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Issue 531, 8 April 2014 

In this issue:

APRA releases final modification declaration regarding self-insurance 

APRA has released a final modification declaration to regulation 4.07E(8) of the Superannuation Industry (Supervision) Regulations 1994. The modification declaration will apply where a superannuation fund has been permitted to self-insure its defined benefit members, and the defined benefit members are transferred (on a successor fund basis) to a second or subsequent fund. 

The purpose of the modification declaration is to allow the second or subsequent fund to continue the self-insurance arrangement in respect of the fund’s defined benefit members, subject to an approval by APRA. 

APRA has issued a letter to all superannuation trustees concerning this release. The letter, dated 31 March 2014, is available on the APRA website. 

 

AUSTRAC guidance: rules regarding transactions involving Iran 

AUSTRAC has released Guidance note 12/02: Countermeasures applied to Iran (updated April 2014), which provides information on the counter-measure requirements that reporting entities, including trustees of superannuation funds, must follow in relation to transactions involving individuals that are physically present in Iran or corporations incorporated in Iran. The requirements commenced on 1 March 2012 and have been continued. 

Guidance note 12/02 is available on the AUSTRAC website and contains measures, in the form of Rules and Regulations, which counter deficiencies in Iran’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. 

Under the AML/CTF Rules, all reporting entities are required to: 

Under the Regulations, reporting entities are prohibited from undertaking particular transactions involving parties in Iran where the transaction is valued at $20,000 or more. 

The prohibition on transactions does not relate to transactions involving: 

To be exempt from the Regulations, a reporting entity must have been granted an exemption by the secretary of the Department of Foreign Affairs and Trade (DFAT). 

Enquiries about the exemptions process for countermeasures can be directed to DFAT via email (sanctions@dfat.gov.au) or the DFAT website. 

 

FATCA update 

On 2 April 2014, the United States (US) Treasury issued a press release detailing its proposal to treat jurisdictions with Foreign Account Tax Compliance Act (FATCA) “agreements in substance as agreements in effect”, in preparation for the commencement of the FATCA regime. 

Under the proposal, jurisdictions that have reached an intergovernmental agreement (IGA) in substance with the US on the terms of the FATCA IGA will be treated as having agreements in effect until the end of 2014, provided that agreements in substance are reached prior to 1 July 2014, and that they consent to having the status of their agreements disclosed. 

Australia is included on the list of jurisdictions that are treated as having an IGA in effect. 

This means that Australian foreign financial institutions (FFIs) can now go through the registration process. The press release also advises that the registration date for inclusion on the first US Internal Revenue Service (IRS) FFI list has been moved from 25 April to 5 May. 

It is ASFA’s view that Australian superannuation funds are currently exempt from FATCA registration, as they fall within the FATCA definition of an exempt beneficial owner due to the fact they are pension funds and because Australia is a US tax-treaty country. However, to remove any doubt, ASFA has supported a specific exemption for Australian superannuation entities, as defined in the Superannuation Industry (Supervision) Act 1993 (SIS Act), being sought through the IGA process. 

ASFA understands that the US/Australia Annex II of the Model 1 IGA, once in place, will treat Australian superannuation entities, as defined in the SIS Act, as exempt beneficial owners for the purpose of FATCA. As exempt beneficial owners, Australian superannuation funds will have no FATCA registration, reporting or withholding obligations. 

However, as these modifications to Annex II of the Model 1 IGA (which will set out the entities and accounts that are exempt from, or deemed to comply with aspects of FATCA) cannot be applied until the IGA is signed, some uncertainty will continue for superannuation funds that are seeking to rely on the IGA exemption. 

ASFA is maintaining a watching brief. Any questions should be directed to ASFA’s principal policy adviser, Robert Hodge. 

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