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.
Overview
The Defence Force Retirement and Death Benefits (Sustaining the Superannuation Contributions Concession – DFRDB Pension Reduction Conversion Factors) Determination 2015 was enacted to address the changes necessitated by the Sustaining the Superannuation Contributions Concession, also known as the Division 293 tax, introduced in 2013. This tax reform reduced the superannuation contributions concession from 30 per cent to 15 per cent for individuals with income above $300,000. The amendments to the Defence Force Retirement and Death Benefits Act 1973 were implemented through the Superannuation Laws Amendment (MySuper Capital Gains Tax Relief and Other Measures) Act 2013 and the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013. The Determination, made under subsection 49N(3) of the DFRDB Act by the relevant authority, specifies the conversion factors used to reduce retirement and invalidity pay for very high income earners within the Defence Force Retirement and Death Benefits scheme, ensuring compliance with the new tax laws.
Scope and Application
The Defence Force Retirement and Death Benefits (Sustaining the Superannuation Contributions Concession – DFRDB Pension Reduction Conversion Factors) Determination 2015 applies to members of the Australian Defence Force (ADF) who are considered very high income earners. The act pertains specifically to the reduction of retirement and invalidity pay in accordance with the release of lump sum payments from the DFRDB scheme, addressing the changes necessitated by the Sustaining the Superannuation Contributions Concession introduced in 2013. This Determination is made under the Defence Force Retirement and Death Benefits Act 1973 and operates to set the conversion factors that will be used to adjust the benefits of ADF members who have released a lump sum payment from their superannuation interest to discharge a debt. The Determination is applicable nationally as it falls under the Commonwealth jurisdiction. This legislative instrument is exempt from disallowance and does not require a Statement of Compatibility with Human Rights, as it is not subject to disallowance under the Legislative Instruments Act 2003.
Key Provisions
The Defence Force Retirement and Death Benefits (Sustaining the Superannuation Contributions Concession – DFRDB Pension Reduction Conversion Factors) Determination 2015 outlines the conversion factors used to adjust retirement and invalidity pay for Defence Force Retirement and Death Benefits (DFRDB) scheme members who have received a lump sum payment to meet a debt account discharge liability (sections 49K and 49N of the DFRDB Act). These conversion factors ensure that the member’s benefits are reduced appropriately to account for the lump sum payment. The determination specifies the exact conversion factors that are to be applied in such instances, which are detailed in the schedule of the determination.
Entities and individuals governed by this Act must adhere to the specified conversion factors when a lump sum is paid out from a superannuation interest to meet a debt account discharge liability. This includes ensuring that any retirement pay and invalidity pay is reduced in accordance with the conversion factors stipulated in the determination (subsection 49N(2) of the DFRDB Act). This obligation applies to Commonwealth Superannuation Corporation (CSC) and other relevant entities involved in the administration of DFRDB scheme benefits. Proper documentation and compliance with the conversion factors are essential to maintain the integrity of the scheme and to ensure that the benefits are correctly adjusted.
Failure to comply with the provisions of this Determination may result in incorrect adjustments to retirement and invalidity pay, potentially leading to legal and financial discrepancies. While the Determination itself does not explicitly list specific offences or penalties, any non-compliance could be addressed under the broader provisions of the Defence Force Retirement and Death Benefits Act 1973 or other relevant legislation. This may include administrative actions, financial penalties, or legal proceedings to rectify the improper adjustments and restore the correct benefit levels. The severity of the penalties would depend on the nature and extent of the non-compliance, as well as any resultant harm caused by the incorrect adjustments.