Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (FAMILY LAW - SUPERANNUATION ACT 1976) ORDERS 2004 2004 NO. 86

The Superannuation Act 1976 (the Act) makes provision for and in relation to the Commonwealth Superannuation Scheme (CSS) for Australian Government employees and for certain other persons.

Part IXB of the Act makes specific provision for the splitting of a superannuation interest under the Act when the CSS Board is served with an agreement or order in relation to that interest as a result of actions taken under the Family Law Act 1975 (the Family Law Act). For the purposes of the Family Law Act a member may have a superannuation interest under the Act as a CSS contributor (an eligible employee), a person to whom deferred benefits will become payable at a future date, a person in receipt of pension or a person to whom an associate deferred benefit or an associate pension is or may be payable as a result of a previous agreement or order.

When a split occurs the former spouse of the member (described in Part IXB as the non-member spouse) is allocated a separate interest in the scheme based on a transfer amount that will be ascertained from the agreement or order served on the Board.

Subsection 146MH(1) of the Act provides that the Minister may make Orders prescribing matters required or permitted to be prescribed by Part IXB. Subsections 146MH(2) and (3) provide that an order made under that section is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 and a Statutory Rule for the purposes of the Statutory Rules Publication Act 1903.

The purpose of the Orders contained in the Statutory Rule and cited as the Superannuation (Family Law - Superannuation Act 1976) Orders 2004 (the Orders) is to prescribe the matters required or permitted by Part IXB of the Act to be prescribed.

Section 146MA of the Act defines a number of terms used in Part IXB. The definitions of basic contributions amount, employer contributions amount, scheme value, section 110SL amount, section 130B amount and supplementary contributions amount all refer to amounts determined under the Orders. These Orders provide methods and/or factors that are to be used to calculate the relevant amounts in relation to each of these definitions.

Section 146MB of the Act provides for the creation of a separate interest in the CSS for a former spouse in certain circumstances following the receipt of a splitting agreement or order. The form of the separate interest varies depending on the circumstances of the member and may be in the form of associate deferred benefits or an associate standard pension and associate additional pension (where relevant).

Subsections 146MB(2) and (3) of the Act provide that the rate of associate standard pension and associate additional pension should be calculated under the Orders with reference to the transfer amount (defined in section 146MA of the Act). These Orders provide methods and/or factors that are to be used to calculate the relevant rates.

Section 146MC of the Act provides for the calculation of, and the payment rules for, associate deferred benefits. Paragraph 146MC(1)(b) of the Act provides for the annual rate of an associate deferred pension to be calculated under the Orders with reference to the unfunded component defined under section 146MA of the Act. Paragraph 146MC(5)(b) of the Act provides for the calculation, under the Orders, of an amount in respect of the associate deferred pension that is to be paid under subsection 146MC(5) of the Act in the event of the death of the former spouse before the associate deferred benefits have become payable. These Orders provide methods and/or factors that are to be used to calculate the annual rate of associate deferred pension or the lump sum amount to be payable on death.

Section 146MD of the Act provides for the former spouse to be able to elect to commute an associate standard pension (and additional pension if relevant) or associate deferred pension where the rate of that pension is below an amount to be determined under the Orders. These Orders provide an initial amount and for that amount to be indexed.

Paragraph 146MD(3)(b) of the Act provides that the lump sum payable to the former spouse as a result of an election under the section should be calculated under the Orders. These Orders provide the method and factors to be used to calculate the lump sum payable under paragraph 146MD(3)(b) of the Act.

Under the Family Law Act superannuation interests that have either been reduced or established because of an agreement or order following marriage breakdown may be subject to splitting on the breakdown of a later marriage. Therefore, where there has been a separate interest created for a former spouse under the Act, that separate interest may also be subject to a later splitting process. Section 146MF of the Act provides for the reduction of associate deferred benefits where there is a splitting agreement or order served in respect of those benefits. Subsection 146MF(2) of the Act provides that, where this has occurred, the associate deferred benefit should be reduced on payment in accordance with the Orders. These Orders provide the method and/or factors to be used to reduce those benefits.

Section 146MG of the Act provides for the immediate reduction of pension where a splitting agreement or order is received in relation to a person who is in receipt of pension or pensions (including an associate pension) under the Act. Subsection 146MG(1) of the Act provides that the annual rate of standard pension should by reduced to an amount of pension calculated under the Orders. Subsection 146MG(2) of the Act provides, similarly, that the annual rate of additional pension should be reduced to an amount of pension calculated under the Orders. These Orders provide the method and factors to be used to arrive at the reduced rate of pension or pensions.

Section 167AB of the Act provides that the Minister may make Orders under the Act without the agreement of the CSS Board in certain circumstances. Subparagraph 167AB(b)(i) of the 1976 Act provides that amendments that relate to a payment by an employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) that will, after the making of the amendment, be required or permitted to be made under the Act do not require that agreement. These Orders affect benefits that are payable under the Act and are paid by the Australian Government (the employer sponsor) and therefore do not require the consent of the Board.

Part 1 of the Orders takes effect from gazettal. The remaining Parts take effect on the commencement of Schedule 1 to the Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004, that is, 14 days after Royal Assent to that Act.

Details of the Orders are explained in the Attachment.

ATTACHMENT

Section 1.01 - Name of Orders

This section provides that the name of the instrument is the Superannuation (Family Law - Superannuation Act 1976) Orders 2004 (the Orders).

Section 1.02 - Commencement

This section provides for the commencement of Part 1 of the Orders on gazettal and of the remainder of the Orders on the commencement of Schedule 1 to the Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004.

Section 1.03 - Definitions

This section defines certain terms used in the Orders and provides that, where an expression is defined in section 146MA of the Act, that expression has the same meaning in the Orders.

Section 2.01 - Basic contributions amount

Basic contributions amount is defined in section 146MA of the Act to be the amount determined under the Orders. This section provides the method of calculating that amount at a particular time. The basic contributions amount is used to calculate the basic contributions component that forms part of the funded component of the transfer amount.

Subsection 2.01(2) applies to a member spouse whose original interest arises from membership of the CSS as a contributor. In that case the basic contributions amount is derived from the lump sum benefit that would be payable to the member spouse if he or she had ceased to be a member at the operative time. The basic contributions amount is the component of that lump sum that would relate to basic contributions made by the member spouse together with interest on those contributions. The Act defines accumulated basic contributions in respect of a person who has ceased to be a member (know as an eligible employee under the Act) and includes the member's basic contributions and certain other member funded amounts as well as interest on those contributions and amounts.

Subsection 2.01(3) applies where a member spouse has an entitlement to associate deferred benefits. In that case the basic contributions amount is the funded component of the associated deferred benefits calculated as if it were payable at the operative time. Paragraph 146MC(1)(a) of the Act provides for the calculation of this amount to include interest.

The funded component of associate deferred benefits arises from the full funded component of the transfer amount and does not have separate components relating to basic contributions, employer contributions and supplementary contributions.

Section 2.02 - Employer contributions amount

Employer contributions amount is defined in section 146MA of the Act to be the amount determined under the Orders. This section provides the method of calculating that amount at a particular time. The employer contributions amount is used to calculate the employer contributions component that forms part of the funded component of the transfer amount.

Subsection 2.02(2) applies to a member spouse whose original interest arises from membership of the CSS as a contributor. In that case the employer contributions amount is derived from the lump sum benefit that would be payable to the member spouse if he or she had ceased to be a member at the operative time. The employer contributions amount is the component of that lump sum that would relate to accumulated employer contributions. The Act defines accumulated employer contributions in respect of a person who has ceased to be a member to include productivity contributions and any notional interim benefit that may be applicable to the member and interest on those amounts.

It is not necessary to define the term "employer contributions amount" in relation to a member spouse whose original interest is to associate deferred benefits, as the separate character of the funded components of the original CSS member's benefit is lost when the separate interest is created for a non-member spouse. That is, the funded component of associate deferred benefits does not have separate components arising from basic, supplementary or employer contributions.

Section 2.03 - Supplementary contributions amount

Supplementary contributions amount is defined in section 146MA of the Act to be the amount determined under the Orders. This section provides the method of calculating that amount at a particular time. The supplementary contributions amount is used to calculate the supplementary contributions component that forms part of the funded component of the transfer amount.

Subsection 2.03(2) applies to a member spouse whose original interest arises from membership of the CSS as a contributor. In that case the supplementary contributions amount, if any, is derived from the lump sum benefit that would be payable to the member spouse if he or she had ceased to be a member at the operative time. The supplementary contributions amount is the component of that lump sum that would relate to accumulated supplementary contributions. The Act defines accumulated supplementary contributions in respect of a person who has ceased to be a member to include supplementary contributions and certain other funded amounts and interest on those contributions and amounts.

It is not necessary to define the term "supplementary contributions amount" in relation to a member spouse whose original interest is to associate deferred benefits, as the separate character of the funded components of the original CSS member's benefit is lost when the separate interest is created for a non-member spouse. That is the funded component of associate deferred benefits does not have separate components arising from basic, supplementary or employer contributions.

Section 2.04 - Scheme value

Part IXB of the Act provides for two separate valuations of a member spouse's interest in the CSS for the purposes of determining the transfer amount in some cases. The family law value is the amount determined under regulations made for the Family Law Act. The other valuation is the scheme value that is defined to mean the amount determined under the Orders. The transfer amount will be based on whichever is the greater of these two valuations.

The regulations under the Family Law Act provides default methods and factors for determining the value of a defined benefit interest such as is available to members of the CSS. However, the Attorney-General may approve specific methods or factors for determining the value of a defined benefit interest in a particular superannuation scheme. On 2 March 2004, the Attorney-General approved specific methods and factors to determine the value of an interest that a person has in the CSS for the purposes of the Family Law Act. Prior to the approval of those specific methods and factors for the CSS, the regulations under the Family Law Act would have determined the value of a CSS superannuation interest by the default valuation process included in those regulations. Any property settlement finalised before 2 March 2004 would have been based on the default valuation.

After that date, the regulations under the Family Law Act will determine the value of such an interest by the approved specific methods or factors. The approved specific methods or factors involve a substantially different process from that provided by the default valuation and the process for determining the scheme value under these Orders will reflect the approved methods or factors rather than the default valuation.

It is not appropriate to compare the scheme value of the interest as calculated under the Orders to the Family Law default value because of the substantially different process used to arrive at the two valuations. In order to protect the integrity of a property settlement that had been finalised prior to the approval of specific methods and factors for the CSS it is appropriate to provide that, prior to the commencement of these Orders, the scheme value should be the family law value.

Prior to 2 March 2004, this will be the Family Law default value and from that date it will be the family law value provided by the approved specific methods and factors.

Paragraph 2.04(a) provides, for the purposes of the definition of scheme value included in section 146MA of the Act, that if the operative time is before the commencement of Part IXB of the Act, the scheme value is the family law value.

Subparagraph 2.04(b)(i) provides that, if the operative time is on or after the commencement of Part IXB of the Act, the scheme value is to be determined by using the methods and factors set out in Schedule 1. The methods are the same as those used to obtain the family law value under the specific process approved by the Attorney-General on 2 March 2004 but the factors reflect the different actuarial assumptions that apply to the CSS.

Subparagraph 2.04(b)(ii) provides for the scheme value to be determined by an actuary if it is not able to be determined under subparagraph 2.04(b)(i).

Sections 2.05 and 2.06 - Annual rate of associate standard pension and associate additional pension

Subsections 146MB(2) and (3) of the Act provide for the annual rate of associate standard pension and associate additional pension (where applicable) to be calculated under the Orders. These provisions apply where the member spouse is in receipt of standard pension and, if applicable, additional pension at the operative time.

Standard pensions are indexed pensions arising from the unfunded component of the member spouse's retirement, reversionary or associate benefit. Additional pensions are unindexed pensions arising from the funded components of that benefit, if any. CSS members may, when an additional pension becomes payable elect to commute that pension to a lump sum.

When the separate interest is created for the former spouse, it is to be in the form of a pension payable for life without a reversionary component. Where the member spouse was in receipt of a single pension, standard pension, at the operative time the former spouse becomes entitled to a single pension, associate standard pension, from that date. The annual rate of that pension is calculated by applying a factor based on the former spouse's age and gender at the operative time to the transfer amount.

Where the member spouse is in receipt of two pensions, standard and additional pension, the former spouse will become entitled to two pensions, associate standard and associate additional pension. In this case it will be necessary to split the transfer amount into components representing the two types of pension in order to calculate the annual rate of those pensions payable to the former spouse.

Section 2.05

Subsection 2.05(1) provides that section 2.05 applies where standard pension is payable to the member spouse whether or not additional pension is also payable.

Subsection 2.05(2) provides the method for calculation of an associate standard pension.

Step 1 requires the transfer amount to be identified. This amount is defined in section 146MA of the Act by reference to the splitting agreement or order.

Step 2 requires a factor to be worked out representing the proportion of the relevant valuation (that is the family law value or the scheme value) that relates to standard pension. Where no additional pension is payable the factor will be 1.

Step 3 applies the factor from step 2 to the transfer amount to arrive at a lump sum that is to be used to calculate the annual rate of associate standard pension payable to the former spouse.

Step 4 works out a factor by a formula which uses a valuation factor provided by Table 1 in Schedule 2 to the Orders based on the former spouse's gender and age in years and months at the operative time.

Step 5 divides the lump sum calculated at step 3 by the factor identified at step 4 to arrive at an annual rate of associate standard pension that becomes payable to the former spouse.

Subsection 2.05(3) provides for the annual rate of associate standard pension to be calculated by an actuary if it cannot be calculated under subsection 2.05(2).

Section 2.06

Subsection 2.06(1) provides that section 2.06 applies where additional pension is payable to the member spouse.

Subsection 2.06(2) provides the method for calculation of an associate additional pension.

Step 1 requires the transfer amount to be identified and step 2 subtracts the lump sum calculated at step 3 of section 2.05 from the transfer amount to arrive at a lump sum that is to be used to calculate the annual rate of associate additional pension payable to the former spouse.

Step 3 works out a factor by a formula which uses a valuation factor provided by Table 2 in Schedule 2 to the Orders based on the former spouse's gender and age in years and months at the operative time. A different table of factors is required for the conversion of the lump sum to annual rate of associate additional pension than is used for the associate standard pension because additional pension is unindexed.

Step 4 divides the lump sum calculated at step 2 by the factor identified at step 3 to arrive at an annual rate of associate additional pension that becomes payable to the former spouse.

Subsection 2.06(3) provides for the annual rate of associate additional pension to be calculated by an actuary if it cannot be calculated under subsection 2.06(2).

Section 2.07 - Annual rate of associate deferred pension

Section 146MC of the Act provides for the calculation, and circumstances of payment, of associate deferred benefits to a former spouse under the Act.

Paragraph 146MC(1)(a) of the Act provides for the calculation of a lump sum arising from the funded component of the transfer amount which is payable in the circumstances described in the subsequent subsections. Paragraph 146MC(1)(b) of the Act provides for the calculation, under the Orders, of an associate deferred pension by reference to the unfunded component of the transfer amount which also becomes payable in the circumstances described in the subsequent subsections.

Subsection 2.07(1) provides a method of calculating the annual rate of associated deferred pension to become payable to the former spouse.

Step 1 requires the unfunded component of the transfer amount at the operative time to be identified.

Step 2A provides for the increase of the amount identified at step 1 between the operative time and the date on which the payment of the pension commences. The rate of increase to be used is the 10 year Treasury bond rate. The particular rate to be used for a full year increase is to be the rate published on the last working day of the previous financial year.

The unfunded component is to be increased at the end of each financial year during the period and immediately before the associated deferred pension becomes payable.

Step 2B provides that there is to be a pro-rata increase for the period between the operative date and the end of the first financial year after that date based on the number of days in that period.

Step 2C provides the rate of increase that is to apply for any full financial years.

Step 2D provides a pro-rata increase for the period between the end of the last financial year before the payment date and that date. Step 2D may either follow step 2B or an application of step 2C.

Step 3 works out a pension factor by a formula which uses a valuation factor provided by Table 3A or 3B in Schedule 2 to the Orders based on the former spouse's gender and age in years and months on the date from which the associate deferred pension becomes payable. Table 3A is used when that benefit has become payable for reasons other than total and permanent incapacity and Table 3B is used when the benefit has become payable because of total and permanent incapacity.

Step 4 divides the unfunded component of the transfer amount as indexed by step 2A by the pension factor identified by step 3 to arrive at an annual rate of associate deferred pension to become payable to the former spouse.

Subsection 2.07(2) provides for the pension factor referred to in step 3 in subsection 2.07(1) to be determined by an actuary if it cannot be worked out under that step in that subsection

Section 2.08 - Amount payable if non-member spouse dies before benefits become payable

Section 146MC(5) of the Act provides that associate deferred benefits should become payable to certain individuals on the death of the former spouse before those benefits have been paid. Paragraph 146MC(5)(a) of the Act provides for the payment of the funded lump sum arising from the transfer amount. Paragraph 146MC(5)(b) of the Act provides for the calculation, under the Orders, of a lump sum amount arising from the unfunded component of the transfer amount that would otherwise have become payable as an associate deferred pension to the former spouse.

Section 2.08 provides that the amount to become payable to the former spouse under paragraph 146MC(5)(b) of the Act is the unfunded component of the transfer amount indexed as described in step 2A of subsection 2.07(1) of these Orders.

Section 2.09 - Commutation of small associate pension - minimum amount

Subsection 146MD(1) of the Act provides that a former spouse may commute associate standard pension and additional pension (where applicable) when the total annual rate of that pension, or those pensions, is less than an amount specified in the Orders.

Subsection 2.09(1) provides that the amount to be used for the purposes of subsection 146MD(1) of the Act is initially to be $1,300. Subsection 2.09(2) provides that the amount specified in subsection 2.09(1) is to be indexed in the same way as pensions in payment under the Act are indexed under Part X of the Act. This provides for twice yearly indexation by the Consumer Price Index.

Section 2.10 - Commutation of small associate pension - lump sum payable on election

Subsection 146MD(3) of the Act provides for the amount that becomes payable to the former spouse who has made an election to commute a small associate pension or associate deferred pension. Paragraph 146MD(3)(b) of the Act provides that where a small associate deferred pension has been commuted the lump sum entitlement should be calculated under the Orders.

Section 2.10 provides, for the purposes of paragraph 146MD(3)(b) of the Act, the lump sum should be the unfunded component of the transfer amount indexed as described in step 2A of subsection 2.07(1) of these Orders.

Section 2.11 - Reduction of associate deferred benefits where original interest is entitlement to associate deferred benefits

Section 146MF of the Act provides for the reduction of the member spouse's interest where that interest, at the operative time, consists of an entitlement to associate deferred benefits. This situation may arise when a person, who has become entitled to a separate interest under the Act as a result of a splitting agreement or order, has remarried and separated again. If the Board receives a new splitting agreement or order as a result of a second (or subsequent) marriage breakdown, the person with an entitlement to associate deferred benefits becomes the member spouse and the other party becomes a former spouse. The former spouse then has entitlement to associate deferred benefits based on the transfer amount provided at the operative time of the second, or later, action under the Family Law Act.

Associate deferred benefits under the Act are not calculated until they become payable. At that time it is necessary to ensure that, where there has been a further split of the original interest (being the associate deferred benefit), the benefits are reduced to take account of the transfer amount that has formed the basis of the separate interest arising from that further split.

Subsection 146MF(2) of the Act provides that the associate deferred benefits, when they become payable, are to be reduced in accordance with the Orders.

Section 2.11 provides the method for reduction of associate deferred benefits.

Step 1 requires the identification of the funded and unfunded components of the transfer amount arising from the later separation at the operative time (the later transfer amount).

Step 2 increases the funded component of the later transfer amount to the date on which the associate deferred benefits become payable with reference to an amount calculated under paragraph 146MC(1)(a) of the Act. This indexes the amount by application of Fund crediting rates.

Step 3 increases the unfunded component of the later transfer amount to the date on which the associate deferred benefits become payable using the process used in step 2A in subsection 2.07(1).

Step 4 identifies the funded and unfunded components of the associate deferred benefit with reference to paragraph 146MC(1)(a) of the Act and step 2A of subsection 2.07(1) of these Orders. The step further provides that any relevant previous reductions of the benefit must be taken into account.

Step 5 reduces the funded component of the associate deferred benefits by the amount worked out in step 2

Step 6 reduces the unfunded component of the associate deferred benefits by the amount worked out at step 3.

Step 7 ensures that the funded component of the associate deferred benefits that becomes payable under paragraph 146MC(1)(a) of the Act is the reduced amount worked out in step 5.

Step 8 provides that the reduced lump sum calculated at step 6 is used to calculate the unfunded component of the associate deferred benefits that becomes payable under paragraph 146MC(1)(b) of the Act rather than the lump sum referred to in step 4 in subsection 2.07(1) of these Orders.

Sections 2.12, 2.13 and 2.14 - Reduction of standard pension and additional pension

Section 146MG of the Act applies where the member spouse is in receipt of standard pension and additional pension (where applicable) at the operative time. Subsection 146MG(1) of the Act provides that, where the member spouse is in receipt of standard pension at the operative time, that pension should be reduced to an amount calculated under the Orders. Subsection 146MG(2) of the Act provides that, where payable, additional pension should be reduced from the operative time to an amount calculated under the Orders.

The general approach to be adopted is to convert the annual rate of pension or pensions into a lump sum or lump sums by application of a relevant factor, subtract the amount of the transfer amount and then calculate the reduced annual rate of pension by the application of the same factor. Where there is more than one pension, or the pension has more than one component, it is necessary to divide the transfer amount between the pensions or components in proportions that reflect the share of the relevant valuation that arises from the pensions or components.

Subsection 2.12

Subsection 2.12(1) provides that, for the purposes of subsection 146MG(1), section 2.12 applies where the member spouse is in receipt of standard pension whether or not additional pension is payable.

Subsection 2.12(2) provides that the subsection does not apply to certain standard pensions. Invalidity pensions payable under the Act are included in the definition of standard pensions but may include a fixed component that is not subject to indexation by CPI. This also applies to spouse's pension that becomes payable on the death of a contributing member or an invalidity pensioner. The reduction of these types of pension will be dealt with under subsection 2.13.

Subsection 2.12(3) provides the method for reduction of a standard pension other than those mentioned in subsection 2.12(2).

Step 1 requires the identification of the annual rate of standard pension payable to the member spouse at the operative time.

Step 2 requires, if the standard pension payable to the member spouse has been increased because of the existence of children, that the annual rate identified at step 1 should not take into account that increase.

Step 3 works out a pension factor by a formula which uses a valuation factor provided by Table 1 in Schedule 3 to these Orders based on the member spouse's gender and age at the operative time and the kind of pension.

Step 4 multiplies the annual rate identified at step 1, or worked out under step 2 if applicable, by the pension factor worked out at step 3.

Step 5 subtracts the amount worked out in step 3 in subsection 2.05(2) (the amount used to calculate the annual rate of associate standard pension that becomes payable to the former spouse) from the amount identified in step 4.

Step 6 converts the lump sum worked out at step 5 into an annual rate of reduced standard pension by application of the factor worked out in step 3.

Step 7 provides, where step 2 has applied, that the increase in the annual rate arising from the existence of children should be added to the rate worked out by step 6.

These steps arrive at the annual rate of standard pension that becomes payable to the member spouse from the operative time.

Subsection 2.12(3) provides for the reduction of the annual rate of standard pension to be calculated by an actuary if the reduction cannot be calculated under subsection 2.12(2).

Section 2.13

Subsection 2.13(1) provides that, for the purposes of subsection 146MG(2), section 2.13 applies to standard pensions to which section 2.12 does not apply. Those pensions are described in subsection 2.12(2).

Subsection 2.13(2) provides for the reduced rate of the annual rate of a standard pension to be calculated using the following subsections. Subsections 2.13(3) and (4) and subsections 2.13(3) and (6) must be read together to work out the reduction.

Subsection 2.13(3) works out the portions of the transfer amount. Because the original interest in these cases arises from only one pension which has an indexed component and may also have a fixed component it is necessary to separate the transfer amount into similar components in order to provide for an equitable rate of reduction.

Step 1 requires the transfer amount to be identified. This amount is defined in section 146MA of the Act by reference to the splitting agreement or order.

Step 2 works out a factor representing the proportion of the relevant valuation (that is the family law value or the scheme value) that relates to the part of the standard pension that is subject to CPI indexation. Where the whole pension is subject to indexation the factor will be 1.

Step 3 multiplies the transfer amount by the factor worked out in step 2 to calculate the portion of the transfer amount arising from the indexed component. This portion will be used in subsection 2.13(4) to arrive at a reduced rate of the indexed component of the person's standard pension.

Step 4 subtracts the amount worked out at step 3 from the transfer amount to arrive at the portion of that amount arising from the fixed component of the pension. This portion will be used in subsection 2.13(6) to arrive at a reduced rate of the fixed component of the person's standard pension.

Subsection 2.13(4) provides for the amount worked out in step 3 of subsection 2.13(3) to be used to calculate the reduced annual rate of the indexed component of the standard pension payable after the operative time.

Step 1 works out a pension factor by a formula which uses a valuation factor provided by Table 1 in Schedule 3 to these Orders based on the member spouse's gender and age at the operative time and the kind of pension.

Step 2 deducts from the indexed component any amount payable in respect of children.

Step 3 multiplies the indexed component by the pension factor worked out at step 1.

Step 4 subtracts the amount worked out in step 3 in subsection 2.13(3) from the amount worked out in step 3.

Step 5 converts the lump sum worked out at step 4 into an annual rate of reduced standard pension by application of the factor worked out in step 1. Any amount payable in respect of children that has been deducted at step 2 should be added under step 6.

These steps arrive at the annual rate of the indexed component of the standard pension that becomes payable to the member spouse from the operative time.

Subsection 2.13(5) provides for the reduction of the annual rate of the indexed component of the standard pension to be calculated by an actuary if the reduction cannot be calculated under subsection 2.13(4).

Subsection 2.13(6) provides for the amount worked out in step 4 of subsection 2.13(3) to be used to calculate the reduced annual rate of the fixed component of the standard pension payable after the operative time.

Step 1 works out a pension factor by a formula which uses a valuation factor provided by Table 2 in Schedule 3 to these Orders based on the member spouse's gender and age at the operative time and the kind of pension.

Step 2 multiplies the fixed component by the pension factor worked out at step 1.

Step 3 subtracts the amount worked out in step 4 in subsection 2.13(3) from the amount worked out under step 2.

Step 4 converts the lump sum worked out at step 3 into an annual rate of the fixed component of standard pension by application of the factor worked out in step 1.

These steps arrive at the annual rate of the fixed component of the standard pension that becomes payable to the member spouse from the operative time.

Subsection 2.13(7) provides for the reduction of the annual rate of the fixed component of the standard pension to be calculated by an actuary if the reduction cannot be calculated under subsection 2.13(6).

Section 2.14

Subsection 2.14(1) provides that, for the purposes of subsection 146MG(2), section 2.14 applies where the member spouse is in receipt of additional pension.

Subsection 2.14(2) provides the method for reduction of an additional pension.

Step 1 requires the identification of the annual rate of additional pension payable to the member spouse at the operative time.

Step 2 works out a pension factor by a formula which uses a valuation factor provided by Table 2 in Schedule 3 to these Orders based on the member spouse's gender and age at the operative time and the kind of pension.

Step 3 multiplies the annual rate identified at step 1 by the pension factor worked at step 2.

Step 4 subtracts the amount worked out in step 2 in subsection 2.06(2) (the amount used to calculate the annual rate of associate additional pension that becomes payable to the former spouse) from the amount worked out by step 3.

Step 5 converts the resulting lump sum into a reduced annual rate of additional pension by application of the factor worked out in step 2.

These steps arrive at the annual rate of additional pension that becomes payable to the member spouse from the operative time.

Subsection 2.14(3) provides for the reduction of the annual rate of additional pension to be calculated by an actuary if the reduction cannot be calculated under subsection 2.14(2).

Section 3.01 - Section 110SL amount

Subsection 3.01(1) provides that section 3.01 determines the section 110SL amount in relation to a member spouse as referred to in the definition in section 146MA of the Act.

Subsection 3.01(2) provides that the section 110SL amount is the amount of the benefit that would have become payable to the member spouse under section 110SN of the Act if the benefit had become payable at the operative time. Section 110SL of the Act allows CSS members to pay certain amounts, including performance based pay amounts, to the CSS Board for payment into the CSS Fund. When benefits otherwise become payable to that member those amounts become payable as a lump sum under section 110SN of the Act.

PART 4 - ORDERS RELATING TO SECTION 130B AMOUNT FOR THE ACT

Section 4.01 - Section 130B amount

Subsection 4.01(1) provides that section 4.01 determines the section 130B amount in relation to a member spouse as referred to in the definition in section 146MA of the Act.

Subsection 4.01(2) provides that the section 130B amount is the amount of the benefit that would have become payable to the member spouse under section 130D of the Act if the benefit had become payable at the operative time. Section 130B of the Act allows CSS members to pay certain amounts, known at transferred amounts, to the CSS Board for payment into the CSS Fund. When benefits otherwise become payable to that member the transferred amounts become payable as a lump sum under section 130D of the Act.

SCHEDULE 1 - METHODS AND FACTORS USED TO DETERMINE SCHEME VALUE IN RELATION TO MEMBER SPOUSE

Schedule 1 to the Orders provides, for the purposes of subsection 2.04(1) of the Orders, the methods and factors to be used to determine the scheme value of the member spouse's superannuation interest at the operative time. The methods and factors have been provided by an actuary.

Part 1 - Methods

Part 1 of Schedule 1 to these Orders provides the methods to be used to determine the scheme value in all the various circumstances of persons who have superannuation interests in the CSS.

Part 2 - Scheme factors

Part 2 of Schedule 1 to these Orders provides the factors that are required to apply the methods provided by Part 1 to determine the scheme value.

SCHEDULE 2 - PENSION FACTORS FOR NON-MEMBER SPOUSES

Schedule 2 to these Orders provides the pension factors applicable to former spouses that are required for the purposes of subsections 2.05(2), 2.06(2) and 2.07(1) of the Orders. The factors have been provided by an actuary.

SCHEDULE 3 - PENSION FACTORS FOR MEMBER SPOUSES

Schedule 3 to these Orders provides the pension factors applicable to member spouses that are required for the purposes of step 2 in subsection 2.12(2) of the Orders. The factors have been provided by an actuary.