Superannuation (Sustaining the Superannuation Contribution Concession – PSS Pension Reduction Conversion Factors) Determination 2015 –
Explanatory Statement
1 Name of Determination
This Determination is the Superannuation (Sustaining the Superannuation Contribution Concession – PSS 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 rule 17.1.8 of the Schedule to the Public Sector Superannuation Scheme Trust Deed (PSS Rules).[1]
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”.
The 38th Amending Trust Deed[2] inserted Part 17 into the PSS Rules to allow for the adjustment of benefits to meet this liability.
Under Part 17 of the PSS Rules, 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 rule 17.1.2(b) of the PSS Rules, a person entitled to receive, or in receipt of, a pension may elect to receive a reduced pension to reflect the release authority lump sum.
Pensions are reduced under rule 17.1.7 of the PSS Rules using conversion factors determined by CSC under rule 17.1.8 of the PSS Rules. Pension reductions under rule 17.1.7 take effect from the pension reduction day set out in rule 17.1.9 of the PSS Rules.
The pension reduction conversion factors 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.
[1] The Rules are a Schedule to the Trust Deed available at http://www.comlaw.gov.au/Series/F2005B01198.
[2] ComLaw ID F2013L01568.
Overview
The Superannuation (Sustaining the Superannuation Contribution Concession – PSS Pension Reduction Conversion Factors) Determination 2015 was enacted to address the need for adjusting benefits in response to the reduction in the tax concession on superannuation contributions for high-income earners, specifically those earning over $300,000. This reduction, referred to as the Sustaining Superannuation Contributions Concession or Division 293 tax, decreased the concessional contribution rate from 30 per cent to 15 per cent in 2013. The Determination was made under rule 17.1.8 of the Public Sector Superannuation Scheme Trust Deed (PSS Rules) and is designed to establish the conversion factors used to reduce pensions in line with the release authority provided to the Commonwealth Superannuation Corporation (CSC). The policy objective is to ensure that the adjustments to pension benefits align with the changes in the tax concession, thereby maintaining the financial balance within the superannuation system. The Determination is a legislative instrument under the Legislative Instruments Act 2003, although it is exempt from disallowance due to its specific superannuation-related nature.
Scope and Application
The Superannuation (Sustaining the Superannuation Contribution Concession – PSS Pension Reduction Conversion Factors) Determination 2015 applies to individuals who are entitled to or in receipt of a pension under the Public Sector Superannuation Scheme (PSS). Specifically, it is relevant to those who may have a release authority under Division 135 of Schedule 1 to the Taxation Administration Act 1953, allowing them to convert a portion of their superannuation pension into a lump sum. The Determination sets out the conversion factors used by the Commonwealth Superannuation Corporation (CSC) to calculate the reduced pension amounts, in accordance with the PSS Rules. The Determination operates nationally, as it is made under the authority of the PSS Rules, which are a Schedule to the Public Sector Superannuation Scheme Trust Deed. The Determination is a legislative instrument exempt from disallowance under the Legislative Instruments Act 2003, and it was made after consulting actuarial advice regarding the appropriate conversion factors.
Key Provisions
The Superannuation (Sustaining the Superannuation Contribution Concession – PSS Pension Reduction Conversion Factors) Determination 2015 sets out the conversion factors that are used to reduce the pensions of certain individuals under the Public Sector Superannuation Scheme (PSS). This Determination (sections 3 to 5) outlines the specific conversion factors that will be used to calculate the reduced pension amounts. These factors are designed to reflect the changes in the tax concession rates for superannuation contributions, particularly for individuals earning above a certain income threshold.
Individuals who are entitled to receive a pension under the PSS and have provided a release authority to the Commonwealth Superannuation Corporation (CSC) in accordance with the PSS Rules (rule 17.1.2(b)) are subject to the provisions of this Determination. Specifically, those who opt to receive a reduced pension in recognition of their release authority must have their pensions adjusted using the conversion factors specified in this Determination (rule 17.1.7). The pension reduction day, when these changes take effect, is defined in rule 17.1.9 of the PSS Rules.
Failure to comply with the requirements set out in this Determination could result in penalties or other consequences. However, the Determination itself does not explicitly state any specific offences, penalties, or civil/criminal consequences for non-compliance. It is important to note that the Determination is made under rule 17.1.8 of the PSS Rules and is a legislative instrument for the purposes of section 5 of the Legislative Instruments Act 2003 (LIA). As such, it is exempt from disallowance by item 39 of the table in subsection 44(2) of the LIA, and a Statement of Compatibility with Human Rights is not required under the Human Rights (Parliamentary Scrutiny) Act 2011.
Overall, the primary focus of this Determination is to ensure that the pension reductions for certain individuals under the PSS are calculated correctly and in accordance with the relevant tax concession changes. By setting out the specific conversion factors to be used, the Determination aims to provide clarity and consistency in the application of these reductions, thereby ensuring that the PSS remains compliant with the relevant legislative requirements.