian Prudential Regulation Authority
597. APRA has administration of provisions about establishing and
enforcing prudential standards and practices for FHSA providers.
These provisions are designed to operate alongside APRA's current
regulatory activity of potential FHSA providers (public offer
superannuation fund trustees, ADIs, life insurance companies and
friendly societies). APRA has general administration of:
. Part 7, which relates to the prudential regulation of FHSA
providers, except where ASIC has general administration;
and
. Subdivision B of Division 4 of Part 5, which relates to
the review of certain APRA decisions.
[Subsection 3(2)]
Australian Securities and Investment Commission
598. ASIC has general administration of provisions which relate to
ensuring that consumer protection arrangements apply for the
benefit of FHSA holders and potential FHSA holders. These
provisions are designed to operate parallel to ASIC's current
licensing, conduct, advice and disclosure regulation under the
Corporations Act.
599. To ensure consistency with the SIS Act the main Bill provides ASIC
with the general administration of the same provisions it has
general administration of in the SIS Act as they apply to FHSA
providers. ASIC has general administration of:
. section 101 (duty to establish arrangements for dealing
with inquiries or complaints) and section 103 (duty to
keep minutes and records); and
. Part 19 (public offer entities: provisions relating to
superannuation interests).
[Subsection 3(3)]
Powers and duties of the Regulators
600. In order to allow the Regulators to administer the provisions for
which they are responsible, they are provided with powers and
duties for the purposes of provisions they respectively administer
[subsection 3(4)].
. Where a function is performed under the FHSA Bill 2008 it
also refers to a duty being performed. [Section 18].
Reporting by providers
601. For FHSAs they provide, FHSA providers are required to report
certain information to the Commissioner. This includes:
. personal contributions made to FHSAs during the period;
. payments made from FHSAs during the period;
. the balances of FHSAs during the period; and
. the opening and closing of FHSAs during the period.
[Schedule 1, item 66, FHSA (Consequential Amendments) Bill 2008;
subsection 391-5(1) of Schedule 1 to the Taxation Administration
Act 1953 (TAA 1953)]
602. This does not apply in relation to FHSAs that have been transferred
to another FHSA provider during the specified period. [Schedule 1,
item 66, FHSA (Consequential Amendments) Bill 2008; subsection 391-
5(2) of Schedule 1 to the TAA 1953]
603. Unless the Commissioner determines otherwise, the specified period
is a financial year. The Commissioner is able to specify different
periods for different information. [Schedule 1, item 66,
FHSA (Consequential Amendments) Bill 2008; subsections 391-5(3) and
(4) of Schedule 1 to the TAA 1953]
604. The statement must be in the form approved by the Commissioner, and
must be given to the Commissioner on or before the date determined
by the Commissioner. [Schedule 1, item 66, FHSA (Consequential
Amendments) Bill 2008; subsections 391-5(5) to (9) of Schedule 1 to
the TAA 1953]
605. The approved form may require the statement to contain the TFN of
the provider, the FHSA holder, and if the FHSA is a trust, that
trust. This does not limit the information which the approved form
may require the statement to provide. [Schedule 1, item 66, FHSA
(Consequential Amendments) Bill 2008; subsections 391-5(10) and
(11) of Schedule 1 to the TAA 1953]
Information gathering and access powers
Information gathering
606. The FHSA Bill 2008 contains information gathering and access powers
for the Commissioner in relation to his administration of the
Government contribution. For FHSA matters contained in the income
tax law (eg, the FHSA misuse tax in the ITAA 1997) the Commissioner
can rely on his standard information gathering and access powers
under the income tax law.
607. The information gathering and access powers in the FHSA Bill 2008
for the Commissioner are broadly the same as in the Superannuation
(Government Co-Contribution for Low Income Earners) Act 2003.
608. APRA and ASIC will be able to rely on their existing information
gathering powers under the existing Acts.
From the FHSA holder
609. The Commissioner may require a person or their legal personal
representative, through a written notice, to give the Commissioner
information to enable the Commissioner to determine:
. whether a Government contribution is payable;
. the amount of any Government contribution;
. where the Government contribution should be paid in
respect of the FHSA holder;
. whether an overpayment amount is recoverable under
section 50 in respect of the person;
. the amount overpaid; and
. any other matters prescribed by the regulations.
[Paragraphs 77(1)(a) to (d)]
610. Notices can be given at any time, however, they must specify the
period (not less than 21 days after the notice is given) in which
compliance with the notice is required. [Subsections 77(1) and
(3)]
611. Failure to comply with such a notice (in relation to overpayments)
is an offence with a penalty of 30 penalty units.
[Subsection 77(2)]
From the FHSA provider
612. The Commissioner has the same powers and obligations when seeking
information from an FHSA provider relating to an FHSA holder as
they do from an FHSA holder. [Section 78]
613. Failure to comply with any such notice is an offence with a penalty
of 30 penalty units. [Subsection 78(2)]
Self-incrimination
614. A person is not excused from providing a statement to the
Commissioner (as required by sections 77 and 78) on the grounds
that the statement might tend to incriminate the person, or make
them liable to a penalty. [Subsection 79(1)]
615. However, if the person is an individual, neither the statement or
anything obtained as a direct result of the statement, is
admissible against the individual in any criminal proceedings,
other than against:
. section 77 or 78 of the FHSA Bill 2008; or
. section 137.1 or 137.2 of the Criminal Code Act 1995 that
relates to this Bill.
[Subsection 79(2)]
Access to premises
General
616. The Commissioner requires powers for authorised persons to be able
to enter the premises of persons. These powers may be used to
ensure that an FHSA provider (or other person) has reported the
correct information and where it may be necessary to inspect
documents which might otherwise not be available for inspection if
access powers were not available.
617. The issues that the Commissioner may be seeking to resolve through
the use of these access powers may be in relation to more than one
person's Government contribution and as such there may be a
significant revenue risk involved.
618. The Commissioner may only appoint ATO employees to be authorised
persons for the purposes of the access to premises provisions in
sections 81 to 85. [Section 80]
619. An authorised person may, with the consent of the occupier, or in
accordance with a warrant issued under section 87, enter the
premises. [Paragraphs 81(1)(a) and (b)]
620. They must enter the premises only for the purposes of determining:
. whether a Government contribution is payable;
. the amount of any Government contribution;
. whether an overpayment amount is recoverable under
section 3-50 in respect of the person;
. the amount overpaid; and
. whether a person has contravened a provision of this Bill.
[Paragraphs 81(1)(c) and (d)]
621. If an authorised person enters any premises they may search the
premises for, inspect, examine, take extracts from, and make copies
of, any examinable documents. [Subsection 81(2)]
622. In all cases, authorised officers must only enter premises if they
have shown their identity cards if requested and given the occupier
a written statement of the occupiers' rights and obligations. If,
after an authorised person has entered the premises, they fail to
produce their identity card when requested by the occupier to do
so, they are unable to exercise their powers under Division 2 of
the main Bill. [Subsections 82(1) and (2)]
Obligations of authorised person - entry by consent
623. An authorised person is only able to enter premises with the
consent of the occupier (under paragraph 81(1)(a)) if they have
informed the occupier that the occupier is entitled to refuse
consent and that the authorised person must leave if asked to do
so. If the occupier does request the authorised person to leave,
the authorised person must do so. [Section 83]
Obligations of authorised person - entry under warrant
624. An authorised person is only able to enter premises under a warrant
(under paragraph 81(1)(b)) if they have:
. announced that they are authorised to enter the premises;
and
. given any person on the premises an opportunity to allow
entry to the premises.
[Subsection 84(1)]
625. However, an authorised person is not required enter the premises
where they believe on reasonable grounds that immediate entry to
the premises is required to ensure the effective execution of the
warrant is not frustrated. [Subsection 84(2)]
626. If the occupier, or any person who appears to represent the
occupier, is present when the warrant is being executed, an
authorised person must identify themselves and make a copy of the
warrant available to the occupier. The warrant need not include
the signature of the authorising magistrate. [Subsections 84(3) to
(5)]
627. A person must not obstruct or hinder an authorised person in the
exercise of the authorised person's power under section 81, and the
authorised person exercises that power in accordance with a warrant
issued under section 44. Doing so is an offence with a penalty of
30 penalty units. [Section 85]
628. If an authorised person enters any premises under section 41 in
accordance with a warrant issued under section 87, the occupier or
person in charge must, if requested to do so by the authorised
person, provide reasonable assistance to the authorised person in
the exercise of his or her powers. Failure to do so is an offence
with a penalty of 30 penalty units. [Section 86]
Issue of warrants
629. Warrants are only able to be issued in relation to the premises of
an FHSA provider. Magistrates are only able to issue warrants, on
application by an authorised person, if they are reasonably
satisfied based on information on oath or affirmation that there
are reasonable grounds for believing there are examinable documents
on particular premises of an FHSA provider. The magistrate must
also be satisfied the warrant is reasonably required for the
purposes of ascertaining:
. whether a Government contribution is payable;
. the amount of any Government contribution;
. whether an overpayment amount is recoverable under
section 3-120 in respect of the person;
. the amount overpaid; and
. whether a person has contravened a provision of this Bill.
[Paragraphs 87(1)(a) and (b)]
630. These warrants may authorise an authorised person to enter
particular premises with such assistance as is necessary and
reasonable, and during the hours that the warrant specifies.
However, these warrants do not authorise for the use of force,
unlike the corresponding power in the Superannuation (Government Co-
contribution for Low Income Earners) Act 2003. [Paragraphs
87(1)(c) and (d)]
631. The warrant must specify the purpose of the warrant, the powers
exercisable under subsection 81(2) and the day on which the warrant
ceases to have effect. [Subsection 87(2)]
632. The function of issuing a warrant is conferred on a magistrate in
their personal capacity, rather than as a court or member of a
court. The magistrate does not need to accept the conferral of
this function. [Subsection 87(3)]
633. The Commissioner may cause an identity card to be issued to an
authorised person. This card must contain a recent photograph of
the authorised person and be in a form approved by the
Commissioner. A person who ceases to be an authorised person and
does not immediately return the card to the Commissioner commits an
offence with a penalty of one penalty unit. [Section 88]
Secrecy
634. Secrecy provisions have been inserted into the FHSA Bill 2008 to
protect the confidentiality of an individual's information in
relation to their FHSA. These provisions are modelled on
arrangements that currently apply to superannuation and impose
strict obligations on tax officers who receive FHSA information.
635. In relation to an individual's FHSA it is an offence for particular
people to communicate information to others unless it is for the
purposes of, or in performing duties under the FHSA Bill 2008,
regulations made under the main Bill or a taxation law. This
protection applies even if communicating information to a Minister
or in a court. [Section 70]
Tax file numbers
636. Under section 19 an FHSA provider is not able to open or issue an
FHSA unless the person has quoted their TFN. This is necessary as
the quotation of TFNs is vital to the integrity of FHSAs to:
. ensure that only one account is opened per person;
. facilitate the payment of the Government contribution; and
. allow the balance of an FHSA to be contributed to
superannuation.
637. The use of TFN information is restricted by the Privacy Act 1988
and the Privacy Commissioner's Tax File Number Guidelines issued
under section 17 of the Privacy Act 1988.
638. In line with these requirements, provisions have been inserted into
the FHSA Bill 2008 which are designed to restrict the use of a
person's TFN information and ensure compliance with the Privacy
Act 1988 and the Privacy Commissioner's Tax File Number Guidelines
issued under section 17 of the Privacy Act 1988. They have been
modelled on the TFN arrangements that currently apply for
superannuation. They apply to the Commissioner, FHSA providers and
persons applying to open or be issued with an FHSA.
Obligation to quote a tax file number
639. An individual may quote their TFN if they inform another person of
the number in the approved form. [Paragraph 56(a)]
640. To open or be issued with an FHSA an individual must quote their
TFN in relation to the main Bill and the 'Superannuation Acts' as
defined in section 18.
. The Superannuation Industry (Supervision) Regulations 1994
(SIS Regulations) require an individual to quote their TFN
to allow them to make a post-tax contribution. An
individual must quote their TFN in relation to the
Superannuation Acts, in addition to the FHSA Bill 2008, to
ensure that a superannuation provider is able to accept
post-tax contributions from an FHSA.
641. To assist in the process of opening and issuing FHSAs, the approved
form to be completed by an individual may request they quote their
TFN [subsection 68(3)].
. An individual is not required to quote their TFN, and if
they choose not to, they have not committed an offence
under section 137.1 of the Criminal Code Act 1995
[sections 59 and 69].
. However if they choose not to quote their TFN they will
not be able to hold an FHSA.
Request of a TFN
642. If an FHSA provider inadvertently opens or issues an FHSA where a
TFN has not been quoted the FHSA provider must request the TFN in
the approved form within 28 days of becoming aware of this fact
[subsections 58(1) and (2)].
. The FHSA provider may request a person's TFN at any time
[section 57].
1.
On 15 July 2010 Kristen opened an FHSA with ABC Bank. On
18 November 2010, ABC Bank identified that Kristen had not
supplied a TFN. ABC Bank must request Kristen to quote her
TFN within 28 days.
Deemed quotation of a TFN
643. A person does not have to quote their TFN personally. They may be
deemed to have quoted their TFN in connection with the operation or
future operation of the FHSA Bill 2008 and the Superannuation Acts
if:
. the Commissioner gives notice of a person's TFN. This may
occur where the Commissioner assesses a TFN quoted to
either be cancelled, withdrawn or wrong and the
Commissioner is satisfied that the person has a TFN
[section 66];
. an FHSA provider transfers a holder's FHSA to a second
FHSA provider and informs it of the person's TFN in the
approved form;
. an FHSA provider contributes an amount in a person's FHSA
to a superannuation provider and informs it of the
person's TFN in the approved form:
- however, where an FHSA provider contributes an FHSA
balance to a complying superannuation plan that is not
in the name of the FHSA holder, the provider is not
required to provide the FHSA holder's TFN to that
superannuation provider; and
. after the commencement of the main Bill the person quotes
their TFN under a provision of: the TAA 1953, the Income
Tax Assessment Act 1936 (ITAA 1936), the ITAA 1997 or the
Superannuation Acts:
- if the quotation is made before the commencement of this
Bill, the FHSA provider must request that person to
quote a TFN in relation to this Bill and the
Superannuation Acts. This is to ensure that when a
person quotes their TFN they are aware that they are
quoting it for the purposes of administering FHSAs.
[Sections 62 to 65]
Incorrect quotation of a tax file number
644. An FHSA provider may record a TFN which when reported to the
Commissioner is assessed to be cancelled, withdrawn or wrong.
645. If the Commissioner is satisfied that the FHSA holder has a TFN,
the Commissioner may provide the person's TFN to the FHSA provider.
[Section 66]
646. If the Commissioner is not satisfied that the FHSA holder has a
TFN, the Commissioner may provide a notice to the FHSA provider and
the FHSA holder stating that they are not satisfied that the FHSA
holder has a TFN and that the FHSA provider will be:
. unable pay any amounts to the FHSA under section 26;
. unable to pay any amount from the FHSA under section 31;
and
. required to close the FHSA and contribute the balance to a
complying superannuation plan under section 22.
[Section 67]
Provider's obligations to retain and destroy an individual's tax
file number
647. An FHSA provider is also required to record and retain the TFN of
an FHSA holder (and an FHSA applicant who becomes an FHSA holder).
It must destroy the TFN as soon as reasonably practicable after:
. the FHSA holder ceases to hold an FHSA; or
. the FHSA provider no longer requires the TFN:
- an FHSA provider must record and retain a TFN that has
been quoted or taken to have been quoted by an applicant
and destroy it as soon as reasonably practicable after
the application ceases; and
- this obligation does not apply if a TFN has been quoted
for another purpose and it is still required for that
purpose.
[Section 60]
Provider's obligations when using a tax file number to locate
amounts
648. To protect the privacy of an individual's TFN information FHSA
providers are only permitted to use a TFN to identify amounts it
holds in an FHSA for a person, if it first uses other information
to locate the amounts. It may then use the TFN where the other
information is insufficient or to confirm the identification of
that FHSA resulting from the use of that other information.
[Subsection 60(6)]
Provider's obligations when transferring FHSA savings
649. If a person chooses to transfer their FHSA to another FHSA
provider, the other FHSA provider requires the person's TFN to open
or issue them an FHSA. In addition, if an FHSA provider is
required to contribute the FHSA to superannuation, the complying
superannuation plan will require the person's TFN to be able to
accept it as a post-tax contribution.
650. To assist with the administration of these provisions, where an
FHSA is transferred to another FHSA provider or contributed to
superannuation the FHSA provider must quote the FHSA holder's TFN
in the approved form [section 61].
. This obligation only applies to where an FHSA provider
transfers or contributes the FHSA for the benefit of the
FHSA holder (ie, if the FHSA is contributed for the
benefit of another individual, for example, under a family
law obligation, the FHSA provider is not required to quote
a TFN).
1.
Jack and Jill are filing for divorce. Under the Family Law
Act 1975 Jill is entitled to half of Jack's assets,
including his FHSA balance. Jack's FHSA provider, the
Australian Bank, receives a request from Jack to contribute
half of his FHSA balance to Jill's superannuation plan.
When the Australian Bank makes this contribution, it is not
required to provide Jack's TFN to Jill's superannuation
plan.
Offence
651. If the FHSA provider fails to comply with its TFN obligations there
are alternative offences depending on the level of culpability of
the FHSA provider. These offences and the applicable penalties are
essentially the same as those in the SIS Act.
652. Where the relevant fault element in the Criminal Code Act 1995 is
proven, the FHSA provider is liable and a penalty of up to
100 penalty units applies. This penalty reflects the serious
nature of breaches of a person's privacy. [Subsections 58(4) and
60(8), and 61(4)]
653. Where an offence of strict liability (requiring no fault element)
is proven the FHSA provider is liable for a penalty of up to 50
penalty units. [Subsections 58(5), 60(9), and 61(5)]
Provision of tax file numbers in forms etc.
654. To assist with the administration of FHSAs, certain forms to be
submitted to the Regulator may require an FHSA provider's TFN.
These are:
. the approved form to apply for authorisation as an FHSA
provider which must be submitted to APRA under section 89;
and
. a financial return form which must also be submitted to
APRA under section 13 of the Financial Sector (Collection
of Data) Act 2001.
[Section 68]
Facilitation of the administration
655. Section 202 of the ITAA 1936 creates a system of TFNs to assist
with the administration of various pieces of legislation including
the SIS Act.
656. This system of TFNs will also be used to facilitate the
administration of individual's TFNs in Division 2 of Part 5 of the
main Bill. It will also be used to facilitate the administration
of FHSA providers in relation to the main Bill. [FHSA
(Consequential Amendments) Bill 2008, Schedule 1, item 6,
subsection 202(ka)]
Other administrative matters
External territories
657. The FHSA Bill 2008 applies to all external territories. It is
intended that people living in Norfolk Island, Christmas Island and
Cocos (Keeling) Islands be eligible to open an FHSA to acquire a
first home in the territory in which they live. Where they do
this, the associated legislation (eg, about taxation treatment) is
intended to apply in the same way it does for residents of mainland
Australia. [Section 5]
Commissioner's annual report
658. As is usual for Acts administered by the Commissioner, the
Commissioner is required to prepare an annual report. The report
is about the working of those parts of the Bill for which the
Commissioner has general administration. It is envisaged that the
Commissioner will include the report in his annual report about the
various taxation laws the Commissioner administers. [Section 126]
659. APRA and ASIC will also include information about their
administration of FHSAs in their annual reports under existing
obligations in the APRA and ASIC Acts.
Approved form
660. For provisions of the Bill administered by the Commissioner, the
standard approved form provisions (in section 388-50 of Schedule 1
to the TAA 1953) for taxation laws apply. Although these
provisions empower the Commissioner to require the use of a
particular form in the sense of a standard document he makes
available (eg, an annual income tax return), it is expected that
under most provisions requiring an approved form the Commissioner
would not require this. Rather, he would stipulate the particular
information that must be provided and leave the design of the
document (if one is required) to the entity providing the required
information.
661. The application of the approved form provisions also means that
where an approved form is not given on time, the generic
administrative penalties for failing to notify on time (in Division
286 of Schedule 1 to the TAA 1953) apply. [Section 55]
Decisions about Government contributions to be in writing
662. A decision by the Commissioner about Government contributions must
be recorded in writing, but this can include electronic recording.
Computer programs may be used to make these decisions, which are
taken to be decisions of the Commissioner. [Part 4, Division 1,
sections 53 and 54]
Miscellaneous matters
Application of the main Bill not to be excluded or modified
663. The operation of the main Bill can not be excluded or modified by
the terms and conditions of the FHSA including any provisions that
seek to substitute provisions of other law for all or any of the
provisions of that Bill. [Section 4]
Civil liability of an FHSA holder
664. An FHSA provider is not subject to any civil liability where it
performs an action required under the FHSA legislation. This
provision is included to avoid doubt. [Section 127]
Bankruptcy
665. If an FHSA holder becomes bankrupt, the FHSA legislation does not
prevent the FHSA holder paying to the trustee in bankruptcy an
amount out of the FHSA to be property divisible among the FHSA
holder's creditors. See Chapter 2 for a more detailed discussion
of these issues. [Section 128]
Constitutional savings provisions
666. The main Bill includes provisions (as a matter of caution) to
prevent any contravention of the Constitution that could result
from:
. the acquisition of property on unjust terms; or
. the main Bill applying to State insurance not extending
beyond the State in question [sections 129 and 130].
Regulations
667. The main Bill includes a standard power permitting the Governor-
General to make regulations. [Section 131]
Application and transitional
668. The amendments formally commence on the day after the date of Royal
Assent to the Bills. [Section 2 of the FHSA Bill 2008; section 2
of the FHSA (Consequential Amendments) Bill 2008; section 2 of the
Income Tax (FHSA Misuse Tax) Bill 2008]
669. However, their practical effect is in relation to FHSAs, which can
only be opened on or after 1 October 2008 (or a later dater
specified by regulation). [Section 8 of the FHSA Bill 2008]