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Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Bill 2001

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1998 - 1999 - 2000 - 2001

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

SENATE

 

 

 

 

 

FAMILY LAW LEGISLATION AMENDMENT

(SUPERANNUATION) (CONSEQUENTIAL PROVISIONS) BILL 2001

 

 

 

 

REVISED EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

(Circulated by authority of the Attorney-General,

the Honourable Daryl Williams  AM QC MP)

 

 

 

 

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OR REPRESENTATIVES TO THE BILL AS INTRODUCED

 



 

FAMILY LAW LEGISLATION AMENDMENT

(SUPERANNUATION) (CONSEQUENTIAL PROVISIONS) BILL 2001

OUTLINE

 

The Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Bill 2001 (the Bill) makes amendments to relevant taxation legislation to ensure that appropriate tax treatment is applied to superannuation interests which will be split pursuant to the Family Law Legislation Amendment (Superannuation) Act 2001 .

 

The Acts that are amended are as follows:

·          the Family Law Act 1975;

·          the Income Tax Assessment Act 1936;

·          the Income Tax Assessment Act 1997;

·          the Small Superannuation Accounts Act 1995;

·          the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

·          the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection) Act 1997; and

·          the Superannuation (Unclaimed Money and Lost Members) Act 1999.

 

The Bill will ensure appropriate tax treatment is applied when a superannuation interest is split under the Family Law Legislation Amendment (Superannuation) Act 2001 . Specifically, the Bill provides that:

·          if the non-member’s entitlement is paid as a lump sum, it will be treated as a separate eligible termination payment (ETP) for the non member;

·          if the non-member’s entitlement is paid as a pension, it will be treated as a separate pension for the non member;

·          the undeducted contributions, concessional, post-June 1994 invalidity, CGT exempt component and the untaxed element of the post-June 1983 component will be split on a proportionate basis to the overall split;

·          the non-member spouse’s benefit will be assessed separately against his or her own Reasonable Benefit Limit (RBL);

·          capital gains or losses that may arise from the creation or forgoing of rights when spouses enter into a binding superannuation agreement or where the agreement comes to an end will be disregarded;

·          the current CGT exemption for payments made from a superannuation fund or an approved deposit fund will be extended to non-member spouses; and

·          CGT rollover relief will apply to in-specie transfers between funds with fewer than five members.



 

The Bill will also:

·          provide for accounts held within the Superannuation Holding Accounts Reserve (SHAR) to be split;

·          ensure that if a surcharge assessment is issued after a split but in respect of a period prior to the split, then the fund that holds those surchargeable contributions for the member spouse will be liable to pay the surcharge. If no fund holds those surchargeable contributions for the member spouse, then the member spouse will be liable to pay the surcharge;

·          ensure that payments to a non member spouse will trigger payment of the surcharge debt account by an unfunded defined benefit scheme (or the member in a constitutionally protected fund) if the benefit payment would have triggered payment of the debt account if made to the member spouse;

·          apply the same protection and rights to the non-member spouse under the Superannuation (Unclaimed Money and Lost Members) Act 1999 that are currently given to the member spouse; and

·          widen a regulation making power in Part VIIIB of the Family Law Act 1975 to prescribe a payment in respect of a superannuation of a spouse as a payment that is not splittable.

 

The Bill will commence immediately after the Family Law Legislation Amendment (Superannuation) Act 2001 commences.

 

FINANCIAL IMPACT

 

The cost to revenue of the measures in the Bill (apart from the measure to provide CGT rollover relief for small superannuation funds) is estimated to be less than $3 million in the first 5 years. The cost of the CGT rollover relief for small superannuation funds is estimated to be less than $5 million per annum.

 

REGULATION IMPACT STATEMENT

 

A Regulation Impact Statement (RIS) for the reforms relating to the treatment of superannuation on marriage breakdown was included in the explanatory memorandum to the Family Law Legislation Amendment (Superannuation) Bill 2001 .

 



 

NOTES ON CLAUSES

Title and Commencement of the Act

 

When the Bill is enacted it will be called the Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Act 2001 . [Clause 1]

 

2.         The Act will commence immediately after the Family Law Legislation Amendment (Superannuation) Act 2001 commences. [Clause 2]

 

Amendments to the Family Law Act 1975

 

3.         Amendments are made to section 90MB to provide that the provisions of new Part VIIIB have effect subject to the Superannuation (Unclaimed Money and Lost Members) Act 1999. [Schedule 1, items 1 and 2, section 90MB]

 

4.         The effect of the amendments will be that the non-member spouse will receive his or her entitlement under a payment split in respect of an interest from the Commissioner of Taxation where the trustee of the fund has paid the member spouse’s entitlements as unclaimed superannuation monies to the Commissioner.

 

5.         An amendment is also made to widen the regulation making power in subsection 90ME(2) so that it can be exercised to prescribe a payment in respect of a superannuation interest of a spouse as a payment that is not splittable in relation to a particular payment split.

 

Amendments to the Income Tax Assessment Act 1936

Eligible termination payments (ETPs)

 

Lump sum benefits paid following a payment split are ETPs

 

6.         The amendments ensure that a lump sum payment made to the non-member spouse (or the non-member spouse’s legal personal representative after the non-member spouse’s death) will be an eligible termination payment (ETP).  ETPs receive different concessional tax treatment depending on their respective components, the recipient’s age, and the level of the payment received.  The payment made to the non-member spouse is to be referred to as the new ETP. [Schedule 1, item 3, subsection 27ACA(1)]

 

7.         The example in new subsection 27ACA(1) illustrates the operation of the subsection in the event of a multiple split - that is, where more than one marriage has failed. 

 

8.         Section 27AA identifies the components of an ETP, each of which is taxed differently. The Bill ensures that the non-member spouse is entitled to a share of the various fixed dollar ETP components (the identified components) contained in the member spouse’s superannuation benefit at the time the benefit is paid.

 

9.         The identified components are:

·          the concessional component;

·          the post-June 1994 invalidity component;

·          the CGT exempt component

·          the undeducted contributions; and

·          the untaxed element of the post June 1983 component.

[Schedule 1, item 3, subsection 27ACA(5)]

 

10.       The identified components contained in the member spouse’s superannuation benefit will be allocated to the ETP paid to the non-member spouse by applying the formula:

 

 

 

   New ETP                 X              Corresponding amount

Amount to which

the payment split

is applied

 

11.       The corresponding amount is the total amount of the relevant identified component assuming that the whole of the amount to which the split is applied had been paid to the member spouse. [Schedule 1, item 3, subsection 27ACA(2)]

 

12.       The example in new subsection 27ACA(2) illustrates the operation of the subsection in the event of a multiple split - that is, where more than one marriage has failed. 

 

13.       However, the number of days in the eligible service period of the non-member spouse is deemed to be zero. [Schedule 1, item 3, subsection 27ACA(3)]  

 

14.       Consequently, unless the non-member spouse is an existing member of the fund and has an eligible service period that commenced before 1 July 1983, the ETP paid to the non-member spouse will not have any pre-July 1983 component. The non member spouse will, of course, be able to access the eligible service period he or she has in another fund by, for example, rolling-over the ETP to that other fund.

 

15.       As part of the identified components contained in the member spouse’s superannuation benefit are allocated to the non-member spouse, the identified components in the ETP paid to the member spouse are reduced accordingly. [Schedule 1, item 3, subsection 27ACA(4)]

 

16.       The example in new subsection 27ACA(4) illustrates the operation of the subsection in the event of a multiple split - that is, where more than one marriage has failed. 

 

Interest splits under the Family Law Act

 

17.       New section 27ACB applies if the effect of the superannuation agreement on the member spouse’s interest in a superannuation fund is to either:

·          create an interest in the fund for the non-member spouse in circumstances to be prescribed in the income tax regulations; or

·          transfer an amount to another superannuation fund in circumstances to be prescribed in the income tax regulations for the benefit of the non-member spouse.

 

18.       In these circumstances an ETP equal to the value of the interest created for the non-member spouse or the amount transferred (the new ETP amount) is deemed to have been made to the non-member spouse and rolled-over to the relevant fund. Similarly, the value of the remaining amount (the remaining ETP amount) is deemed to be an ETP made to the member spouse and rolled-over to the member’s fund  [Schedule 1, item 3, subsection 27ACB(1))]

 

19.       The Bill ensures that the non-member spouse is entitled to a share of the various fixed dollar ETP components (the identified components) contained in the member spouse’s superannuation benefit at the time of the split or transfer.

 

20.       The identified components in this case are:

·          the concessional component;

·          the post-June 1994 invalidity component;

·          the CGT exempt component; and

·          the undeducted contributions.

[Schedule 1, item 3, subsection 27ACB(5)]

 

21.       The identified components contained in the member spouse’s superannuation benefit will be allocated to the ETP made to the non-member spouse by applying the formula:

 

  New ETP amount                 X              Corresponding amount

Value of original

interest immediately

before the relevant time

 

22.       The corresponding amount is the total amount of the relevant identified component assuming that the whole of the value of the original interest had been paid as an ETP to the member spouse at the time of the split or transfer.

[Schedule 1, item 3, subsection 27ACB(2)]

 

23.       However, the number of days in the eligible service period of the non-member spouse is deemed to be zero. [Schedule 1, item 3, subsection 27ACB(3)]  

 

24.       As part of the identified components contained in the member spouse’s superannuation benefit are allocated to the non-member spouse, the identified components in the ETP made to the member spouse are reduced accordingly. [Schedule 1, item 3, subsection 27ACB(4)]

 

Reasonable Benefit Limits

 

25.       The RBL provisions set a limit on the amount of concessionally taxed superannuation benefits a person can receive. The provisions rely on requiring benefit payments to be reported, which then triggers a determination as to whether the benefit is within a person’s RBL. Any part of a lump sum payment in excess of a person’s RBL is taxed at the highest marginal tax rate plus medicare levy. Any part of a pension with a capital value in excess of a person’s RBL does not qualify for the 15% rebate.

 

26.       If a superannuation interest is split in the accumulation phase, the RBL provisions will operate normally to measure any subsequent benefit paid to the non-member spouse against his or her RBL. Similarly, any subsequent benefit paid to the member spouse will be separately measured against his or her RBL.

 

27.       The Bill amends the RBL provisions so that those provisions apply in a consistent way if a superannuation interest is split in the pension phase. That is, the Bill ensures that the pension paid to the non-member spouse is assessed appropriately against his or her RBL. Similarly, the reduced pension paid to the member spouse is remeasured and assessed against his or her RBL.

 

Obligations for the payer if there is a payment split

 

28.       When a non-member spouse receives a payment that would have been a pension payment if made to the member spouse (the original payee) as a result of a payment split that applies to a splittable payment in respect of a superannuation interest of the member spouse, then:

·            the payer is taken to have commenced the payment of a superannuation pension to the non-member spouse that is included in his or her assessable income under section 27H, measured for RBL purposes and may qualify for the 15% pension rebate; and

·            the payer must provide the Commissioner the information specified in the income tax regulations at the time the payments to the non-member spouse commence.

[Schedule 1, item 7, subsections 140M(1A) and (1B)]

 

29.       In addition, if the pension that had commenced to be paid to a member spouse has been counted for RBL purposes and a payment split subsequently applies to a splittable payment in respect of that superannuation interest which results in the payment of a benefit to the non-member spouse, then:

·            the payer must provide the Commissioner the information specified in the income tax regulations at the time of the payment split; and

·            if the member spouse continues to receive a pension as a result of the splittable payment becoming payable, the payer is taken to have commenced the payment of a new superannuation pension to the member spouse that is included in his or her assessable income under section 27H, measured for RBL purposes and may qualify for the 15% pension rebate.

[Schedule 1, item 7, subsection 140M(1C )]

 

30.       The terms non-member spouse , payment split and splittable payment are defined in section 140C to have the same meaning as in Part VIIIB of the Family Law Act 1975 . [Schedule 1, items 4, 5, and 6, section 140C]

 

31.       Consequential amendments are made to subsections 140M(2) and 140M(3). [Schedule 1, items 8 and 9, subsections 140M(2) and (3)]  

 

32.       New subsection 140UA applies if a payer commences or has commenced to pay a superannuation pension to a member spouse (the first person) in respect of a superannuation interest and there is a commutation or a partial commutation of the pension at the time when a payment split applies to that interest.

 

33.       If an ETP is made to the member spouse or the non-member spouse in relation to the interest as a result of the commutation or a partial commutation, then the Commissioner must apply subsections 140R(1) and 140T(1) to determine the RBL rather than subsections 140R(1A) and 140T(2B). That is, a fresh RBL determination is made rather than the application of the rebatable proportion of the RBL determination in relation to the original pension. If the non-member spouse chooses to rollover their ETP this will not be reported as an ETP (existing section 140D) nor will it be required to be reported under subsection 140Q(1). This is because when payment is eventually made from the rollover fund it will then be reported and assessed for RBL purposes. [Schedule 1, items 10, 11, 12 and 13, subsections 140Q(1A), 140R(5), 140T(4) and 140UA(1)]

 

34.       Similarly, if a residual pension is made to the member spouse or the non-member spouse in relation to the interest as a result of the commutation or a partial commutation, then the Commissioner must apply subsections 140R(1) and 140T(1) to determine the RBL rather than subsections 140R(1B) and 140T(2C). That is, a fresh RBL determination is made rather than the application of the rebatable proportion of RBL determination in relation to the original pension. [Schedule 1, items 11, 12 and 13, subsections 140R(5), 140T(4) and 140UA(1)]

 

35.       Generally pensions that originated before 1 July 1990 are not counted for RBL purposes. However, if pension payments are made to the non-member spouse which originated from a pension for the member spouse that commenced to be paid prior to 1 July 1990, they will be counted towards the non-member spouse’s RBL. That is, the exemption provisions under subsection 140ZC(2)(b) and(c) do not apply . [Schedule 1, item 13, subsection 140UA(2)]

 

36.       If the member spouse’s pension qualified for the pension RBL before a payment split, then it will continue to qualify for the higher RBL amount after the split. For example, assume the member spouse received an ETP of $400,000 prior to divorcing with the non-member spouse. The member spouse was, at the time of the split in receipt of a $500,000 pension. As the member spouse’s pension was greater than 50% of his/her total superannuation benefit it qualified for the pension RBL. After the split the member spouse is only entitled to a pension of $250,000. The amendment will ensure that the member spouse’s benefit continues to be measured against the pension RBL. [Schedule 1, item 14, section 140ZFA]

 

Reduction of capital value

 

37.       The reduction in the capital value of a pension is determined under section 140ZP. The Bill amends section 140ZP so that the capital value of the pension is reduced by an amount calculated in accordance with a method determined by the Commissioner of Taxation in writing in relation to a pension where:

·          a payer commences or has commenced to pay a superannuation pension to a member spouse (the first person) in respect of a superannuation interest;

·          the pension counts or counted against the member spouse’s RBL;

·          a payment split applies to a splittable payment in respect of the interest; and

·          as a result of the payment split, a payment is made to the non-member spouse.

[Schedule 1, item 15, subsection 140ZP(3)]

 

38.       This amendment will ensure that, after the split has occurred, the member spouse will only have a reduced pension benefit (reflecting the fact that part of the original pension has been allocated to the non-member spouse) counted for RBL purposes.

 

Amendments to the Income Tax Assessment Act 1997

Capital gains tax amendments

 

39.       The CGT amendments deal with:

·          disregarding a capital gain or loss arising in circumstances where a person has made a capital gain or capital loss in respect of a right because of a superannuation agreement;

·          disregarding a capital gain or capital loss arising on payments being made out of a superannuation fund or approved deposit fund to a non-member spouse; and

·          providing a CGT same-asset roll-over deferring a capital gain or capital loss arising on an in-specie transfer of an asset between two complying superannuation funds with 4 or less members.

 

Capital gain or loss disregarded in relation to rights of the parties

 

40.       A new CGT exemption is being provided to disregard a capital gain or capital loss made on either:

·          creating a contractual right or other legal or equitable right in another person (CGT event D1, section 104-35 of the ITAA 1997); or

·          having a right coming to an end (CGT event C2, section 104-25 of the ITAA 1997).

 

41.       Technically, when such rights are created or a certain rights come to an end, a capital gain or capital loss may arise. In the context of dealing with rights in respect of a superannuation agreement and the interaction with the CGT rules, the relevant transaction giving rise to a capital gain or capital loss is the actual transfer of an asset or making of a payment under a superannuation agreement or court order. As such, the CGT rules will ignore the realisation of a capital gain or capital loss on the creation of rights or rights coming to an end in respect of a superannuation agreement.



 

The amendments will therefore effectively look through the rights to the actual transfer of an asset or making of a payment in respect of the superannuation agreement.

 

42.       The following are examples of when the exemption will apply:

 

·          A spouse forgoes a right to seek a superannuation property settlement through the Family Court under the Family Law Act 1975 by entering into a binding superannuation agreement [Schedule 1, item 18, paragraph 118-315(a)] . This is also an example of where the spouse has acquired new rights replacing their original rights to seek a property settlement through the Family Court. [Schedule 1, item 18, paragraph 118-315(a)]

 

·          The Family Court sets a superannuation agreement aside on establishing that a spouse had entered into the agreement under duress. The rights a spouse had under that agreement come to an end by the Court setting them aside. [Schedule 1, item 18, paragraph 118-315(b) and (c)]

 

 

CGT exemption for rights connected to superannuation payments

 

43.       There is an existing exemption (section 118-305 of the ITAA 1997) for any capital gain or capital loss a person makes on receiving a payment or property from a superannuation fund or an approved deposit fund.

 

44.       The exemption does not apply, for example, to a capital gain or capital loss made by a person who is not a member of such a fund and that person acquired the right to a payment or property for consideration.

 

45.       This exemption will be extended to allow for a capital gain or capital loss to be disregarded because a spouse, who is not a member of the fund, receives a payment or property from the fund as a result of either a superannuation agreement or court order. [Schedule 1, item 17, subsection 118-305(3)]

 

46.       This will allow the exemption to apply if a non-member spouse acquired their right to the payment or property for consideration. The consideration is the spouse’s foregoing of a right to a property settlement in respect of his or her superannuation interests through the Family Court under the Family Law Act 1975 on entering into a superannuation agreement.

 

Same-asset roll-over between two small superannuation funds

 

47.       A same-asset roll-over will apply where a trustee of small superannuation fund transfers an asset to another such fund in certain circumstances. Under the roll-over a capital gain or capital loss made by the trustee will be deferred. [Schedule 1, item 19, Subdivision 126-D]

 

48.       A small superannuation fund is defined as being a complying superannuation fund with 4 or less members. [Schedule 1, item 23, definition of small superannuation fund in subsection 995-1(1)]

 

Basic conditions that must be satisfied to qualify for same-asset roll-over

 

49.       The roll-over will apply automatically if the conditions of the roll-over are satisfied. This means that the trustee does not have to choose to defer a capital gain or capital loss, the capital gain or capital loss will be deferred automatically on satisfying the conditions of the roll-over. [Schedule 1, item 19, subsections 126-140(1) and (2)]

 

50.       The first situation the roll-over deals with is if a non-member spouse serves a waiver notice under section 90MZA of the Family Law Act 1975 on a trustee of small superannuation fund, resulting in an asset being transferred from that fund to another such fund in which the non-member spouse is a member. [Schedule 1, item 19, subsection 126-140(1)]

 

51.       The second situation is if:

·          an interest in a small superannuation fund is subject to a payment split;

·          as a result of the split, there is a transfer or rollover of benefits from that small superannuation fund to another small superannuation fund under the provisions of the Superannuation Industry (Supervision) Regulations 1994 dealing with superannuation interests that are subject to a payment split; and

·          to give effect to the payment split, the trustee of the first fund transfers an asset to the trustee of the second fund for the benefit of the non-member spouse. 

[Schedule 1, item 19, subsection 126-140(2)]

 

Consequences of the same-asset roll-over

 

52.       The consequences of the roll-over are:

·          the capital gain or capital loss the trustee makes on the transfer of the asset is disregarded. This means that the realisation of any capital gain or capital loss on arising at the time of transfer is deferred until a later CGT event happens to the asset, such as a sale of the asset (CGT event A1) by the trustee who acquired it on transfer [Schedule 1, item 19, subsection 126-140(3)] ;

·          the first element of the cost base or reduced cost base of the asset (acquisition cost) for the trustee who acquires the asset on transfer will be the cost base or reduced cost base of the asset to the trustee who transferred the asset [Schedule 1, item 19, subsection 126-140(4)] ; and

·          if the trustee who transferred the asset acquired that asset before 20 September 1985, the trustee who acquires that asset on transfer will also be taken to have acquired the asset before that time [Schedule 1, item 19, subsection 126-140(5)] .

 

Guide material used to locate same-asset roll-over in the law

 

53.       Subdivision 112-D of the ITAA1997 is guide material providing signposts to the reader indicating where same-asset roll-overs are located in the CGT rules. The table in section 112-150 will be amended by inserting a new item letting a taxpayer know where the small superannuation fund same-asset roll-over can be found in the CGT rules. [Schedule 1, item 16, section 112-150, item 7]

 

Amendments to the Small Superannuation Accounts Act 1995

 

54.       The Superannuation Holding Accounts Reserve (SHAR) was established under the Small Superannuation Accounts Act in 1995 and is designed to accept small superannuation contributions from employers who are unable to find a superannuation fund willing to accept those contributions. The Commissioner of Taxation administers the SHAR.

 

55.       The amendments to section 15 of the Small Superannuation Accounts Act facilitate the split of a SHAR account under the Family Law Act. Under the amendments:

·          if the account is subject to a payment split, the Commissioner may open an account in the name of the non-member spouse;

·          the balance of the non-member’s account when opened is worked out in accordance with regulations;

·          the balance of the member’s account is reduced by the amount allocated to the non-member’s account; and

·          the Commissioner must give the member spouse a written notice setting out the balance of the account after the reduction.

[Schedule 1, item 25, subsections 15(3) to (7)]

 

Amendments to the Superannuation Contributions Tax (Assessment and Collection) Act 1997

 

56.       The superannuation surcharge is imposed in respect of the ‘surchargeable contributions’ of superannuation fund members who have high taxable incomes or who have not quoted their tax file number to their superannuation fund. Section 90MW of the Family Law Act provides for any known superannuation surcharge debt to be paid prior to a superannuation benefit subject to a superannuation agreement or Court Order being split.

 

57.       Where a surcharge assessment is issued after a split but in respect of a period prior to the split, then the fund that holds those surchargeable contributions for the member spouse will be liable to pay the surcharge, or if no fund holds those surchargeable contributions for the member spouse, then the member spouse will be liable to pay the surcharge. This means that in these circumstances no surcharge liability is applied to the non-member spouse in respect of their new share of the benefit.

 

Who is liable to pay any surcharge assessment issued after a split occurs?

 

58.       Where a surcharge assessment is issued after a split but in respect of a period before the split and a superannuation provider is still the holder of surchargeable contributions for the member spouse, then the provider is liable to pay the relevant



 

surcharge.  If no provider holds the surchargeable contributions on behalf of the member, then the member spouse is taken to be the holder of the surchargeable contributions and is liable to pay the surcharge. [Schedule 1, items 28 and 32, section 10A and the definition of holder in section 43]

 

Benefit paid to non-member spouse unfunded defined benefit schemes

 

59.       In the case of unfunded defined benefit superannuation schemes, the surcharge is imposed on the holder of the surchargeable contributions at the time the assessment is made in the same manner that it is imposed for accumulation and funded defined benefit funds. However, under subsection 16(6) payment of the debt by the unfunded provider is deferred until a payment is actually made to/for the member.

 

60.       Section 16 is amended so that the provider must pay the outstanding amount in the surcharge debt account if a payment split applies to a splittable payment in respect of an interest that a person has as a member. This ensures that payment of the debt account will be triggered whenever a payment is made to the non member spouse, not just when a payment is made to the member spouse (which is the current effect of subsection 16(6)). [Schedule 1, items 29, 30 and 31, subsections 16(6), (6A) and (11)]

 

Amendments to the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997

 

61.       The Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 applies to members of constitutionally protected superannuation funds. Members of constitutionally protected superannuation funds are liable to pay any surcharge liability at the time a benefit is payable to the member.

 

62.       The amendments ensure that where payments are made from a constitutionally protected superannuation fund to a non-member spouse under a payment split, then the provider must notify the Commissioner of Taxation of relevant details. [Schedule 1, items 33, 34 and 35, subsections 12(3), (6) and (8)]

 

63.       New subsection 15(6A) ensures that payment of the debt account will be triggered whenever a payment is made to the non member spouse, not just when a payment is made to the member spouse (which is the current effect of subsection 15(6)). The member spouse will be liable to pay the lesser of the amount in their debt account and 15% of the employer-financed component of that part of the benefits that would have been payable to the member but for the payment split and that accrued after 20 August 1996. [Schedule 1, items 36, 37, 38, 39 and 40, subsections 15(6), (6A), (7), (8A) and (11)]



 

Amendments to the Superannuation (Unclaimed Money and Lost Members) Act 1999

 

64.       The Superannuation (Unclaimed Money and Lost Members) Act 1999 established a scheme administered by the Commissioner for dealing with lost superannuation members and unclaimed superannuation money (the latter arises when benefits are payable from the fund, eg: after age 65, but the member cannot be found).

 

65.       The Bill provides for the non-member spouse to be accorded with the same rights under this Act as the member spouse in respect of unclaimed money. That is, if a benefit has become payable for the member spouse and, as a result of a payment split an amount of that benefit must be paid to the non-member spouse, then, if the fund is unable (after reasonable efforts) to contact the non member spouse, the fund must treat the non member spouse benefit as unclaimed money. [Schedule 1, items 41, 42, 43 and 44, subsections 12(2) and (3) and 13(1), (1A), (1B) and (2)]

 

66.       A consequential amendment is made to the Family Law Act 1975 to ensure that Part VIIIB has effect subject to the Superannuation (Unclaimed Money and Lost Members) Act. [Schedule 1, items 1 and 2, section 90MB)