Commonwealth of Australia Explanatory Memoranda

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SUPERANNUATION LEGISLATION AMENDMENT BILL 2002

2002

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

SUPERANNUATION LEGISLATION AMENDMENT BILL 2002

EXPLANATORY MEMORANDUM

(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)

Table of contents

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Amendments consequential on the Superannuation (Government Co-contributions for Low Income Earners) Bill 2002

This bill will amend various acts. These amendments are as a consequence of the Government Co-contribution Bill.

These amendments relate to the:

• eligibility for Government co-contributions;

• taxation treatment of Government co-contributions;

• co-contribution arrangements for certain Defence personnel and Commonwealth employees;

• review of certain decisions about the administration of the Government co-contributions;

• use of the SHAR for Government co-contributions in some circumstances; and

• interest that may be levied on late repayments of Government co-contribution overpayments.

Date of effect: This measure generally applies in relation to contributions made to complying superannuation funds and RSAs on or after 1 July 2002.

Proposal announced: The measure was foreshadowed in the Government’s policy statement A Better Superannuation System on 5 November 2001, and clarified in the Minister for Revenue and Assistant Treasurer’s Press Release No. 43 of 14 May 2002.

Financial impact: The co-contribution measure is expected to result in a budgetary cost of $85 million in 2003-2004, $90 million in 2004-2005 and $95 million in 2005-2006.

Compliance cost impact: No estimates are available. Superannuation providers affected by these amendments will be expected to change their systems to provide additional data to the Australian Taxation Office to enable the Government co-contributions to be determined without imposing additional burdens on the contributors.

Superannuation surcharge

This measure will reduce the superannuation surcharge rates by one-tenth of their current level over 3 years.

Date of effect: This measure will take effect from 1 July 2002.

Proposal announced: This measure was foreshadowed in the Government’s election policy statement A Better Superannuation System released on 5 November 2001. In line with this statement, the implementation of this measure was announced in the 2002-2003 Federal Budget.

Financial impact: This measure is expected to result in a revenue cost of $50 million in 2003-2004, $120 million in 2004-2005 and $200 million in 2005-2006;

Compliance cost impact: Some public sector superannuation schemes may have additional reporting obligations as a result of the surcharge rate reduction.

Chapter 1
Amendments consequential on the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002

Outline of chapter

1.1 Schedule 1 to this bill amends various acts. These amendments are as a consequence of the Government Co-contribution Bill.

1.2 This chapter will outline amendments related to the:

• eligibility for Government co-contributions;

• taxation treatment of Government co-contributions;

• Government co-contribution arrangements for certain Defence personnel and Commonwealth employees;

• review of certain decisions about Government co-contributions administration;

• use of the SHAR for Government co-contributions in some circumstances; and

• interest that may be levied on late repayments of Government co-contribution overpayments.

Context of amendments

1.3 This measure was foreshadowed in the Government’s policy statement A Better Superannuation System on 5 November 2001, and clarified in Minister for Revenue and Assistant Treasurer’s Press Release No. C43/02 of 14 May 2002.

1.4 Under this measure, the Government will contribute towards the superannuation savings of eligible low income earners where they make eligible personal contributions to superannuation. Those on low incomes are currently entitled to a maximum rebate of $100 (10% of contributions up to $1,000) for undeducted personal superannuation contributions. The maximum rebate applies to those on or below an income of $27,000 and tapers off for those on incomes between $27,000 and $31,000.

1.5 Under this measure, from 1 July 2002 the Government will replace this rebate with a far more generous Government co-contribution to help low income earners save for their retirement by matching the eligible personal superannuation contributions of eligible low income earners up to an annual amount of $1,000. The maximum Government co-contribution would apply to those on or below an income of $20,000 and would taper off for those on incomes between $20,000 and $32,500.

Summary of new law

1.6 This bill amends legislation to:

• assist in determining the eligibility of persons for Government co-contributions around the employer superannuation support principle;

• enable the taxation treatment of Government co-contributions to mirror that of any other undeducted superannuation contribution;

• make arrangements for certain Defence personnel and Commonwealth employees to receive Government co-contributions in their funds or schemes;

• enable persons to seek review of the information that their superannuation providers give to the Commissioner for the purposes of Government co-contributions; and,

• enable the general interest charge to be levied on late repayments of Government co-contribution overpaid amounts.

Comparison of key features of new law and current law

Detailed explanation of new law

Preliminary

1.7 This bill may be cited as the Superannuation Legislation Amendment Bill 2002.

1.8 Each Act that is specified in Schedule 1 is amended or repealed as set out in the applicable items in this schedule and any other items has effect according to its terms.

1.9 This schedule contains Part 1 (the amendments) and Part 2 (the application of amendments). The application of amendments made by Part 2 applies in relation to contributions made to complying superannuation funds and RSAs on or after 1 July 2002. [Schedule 1, Part 2, item 25]

1.10 For the Commissioner to be satisfied that a Government co-contribution is payable in respect of a person in the Government Co-contribution Bill the person must have employer superannuation support. The Government Co-contribution Bill refers to the provisions in section 82AAS of the ITAA 1936 and the definition of ‘not an eligible person’ under this provision. The previous provision meant that any type of ‘superannuation support’, for example, whether this be from a spouse, relative, friend or employer, would mean a person was not an eligible person.

1.11 The policy intention for Government co-contributions was that only those low income earners who also had employer superannuation support should receive a Government co-contribution. In order for this provision to maintain the previous subparagraphs 82AAS(2)(b)(i) and (ii) structure (to reflect the funded and unfunded scheme types), capture this new intent, and maintain a mutual exclusion between those persons who could receive a taxation deduction and those persons who may receive a Government co-contribution, it was necessary to make these amendments.

1.12 The test for ‘not an eligible person’ is now narrower and related to whether a person had received superannuation contributions (or should have received superannuation contributions) or will receive superannuation benefits out of moneys in connection with their eligible employment. Eligible employment is already defined in the existing provision at subsection 82AAS(1) and used in subsection 82AAS(3) and this continues the use of that term in relation to this new intent.

1.13 As a result, this amendment will repeal paragraph 82AAS(2)(b) and substitute it with the new provision. Therefore, the concept of an eligible person under this new provision will be broader, for example, persons who ‘only’ receive either spouse, relative or friend superannuation support, will now be entitled to a tax deduction. The previous provision would have classed these people as ‘supported’. They could therefore have received a taxation rebate (which will also be repealed by this bill). [Schedule 1, Part 1, item 1]

1.14 The amendment to subparagraph 82AAS(3)(c)(i) of the ITAA 1936 that now inserts the words ‘required to be made’, has also been made as part of the amendment to paragraph 82AAS(2)(b) [Schedule 1, Part 1, item 1]. This has been done to take account of situations where persons have an obligation to make superannuation contributions on behalf of other persons in connection with the eligible employment of those persons (e.g. superannuation guarantee for their employees). If those obligations are not met this should not affect the status of the person in relation to the eligible person test. Therefore a person who should have received contributions from their employer but did not, is not an eligible person for the purposes of the ITAA 1936. In the Government co-contributions context they can still be seen as having employer superannuation support and receive a Government co-contribution if they are otherwise entitled in the Government Co-contribution Bill. [Schedule 1, Part 1, item 2]

1.15 This amendment repeals Subdivision AAC of Division 17 of Part III of the ITAA 1936 and therefore the previously available taxation rebate for personal superannuation contributions by low income earners. The application of these amendments apply in relation to contributions made to complying superannuation funds and RSAs on or after 1 July 2002. For clarification this means that the rebate is still in force for contributions made before that date and therefore rebates that are claimed in tax returns after the day on which this bill receives Royal Assent. [Schedule 1, Part 1, item 3]

1.16 These amendments ensure that Government co-contributions paid into complying superannuation funds, RSAs and the SHAR are not treated as taxable contributions for the purposes of section 274 of the ITAA 1936. These amendments to the definition of taxable contributions also ensures that for the SCTACA 1997 and the CPF ACT 1997 that these Government co-contributions are not treated as surchargeable contributions for accumulation schemes. [Schedule 1, Part 1, items 4 to 6]

1.17 Consistent with the Government’s intention that Government co-contributions not be taxable, the amendments to sections 11-10 and 51-65 of the ITAA 1997 mean that Government co-contribution amounts that are paid to the person directly or their legal personal representatives, including amounts paid as a result of claims to the SHAR, are exempt from income tax in the ITAA 1997. According to ordinary concepts, if the amount was paid to the complying superannuation fund or RSA (and not to the person directly or their representative) then it would also not be the person’s income. [Schedule 1, Part 1, items 7 and 8]

1.18 This amendment to section 5 of the Military Superannuation Benefits Act 1991 that inserts new subsection 5(1AA) deals with the payment of Government co-contributions to Defence personnel. Of the 2 main Defence personnel schemes, the DFRDB scheme cannot accept Government co-contribution payments for their members. This amendment will allow the Minister of Defence to amend the trust deed of the MSBS to authorise the Military Superannuation Benefits Board to accept Government co-contributions for people who are not MSBS members (in this case DFRDB members) and deal with these under the deed, including:

• the manner in which to deal with these contributions;

• the benefits that will be payable as a result; and

• the circumstances in which the entitlements to receive those benefits will arise.

[Schedule 1, Part 1, item 9]

1.19 This amendment at the end of section 3 of the SSAA 1995 outlines that the accounts in the SHAR may also be used to hold Government co-contributions payable under the Government Co-contribution Bill and that the rules for these deposits differ in some respects from those that apply to other deposits into the SHAR. [Schedule 1, Part 1, item 10]

1.20 The amendments to section 4 of the SSAA 1995 insert definitions of Government co-contribution and complying superannuation fund, for the purposes of the Government co-contribution changes to the SSAA 1995. For an individual a Government co-contribution is one that is payable in respect of an individual under the Government Co-contribution Bill. Complying superannuation fund has the same meaning as it does for the Government Co-contribution Bill. [Schedule 1, Part 1, items 11 and 12]

1.21 The amendment to paragraph 16(b) of the SSAA 1995 will mean that the Commissioner may also close an individual’s account if the balance of the account is nil and the balance was withdrawn under a transfer request arising under section 61 of the SSAA 1995 or a transfer out by the Commissioner without a request under new provisions 61A or 91E of the SSAA 1995. [Schedule 1, Part 1, item 13]

1.22 The new provisions that will be located in section 61A of the SSAA 1995 will allow the Commissioner to pay the balance of an individual’s account to an RSA of an individual or to the trustee of a complying superannuation fund for the benefit of the individual without a request from the individual, that would previously have been necessary under section 61 of the SSAA 1995.

1.23 This pay out may include employer deposits and Government co-contribution deposits, and does not necessarily have to involve Government co-contribution deposits at all. This will facilitate the use of the SHAR for the Government co-contributions measure as an effective holding reserve, and the eventual intention for the Government co-contributions to benefit an individual’s retirement, rather than as previously occurred that deposits could not be transferred out without a request from an individual. Where the Commissioner pays out a balance under this new provision the SHAR is debited for that purpose and the individual’s account is debited by that amount. A definition of trustee, which has the same meaning as it does for the Government Co-contribution Bill, has also been inserted. [Schedule 1, Part 1, item 14]

1.24 A number of amendments are required to the SSAA 1995 to deal with deposits of Government co-contributions payable in respect of persons into the SHAR. For the purposes of new Part 12A (that has been created to deal with these necessary amendments) deposits will include any interest that may accrue on these deposits. [Schedule 1, Part 1, item 15]

1.25 New sections 91A, 91B and 91C mean that these Government co-contribution deposits are Part 12A deposits and not to be treated as Part 4 employer deposits unless otherwise stated. The new sections also state that only section 33 of the SSAA 1995 will apply to both Part 4 and Part 12A deposits (deposits not held on trust).

1.26 New section 91D means that the Government co-contribution deposits under Part 12A should also not be credited to the SHAR in the same way as other deposits under Part 5. The process that will be followed for these deposits is that an amount equal to the amount to be deposited will be transferred from the Consolidated Revenue Fund to the SHAR. As soon as is practicable after this, the individual’s account is to be credited with an amount equal to that deposit.

1.27 New sections 91DA and 91E allow the Commissioner to debit the accounts in the cases where an overpayment of Government co-contribution has occurred under the Government Co-contribution Bill. This may only be done if the account still holds an amount of Government co-contribution deposit, with employer deposits not to be debited for this purpose.

1.28 In respect of other withdrawals the account is not frozen for 14 days for Government co-contribution deposits as it applies for other deposits in the SHAR. In line with new section 61A and the intention for Government co-contribution payments, new subsection 91E(3) means that Government co-contribution deposits should only be transferred to complying superannuation funds or RSAs. This is despite the situation where an individual might request the amount be transferred to a regulated superannuation fund, which may be a non-complying superannuation fund. A complying superannuation fund has the same meaning as for the Government Co-contribution Bill.

1.29 As the deposits under Part 12A are ‘Government’ co-contributions the refund of deposits provisions of Part 8 of the SSAA 1995 are not necessary for Government co-contribution deposits.

1.30 The amendments proposed for section 130A and subsection 130B(1) of the SA 1976 deal with the acceptance of Government co-contribution payments in relation to employees who are members of the CSS. It will do this by redefining a transferred amount to now include an amount payable in respect of the person under the Government Co-contribution Bill. After subsection 130B(1) new subsection (1A) will be inserted that allows the Commissioner to pay to the CSS Board an amount payable in respect of a person under the Government Co-contribution Bill. These amendments commence on a day which is the later of:

• the day on which this bill receives Royal Assent; and

• immediately after the commencement of item 48 of Schedule 1 to the Superannuation Legislation (Commonwealth Employment) Repeal and Amendment Act 2002.

[Schedule 1, Part 1, items 16 and 17]

1.31 The amendments to paragraphs 8(5)(a) and (b) of the SCTACA 1997, and paragraphs 9(6)(a) and (b) of the CPF ACT 1997, will make it clear that surchargeable contributions for the purposes of a defined benefit scheme do not include Government co-contribution paid under the Government Co-contribution Bill. [Schedule 1, Part 1, items 18 to 21]

1.32 The amendments to paragraph 15CA(1)(b) and subsection 15CA(2) of the Superannuation (Resolution of Complaints) Act 1993 will allow persons to make a complaint to the SCT if they are persons to whom the superannuation providers have provided statements to the Commissioner under section 26 of the Government Co-contribution Bill. This means that similar review processes for disputes about contribution information will apply for the surcharge and Government co-contributions measures, and this is consistent with the use of the same reporting mechanism likely to be adopted by the Commissioner. [Schedule 1, Part 1, items 22 and 23]

1.33 This amendment to section 23 of the Taxation Administration Act 1953 will allow the Commissioner to impose the general interest charge for the late payment of repayment of overpaid amounts by persons under section 25 of the Government Co-contribution Bill. [Schedule 1, Part 1, item 24]

Chapter 2
Reduction of the superannuation surcharge

Outline of chapter

2.1 Part 1 of Schedule 2 to this bill will amend the SCT Imposition Act 1997, the CPF Imposition Act 1997 and the TPT Imposition Act 1997 to reduce the superannuation contributions and the termination payments surcharge rates by 1/10^th of their current levels in each of the 3 income years commencing from 1 July 2002.

2.2 Part 2 of Schedule 2 to this bill will amend the provisions which impose a limit on the maximum amount of surcharge payable by members of CPFs and the maximum reduction of benefits of members of certain unfunded defined benefits superannuation schemes. These limits reflect the current maximum surcharge rates, which will be reduced under this measure.

2.3 Part 3 of Schedule 2 to this bill sets out the application of the amendments in Parts 1 and 2.

Context of amendments

2.4 On 5 November 2001, in the election policy document A Better Superannuation System, the Government foreshadowed a number of measures designed to enhance the overall attractiveness, accessibility and security of superannuation.

2.5 In line with the foreshadowed measures, the Government announced in the 2002-2003 Federal Budget the implementation of the commitment to reduce the superannuation and termination payments surcharge rates by 1/10^th of their current levels for the next 3 income years commencing from 1 July 2002. As a consequence, the maximum surcharge rates will be reduced to 13.5% for 2002-2003, 12% for 2003-2004 and 10.5% for 2004-2005.

2.6 The reduction in the surcharge rates is intended to ensure that superannuation remains attractive and encourages all employees to save for their retirement. The amendments in this Schedule will have a beneficial impact on people whose superannuation contributions are subject to the surcharge.

2.7 A related issue arising from the reduction of the surcharge rates is the consequences for the limits that apply to the amount of surcharge payable by members of CPFs and the amount of reduction of benefits for members of certain unfunded defined benefits superannuation schemes. The limits reflect the current maximum surcharge rates which will be reduced under this measure.

Summary of new law

2.8 The maximum surcharge rates and the method of calculating rates within the upper and lower thresholds will be amended so that all rates will be reduced by 1/10^th of their current levels for each of the next 3 income years commencing on 1 July 2002.

2.9 Where a limit of 15% applies in relation to the surcharge liability of members of CPFs and the reduction of benefits of members of certain unfunded defined benefits superannuation schemes, the limit will be amended to reflect the reducing maximum surcharge rates.

Comparison of key features of new law and current law

Detailed explanation of new law

Reduction in the surcharge rates

2.10 The superannuation contributions surcharge is determined under the SCT Imposition Act 1997 in relation to superannuation contributions other than contributions to CPFs. Superannuation contributions surcharge in relation to contributions to CPFs is determined under the CPF Imposition Act 1997. The termination payments surcharge is determined under the TPT Imposition Act 1997.

Application of maximum surcharge rate

2.11 Subsection 5(2) of the SCT Imposition Act 1997, subsection 5(3) of the CPF Imposition Act 1997 and subsection 5(2) of the TPT Imposition Act 1997 provide that the maximum surcharge rate of 15% applies where a member’s ‘adjusted taxable income’ for a financial year is $85,000 (as indexed) or a higher amount. ‘Adjusted taxable income’ is determined under section 7A or 7B of the SCTACA 1997. In general terms, the Commissioner determines a person’s ‘adjusted taxable income’ by adding to a person’s taxable income, surchargeable superannuation contributions and reportable fringe benefits.

2.12 Under paragraphs 5(3)(c), (d) and (f) of the SCT Imposition Act 1997 and paragraphs 5(4)(c), (d) and (f) of the CPF Imposition Act 1997, in certain circumstances where a member’s tax file number is not known, a 15% surcharge rate may apply in relation to the superannuation contributions of the member.

2.13 The references to ‘15%’ in the SCT Imposition Act 1997, the CPF Imposition Act 1997 and the TPT Imposition Act 1997 reflect current maximum surcharge rates which will be reduced over the 3 income years commencing from 1 July 2002. The references to ‘15%’ will be replaced by the term ‘maximum surcharge percentage’, which will be defined as:

(a) for the 2002-2003 financial year – 13.5%;

(b) for the 2003-2004 financial year – 12%; and

(c) for each later financial year – 10.5%.

[Schedule 2, Part 1, items 1, 5, 6, 9, 13, 14, 17 and 21]

Formulae to calculate surcharge rates

2.14 In addition to reducing the maximum surcharge rates by 1/10^th of their current levels for each of the 3 income years commencing from 1 July 2002, each formula for determining the applicable rate between the lower and upper surcharge thresholds will be replaced with a new formula.

2.15 Subsection 5(1) of the SCT Imposition Act 1997, the CPF Imposition Act 1997 and the TPT Imposition Act 1997 will be amended to insert new formulae to calculate surcharge rates so that the rate calculated will be 1/10^th of their current levels for each of the 3 income years from 1 July 2002. [Schedule 2, Part 1, items 3, 11 and 19]

2.16 Definitions of the terms ‘higher income amount’ and ‘lower income amount’ will be included in the SCT Imposition Act 1997. ‘Higher income amount’ is defined as $103,507 for the 2001-2002 financial year and that amount as indexed for later financial years. ‘Lower income amount’ is defined as $85,242 for the 2001-2002 financial year, and that amount as indexed for later financial years. [Schedule 2, Part 1, items 1, 9 and 17]

2.17 The terms ‘higher income amount’ and ‘lower income amount’ are used in the new formulae and also replace references in the Acts to the original threshold amounts of $70,000 and $85,000. [Schedule 2, Part 1, items 2, 4, 10, 12, 18 and 20]

2.18 For the 2002-2003 financial year and later financial years the higher and lower income amounts will be indexed in line with average weekly ordinary time earnings under the indexation provisions. These provisions are section 7 of the SCT Imposition Act 1997, section 7 of the CPF Imposition Act 1997 and section 6 of the TPT Imposition Act 1997. [Schedule 2, Part 1, items 7, 8, 15, 16, 22 and 23]

Reduction of the surcharge cap, etc.

2.19 The CPF Act 1997 imposes superannuation contributions surcharge on members of CPFs. Surcharge assessed each year for each CPF member, plus interest, accumulates in a ‘surcharge debt account’ maintained by the Commissioner. Under subsections 15(6), 15(6A) (inserted by TLAA5 2001) and 15(6A) (included in the Family Law Amendment Act 2001) of the CPF Act 1997 when a benefit becomes payable to a CPF member or when a CPF ceases to be a CPF, the CPF member is liable to pay the surcharge. CPF members’ surcharge liability is the lesser of the amount by which their surcharge debt account is in debit or 15% of the employer-financed component of that part of the benefits payable to the member that accrued after 20 August 1996.

2.20 The references to ‘15%’ in subsection 15(6) and both of the subsections 15(6A) of the CPF Act 1997 reflect the current maximum surcharge rates. As a result of the proposed reduction in the surcharge rates over each of the 3 income years commencing from 1 July 2002, the references to ‘15%’ will be amended to reflect the proposed reduction in the maximum surcharge rates. Subsection 15(6A) inserted into the CPF Act 1997 by the Family Law Amendment Act 2001, which has not yet commenced, applies where a superannuation interest in a CPF has been split and subsequently becomes payable. Schedule 6 to the Taxation Laws Amendment (Superannuation) Bill (No. 2) 2002 will rename subsection 15(6A) as subsection (15(6AA). [Schedule 2, Part 2, items 29 to 31]

2.21 The Cth Reduction Act 1997 allows trustees of certain unfunded defined benefit superannuation schemes to reduce the benefits payable to members of such funds by no more than 15% of the employer financed component of that part of the benefits payable to the member that accrued after 20 August 1996. The reference to 15% in subsection 4(1) of the Cth Reduction Act 1997 reflects the current maximum surcharge rate and will be amended to reflect the proposed reduction in the maximum rates over each of the 3 income years commencing from 1 July 2002. [Schedule 2, Part 2, items 27 and 28]

2.22 The SA 1976 provides for an occupational superannuation scheme, known as the CSS, for people employed by the Commonwealth and for certain other people. The payment of the surcharge liability in respect of CSS members’ surchargeable contributions is deferred until a benefit is paid. When a benefit becomes payable, the CSS Board is liable to pay the deferred surcharge liability plus accumulated interest.

2.23 Under subsection 80A(3) of the SA 1976 the CSS Board may not reduce the benefits of a member by more than 15% of the employer financed component of that part of the benefits payable to the member that accrued after 20 August 1996. The reference to ‘15%’ reflects the current maximum surcharge rate and will be amended to reflect the proposed reduction in the maximum rates over each of the 3 income years commencing from 1 July 2002. [Schedule 2, Part 2, item 26]

2.24 The Parliamentary Contributory Act 1948 provides for an occupational superannuation scheme for Commonwealth Members of Parliament. The payment of the surcharge liability in respect of surchargeable contributions of Members of Parliament is deferred until a benefit is paid. When a benefit becomes payable the Parliamentary Retiring Allowances Trust is liable to pay the deferred surcharge liability plus accumulated interest.

2.25 Under subsection 4E(3) of the Parliamentary Contributory Act 1948 the Parliamentary Retiring Allowances Trust may not reduce the benefits of a member by more than 15% of the employer financed component of that part of the benefits payable to the member that accrued after 20 August 1996. The reference to ‘15%’ reflects the current maximum surcharge rates and will be amended to reflect the reduction in the maximum rates over each of the 3 income years commencing from 1 July 2002. [Schedule 2, Part 2, item 25]

2.26 The Defence Force Retirement and Death Benefits Act 1973 generally provides for the payment of retirement benefits to certain defence force employees. The payment of the surcharge liability in respect of such employees’ superannuation contributions is deferred until a benefit is paid. When a benefit becomes payable the trustee of the fund is liable to pay the deferred surcharge liability plus accumulated interest.

2.27 Under subsection 6C(3) of the Defence Force Retirement and Death Benefits Act 1973 the trustee may not reduce the benefits of a member by more than 15% of the employer financed component of that part of the benefits payable to the member that accrued after 20 August 1996. The reference to ‘15%’ reflects the current maximum surcharge rates and will be amended to reflect the proposed reduction in the maximum rates over each of the 3 income years commencing from 1 July 2002. [Schedule 2, Part 2, item 24]

Application and transitional provisions

2.28 The measure to reduce the surcharge rates will apply in relation to surcharge liability arising in respect of the 2002-2003 financial year and later financial years. [Schedule 2, Part 3, item 32]

2.29 The amendments to reduce the limit applying to CPF members (other than where a CPF ceases to be a CPF) and certain unfunded defined benefit superannuation schemes will apply to benefits that become payable on or after 1 July 2002. Where a CPF ceases to be a CPF and a member becomes liable to pay the surcharge, the amendments will apply where a CPF ceases to be a CPF after 1 July 2002. Where a superannuation interest in a CPF has been split and subsequently becomes payable, the amendment to reduce the limit applying to CPF members will apply to the payment of benefits after the commencement of the Family Law Amendment Act 2001. [Schedule 2, Part 3, items 33 to 35]

Consequential amendments

2.30 There are no consequential amendments relating to this measure.

Index

Schedule 1: Amendments consequential on the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002

Schedule 2: Superannuation surcharge

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