OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1992 NO. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1992 NO. 463 - TABLE OF PROVISIONS 1. Amendment 2. Regulation 3 (Interpretation) 3. New regulations 3E, 3F and 3G 4. Regulation 4A (Interpretation) 5. New regulation 4UA 6. Regulation 4ZB (Reasonable benefit limit where recipient member of certain fund on 15 August 1989) 7. Regulation 4ZC (Pension and annuity standards) 8. 8 Regulation 5AA (Standards: acceptance of contributions by superannuation funds) 9. 9 New Schedule 1A 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 1 1. Amendment 1.1 The Occupational Superannuation Standards Regulations are amended as set out in these Regulations. (NOTE: These Regulations commence on gazettal: see Acts Interpretation Act 1901, s. 48.) 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 2 2. Regulation 3 (Interpretation) 2.1 Subregulation 3 (1): Insert: "'benefit' means a superannuation pension or an annuity, or a payment under a superannuation pension or annuity, as the case requires, and, in Part 1A, includes an ETP; 'commencement day', in relation to a superannuation pension or an annuity, means the first day of the period to which the first payment of the pension or annuity relates; 'CPI' means the consumer price index (all capital cities) published by the Australian Statistician; 'ETP' means an eligible termination payment; 'rules', in relation to a superannuation fund, means a trust instrument, other document or legislation, or any combination of those things, governing the establishment and operation of the fund;". 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 3 3. New regulations 3E, 3F and 3G 3.1 After regulation 3D, insert: Meaning of "annuity"-subsection 3 (1) of Act "3E. (1) A benefit provided by a life assurance company or a registered organisation is taken to be an annuity for the purposes of the Act if it is a benefit that arises under a contract that meets the standards of subregulation (2), (4), (6), (7) or (8). "(2) A contract for the provision of a benefit (in this subregulation called 'the annuity') meets the standards of this subregulation if it contains provisions that ensure: (a) that the annuity is paid at least annually throughout the life of the primary beneficiary in accordance with paragraphs (b) and (c) and, if there is a reversionary beneficiary: (i) throughout the reversionary beneficiary's life; or (ii) if he or she is a child of the primary beneficiary or of a former reversionary beneficiary under the annuity-at least until his or her 16th birthday; or (iii) if the person referred to in subparagraph (ii) is a full-time student at age 16-at least until the end of his or her full-time studies or until his or her 25th birthday (whichever occurs sooner); and (b) that the size of the payments of benefit in a year is fixed, allowing for variation only as specified in the contract; and (c) that, unless the Commissioner otherwise approves, the sum payable as benefit to the primary beneficiary or to the reversionary beneficiary, as the case may be, increases year by year by at least the lesser of: (i) 5%; or (ii) a rate equal to the rate of increase (if any) determined by comparing the quarterly CPI first published by the Australian Statistician for the second-last quarter preceding the date on which the payment is to be made with the quarterly CPI first published by the Australian Statistician for that quarter in the preceding year; and (d) the amount paid as the purchase price is wholly converted into annuity income; and (e) that the annuity does not have a residual capital value; and (f) that the annuity cannot be commuted except: (i) if the commutation is made within 6 months after the commencement day of the annuity; or (ii) if the commutation is made within 10 years after the commencement day of the annuity to the benefit of a reversionary beneficiary on the death of the primary beneficiary; or (iii) if section 15S of the Act applies-in accordance with the section; or (iv) if the ETP resulting from the commutation is transferred directly to the purchase of another benefit provided under a contract that meets the standards of this subregulation or subregulation (3) or provided under rules that meet the standards of subregulation 3f (2) or (3); and (g) that if the annuity reverts or is commuted, it does not have a reversionary component greater than 100% of the benefit that was payable before the reversion or the commutation; and (h) that the annuity cannot be transferred to a person other than a reversionary beneficiary on the death of the primary beneficiary or of another reversionary beneficiary; and (i) that the capital value of the annuity, and the income from it, cannot be used as security for a borrowing. "(3) An annuity is not taken not to meet the standards in subregulation (2) for the reason only that, although making provision meeting the standards of that subregulation, it additionally provides that: (a) if the primary beneficiary dies within 10 years after the commencement day of the annuity, a surviving reversionary beneficiary may obtain a payment equal to the total payments that the primary beneficiary would have received, if the primary beneficiary had not died, from the day of the death until the end of the period of 10 years; and (b) if the primary beneficiary dies within 10 years after the commencement day of the annuity and there is no surviving reversionary beneficiary, an amount, not exceeding the difference between the sum of the amounts paid to the primary beneficiary and the sum of the amounts that would have been so payable in the period of 10 years, is payable to the primary beneficiary's estate; and (c) if the primary beneficiary dies within 10 years after the commencement day of the annuity and there is a surviving reversionary beneficiary who also dies within that period, there is payable to the reversionary beneficiary's estate an amount determined as described in paragraph (b) as if that paragraph applied to the reversionary beneficiary. "(4) A contract for the provision of a benefit (in this subregulation called 'the annuity'): (a) that does not meet the standards in subregulation (2); and (b) that does not fix the size of payments of benefit in a year; and (c) under which the commencement day is on or after the commencement of section 76 of the Taxation Laws Amendment (Superannuation) Act 1992; meets the standards of this subregulation if the contract contains provisions that at least ensure that: (d) the standards in paragraphs (2) (h) and (i) are met; and (e) payments are made at least annually; and (f) the payments in a year, except a payment by way of commutation, are not larger or smaller in total than, respectively, the maximum and minimum limits calculated in accordance with Schedule 1A. (NOTE: The Taxation Laws Amendment (Superannuation) Act 1992 commenced on 21 December 1992) "(5) An annuity is not taken not to meet the standards in subregulation (4) for the reason only: (a) that: (i) the commencement day of the annuity occurs on or after 1 April in a financial year; and (ii) the contract does not ensure that payments in that financial year meet the standard in that subregulation for the minimum amount; or (b) that the contract does not ensure that the payments in the year in which the annuity is to end meet the standard in that subregulation for the minimum amount. "(6) A contract for the provision of a benefit (in this subregulation called 'the annuity'): (a) that does not meet the standards of subregulation (2); and (b) that fixes the size of the payments of benefit in a year, allowing for variation only as specified in the contract; and (c) under which the commencement day is on or after 1 July 1994; meets the standards of this subregulation if the contract contains provisions that at least ensure that: (d) the standards in paragraphs (2) (g), (h) and (i) are met; and (e) variation in payments from year to year does not exceed, in any year, the average rate of increase of the CPI in the preceding 3 years; and (f) payments in accordance with paragraph (b) are made at least annually; and (g) the amount paid as the purchase price is wholly converted into annuity income. "(7) A contract for the provision of a benefit (in this subregulation called 'the annuity') that: (a) does not meet the standards of subregulation (2); and (b) provides for payments whose size in a year is fixed, allowing for variation only as specified in the contract; and (c) provides for additional payments (in this subregulation called 'bonus payments'); (d) the commencement day of which is on or after 1 July 1994; meets the standards of this subregulation if the contract contains provisions at least ensuring that: (e) in respect of the fixed-size payments-the standards in subregulation (6) are met; and (f) the fixed-size payments amount to at least 50% of: (i) if the provider provides annuities of the kind specified in subregulation (6)-the amount that would be payable if the annuity were wholly of that kind; or (ii) if the provider does not provide annuities of the kind specified in subregulation (6)-the fixed-size payments are at least equal in amount to 50% of the interest payable on Commonwealth bonds that have the same value as the purchase price of the annuity and that most closely correspond in term to the term of the annuity; and (g) the amounts of the bonus payments (if any) are reasonably proportional to the investment income from which the payments purport to be derived; and (h) the amount of a bonus payment (if any) is notified in writing by the provider each year and is paid to the beneficiary in the year next following (except when deferral of the payment would not result, in any future year, in the rate of increase in size of the total payments for the year exceeding the average rate of increase of the CPI in the preceding 3 years). "(8) A contract for the provision of a benefit (in this subregulation called 'the annuity'): (a) that does not meet all the standards in any other provision of this regulation; and (b) under which the commencement day is on or after the commencement of section 76 of the Taxation Laws Amendment (Superannuation) Act 1992; and (c) that provides for: (i) payments whose size in a year is fixed, allowing for variation only as specified in the contract; and (ii) additional payments whose size is not fixed, derived from the application of part of the purchase price to investments by allocation of the annuity provider; meets the standards of this subregulation if the contract contains provisions that at least ensure that: (d) in respect of fixed-size payments-if the commencement day is on or after 1 July 1994, the standards in subregulation (6) are met; and (e) in respect of payments whose size is not fixed-the standards in subregulation (4) are met. (NOTE: The Taxation Laws Amendment (Superannuation) Act 1992 commenced on 22 December 1992) Meaning of "pension"-subsection 3 (1) of Act "3F. (1) A benefit is taken to be a pension for the purposes of the Act if it is a benefit that is provided under rules of a superannuation fund that meet the standards of subregulation (2), (4) or (6). "(2) Rules meets the standards of this subregulation if they contain provisions that ensure: (a) that the pension is paid at least annually throughout the life of the primary beneficiary in accordance with paragraphs (b) and (c) and, if there is a reversionary beneficiary: (i) throughout the reversionary beneficiary's life; or (ii) if he or she is a child of the primary beneficiary or of a former reversionary beneficiary under the pension-at least until his or her 16th birthday; or (iii) if the person referred to in subparagraph (ii) is a full-time student at age 16-at least until the end of his or her full-time studies or until his or her 25th birthday (whichever occurs sooner); and (b) that the size of the payments of benefit in a year is fixed, allowing for variation only as specified in the rules; and (c) that, unless the Commissioner otherwise approves, the sum payable as benefit to the primary beneficiary or to the reversionary beneficiary, as the case may be, increases year by year by at least the lesser of: (i) 5%; or (ii) a rate equal to the rate of increase (if any) determined by comparing the quarterly CPI first published by the Australian Statistician for the second-last quarter preceding the date on which payment is to be made with the quarterly CPI first published by the Australian Statistician for that quarter in the preceding year; and (d) that the pension does not have a residual capital value; and (e) that the pension cannot be commuted except: (i) if the commutation is made within 6 months after the commencement day of the pension; or (ii) if the commutation is made within 10 years after the commencement day of the pension to the benefit of a reversionary beneficiary on the death of the primary beneficiary; or (iii) if section 15S of the Act applies-in accordance with the section; and (iv) if the ETP resulting from the commutation is transferred directly to the purchase of another benefit provided under rules that meet the standards of this subregulation or subregulation (3) or provided under a contract that meets the standards of subregulation 3e (2) or (3); and (f) that, if the pension reverts or is commuted, it does not have a reversionary component greater than 100% of the benefit that was payable before the reversion or the commutation; and (g) that the pension is not able to be transferred to a person other than a reversionary beneficiary on the death of the primary beneficiary or of another reversionary beneficiary; and (h) that the capital value of the pension and the income from it, cannot be used as security for a borrowing. "(3) Rules are not taken not to meet the standards in subregulation (2) for the reason only that, although making provision meeting the standards of that subregulation, they additionally provide that: (a) if the primary beneficiary dies within 10 years after the commencement day of the pension, a surviving reversionary beneficiary may obtain a payment equal to the total payments that the primary beneficiary would have received, if the primary beneficiary had not died, from the day of the death until the end of the period of 10 years; and (b) if the primary beneficiary dies within 10 years after the commencement day of the pension and there is no surviving reversionary beneficiary, an amount, not exceeding the difference between the sum of the amounts paid to the primary beneficiary and the sum of the amounts that would have been so payable in the period of 10 years, is payable to the primary beneficiary's estate; and (c) if the primary beneficiary dies within 10 years after the commencement day of the pension and there is a surviving reversionary beneficiary who also dies within that period, there is payable to the reversionary beneficiary's estate an amount determined as described in paragraph (b) as if that paragraph applied to the reversionary beneficiary. "(4) Rules: (a) that do not meet the standards in subregulation (2); and (b) that do not fix the size of payments of benefit in a year; and meet the standards of this subregulation if they contain provisions that at least ensure that: (c) the standards in paragraphs (2) (g) and (h) are met; and (d) payments are made at least annually; and (e) on and after the commencement of section 76 of the Taxation Laws Amendment (Superannuation) Act 1992-the payments in a year, except a payment by way of commutation, are not larger or smaller in total than, respectively, the maximum and minimum limits calculated in accordance with Schedule 1A. (NOTE: The Taxation Laws Amendment (Superannuation) Act 1992 commenced on 22 December 1992) "(5) Rules are not taken not to meet the standards in subregulation (4) for the reason only: (a) that: (i) the commencement day of the pension occurs on or after 1 April in a financial year; and (ii) the rules do not provide for the payment of an amount in that financial year that meets the standard for the minimum amount in that subregulation; or (b) that the rules do not ensure that the payments in the year in which the pension is to end meet the standard for the minimum amount in that subregulation. "(6) Rules: (a) that do not meet the standards in subregulation (2); and (b) that provide that the size of the payments of benefit in a year is fixed, allowing for variation only as specified in the rules; and (c) under which the commencement day is on or after 30 June 1994; meet the standards in this subregulation if they at least ensure that: (d) the standards in paragraphs (2) (f), (g) and (h) are met; and (e) variation in payments from year to year does not exceed, in any year, the average rate of increase of the CPI in the preceding 3 years; and (f) payments in accordance with the contracted size are made at least annually; and (g) if, under the rules, the pension can be commuted-the conversion to a lump sum is limited to a sum that is not greater than the sum determined by applying the appropriate pension valuation factor under Schedule 3 to the pension as if the commencement day were the day on which the commutation occurs. Periods when beneficiary may not receive benefits "3G. A benefit is not taken not to meet the standards in regulation 3E or 3F by reason only that payments of benefit to the beneficiary have been properly suspended during a period when the beneficiary is the holder of a paid public office.". 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 4 4. Regulation 4A (Interpretation) 4.1 Subregulation 4a (1) (definition of "benefit"): Omit the definition. 4.2 Subregulation 4A (1) (definition of "commencement day"): Omit the definition. 4.3 Subregulation 4A (1) (definition of "ETP"): Omit the definition. 4.4 Subregulation 4A (1) (definition of "pension and annuity standards"): Omit the definition, substitute: "'pension and annuity standards' means: (a) in relation to annuities-the standards of subregulation 3E (2); or (a) in relation to pensions-the standards of subregulation 3F (2);". 4.5 Subregulation 4A (1) (definition of "rules"): Omit the definition. 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 5 5. New regulation 4UA 5.1 After regulation 4U, insert: Amount of ETP paid out of employee share participation scheme that counts towards RBL "4UA. (1) If an ETP is paid to an employee out of a trust scheme of a kind that is generally known as an 'employee share participation scheme', the amount that is counted towards the reasonable benefit limits of the employee is: (a) if the employee is an associate of the employer-the sum of: (i) 100% of the pre-July 83 component of the payment; and (ii) 85% of the post-June 83 component of the payment; or (b) if the employee is not an associate of the employer-85% of the part of the post-June 83 component of the payment that is calculated under the following table: Financial year, or other % of post-June 83 period, in which payment is component to be counted made 24 December 1991 to 20% 30 June 1993 1993/94 40% 1994/95 60% 1995/96 80% 1996/97 100% "(2) In this regulation: 'employee' includes: (a) in relation to a body corporate-a director or other officer, however described, of the body; and (b) a person engaged under a contract for services.". 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 6 6. Regulation 4ZB (Reasonable benefit limit where recipient member of certain fund on 15 August 1989) 6.1 Subparagraph 4ZB (2) (a) (ii): Omit the subparagraph, substitute: "(ii) is payable under rules that meet the standards of subregulation 3F (2);". 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 7 7. Regulation 4ZC (Pension and annuity standards) 7.1 Omit the regulation. 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 8 8 Regulation 5AA (Standards: acceptance of contributions by superannuation funds) 8.1 Add at the end: "(4) In this regulation, 'contribution' does not include a payment of the kind referred to in paragraph (b) of the definition of 'transferred retiree member' in subsection 3 (1) of the Act.". 1992 No. 463 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 9 9 New Schedule 1A 9.1 After Schedule 1, insert: SCHEDULE 1A Subregulations 3E (4) and 3F (4) PAYMENT LIMITS 1. Subject to clauses 3 and 4, the maximum limits mentioned in paragraph 3E (4) (f) or 3F (4) (f) are determined under the formula: AB PVF where: 'AB' means the amount of the annuity account balance, or pension account balance, as the case requires: (a) on 1 July in the financial year in which the payments are made; or (b) if that year is the year in which the annuity payments, or pension payments, commence-on the commencement day; and 'PVF' means the maximum pension valuation factor set out in Column 3 in Schedule 1A in relation to the item in the Schedule that represents the age of the beneficiary on: (a) 1 July in the financial year in which the payments are made; or (b) if that is the year in which the annuity payments, or pension =x payments, commence-the commencement day. 2. Subject to clauses 3 and 4, the minimum limits mentioned in paragraph 3E (4) (f) or 3F (4) (f) are determined under the formula: AB PVF where: 'AB' means the amount of the annuity account balance, or pension account balance, as the case requires: (a) on 1 July in the financial year in which the payments are made; or (b) if that year is the year in which the annuity payments, or pension payments, commence-on the commencement day; and 'PVF' means the minimum pension valuation factor set out in Column 4 in Schedule 1A in relation to the item in the Schedule that represents the age of the beneficiary on: (a) 1 July in the financial year in which the payments are made; or (b) if that is the year in which the annuity payments, or pension payments, commence-the commencement day. 3. For a calculation of the maximum or minimum limit in the year in which the commencement day of the pension or annuity occurs if that day is a day other than 1 July, the appropriate value set out in Column 3 or Column 4 must be applied proportionally to the number of days in the financial year that include and follow the commencement day. 4. An amount determined under the formula that is not evenly divisible by 10 is to be rounded to the nearest amount that is so divisible. Column 1 Column 2 Column 3 Column 4 Item Age of Maximum Pension Minimum Pension Beneficiary Valuation Factor Valuation Factor 1 20 or less 10 28.6 2 21 10 28.5 3 22 10 28.3 4 23 10 28.1 5 24 10 28.0 6 25 10 27.8 7 26 10 27.6 8 27 10 27.5 9 28 10 27.3 10 29 10 27.1 11 30 10 26.9 12 31 10 26.7 13 32 10 26.5 14 33 10 26.3 15 34 10 26.0 16 35 10 25.8 17 36 10 25.6 18 37 10 25.3 19 38 10 25.1 20 39 10 24.8 21 40 10 24.6 22 41 10 24.3 23 42 10 24.0 24 43 10 23.7 25 44 10 23.4 26 45 10 23.1 27 46 10 22.8 28 47 10 22.5 29 48 10 22.2 30 49 10 21.9 31 50 9.9 21.5 32 51 9.9 21.2 33 52 9.8 20.9 34 53 9.7 20.5 35 54 9.7 20.1 36 55 9.6 19.8 37 56 9.5 19.4 38 57 9.4 19.0 39 58 9.3 18.6 40 59 9.1 18.2 41 60 9.0 17.8 42 61 8.9 17.4 43 62 8.7 17.0 44 63 8.5 16.6 45 64 8.3 16.2 46 65 8.1 15.7 47 66 7.9 15.3 48 67 7.6 14.9 49 68 7.3 14.4 50 69 7.0 14.0 51 70 6.6 13.5 52 71 6.2 13.1 53 72 5.8 12.6 54 73 5.4 12.2 55 74 4.8 11.7 56 75 4.3 11.3 57 76 3.7 10.8 58 77 3.0 10.4 59 78 2.2 10.0 60 79 1.4 9.5 61 80 0 9.1 62 81 0 8.7 63 82 0 8.3 64 83 0 7.9 65 84 0 7.5 66 85 0 7.1 67 86 0 6.8 68 87 0 6.4 69 88 0 6.1 70 89 0 5.8 71 90 0 5.5 72 91 0 5.3 73 92 0 5.0 74 93 0 4.8 75 94 0 4.6 76 95 0 4.4 77 96 0 4.2 78 97 0 4.0 79 98 0 3.8 80 99 0 3.7 81 100 or more 0 3.5 EXAMPLE Ms Johnson, who turns 60 on 5 September 1993, invests $100,000 in an allocated pension fund on 1 October 1993. The date of the first payment to Ms Johnson is 1 January 1994. Assume a fund earning rate of 7%. 1993/94: The maximum and minimum payments for 1993/94 are based on: (a) the account balance on the day of purchase; and (b) the beneficiary's age of 60 on the day of purchase: $100,000 x 273 = $8,310.50 (maximum limit, rounded to $8,310) 9.0 365 $100,000 x 273 = $4,201.93 (minimum limit, rounded to $4,200) 17.8 365 Assume total payments to Ms Johnson at 30 June 1994 are $6,000. 1994/95: The maximum and minimum payments for the year 1994/95 are based on: (a) the account balance on 1 July 1994 which is $99,145 (residue $94,000 + interest of $5,145); and (b) the beneficiary's age of 60 on 1 July 1994: $99145 = $11,016.11 (maximum limit, rounded to $11,020) 9.0 $99145 = $5,569.94 (minimum limit, rounded to $5,570) 17.8 - NOTES 1992 NO. 463*1* OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS*2* (AMENDMENT) *1* Notified in the Commonwealth of Australia Gazette on 24 December 1992. *2* Statutory Rules 1987 No. 322 as amended by 1988 No. 255 (as amended by 1989 No. 281); 1989 Nos. 24, 281 and 356; 1990 Nos. 149, 150, 185, 202 and 275; 1991 Nos. 16, 58, 148, 150, 155 and 458; 1992 Nos. 192, 218, 223, 224 and 387.