Defence Force Retirement and Death Benefits (Sustaining the Superannuation Contributions Concession – DFRDB Pension Reduction Conversion Factors) Determination 2015 – Explanatory Statement
1 Name of Determination
This Determination is the Defence Force Retirement and Death Benefits (Sustaining the Superannuation Contributions Concession – DFRDB Pension Reduction Conversion Factors) Determination 2015.
2 Commencement
This Determination commences on the day after it is registered on the Federal Register of Legislative Instruments.
3 Authority for this Determination
This Determination is made under subsection 49N(3) of the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act).
4 Purpose and operation of this Determination
In 2013 the tax concession that individuals with income above $300,000 received on their concessional superannuation contributions was reduced from 30 per cent to 15 per cent. This is known as Sustaining the Superannuation Contributions Concession, also known as “Division 293 tax”.
Schedule 2 of the Superannuation Laws Amendment (MySuper Capital Gains Tax Relief and Other Measures) Act 2013 amended the DFRDB Act. The amendments give effect to changes that are necessary as a result of implementing the Sustaining the Superannuation Contribution Concession contained in Schedule 3 of the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013.
The amendments allow a lump sum to be paid from a superannuation interest in the DFRDB scheme to meet a debt account discharge liability for Australian Defence Force scheme members who are very high income earners. As a result a member’s DFRDB scheme superannuation benefits, including any reversionary pension to be paid to the surviving spouse of a deceased member, are reduced.
Section 49K of the DFRDB Act provides that a lump sum (the release authority lump sum) may be paid at a time in compliance with a release authority issued to a person under item 3 of the table in subsection 135‑10(1) in Schedule 1 to the Taxation Administration Act 1953 and given to CSC in accordance with Subdivision 135‑B in that Schedule.
Under subsection 49N(1) of the DFRDB Act, if a release authority lump sum is paid in relation to a release authority issued to a person and given to CSC under subsection 49K of the DFRDB Act, any benefits to which the person is entitled under the DFRDB Act must be reduced to reflect the release authority lump sum.
Retirement pay and invalidity pay is reduced under subsection 49N(2) of the DFRDB Act using conversion factors determined by CSC under subsection 49N(3) of the DFRDB Act.
The conversion factors to reduce retirement pay and invalidity pay are set out in this Determination.
5 Legislative Instruments Act 2003
This Determination is a legislative instrument for the purposes of section 5 of the Legislative Instruments Act 2003 (LIA). However, as this Determination is an instrument relating to superannuation, it is exempted from disallowance by item 39 of the table in subsection 44(2) of the LIA.
6 Consultation
Section 17 of the LIA specifies that rule-makers should consult before making legislative instruments. Actuarial advice was obtained regarding the factors included in this Determination.
7 Statement of Compatibility with Human Rights
Subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011 requires a Statement of Compatibility with Human Rights for all legislative instruments subject to disallowance under section 42 of the LIA. As mentioned above, this Determination is exempt from disallowance which means that a Statement of Compatibility with Human Rights is not required.