SUPERANNUATION (FAMILY LAW — SUPERANNUATION ACT 1976) ORDERS 2004 2004 No. 86 - REG 2.11 Reduction of associate deferred benefits where original interest is entitlement to associate deferred benefits

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SUPERANNUATION (FAMILY LAW — SUPERANNUATION ACT 1976) ORDERS 2004 2004 No. 86 - REG 2.11

Reduction of associate deferred benefits where original interest is entitlement to associate deferred benefits

For subsection 146MF (2) of the Act, associate deferred benefits are to be reduced as follows:

Step 1	Identify the funded and unfunded components of the transfer amount at the operative time.
Step 2	Increase the funded component of the transfer amount as if the component were an amount calculated under paragraph 146MC (1) (a) of the Act and paid when the associate deferred benefits become payable.
Step 3	Increase the unfunded component of the transfer amount as if it were the lump sum amount calculated in step 2A in subsection 2.07 (1) when the associate deferred benefits become payable. Note A lump sum amount is increased under section 2.07 only if there is a period between the operative time and the time at which benefits first become payable. Therefore, in a particular case, it is possible that the unfunded component of the transfer amount will not need to be increased under this step.
Step 4	Identify: (a) the funded component of the associate deferred benefits, as calculated under paragraph 146MC (1) (a) of the Act; and (b) the lump sum value of the unfunded component of the associate deferred benefits, as worked out under section 2.07; to the date of payment. Note The lump sum value of the unfunded component of the associate deferred benefits represents the increased unfunded component of the transfer amount worked out under step 2A in subsection 2.07 (1). If the funded component of the associate deferred benefits has previously been reduced in accordance with these Orders, the reduction must be taken into account.
	If the unfunded component of the associate deferred benefits has previously been reduced in accordance with these Orders, the reduction must be taken into account.
Step 5	Reduce the funded component of the associate deferred benefits as identified in step 4 by the increased funded component of the transfer amount worked out at step 2.
Step 6	Reduce the lump sum value of the unfunded component of the associate deferred benefits identified in step 4 by the increased unfunded component of the transfer amount worked out at step 3.
Step 7	Substitute the reduced amount calculated under step 5 for the lump sum calculated under paragraph 146MC (1) (a) of the Act for payment under section 146MC.
Step 8	Substitute the reduced lump sum calculated in step 6 for the amount that is referred to in step 4 in subsection 2.07 (1) as `the unfunded component in relation to the transfer amount, as increased in step 2A', for the purposes of paragraph 146MC (1) (b) of the Act.

Example for section 2.11
A member spouse has an entitlement to associate deferred benefits. The scheme value of those benefits at the operative time is $300 000. The funded component is $100 000, and the unfunded component is $200 000.
The agreement served on the Board specifies that half of the interest is to be transferred to the non-member spouse. Therefore, the transfer amount is $150 000, of which the funded component is $50 000.
Step 1 identifies the components of the transfer amount to be $50 000 funded and $100 000 unfunded.
Step 2 indexes the funded component of the transfer amount to the day on which the associate deferred benefits become payable to the non-member spouse.
The $50 000 is increased by the Fund crediting rate to $60 000.
Step 3 indexes the unfunded component of the transfer amount to the same day, assuming that indexation is required.
The $100 000 is increased as provided for under section 2.07 to $110 000.
Step 4 calculates the funded component and the lump sum value of the unfunded component of the associate deferred benefits that would become payable if there were no reduction.
The $100 000 funded value is increased by the Fund crediting rate to $120 000.
The $200 000 is increased by the Bond Rate to $220 000.
Step 5 reduces the funded component calculated at Step 4 by the amount calculated at Step 2.
The $120 000 is reduced by $60 000, leaving $60 000.
(Step 7 provides that the amount of $60 000 left after this reduction becomes payable to the member spouse under paragraph 146MC (1) (a) of the Act.)
Step 6 reduces the lump sum value of the unfunded component of the associate deferred benefits calculated at Step 4 by the amount calculated at Step 3.
The $220 000 is reduced by $110 000, leaving $110 000.
Step 8 provides that the reduced lump sum value ( $110 000 ) is to be substituted for the amount calculated for section 2.07 to calculate the rate of pension under paragraph 146MC (1) (b) of the Act.

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