Superannuation (Sustaining the Superannuation Contributions Concession – CSS Pension Reduction Conversion Factors) Determination 2015 – Explanatory Statement
1 Name of Determination
This Determination is the Superannuation (Sustaining the Superannuation Contributions Concession – CSS 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 146RE(4) of the Superannuation Act 1976 (the CSS 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 4 of the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 inserted Part IXC into the CSS Act to allow for the adjustment of benefits to meet this liability.
Under Part IXC of the CSS Act, a person may give Commonwealth Superannuation Corporation (CSC) a release authority in accordance with Division 135 in Schedule 1 to the Taxation Administration Act 1953.
Under paragraph 146RC(1)(b) of the CSS Act, a person entitled to receive, or in receipt of, an indexed or non-indexed pension may elect to receive a reduced pension to reflect the release authority lump sum.
Pensions are reduced under subsection 146RE(2) of the CSS Act using conversion factors determined by CSC under subsection 146RE(4) of the CSS Act. Pension reductions take effect from the pension reduction day set out in subsection 146RE(3) of the CSS Act.
The pension reduction conversion factors for indexed and non-indexed pensions 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 Superannuation (Sustaining the Superannuation Contributions Concession – CSS Pension Reduction Conversion Factors) Determination 2015 was enacted to address the need for adjusting superannuation pension benefits following the reduction of the tax concession on concessional contributions for individuals earning over $300,000, from 30 per cent to 15 per cent. This change, implemented in 2013, was aimed at sustaining the superannuation contributions concession, commonly referred to as "Division 293 tax". The enactment of this Determination under subsection 146RE(4) of the Superannuation Act 1976 facilitates the conversion of pension benefits to reflect the new tax liability. The objective of this legislation is to ensure that the Commonwealth Superannuation Corporation can effectively manage pension reductions for individuals who have elected to receive a reduced pension, in line with the legislative changes. This Determination, exempt from disallowance, was made following appropriate consultation and consideration of actuarial advice.
Scope and Application
The Superannuation (Sustaining the Superannuation Contributions Concession – CSS Pension Reduction Conversion Factors) Determination 2015 applies to individuals who are in receipt of, or entitled to, an indexed or non-indexed pension under Part IXC of the Superannuation Act 1976, commonly referred to as the "Division 293 tax". This Determination sets out the pension reduction conversion factors used to calculate the reduced pension amount for individuals who have a release authority issued under Division 135 in Schedule 1 to the Taxation Administration Act 1953. The Determination is made under subsection 146RE(4) of the CSS Act and comes into effect on the day after it is registered on the Federal Register of Legislative Instruments. While this Determination is a legislative instrument under the Legislative Instruments Act 2003, it is exempt from disallowance and does not require a Statement of Compatibility with Human Rights as it pertains to superannuation. The Determination is made pursuant to consultation with actuarial experts and does not contain any exclusions, exemptions, or thresholds.
Key Provisions
The Superannuation (Sustaining the Superannuation Contributions Concession – CSS Pension Reduction Conversion Factors) Determination 2015 (subsection 146RE(4) of the Superannuation Act 1976) sets forth the conversion factors to be used for reducing pensions under Part IXC of the CSS Act, which was introduced to address the reduced tax concession on concessional superannuation contributions for individuals with incomes over $300,000 per annum. The determination outlines the conversion factors for indexed and non-indexed pensions, establishing the methodology for pension reductions to reflect the release authority lump sum. These factors are intended to adjust the benefits of superannuation pensions to align with the new tax regime introduced by the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013.
The Determination imposes specific obligations on the Commonwealth Superannuation Corporation (CSC) as the entity responsible for applying the conversion factors to calculate the reduced pension amounts for individuals who have elected to have their pensions reduced. Under the CSS Act, individuals who are receiving or entitled to receive an indexed or non-indexed pension can opt to have their pensions reduced to reflect the release authority lump sum. This election must be made in accordance with the provisions of Part IXC of the CSS Act and the determination of the conversion factors as outlined in this Determination. The CSC must use these factors to accurately calculate the reduced pension amounts, ensuring compliance with the legislative requirements.
Failure to comply with the provisions of the Determination could lead to significant legal and financial repercussions. While the Determination itself does not explicitly outline specific offences, penalties, or consequences for non-compliance, breaches of the CSS Act or the Tax and Superannuation Laws Amendment Act 2013 could result in civil or criminal penalties. The penalties for breaches of these Acts can include fines, imprisonment, or other financial penalties as prescribed by the relevant legislation. It is important for parties governed by these Acts to ensure strict adherence to the prescribed conversion factors and pension reduction processes to avoid any potential legal consequences.