Commonwealth Numbered Regulations - Explanatory Statements

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RETIREMENT SAVINGS ACCOUNTS AMENDMENT REGULATIONS 2004 (NO. 3) 2004 NO. 197

EXPLANATORY STATEMENT

STATUTORY RULES 2004 No. 197

Issued by authority of the Minister for Revenue
and Assistant Treasurer

Retirement Savings Accounts Act 1997

Retirement Savings Accounts Amendment Regulations 2004 (No. 3)

Section 200 of the Retirement Savings Accounts Act 1997 (the Act) provides that the Governor-General may make regulations prescribing 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.

The purpose of these Regulations is to make drafting and technical changes to the provisions relating to superannuation and family law.

The Family Law Legislation Amendment (Superannuation) Act 2001, which commenced on 28 December 2002, provides for superannuation to be split upon marriage breakdown. Consequential amendments have also been made to a range of legislation, including the Retirement Savings Accounts Regulations (the RSA Regulations). In relation to the RSA Regulations, the consequential amendments were contained in the Retirement Savings Accounts Amendment Regulations 2002 (No. 5) (SR 2002 No. 352), which commenced on 28 December 2002.

Consultations with industry since the amendments commenced have disclosed several technical and drafting issues. These Regulations address those issues.

Details of the Regulations are set out in the Attachment.

The Regulations commenced on gazettal.

ATTACHMENT

Details of the Retirement Savings Accounts Amendment Regulations 2004 (No. 3)

Explanation of the amendments

Regulation 1 - specifies the name of the Regulations as the Retirement Savings Accounts Amendment Regulations 2004 (No. 3).

Regulation 2 - provides that the Regulations commenced on the date of their notification in the Gazette.

Regulation 3 - provides that Schedule 1 amends the Retirement Savings Accounts Regulations 1997 (the Principal Regulations).

Schedule 1 - Amendments

Items 1 and 2 amend the definition of `transferable benefits' in subregulation 1.03(1). Paragraph (c) of the definition applies when a family law agreement or order specifies that a certain percentage of each payment from an retirement savings account (RSA) must be paid to the RSA holder's former spouse. The RSA provider may (under Part 4A of the Principal Regulations) roll over or transfer an amount representing the former spouse's entitlement to another RSA or superannuation fund for the former spouse. The amount to be transferred (the `transferable benefits') is the amount of the interest multiplied by the specified percentage. Part 5 of the Family Law (Superannuation) Regulations 2001 (the FLS Regulations) contain methods for the Court to use to determine the value of a superannuation interest before making an order to split the interest. These amendments remove any doubt that the RSA provider should use the methods in the FLS Regulations for the purpose of determining how much to roll over or transfer for the RSA holder's former spouse.

Regulation 1.06 defines a `lost RSA holder', which is an RSA holder with which the provider has lost contact. RSA providers must report lost RSA holders to the Commissioner of Taxation. Item 3 adds a new subregulation 1.06(4), which extends the provisions governing lost RSA holders to the former spouse of an RSA holder, where the RSA is subject to a family law order or agreement.

Item 4 inserts a definition of `relevant condition of release' at the start of Part 4A of the Principal Regulations. A relevant condition of release, in relation to a person, is the person's retirement, death or permanent incapacitation, or the person reaching age 65. This concept is used in certain situations for the purposes of determining whether or not the former spouse of an RSA holder can receive his or her entitlement in cash. This definition replaces an identical definition that is duplicated in several places in Part 4A (for example, in subregulation (4A.18(3), which is repealed by item 14 below).

Item 5 amends the heading to Division 4A.2 to reflect the fact that these amendments broaden the application of that Division.

Items 6 and 7 broaden the application of Division 4A.2. When an RSA (the `original interest') becomes subject to a family law agreement or order, the former spouse of the RSA holder may ask the RSA provider to create a new RSA, to hold his or her entitlement, under Division 4A.3. If the original interest is an allocated pension, Division 4A.2 already allows the RSA provider to create a new RSA for the former spouse without waiting for a request. This amendment provides that Division 4A.2 also applies if the original interest is in the growth phase (that is, payments have not begun to be made in respect of the RSA). If the RSA provider does not create a new RSA under Division 4A.2, the former spouse will be able to request a new RSA, rollover or lump sum payment of his or her entitlement under the existing provisions in Division 4A.3.

Item 8 amends subregulation 4A.05(3) to take account of the amendments in items 6 and 7 above. This would reflect the fact that the RSA provider may have been required (under the FLS Regulations) to adjust the base amount to which the former spouse is entitled (the base amount is not adjusted for allocated pensions).

Item 9 corrects an error in terminology.

Item 10 provides for a pro-rata division of the preserved, restricted non-preserved and unrestricted non-preserved benefits between the former spouses if the original interest is in the growth phase. These categories are used for determining the conditions under which an RSA holder can access his or her benefits. Preservation is not relevant to an allocated pension, because the benefits in such an interest would be freely accessible to the pensioner.

Item 11 amends regulation 4A.08 so that, if the original interest is in the growth phase, the RSA provider's former spouse can only request a lump sum payment if he or she has satisfied a relevant condition of release or the original interest comprises only unrestricted non-preserved benefits.

Items 12 and 13 relate to the RSA provider's options in a situation in which the RSA holder's former spouse has not made any request about his or her new interest. The amendment ensures that those options are available to the RSA provider if the provider has been unable to give a notice to the former spouse, for example where the provider cannot locate the former spouse.

Item 14 omits the definition of `relevant condition of release' in regulation 4A.18 because the definition is now contained in regulation 4A.01A (see item 4 above).

Division 4A.3 of the Principal Regulations allows the RSA holder's former spouse to request that his or her entitlement be paid into a new RSA, rolled over to another RSA provider or superannuation fund, or paid in cash. Items 15 and 16 relate to the RSA provider's options in a situation in which the RSA holder's former spouse has not made such a request. The amendment ensures that the options are available to the RSA provider where the RSA provider has been unable to give a notice to the RSA holder's former spouse, for example where the RSA provider is unable to locate that person.

Items 17 and 18 clarify the process by which the RSA provider determines the amount of a new RSA for the former spouse of an existing RSA holder. These amendments ensure consistency with the definition of `transferable benefits' as amended by items 1 and 2 above.

Item 19 corrects an error in terminology.

Items 20 and 21 ensure consistent treatment of a rollover or transfer of benefits where the rollover or transfer is done on the RSA provider's initiative under regulation 4A.20 (because the RSA provider has been unable to follow a request from the RSA holder's former spouse).

Items 22, 23, 24 and 25 provide that the amount rolled over or transferred for the RSA holder's former spouse does not exceed the withdrawal benefit in the original interest immediately before the rollover or transfer takes place. This rule is consistent with existing provisions that apply when the RSA provider creates a new RSA or makes a payment in cash under Division 4A.3.

Items 26 and 27 clarify the process by which the RSA provider determines the amount of a new RSA for the former spouse of an existing RSA holder. These amendments ensure consistency with the definition of `transferable benefits' as amended by items 1 and 2 above.

Item 28 corrects an error in terminology.

Items 29 and 30 amend the rules for handling payments made after the death of the RSA holder. Under family law, the RSA holder's former spouse may be entitled to receive a share of the money payable from the RSA after the death. However, under certain circumstances the payment may not be able to be rolled over, due to provisions in the Income Tax Assessment Act 1936 dealing with death benefits. Accordingly, new subregulation 4A.25(2) ensures that the Principal Regulations do not require such a payment to be rolled over under these circumstances.

Item 31 omits regulation 4A.26, which defines `relevant condition of release', because the definition is now contained in regulation 4A.01A (see item 4 above).

Item 32 amends subregulation 4A.27 to clarify the terminology.

Item 33 amends the rules that apply if a payment is payable and the RSA holder's former spouse has satisfied a condition of release. These rules also apply if the payment derives from an allocated pension. The former spouse may ask the RSA provider to retain his or her entitlement in superannuation by creating a new RSA or rolling over the entitlement to another RSA provider or superannuation fund. If the RSA provider cannot give effect to the request then the provider may roll the amount over to another fund or, if requested, pay the amount in cash. In the absence of any request, the RSA provider will pay the amount in cash.

Item 34 omits Division 4A.5 of the Principal Regulations. This Division relates to transactions that are undertaken to satisfy regulation 14G of the FLS Regulations. Regulation 14G of the FLS Regulations provides options for superannuation fund trustees to create separate entitlements for separated spouses pursuant to family law agreements and orders. It applies mainly to defined benefit interests in superannuation funds. Regulation 14G does not apply to RSAs, so Division 4A.5 of the Principal Regulations has no purpose.


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