EXPLANATORY STATEMENT
Select Legislative Instrument 2007 No. 348
Issued by the Authority of the Minister for Veterans’ Affairs
Defence Force Retirement and Death Benefits Act 1973
Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1)
Subsection 131(1) of the Defence Force Retirement and Death Benefits Act 1973 (the Act) provides, in part, that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which, by the Act, are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Superannuation Legislation Amendment Act 2007 (the Amendment Act) amends the Act to improve access to reversionary benefits in circumstances where the retirement pensioner commenced a marital relationship after age 60 (know as a post retirement marriage). The Amendment Act reduces the post retirement marital relationship test from five years to three years, meaning a spouse will only have to be in a marital relationship for three years before a pension is payable. The Amendment Act also made a provision for the payment of pro-rata reversionary pensions to genuine spouses who do not meet the three-year test.
Section 6BA is inserted into the Act by the Amendment Act and a separate instrument recommends that this and other parts of Schedule 6 to the Amendment Act be proclaimed to commence on 1 January 2008. Subsection 6BA (3) provides that if the resulting annual pension rate worked out under subsection 6BA(2) is less than or equal to the rate prescribed by the regulations for the purpose of this section, the spouse is instead entitled to a lump sum payment worked out in accordance with the regulations’.
The Regulations will provide the prescribed rate to be $1407.79 for the purpose of determining if a small resulting pension is to be converted to a lump sum. The prescribed rate will be increased each year in accordance with the formula set out in the regulations. The Regulations will also provide the method for calculating the small resulting pension to a lump sum payment.
Details of the Regulations are outlined in the Attachment
A regulation impact statement is not required; the Office of Best Practice Regulation has been consulted. The Defence Force Retirement and Death Benefits Authority, the Australian Government Actuary, ComSuper and the Department of Finance have been consulted in the making of the Regulations.
The Regulation is a legislative instrument for the purpose of the Legislative Instruments Act 2003.
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Attachment
Details of the Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1)
Regulation 1 identifies that the Regulations are the Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1).
Regulation 2 provides that the Regulations are to commence on 1 January 2008.
Regulation 3 provides that Schedule 1 amends the Defence Force Retirement and Death Benefits Regulations (the Regulations).
Schedule 1
Item [1] renames the Principal Regulations as the Defence Force Retirement and Death Benefits Regulations 1973 in line with current drafting practice.
Item [2] inserts new regulations 3A and 3B into the Principal Regulations the prescribed rate and the formula for calculating the lump sum payment for the purpose of subsection 6BA(3) of the Act.
Subregulation 3A (1) provides the prescribed rate as $1407.79 for the purpose of determining if a small resulting pension is to be converted to a lump sum.
Subregulations 3A (2) to (5) provides the method of indexing the prescribed rate each half year in line with the consumer price index published in the March and September quarters.
Subregulations 3B (1) to (3) provides the method for calculating the small resulting pension to a lump sum payment by using the spouses age factor provided by the Australian Government Actuary’s ‘methods and factors for valuing particular superannuation interests’.
Overview
The Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1) were introduced to address issues identified by the Superannuation Legislation Amendment Act 2007 concerning access to reversionary benefits for individuals who enter into a marital relationship after retirement age. This amendment, enacted by the Parliament of Australia, aims to facilitate more timely access to pension benefits by reducing the duration of the marital relationship test from five to three years for spouses in post-retirement marriages. Additionally, the Act provides for pro-rata reversionary pensions to be paid to genuine spouses who do not meet the three-year residency requirement. These Regulations, issued under the authority of the Minister for Veterans' Affairs, are designed to implement the legislative changes by setting the prescribed rate for converting small resulting pensions into lump sum payments and establishing the method for calculating such payments. The Regulations are set to commence on 1 January 2008, ensuring alignment with the policy objectives of the Amendment Act.
Scope and Application
The Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1) pertain to the Defence Force Retirement and Death Benefits Act 1973, as amended by the Superannuation Legislation Amendment Act 2007, and apply to the benefits accruing to service personnel and their spouses. These regulations primarily concern the conditions under which reversionary benefits, such as pensions or lump sum payments, are awarded to spouses who enter into a marital relationship with a retirement pensioner after the pensioner reaches the age of 60. The regulations reduce the marital relationship test from five years to three years, simplifying the eligibility criteria for spouses. Furthermore, the regulations specify a prescribed rate of $1407.79, which is used to determine if a small resulting pension should be converted into a lump sum payment, and provide a formula for annual indexation of this rate. These regulations extend across the Commonwealth of Australia, applying uniformly as subordinate legislation under the authority granted by the Act. There are no explicit exclusions or exemptions mentioned in the provided text, although it is implied that the regulations apply only to cases governed by the Act and its amendments.
Key Provisions
The key operative sections of the Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1) primarily revolve around the adjustments to pension rates and the calculation of lump sum payments for spouses in post-retirement marriages (s 6BA). Regulation 1 identifies the Regulations as the Defence Force Retirement and Death Benefits Amendment Regulations 2007 (No. 1). Regulation 2 sets the commencement date for these Regulations as 1 January 2008. Regulation 3 amends the Defence Force Retirement and Death Benefits Regulations 1973 by inserting new regulations 3A and 3B. Regulation 3A(1) specifies the prescribed rate of $1407.79 for determining if a small resulting pension should be converted to a lump sum, while Regulation 3A(2) to (5) detail the method of indexing this rate using the consumer price index published in the March and September quarters. Regulation 3B outlines the method for calculating the lump sum payment, utilising the spouse’s age factor from the Australian Government Actuary’s ‘methods and factors for valuing particular superannuation interests’.
These Regulations impose specific obligations on the Defence Force Retirement and Death Benefits Authority and other relevant parties to ensure that the new provisions are implemented correctly. The Authority must adhere to the prescribed rate and indexing method outlined in Regulation 3A to determine when a small resulting pension should be converted to a lump sum. Additionally, the Authority is required to follow the calculation method in Regulation 3B when converting a small resulting pension to a lump sum payment. The Australian Government Actuary’s ‘methods and factors for valuing particular superannuation interests’ must be used to determine the spouse’s age factor, ensuring the calculations are accurate and consistent.
Failure to comply with these Regulations may result in civil consequences, although the specific offences and penalties are not detailed within the text provided. The overarching Defence Force Retirement and Death Benefits Act 1973, however, likely encompasses general provisions for penalties related to non-compliance with regulations. For instance, breaches of the Act or its regulations might lead to fines or other administrative actions, although the exact penalties would need to be referred to within the main Act or associated legal instruments. It is important for the Defence Force Retirement and Death Benefits Authority and other relevant parties to meticulously adhere to these Regulations to avoid any potential civil or administrative repercussions.