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FAMILY LAW (SUPERANNUATION) AMENDMENT REGULATIONS 2007 (NO. 1) (SLI NO 151 OF 2007)

EXPLANATORY STATEMENT

Select Legislative Instrument 2007 No. 151

ISSUED BY AUTHORITY OF THE ATTORNEY-GENERAL

FAMILY LAW ACT 1975

FAMILY LAW (SUPERANNUATION) AMENDMENT REGULATIONS 2007 (No. 1)

 

 

Subsection 125(1) of the Family Law Act 1975 (FLA) provides, in part, that the

Governor-General may make regulations, not inconsistent with the Act, prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

FLA Part VIIIB provides for the division of superannuation between parties to a marriage on marriage breakdown or divorce.

The Family Law (Superannuation) Regulations 2001 (the Principal Regulations) contain much of the detail of the legislative scheme for the division of superannuation on marriage breakdown or divorce, including provisions relating to valuing superannuation interests, the entitlement of parties when superannuation is divided and the provision of information before and after division occurs.

The purpose of the Regulations is to amend the Principal Regulations consequential on the enactment of the Tax Laws Amendment (Simplified Superannuation) Act 2007 and the Superannuation Legislation Amendment (Simplification) Act 2007 (the two 2007 Amendment Acts) and to make technical amendments to overcome deficiencies.

In particular, the Regulations:

– to provide information about whether an alternative valuation method has been approved for a superannuation interest paying a lifetime pension; and

– when providing a valuation of a superannuation interest, to also provide information from which that valuation has been determined;

The Regulations commence on 1 July 2007. Amendments made to the Income Tax Assessment Act 1997 by the Superannuation Legislation Amendment (Simplification) Act 2007 (one of the two 2007 Amendment Acts) apply to the 2007-2008 financial years and later years.

Details of the Regulations are as follows:

Regulation 1 – Name of Regulations

This regulation provides that the title of the Regulations is the Family Law (Superannuation) Amendment Regulations 2007 (No. 1).

Regulation 2 – Commencement

This regulation provides for the commencement of the Regulations on 1 July 2007.

Regulation 3 – Amendment of Family Law (Superannuation) Regulations 2001

This regulation provides that the Principal Regulations are amended as set out in Schedule 1.

Schedule 1 – Amendments

Item [1] Regulation 3, definition of constitutionally protected fund

Item [1] inserts a new definition of the term ‘constitutionally protected fund’ in regulation 3 of the Principal Regulations reflecting the repeal, by Part 1 of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007 (the 2007 Amendment Act), of Part IX of the Income Tax Assessment Act 1936 (ITAA 1936) and the enactment, by Part 1 of Schedule 1 to the Tax Laws Amendment (Simplified Superannuation) Act 2007, of provisions relating to the taxation of superannuation in new Part 3-30 of the Income Tax Assessment Act 1997 (ITAA 1997). The term ‘constitutionally protected fund’ is no longer used in ITAA 1936. The new definition of the term ‘constitutionally protected fund’ provides that the term has the meaning that it has in ITAA 1997.

Item [2] – Regulation 3, after definition of superannuation agreement

Item [2] inserts a definition of the term ‘superannuation annuity’ in regulation 3 of the Principal Regulations. Part 2 of Schedule 1 to the 2007 Amendment Act made amendments to several provisions of the Family Law Act 1975 (FLA), reflecting:

One of the amendments made by Part 2 of Schedule 1 to the 2007 Amendment Act was the substitution of new paragraph (e) of the definition of ‘eligible superannuation plan’ in FLA section 90MD. New paragraph (e), which provides that a superannuation annuity within the meaning of ITAA 1997 is an eligible superannuation plan, replaced former paragraph (e), which provided that an eligible annuity, a term defined by reference to ITAA 1936 Part III Division 14, was such a plan.

Items [3] and [32] amend provisions in Parts 2, 3, 4 and 7 of the Principal Regulations to substitute references to ‘eligible annuity’ in those provisions with references to ‘superannuation annuity’.

Item [3] – Subregulation 10(5A)

Item [3] amends subregulation 10(5A) of the Principal Regulations to substitute two references to ‘eligible annuity’ in the provision with references to ‘superannuation annuity’ to reflect the insertion, by the 2007 Amendment Act, of new paragraph (e) of the definition of ‘eligible superannuation plan’ in FLA section 90MD.

Item [4] – After subregulation 10(5A)

Item [4] inserts new subregulation 10(5B) in the Principal Regulations to provide that the Defence Force Retirement and Death Benefits Authority is identified, for the purpose of the definition of the term ‘trustee’ in FLA section 90MD, as the trustee of the superannuation scheme constituted by the Defence Force (Superannuation) (Productivity Benefit) Determination made under subsection 52(1) of the Defence Act 1903.

Item [5]– Subregulation 11(1)

Item [5] amends regulation 11 of the Principal Regulations to prescribe certain superannuation interests paying pensions or annuities to be an unsplittable interest for the purpose of the definition of the term ‘unsplittable interest’ in FLA section 90MD.

The amendment prescribes a superannuation interest paying:

to be an unsplittable interest for the purpose of that definition where the annual benefit payable to the member is less than $2,000.

A superannuation interest that is yet to pay benefits, or that is paying benefits in the form of a commutable pension or an annuity with an underlying capital sum (for example, an allocated annuity or a market linked annuity), continues to be an unsplittable interest if the benefits payable, were the spouse to voluntarily cease to be a member of the relevant eligible superannuation plan, are less than $5,000.

Item [6] – Paragraph 12(1)(a)

Item [6] amends paragraph 12(1)(a) of the Principal Regulations, one of several paragraphs in regulation 12 prescribing particular payments in respect of a superannuation interest of a spouse to each be a payment that is not a splittable payment for the purposes of FLA subsection 90ME(1).

Paragraph 12(1)(a) currently provides that a payment made to the member spouse on compassionate grounds under subregulation 6.19A(1) of the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations) is a payment that is not a splittable payment.

The amendment:

Item [7] – After paragraph 12(1)(d)

Item [7] inserts new paragraph 12(1)(da) in the Principal Regulations to provide that a payment in respect of a superannuation interest in a superannuation annuity that is a deferred annuity made on compassionate grounds under a term of the annuity is a payment that is not a splittable payment for the purposes of FLA subsection 90ME(1).

Items [8], [9] and [10] – Regulation 14Q, heading; Regulation 19, heading; Regulation 19A, heading

These items amend the headings to regulations 14Q, 19 and 19A of the Principal Regulations to substitute the words ‘superannuation annuity’ for ‘eligible annuity’ in those headings to reflect the insertion, by the 2007 Amendment Act, of new paragraph (e) of the definition of ‘eligible superannuation plan’ in FLA section 90MD. New paragraph (e) of that definition reflects the repeal, by the 2007 Amendment Act, of ITAA 1936 Part III Division 14 and the inclusion, by the Tax Laws Amendment (Simplified Superannuation) Act 2007, of provisions relating to the taxation of superannuation in ITAA 1997 Part 3-30.

Item [11] – Regulation 20, heading

Item [11] amends the heading to regulation 20 of the Principal Regulations to substitute ‘low rate cap amount’ for ‘ETP threshold’ in that heading. The amendment reflects the replacement and movement, by the 2007 Amendment Act and the Tax Laws Amendment (Simplified Superannuation) Act 2007 (the two 2007 Amendment Acts), of the upper limit applying under ITAA 1936 section 159SG (which, until the commencement of the two 2007 Amendment Acts, was referred to in FLA subsection 90MQ(3) as the ‘ETP threshold’) with the concept, under ITAA 1997 Subdivision 307-F, of a low rate cap amount.

 

Item [12] – Paragraph 22(2)(c)

Item [12] amends paragraph 22(2)(c) of the Principal Regulations to change the reference in that paragraph to the information disclosure provisions that would require the trustee of a regulated superannuation fund to inform members of the fund that the fund is to be reconstructed or terminated. The information disclosure provisions, which formerly were in Division 2.5 of the SIS Regulations, are now contained in section 1017B of the Corporations Act 2001.

Items [13] and [14] – Regulation 26, heading; Regulation 26A, heading

These items amend the heading to regulations 26 and 26A of the Principal Regulations to substitute the words ‘superannuation annuity’ for ‘eligible annuity’ in those headings to reflect the insertion, by the 2007 Amendment Act, of new paragraph (e) of the definition of ‘eligible superannuation plan’ in FLA section 90MD. New paragraph (e) of that definition reflects the repeal, by the 2007 Amendment Act, of ITAA 1936 Part III Division 14 and the inclusion, by the Tax Laws Amendment (Simplified Superannuation) Act 2007, of provisions relating to the taxation of superannuation in ITAA 1997 Part 3-30.

Items [15] and [16] – Subparagraph 63(3)(e)(ii); After paragraph 63(3)(e)

These items insert new paragraphs 63(3)(f) and (g) in the Principal Regulations in relation to the provision of information in response to an application under FLA section 90MZB for information about a superannuation interest that is an accumulation interest in the payment phase.

New paragraph 63(3)(f) requires, in respect of an application relating to such an interest that is paying a lifetime pension, the trustee of the fund in which the interest is held to provide a statement about whether an alternative method or factors have been approved under the Principal Regulations for valuing the interest and, if so, details of them.

New paragraph 63(3)(g) enables, in respect of an application that specifically requests the trustee to provide a valuation of an accumulation interest in the payment phase, the trustee to choose to provide a valuation of the interest in accordance with the relevant method that applies under the Principal Regulations.

Items [17], [18] and [19] – Paragraph 63(4A)(aa), excluding the note; Subparagraph 63(6)(d)(iii); Paragraph 63(6)(e)

Items [17] and [18]:

in relation to the provision of information in response to an application under FLA section 90MZB for information about a superannuation interest that is a partially vested accumulation interest in the growth phase.

New paragraph 63(4A)(aaa) requires the trustee of the fund in which such an interest is held to provide a statement about whether an alternative method or factors have been approved under the Principal Regulations for valuing the interest and, if so, details of them.

To achieve consistency with new paragraphs 63(3)(g) (inserted by item [16]) 64(3)(g) (inserted by item [22]) and 64(4)(p) (inserted by item [23]), new paragraph 63(4A)(aa)

re-draws current paragraph 63(4A)(aa) to incorporate current paragraph 63(6)(e) into a single provision.

The effect of re-drawn paragraph 63(4A)(aa) is to enable, in respect of an application that specifically requests the trustee to provide a valuation of a partially vested accumulation interest for which an alternative valuation method or factors have been approved under the Principal Regulations, the trustee to choose to provide a valuation of the interest in accordance with that method or those factors.

Consequential on the incorporation of paragraph 63(6)(e) into re-drawn paragraph 63(4A)(aa), item [19] omits paragraph 63(6)(e) from the Principal Regulations.

Item [20] – After regulation 63

Item [20] inserts new regulation 63A in the Principal Regulations to enable a person who:

to apply for, and receive within a reasonable time, information that will enable him or her to check whether the interest has been correctly valued in accordance with those methods or factors.

This information may be needed to check whether the interest has been valued correctly where an information determination has not been made, under subregulation 63(6A) or (6B) of the Principal Regulations, for the partially vested accumulation interest for which the alternative valuation method or factors have been approved. Alternative valuation methods have been approved under the Principal Regulations for partially vested accumulation interests in two superannuation funds, and an information determination is yet to be made in respect of one of those funds. The method approved for that fund requires information, beyond that which is required to be provided under subregulation 63(4A) in response to an FLA section 90MZB application, to check whether a valuation in accordance with the method has been correctly determined.

The information under new regulation 63A will be required to be provided to the person who made the application for it in a document that is addressed to that person. Under subregulation 68B(2) of the Principal Regulations, the document will be evidence of the information stated in it and that the document was provided to the person who made the application.

Items [21] and [22] – Subparagraph 64(3)(e)(ii); After paragraph 64(3)(e)

These items insert new paragraphs 64(3)(f) and (g) in the Principal Regulations in relation to the provision of information in response to an application under FLA section 90MZB for information about a superannuation interest that is a defined benefit interest in the payment phase.

New paragraph 64(3)(f) requires, in respect of an application relating to such an interest that is paying a lifetime pension, the trustee of the fund in which the interest is held to provide a statement about whether an alternative method or factors have been approved under the Principal Regulations for valuing the interest and, if so, details of them.

New paragraph 64(3)(g) enables, in respect of an application that specifically requests the trustee to provide a valuation of a defined benefit interest in the payment phase, the trustee to choose to provide a valuation of the interest in accordance with the relevant method that applies under the Principal Regulations.

Items [23], [24], [25], [26] and [27] – Paragraph 64(4)(p), including the note; Paragraph 64(4A)(e), note; Paragraph 64(6)(c); Paragraph 64(6)(d); Paragraph 64(6)(e)

These items:

·        re-draw paragraph 64(4)(p) of the Principal Regulations to incorporate paragraph 64(6)(e) of the Principal Regulations;

·        omit paragraph 64(6)(c); and

·        revise the notes following paragraphs 64(4)(p) and (4A)(e) consequential on the two above-mentioned amendments;

in relation to the provision of information in response to an application under FLA section 90MZB for information about a superannuation interest that is a defined benefit interest in the growth phase.

Re-drawn paragraph 64(4)(p) (item [23]) and the omission of paragraph 64(6)(c) (item [25]):

·        enable a trustee of a fund in which a defined benefit interest is held, in response to an application that specifically requests the trustee to provide a valuation of the interest, to choose to provide that valuation in accordance with the applicable method that applies under the Regulations;

·        require the trustee, where a valuation determined in accordance with Schedule 2 of the Principal Regulations is provided, to provide the information set out in subregulation 64(4) or (4A) from which that valuation has been determined; and

·        revise the note following paragraph 64(4)(p) consequential on the incorporation into that provision of paragraph 64(6)(e) and the omission of paragraph 64(6)(c).

Paragraph 64(6)(c) currently provides that, where such a valuation is provided, the trustee is not required to provide the information set out in subregulation 64(4) or (4A) from which the valuation has been determined.

Item [24] revises the note following paragraph 64(4A)(e) consequential on re-drawn paragraph 64(4)(p) and the omission of paragraph 64(6)(c).

Item [27] omits paragraph 64(6)(e) consequential on the incorporation of that provision into paragraph 64(4)(p). Item [26] makes a drafting change to paragraph 64(6)(d) consequential on the omission of paragraph 64(6)(e).

Items [28] and [29] – Subregulations 64(6A) and (6B); After regulation 64

These items omit subregulations 64(6A) and (6B) of the Principal Regulations and insert new regulation 64A in the Principal Regulations.

Subregulations 64(6A) and (6B) currently enable a person to obtain information necessary for a person to check whether a valuation of a superannuation interest, provided in response to an application under FLA section 90MZB, has been correctly determined.

The omission of subregulations 64(6A) and (6B) is consequential on the omission by item [25] of paragraph 64(6)(c) of the Principal Regulations. Paragraph 64(6)(c) currently provides that a trustee of a superannuation fund who, in response to an application under FLA section 90MZB about a defined benefit interest in the growth phase, provides a valuation of the interest is not required to provide the information set out in particular paragraphs of subregulation 64(4) or (4A). This information is the information that would be required to value the interest in accordance with Schedule 2 of the Principal Regulations. The omission of paragraph 64(6)(c) requires the trustee of a fund, when it provides such a valuation, to also provide this information.

With the omission of paragraph 64(6)(c), subregulation 64(6A) and (6B) is no longer necessary in relation to applications under FLA section 90MZB made, after the commencement of the proposed Regulations on 1 July 2007, for most defined benefit interests.

There will, however, be two situations when a person may wish to obtain further information from a superannuation fund about the valuation of a defined benefit interest he or she has obtained in response to an application under FLA section 90MZB.

First, the person may wish to obtain that further information to check, after the Regulations commence on 1 July 2007, whether such a valuation he or she has obtained, in response to an FLA section 90MZB application made before 1 July 2007, has been correctly determined.

Second, the person may also wish to obtain that further information to check whether a valuation he or she has obtained, in response to an FLA section 90MZB application, of a defined benefit interest has been correctly determined in accordance with an alternative valuation method approved for the interest under the Principal Regulations where an information determination, under subregulation 64(7), (7A) or (7B) of the Principal Regulations, has not also been made in respect of the interest.

In most cases, different information, from that set out in subregulations 64(4) or (4A), will be required to value an interest in accordance with an alternative method approved under the Principal Regulations. An information determination, if one has been made under subregulation 64(7), (7A) or (7B), will require the trustee of a fund to provide that different information in response to an FLA section 90MZB application.

Only seven of the 29 superannuation funds for which alternative valuation methods have been approved for defined benefit interests in the growth phase have had an information determination made under subregulation 64(7), (7A) or (7B). An information determination has only been made, when an application for an alternative valuation method under the Principal Regulations has been approved, where the trustee of the relevant superannuation fund has advised, during the consideration of the application, that it does not propose to provide valuations of interests, in response to FLA section 90MZB applications, covered by the alternative method.

New regulation 64A enables, in either of these two situations, a person who has received, in response to an FLA section 90MZB application, a valuation of the interest, to apply for, and receive within a reasonable time, information that will enable him or her to check whether the interest has been correctly valued in accordance with the applicable method under the Principal Regulations.

An application in the first of these two situations would be made under new subregulation 64A(2). An application in the second situation would be made under either new subregulation 64A(2) or (3), depending on whether or not the interest was in the payment phase or the growth phase at the time of the FLA section 90MZB application.

Where the valuation of the interest received from the trustee has been determined in accordance with Schedule 2 to the Principal Regulations, the trustee is not required, under new regulation 64A, to provide information relating to the salary or accrued benefit multiple of the member at a particular time unless a record of that information is in its possession, power or control. In some cases, a superannuation fund may have, since the original FLA section 90MZB application, disposed of those records.

The information will be required, under new regulation 64A, to be provided to the person who made the application in a document that is addressed to that person. Under subregulation 68B(2) of the Principal Regulations, the document will be evidence of the information stated in it and that the document was provided to the person who made the application.

Item [30] – Schedule 1 Form 1

This item inserts a revised Form 1 in Schedule 1 to the Principal Regulations, to make amendments to the Form reflecting:

Form 1 provides for the form of the notice for service on the trustee of an eligible superannuation plan where the member spouse has paid an amount in satisfaction of the non-member spouse’s entitlement under a splitting order or agreement.

In relation to the revisions made to the Form to reflect the amendments to regulation 14H, the scheme constituted by the Superannuation Act 1922 was specified, by item [14] in Schedule 1 to the Superannuation Industry (Supervision) Amendment Regulations 2007 (No. 2) (Select Legislative Instrument 2007 No. 105), as an exempt public sector superannuation scheme.

Item [31] – Further amendments

Item [31] makes amendments to provisions in the Principal Regulations to:

– the concept of an ‘eligible service period’ under ITAA 1936 (the concept has been replaced by the concept of a ‘service period’ under ITAA 1997); and

– the concept of an ‘eligible termination payment’ under TAA 1936 (the concept has been replaced by the concept of a ‘superannuation lump sum’ under ITAA 1997).

Item [32] – Further amendments – eligible annuity

Item [32] makes amendments to provisions in Parts 2, 3, 4 and 7 of the Principal Regulations to substitute the words ‘superannuation annuity’ for ‘eligible annuity’ in those provisions to reflect the insertion, by the 2007 Amendment Act, of new paragraph (e) of the definition of ‘eligible superannuation plan’ in FLA section 90MD.

The Regulations incorporate by reference:

and also refer to:

The above-mentioned Acts, Regulations and Determination may be viewed at the following website addresses:

ITAA 1997:

http://www.comlaw.gov.au/ComLaw/Legislation/ActCompilation1.nsf/current/bytitle/D96DD9C0A9727B52CA2572DE000B2480?OpenDocument&mostrecent=1

the SIS Regulations:

http://www.comlaw.gov.au/ComLaw/Legislation/LegislativeInstrumentCompilation1.nsf/current/bytitle/CC0A2290F0F4B89CCA2572B900171C45?OpenDocument&mostrecent=1

the RSA Regulations:

http://www.comlaw.gov.au/ComLaw/Legislation/LegislativeInstrumentCompilation1.nsf/current/bytitle/481CFED754D5C387CA2572CF0002DD8C?OpenDocument&mostrecent=1

the DFRDB Act:

http://www.comlaw.gov.au/comlaw/Legislation/ActCompilation1.nsf/current/bytitle/EE1F39D280F7A5B0CA2570960019E563?OpenDocument&mostrecent=1

the Defence Superannuation Productivity Determination:

http://www.comlaw.gov.au/ComLaw/Legislation/LegislativeInstrumentCompilation1.nsf/current/bytitle/0CCDE2AF23B8C9D8CA25716A0000137A?OpenDocument&mostrecent=1

A copy of the above-mentioned Acts and Regulations may also be purchased from CanPrint Information Services, PO Box 7456, Canberra MC ACT 2610 (telephone: 1300 656 863).

Consultation on the content of the Regulations was undertaken under section 17 of the Legislative Instruments Act 2003 with the Investment & Financial Services Association Ltd, the Association of Superannuation Funds of Australia Ltd, the Law Council of Australia, the Family Court of Australia, the Federal Magistrates Court, MLC Limited, AMP, Treasury, the Australian Government Actuary, the Australian Taxation Office, ComSuper, the Department of Defence and State and Territory Government superannuation officials. The consultation involved exchange of correspondence and discussions.


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