EXPLANATORY STATEMENT
FAMILY LAW (SUPERANNUATION) (INTEREST RATE FOR ADJUSTMENT PERIOD) DETERMINATION 2013
ISSUED BY AUTHORITY OF THE AUSTRALIAN GOVERNMENT ACTUARY
In this instrument the Australian Government Actuary makes a number of determinations under regulation 45D of the Family Law (Superannuation) Regulations 2001 (the FLS Regulations). The determinations relate to the adjustment of superannuation entitlements of separated and divorced spouses, and of separated de facto couples (except in Western Australia). The entitlements are provided under certain orders or agreements that split particular kinds of future superannuation benefits made in property settlements under the Family Law Act 1975 (the Family Law Act). The determinations relate to orders or agreements that provide for a base amount split of future superannuation benefits that are payable in respect of a defined benefit superannuation interest or an interest in a self-managed superannuation fund.
Under a base amount split, a base amount is:
- allocated by the court before making an order; or
- specified in the agreement by the spouses;
and is then adjusted, on an annual basis (or for a part year, where necessary), until:
- superannuation benefits are payable to the spouse – the member spouse – who has the superannuation interest; or
- the member spouse’s interest is split, at some earlier time, under the Superannuation Industry (Supervision) Regulations 1994, the Retirement Savings Regulations 1997, or pursuant to the governing rules of the relevant superannuation fund or scheme in accordance with regulation 14G of the FLS Regulations.
The entitlement of the non-member spouse for whose benefit the order or agreement has been made, when any of those events occurs, is linked to the adjusted base amount under the order or agreement at that time.
A defined benefit superannuation interest is one which satisfies the definition at regulation 5 of the FLS Regulations. It is typically one where the benefits payable in respect of the interest are linked to the member’s period of membership and salary on cessation of membership of the fund or scheme in which the interest is held.
A self managed superannuation fund is a fund with fewer than 5 members that satisfies certain conditions under the Superannuation Industry (Supervision) Act 1993.
Where the interest that is subject to an order or agreement is a defined benefit superannuation interest or an interest in a self managed superannuation fund, regulation 45D of the FLS Regulations provides for the Australian Government Actuary to determine:
- the interest rate for the adjustment of a base amount for any 12 month adjustment period that is a financial year (subregulation 45D(3))
- the method by which the interest rate is to be calculated for any adjustment period that is less than 12 months that begins and ends within a financial year (subregulation 45D(4)), and
- the method by which the interest rate is to be calculated for any adjustment period that begins in one financial year and ends in the following financial year (subregulation 45D(6)).
Consultation on the content of the instrument was undertaken under section 17 of the Legislative Instruments Act 2003 (the LIA) with the Attorney-General’s Department by way of exchange of correspondence and discussions. The determination commenced on 1 July 2013 and is a legislative instrument for the purposes of the LIA. Details of the determination are as follows:
Section 1 — Name of determination
Section 1 provides that the name of the instrument is the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2013.
Section 2 — Commencement
Section 2 provides that the instrument commenced immediately after the commencement of the Family Law (Superannuation) Amendment (ABS) Regulation 2013.
These Regulations amend regulation 45D of the Family Law (Superannuation) Regulations 2001. Prior to the amendments, regulation 45D prescribed that the full time adult ordinary time earnings figures for the February quarter (which were published each year by the Australian Bureau of Statistics (ABS)) were to be used by the Australian Government Actuary to determine the interest rate and methods for determining interest rates. However, the ABS reduced the frequency of publishing of the average weekly earning figures and no longer publishes the February figures. Therefore, amendment of regulation 45D was required to link the rate and methods to the most recent figures available at the commencement of a financial year ‑ the original estimate of full time adult ordinary time earnings by persons in Australia over the year to the November quarter.
The Regulations include transitional provisions for an adjustment period that begins or ends in the financial year beginning on 1 July 2013. An ‘amended percentage change’ is required to be used for that part of the adjustment period that falls within the year beginning on 1 July 2013. The ‘amended percentage change’ is the percentage change in the original estimate of full-time adult ordinary earnings for all persons in Australia between the February and November 2012 quarters, as worked out in accordance with a prescribed formula. Under the formula, the annualised increase in earnings for the nine months to November 2012 is 4.8 per cent. The transitional arrangement is being proposed due to the fact that the 5.0 per cent increase over the year to November 2012 reported by ABS includes the increase over the three months to February 2012 which was taken into account in determining the interest rates to apply under the determination for the 2012/13 financial year. The increase in the February quarter was greater than the average quarterly increase over the remaining three quarters of the year to November 2012 and using the annual increase to November 2012 would have resulted in a double counting of this higher than average increase. The transitional arrangement avoids any such double counting.
The transitional provisions provide that where an adjustment period commences before 30 June 2013 and ends during the financial year beginning on 1 July 2013, for that part of the adjustment period that is before 30 June 2013, the following rate is to be used – a rate that is 2.5 percentage points above the percentage change in original estimate of full-time adult ordinary time earnings for all persons in Australia, as published by the Australian Bureau of Statistics, during the year ending with the February 2012 quarter.
Section 3 — Authority
Section 3 provides that the determination is made under regulation 45D of the Family Law Superannuation) Regulations 2001.
Section 4 — Definition
Section 4 defines regulations as meaning the Family Law (Superannuation) Regulations 2001 (FLS Regulations).
Section 5 — Adjustment period – financial year
In section 5 of the instrument, the Australian Government Actuary determines, under subregulation 45D(3) of the FLS Regulations, that the interest rate is 0.073 where the adjustment period is the financial year beginning on 1 July 2013. This rate is 2.5 percentage points above the ‘amended percentage change’.
Section 6 — Adjustment period – less than 12 months within financial year
In section 6 of the instrument, the Australian Government Actuary determines, under subregulation 45D(4) of the FLS Regulations, the method for calculating the interest rate where the adjustment period is less than 12 months and begins and ends in the financial year beginning on 1 July 2013. The method provides for the calculation of a rate by reference to a rate that is 2.5 percentage points above the ‘amended percentage change’.
Section 7 — Adjustment period – 12 months not within financial year
In section 7 of the instrument, the Australian Government Actuary determines, under subregulation 45D(6) of the FLS Regulations, the method for calculating the interest rate where the adjustment period is 12 months that begins in the financial year beginning on 1 July 2012 and ends in the financial year beginning on 1 July 2013. The method provides for calculation of a rate by reference to a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary earnings for all persons in Australia, as published by the ABS during the year ending with the February 2012 quarter (for that part of the adjustment period that is in the financial year beginning on 1 July 2012) and to a rate that is 2.5 percentage points above the ‘amended percentage change’ (for that part of the adjustment period that is in the financial year beginning on 1 July 2013).
Section 8 — Adjustment period – less than 12 months not within financial year
In section 8 of the instrument, the Australian Government Actuary determines, under subregulation 45D(6) of the FLS Regulations, the method for calculating the interest rate where the adjustment period is less than 12 months that begins in the financial year beginning on 1 July 2012 and ends in the financial year beginning on 1 July 2013. The method provides for calculation of a rate by reference to a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary earnings for all persons in Australia, as published by the ABS during the year ending with the February 2012 quarter (for that part of the adjustment period that is in the financial year beginning on 1 July 2012) and to a rate that is 2.5 percentage points above the ‘amended percentage change’ (for that part of the adjustment period that is in the financial year beginning on 1 July 2013).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2013
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
In this instrument the Australian Government Actuary makes a number of determinations under regulation 45D of the Family Law (Superannuation) Regulations 2001 (the FLS Regulations) relating to the adjustment of entitlements of divorced or separated spouses, and of separated de facto couples (except in Western Australia), under certain orders or agreements splitting particular kinds of future superannuation benefits made in property settlements under the Family Law Act 1975 (the Family Law Act).
The determinations relate to orders or agreements providing for a base amount split of future superannuation benefits, one of two kinds of splits that can be made under the Family Law Act of most types of superannuation, payable in respect of a defined benefit superannuation interest or an interest in a self-managed superannuation fund.
This determination is made pursuant to transitional provisions in the Family Law (Superannuation) Regulations 2001, which were necessary following the decision of the Australian Bureau of Statistics (ABS) to reduce the frequency of the Survey of Average Weekly Earnings from quarterly to biannual. The transitional provisions require an ‘amended percentage change’ to be used for that part of the adjustment period that falls within the year beginning on 1 July 2013. The ‘amended percentage change’ is the percentage change in the original estimate of full-time adult ordinary earnings for all persons in Australia between the February and November 2012 quarters, as worked out in accordance with a prescribed formula. Under the formula, the annualised increase in earnings for the nine months to November 2012 is 4.8 per cent. The transitional arrangement is being proposed due to the fact that the 5.0 per cent increase over the year to November 2012 reported by ABS includes the increase over the three months to February 2012 which was taken into account in determining the interest rates to apply under the determination for the 2012/13 financial year. The increase in the February quarter was greater than the average quarterly increase over the remaining three quarters of the year to November 2012 and using the annual increase to November 2012 would have resulted in a double counting of this higher than average increase. The transitional arrangement avoids any such double counting.
None of these amendments make any substantive changes to the law, in terms of human rights.
Human rights implications
The Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.