explanatory statement
Issued by the authority of the Minister for Finance and Administration
Superannuation Act 1976
Orders under subsection 146MH(1)
The Superannuation Act 1976 (the Act) makes provision for and in relation to the Commonwealth Superannuation Scheme (CSS) for Australian Government employees and for certain other persons.
Part IXB of the Act makes specific provision for the splitting of a superannuation interest under the Act when the CSS Board is served with an agreement or order in relation to that interest as a result of actions taken under the Family Law Act 1975. Part IXB allows for a separate interest to be created in the CSS for the former spouse of a CSS member who has been allocated a part of the member's interest in the CSS under such an agreement or order.
Subsection 146MH(1) of the Act provides that the Minister may make Orders prescribing matters required or permitted to be prescribed by Part IXB. The Superannuation (Family Law – Superannuation Act 1976) Orders 2004 (the Principal Orders) prescribe the matters required or permitted by Part IXB of the Act to be prescribed.
Section 146MA of the Act defines a number of terms used in Part IXB, including the term scheme value. The definition of scheme value refers to the amount determined under the Orders. The Principal Orders provide methods and/or factors that are to be used to calculate the relevant amounts in relation to this definition.
Scheme value is one of the items taken into account in the calculation of the separate interest for a former spouse and the reduction of the member's benefits as a result of the splitting of the member’s interest.
Amendments to the Principal Orders
The purpose of the Superannuation (Family Law – Superannuation Act 1976) Amendment Orders 2005 (No. 2) (the Amending Orders) is to amend the Principal Orders, to correct a factor used to determine the scheme value in relation to a CSS member who has deferred benefits under the CSS.
The original factor was based on actuarial advice. However, subsequent actuarial advice now indicates that the original factor provided was incorrect and needs to be replaced.
The Amending Orders will only apply to future splits of a CSS interest.
The details of the Amending Orders are explained in the Attachment.
Consultation and Commencement
Section 167AB of the Act provides that the Minister may make Orders under the Act without the consent of the CSS Board in certain circumstances. Subparagraph 167AB(b)(i) of the Act provides that Orders that relate to a payment by an employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) that will, after the making of the Orders, be required or permitted to be made under the Act do not require that consent. The Amending Orders affect benefits that are payable under the Act and are paid by the Australian Government (the employer-sponsor) and therefore do not require the consent of the Board.
No consultation is required as the instrument is machinery in nature and does not substantially alter existing arrangements.
The Amending Orders are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Amending Orders will commence on the day after they are registered on the Federal Register of Legislative Instruments.
ATTACHMENT
Superannuation (Family Law – Superannuation Act 1976) amendment Orders 2005 (No. 2)
Section 1 – Name of Orders
This section provides that the name of the Orders is the Superannuation (Family Law – Superannuation Act 1976) Amendment Orders 2005 (No. 2) (the Amending Orders).
Section 2 - Commencement
This section provides that the Amending Orders commence on the day after they are registered on the Federal Register of Legislative Instruments.
Section 3 – Amendment of the Superannuation (Family Law – Superannuation Act 1976) Orders 2004
This section provides that Schedule 1 amends the Superannuation (Family Law – Superannuation Act 1976) Orders 2004.
Schedule 1 – amendments
Item 1 – Factor
Item 1 corrects a factor used in calculating scheme value for certain persons with an interest in the CSS on ceasing to be an eligible employee and where deferred benefits have yet to become payable to the person under subsection 138(2) of the Superannuation Act 1976. The incorrect factor for deferred CSS members (male) aged 57 is “1.6741” and the Amending Orders substitute the factor “1.6471” in its place.
Overview
The Superannuation (Family Law – Superannuation Act 1976) Amendment Orders 2005 (No. 2) were enacted to address an error in the calculation of scheme value for members of the Commonwealth Superannuation Scheme (CSS) who have deferred benefits under the scheme. These Orders amend the Superannuation (Family Law – Superannuation Act 1976) Orders 2004, which prescribe the matters required or permitted by Part IXB of the Superannuation Act 1976. The Superannuation Act 1976, enacted by the Australian Parliament, provides for and in relation to the CSS for Australian Government employees and other specified persons. The policy objective is to ensure accurate calculations of scheme value for superannuation interests that are split due to family law matters, thereby ensuring fair treatment of all parties involved. The Orders are made under the authority of the Minister for Finance and Administration and do not require the consent of the CSS Board as they do not substantially alter existing arrangements, falling under machinery provisions as outlined in Section 167AB of the Superannuation Act 1976. These Amending Orders will only apply to future splits of CSS interests and will commence on the day after they are registered on the Federal Register of Legislative Instruments.
Scope and Application
The Superannuation Act 1976 applies to Australian Government employees and certain other individuals who participate in the Commonwealth Superannuation Scheme (CSS). Part IXB of the Act facilitates the splitting of a superannuation interest in the CSS when the CSS Board receives an agreement or order under the Family Law Act 1975. This splitting results in the creation of a separate interest in the CSS for a former spouse, reducing the member's benefits accordingly. The Act allows the Minister for Finance and Administration to make orders prescribing specific matters required or permitted under Part IXB, with the Superannuation (Family Law – Superannuation Act 1976) Orders 2004 setting out these required and permitted matters. The Superannuation (Family Law – Superannuation Act 1976) Amendment Orders 2005 (No. 2) amend the Principal Orders to correct an actuarial factor used in determining scheme value for CSS members who have deferred benefits, effective only for future splits. These Amending Orders, which do not require CSS Board consent or consultation as they are considered machinery in nature, will commence on the day following their registration on the Federal Register of Legislative Instruments.
Key Provisions
The Superannuation (Family Law – Superannuation Act 1976) Amendment Orders 2005 (No. 2) (the Amending Orders) amend the Superannuation (Family Law – Superannuation Act 1976) Orders 2004 (the Principal Orders), which provide for the calculation of scheme value under Part IXB of the Superannuation Act 1976. Section 1 of the Amending Orders establishes the name of the instrument, while Section 2 sets the commencement date as the day following registration on the Federal Register of Legislative Instruments. The substantive amendments are detailed in Schedule 1, which corrects a factor used to determine the scheme value for certain CSS members with deferred benefits. Specifically, Item 1 of Schedule 1 replaces the incorrect factor of "1.6741" with "1.6471" for male CSS members aged 57.
The Amending Orders impose no additional obligations on parties or entities governed by the Superannuation Act 1976 beyond those already stipulated in the Principal Orders. They primarily serve to rectify an actuarial miscalculation in the calculation of scheme value, ensuring that future splits of a CSS interest under the Act will be based on accurate factors. These Orders ensure that the calculation of benefits payable to former spouses and the reduction of members' benefits due to interest splitting are accurate and fair.
Under the Superannuation Act 1976, failure to comply with the provisions of the Act or the Orders can result in various penalties. However, the Amending Orders themselves do not introduce new offences or penalties. Instead, they amend existing machinery to ensure compliance with the Act. Any breaches of the Act or the Orders could potentially lead to civil or criminal consequences as defined in the Act, including fines and imprisonment. For example, subsection 167B(1) of the Superannuation Act 1976 provides that a person who contravenes the Act or the regulations can be fined up to 120 penalty units or imprisoned for up to 12 months, or both, for a first offence. The maximum penalties for subsequent offences can be significantly higher. It is important to note that these penalties apply to breaches of the Act and the Orders, not specifically to the Amending Orders themselves.