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Superannuation Legislation Amendment (Post-retirement Commutations) Bill 2000
Schedule 2 Amendment of the Superannuation Act 1976

   

1  At the end of section 109AB

Add:

           (12)  For the purposes of this section, in determining the needs of a spouse, disregard any need that results from an election made by the spouse under section 146E.

           (13)  The Board must ensure that so much of a spouse’s pension as is commuted under section 146E is not attributed under this section to a child.

2  At the end of section 110

Add:

           (17)  For the purposes of this section, in determining the needs of a spouse, disregard any need that results from an election made by the spouse under section 146E.

           (18)  The Board must ensure that so much of a spouse’s pension as is commuted under section 146E is not allocated under this section.

3  After subsection 115(2)

Insert:

          (2A)  For the purposes of subsection (2), in determining the needs of a child or children, disregard any need that results from an election made under section 146G in relation to the child or children.

          (2B)  The Board must ensure that so much of an orphan pension as is commuted under section 146G is not apportioned under subsection (2) of this section.

4  After Part IX

Insert:

Part IXA Commutation of pension: payment of surcharge liability

Division 1 Introduction

146A   Simplified outline

                   The following is a simplified outline of this Part:

•      If a person is receiving a pension and becomes liable to pay surcharge under an assessment, the person may elect to commute the whole or a part of the pension.

•      If an election is made, the person will be entitled to a lump sum benefit.

•      The lump sum benefit must be used to pay the surcharge.

•      If an election is made, the pension will be reduced.

146B   Definitions

                   In this Part:

assessment has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997 .

surcharge has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997 .

surchargeable contributions means surchargeable contributions (within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 ) that are attributable to the operation of this Act.

Division 2 Commutation of former eligible employee’s pension

146C   Commutation of former eligible employee’s pension—payment of surcharge liability

Election

             (1)  If:

                     (a)  a person is receiving (whether or not by virtue of section 136):

                              (i)  a standard age retirement pension; or

                             (ii)  a standard early retirement pension; or

                            (iii)  an invalidity pension; or

                            (iv)  an additional age retirement pension; or

                             (v)  an additional early retirement pension; and

                     (b)  an assessment is made of the surcharge on the person’s surchargeable contributions for a financial year; and

                     (c)  the person becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(c) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 ;

the person may, within 3 months after the assessment was made, give the Board:

                     (d)  if the person is receiving only one such pension—a written notice electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

                     (e)  if the person is receiving 2 such pensions and wishes to make an election under this subsection in relation to only one of those pensions—a written notice:

                              (i)  identifying that pension; and

                             (ii)  electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

                      (f)  if the person is receiving 2 such pensions and wishes to make an election under this subsection in relation to both of those pensions—a written notice:

                              (i)  identifying one of these pensions as the first pension to be commuted; and

                             (ii)  electing to commute all of the first pension to a lump sum benefit equal to the amount specified in the election in relation to the first pension; and

                            (iii)  electing to commute the whole or a part of the other pension to a lump sum benefit equal to the amount specified in the election in relation to the other pension.

             (2)  An election must be accompanied by:

                     (a)  a written notice requesting that the amount of the lump sum benefit be:

                              (i)  paid to the Commissioner of Taxation; and

                             (ii)  wholly applied in payment of surcharge under the assessment; and

                     (b)  a copy of the notice of assessment.

Surcharge commutation amount

             (3)  The amount specified in an election in relation to a particular pension:

                     (a)  must be equal to or less than the amount of the surcharge under the assessment; and

                     (b)  must not have the effect of reducing the pension below zero; and

                     (c)  is to be known as the surcharge commutation amount in relation to the pension for the purposes of this section.

             (4)  The sum of the amounts specified in the elections set out in a notice under paragraph (1)(f) must be equal to or less than the amount of the surcharge under the assessment.

Entitlement to lump sum benefit

             (5)  If a person makes an election under subsection (1) in relation to a pension, the person is entitled to a lump sum benefit equal to the surcharge commutation amount.

             (6)  If a person is entitled to a lump sum benefit under subsection (5), the liability to pay that benefit must be discharged by:

                     (a)  paying the amount of that benefit to the Commissioner of Taxation in accordance with the person’s request; and

                     (b)  informing the Commissioner of Taxation of the person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

             (7)  If a person makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced, with effect from the beginning of the day of the election, so that it equals the amount worked out using the following formula:

where:

conversion factor means the factor that is applicable to the person under the determination made by the Board under section 146D.

pre-commutation election pension rate means the annual rate at which the pension was payable to the person immediately before the election was made.

One election per assessment

             (8)  A person is not entitled to make more than one election under subsection (1) in relation to a particular assessment unless the elections:

                     (a)  relate to different pensions; and

                     (b)  are made on a single occasion; and

                     (c)  are set out in the same notice under paragraph (1)(f).

Elections made before the first pension pay day in a financial year

             (9)  If an election under subsection (1) is made during the period:

                     (a)  beginning at the start of a financial year; and

                     (b)  ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

146D   Conversion factor in relation to surcharge commutation amount

Standard age retirement pension, standard early retirement pension or invalidity pension

             (1)  The Board must, in accordance with advice received from an actuary, determine in writing, in relation to persons to whom standard age retirement pension, standard early retirement pension, invalidity pension or a deferred benefit by way of any such pension has become payable, the conversion factor that, having regard to:

                     (a)  a person’s age when he or she makes an election under section 146C; and

                     (b)  other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146C).

Additional age retirement pension or additional early retirement pension

             (2)  The Board must, in accordance with advice received from an actuary, determine in writing, in relation to persons to whom an additional age retirement pension, an additional early retirement pension or a deferred benefit by way of any such pension has become payable, the conversion factor that, having regard to:

                     (a)  a person’s age when he or she makes an election under section 146C; and

                     (b)  other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146C).

Gazette notice

             (3)  A determination under this section must be published in the Gazette .

Division 3 Commutation of spouse’s pension

146E   Commutation of spouse’s pension—payment of surcharge liability

Election

             (1)  If:

                     (a)  a person (the deceased person ) dies and:

                              (i)  the deceased person was an eligible employee; or

                             (ii)  the deceased person was a pensioner to whom age retirement pension, early retirement pension or invalidity pension was payable; and

                     (b)  the deceased person is survived by a spouse; and

                     (c)  the spouse is receiving one or more spouse’s pensions (whether or not by virtue of section 136); and

                     (d)  an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

                     (e)  the spouse becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 ;

the spouse may, within 3 months after the assessment was made, give the Board:

                      (f)  if the spouse is receiving only one spouse’s pension—a written notice electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

                     (g)  if the spouse is receiving 2 spouse’s pensions and wishes to make an election under this subsection in relation to only one of these pensions—a written notice:

                              (i)  identifying that pension; and

                             (ii)  electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

                     (h)  if the spouse is receiving 2 spouse’s pensions and wishes to make an election under this subsection in relation to both of those pensions—a written notice:

                              (i)  identifying one of those pensions as the first pension to be commuted; and

                             (ii)  electing to commute all of the first pension to a lump sum benefit equal to the amount specified in the election in relation to the first pension; and

                            (iii)  electing to commute the whole or a part of the other pension to a lump sum benefit equal to the amount specified in the election in relation to the other pension.

             (2)  An election must be accompanied by:

                     (a)  a written notice requesting that the amount of the lump sum benefit be:

                              (i)  paid to the Commissioner of Taxation; and

                             (ii)  wholly applied in payment of surcharge under the assessment; and

                     (b)  a copy of the notice of assessment.

Surcharge commutation amount

             (3)  The amount specified in an election in relation to a particular pension:

                     (a)  must be equal to or less than the amount of the surcharge under the assessment; and

                     (b)  must not have the effect of reducing the pension below zero; and

                     (c)  is to be known as the surcharge commutation amount in relation to the pension for the purposes of this section.

             (4)  The sum of the amounts specified in the elections set out in a notice under paragraph (1)(h) must be equal to or less than the amount of the surcharge under the assessment.

Entitlement to lump sum benefit

             (5)  If a spouse makes an election under subsection (1) in relation to a pension, the spouse is entitled to a lump sum benefit equal to the surcharge commutation amount.

             (6)  If a spouse is entitled to a lump sum benefit under subsection (5), the liability to pay that benefit must be discharged by:

                     (a)  paying the amount of that benefit to the Commissioner of Taxation in accordance with the spouse’s request; and

                     (b)  informing the Commissioner of Taxation of the spouse’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

             (7)  If a spouse makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced in accordance with the method determined by the Board under section 146F. The reduction takes effect from the beginning of the day of the election.

One election per assessment

             (8)  A spouse is not entitled to make more than one election under subsection (1) in relation to a particular assessment unless the elections:

                     (a)  relate to different pensions; and

                     (b)  are made on a single occasion; and

                     (c)  are set out in the same notice under paragraph (1)(h).

Elections made before the first pension pay day in a financial year

             (9)  If an election under subsection (1) is made during the period:

                     (a)  beginning at the start of a financial year; and

                     (b)  ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

Part of spouse’s pension

           (10)  To avoid doubt, if subsection 109AB(9) or 110(12) applies to an election under subsection (1) of this section, this section has effect, in relation to the election, as if a reference to the spouse’s pension were a reference to the part of the spouse’s pension concerned.

146F   Method for reduction of spouse’s pension in relation to surcharge commutation amount

             (1)  The Board must, following consultation with an actuary, determine in writing, in relation to persons who are receiving a spouse’s pension, the method that, having regard to:

                     (a)  a person’s age when he or she makes an election under section 146E; and

                     (b)  other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146E).

             (2)  A determination under this section is to be published in the Gazette .

Division 4 Commutation of orphan pension

146G   Commutation of orphan pension—payment of surcharge liability

Election

             (1)  If:

                     (a)  a person (the deceased person ) dies; and

                     (b)  either:

                              (i)  the deceased person is not survived by a spouse but is survived by a child or children of the deceased person; or

                             (ii)  the deceased person is survived by a spouse, the spouse dies, and the spouse is survived by a child or children of the deceased person; and

                     (c)  an orphan pension is payable in respect of the child or children (whether or not by virtue of section 136); and

                     (d)  an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

                     (e)  the person to whom the pension is payable (the eligible person ) (who may be the child or one of the children) becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 ;

the eligible person may, within 3 months after the assessment was made, give the Board a written notice electing to commute the whole or a part of the orphan pension to a lump sum benefit equal to the amount specified in the election.

             (2)  The election must be accompanied by:

                     (a)  a written notice requesting that the amount of the lump sum benefit be:

                              (i)  paid to the Commissioner of Taxation; and

                             (ii)  wholly applied in payment of surcharge under the assessment; and

                     (b)  a copy of the notice of assessment.

Surcharge commutation amount

             (3)  The amount specified in the election:

                     (a)  must be equal to or less than the amount of the surcharge under the assessment; and

                     (b)  must not have the effect of reducing the pension below zero; and

                     (c)  is to be known as the surcharge commutation amount for the purposes of this section.

Entitlement to lump sum benefit

             (4)  If an eligible person makes an election under subsection (1) in relation to a pension, the eligible person is entitled to a lump sum benefit equal to the surcharge commutation amount.

             (5)  If an eligible person is entitled to a lump sum benefit under subsection (4), the liability to pay that benefit must be discharged by:

                     (a)  paying the amount of that benefit to the Commissioner of Taxation in accordance with the eligible person’s request; and

                     (b)  informing the Commissioner of Taxation of the eligible person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

             (6)  If an eligible person makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced in accordance with the method determined by the Board under section 146H. The reduction takes effect from the beginning of the day of the election.

One election per assessment

             (7)  An eligible person is not entitled to make more than one election under subsection (1) in relation to a particular assessment.

Elections made before the first pension pay day in a financial year

             (8)  If an election under subsection (1) is made during the period:

                     (a)  beginning at the start of a financial year; and

                     (b)  ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

Part of orphan pension

             (9)  To avoid doubt, if an orphan pension is apportioned under subsection 115(2), this section has effect, in relation to the portion applicable to a particular child or to particular children, as if a reference to the orphan pension were a reference to that portion.

146H   Method for reducing orphan pension in relation to surcharge commutation amount

             (1)  The Board must, following consultation with an actuary, determine in writing, in relation to persons to whom orphan pension is payable in respect of a child or children, the method that, having regard to:

                     (a)  the age of the child, or the ages of the children, when the person makes an election under section 146G; and

                     (b)  other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146G).

             (2)  A determination under this section is to be published in the Gazette .

5  At the end of section 157

Add:

             (4)  If:

                     (a)  a person makes an election under section 146C, 146E or 146G; and

                     (b)  no payment has been made in accordance with the election; and

                     (c)  the Board, having regard to:

                              (i)  such matters (if any) as are prescribed; and

                             (ii)  such other matters as it considers relevant;

                            is satisfied that the election should be cancelled;

the Board may direct that the election is to be cancelled and, if it so directs, this Act has effect as if the election had not been made.

6  At the end of section 168

Add:

           (18)  Regulations made within one year after the commencement of this subsection for purposes arising from any amendment of this Act made by the Superannuation Legislation Amendment (Post-retirement Commutations) Act 2001  may commence on a day:

                     (a)  earlier than the day on which they are made; but

                     (b)  not earlier than the commencement of this subsection.

7  Application—sections 146C, 146E and 146G of the Superannuation Act 1976

Sections 146C, 146E and 146G of the Superannuation Act 1976 as amended by this Schedule apply in relation to an assessment, whether made before, at or after the commencement of this item.

8  Application—sections 146E and 146G of the Superannuation Act 1976

Subsections 146E(1) and 146G(1) of the Superannuation Act 1976 as amended by this Schedule apply to a death, whether the death occurred before, at or after the commencement of this item.

9  Transitional—sections 146D, 146F and 146H of the Superannuation Act 1976

The first set of determinations made under section 146D, 146F or 146H of the Superannuation Act 1976 as amended by this Schedule may be expressed to have taken effect at the commencement of the section concerned.