Superannuation Legislation Amendment (Post-retirement Commutations) Act 2001

No. 98, 2001

An Act to amend various Acts relating to superannuation, and for other purposes

Contents

1 Short title 2

2 Commencement 2

3 Schedule(s) 2

Schedule 1—Amendment of the Parliamentary Contributory Superannuation Act 1948 3

Schedule 2—Amendment of the Superannuation Act 1976 18

Schedule 3—Amendment of the Superannuation Act 1990 32

Superannuation Legislation Amendment (Post-retirement Commutations) Act 2001

No. 98, 2001

[Assented to 22 August 2001]

The Parliament of Australia enacts:
1 Short title

This Act may be cited as the Superannuation Legislation Amendment (Post-retirement Commutations) Act 2001.
2 Commencement

This Act commences on the day on which it receives the Royal Assent.
3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Amendment of the Parliamentary Contributory Superannuation Act 1948

1 Subsection 4(1)

Insert:

assessment has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

2 Subsection 4(1)

Insert:

surcharge has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

3 Subsection 4(1)

Insert:

surchargeable contributions means surchargeable contributions (within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997) that are attributable to the operation of this Act.

4 After subsection 18(1)

Insert:

(1AA) For the purposes of this section, the most recent benefit start-up time is the time when a benefit becomes payable to the person (ignoring any application of subsection (8A) or (8AC)).

5 Subsections 18(1A) and (1B)

Omit “subsection (8A)”, substitute “subsections (8A) and (8AC)”.

6 Subsections 18(2) and (2AA)

Omit “(8A)”, substitute “(8A), (8AC)”.

7 Paragraph 18(8A)(a)

Omit “when a benefit becomes payable to the person”, substitute “at the most recent benefit start-up time”.

8 Subsection 18(8A)

After “instead of the retiring allowance referred to in paragraph (b)”, insert “, and for so long as the person does not make an election under subsection 18A(1) after the most recent benefit start-up time”.

9 Subsection 18(8A) (definition of basic rate)

Repeal the definition, substitute:

basic rate means the rate at which, at the most recent benefit start-up time, the retiring allowance referred to in paragraph (b) would have been payable to the person if this subsection did not apply to the person.

10 Subsection 18(8A) (definition of percentage)

Omit “would be” (wherever occurring), substitute “would have been, at the most recent benefit start-up time,”.

11 Subsection 18(8A) (definition of surcharge adjustment)

Repeal the definition, substitute:

surcharge adjustment means the total of the person’s notional adjustment debits arising under any or all of the following provisions at or before the most recent benefit start-up time:

(a) subsection (8AA);

(b) subsection (8AB);

(c) subsection 18A(6).

12 After subsection 18(8A)

Insert:

(8AA) If:

(a) a person’s surcharge debt account is in debit at the most recent benefit start-up time; and

(b) apart from subsection (8A), the person would be entitled to a retiring allowance under subsection (1A) or (1B) or paragraph (2)(a) or (aa) or (2AA)(a), (b), (c) or (d);

there is taken to have arisen at the most recent benefit start-up time a notional adjustment debit of the person equal to the amount worked out using the following formula:

where:

conversion factor means the factor applicable to the person under the determination made by the Trust under section 22A.

surcharge deduction amount means the person’s surcharge deduction amount.

(8AB) If:

(a) at the time this subsection commences (the commencement time), a person is entitled to a retiring allowance under subsection (8A); and

(b) that retiring allowance was calculated by reference to a particular surcharge adjustment within the meaning of that subsection as in force before the commencement time;

there is taken to have arisen at the commencement time a notional adjustment debit of the person equal to that surcharge adjustment.

(8AC) If:

(a) a person makes an election under subsection 18A(1) on a particular day (the election day) after the most recent benefit start-up time; and

(b) if the election had not been made, the person would have been entitled on the election day to a retiring allowance under subsection (1A), (1B) or (8A) or this subsection or paragraph (2)(a) or (aa) or (2AA)(a), (b), (c) or (d);

then, on and after the election day, instead of the retiring allowance referred to in paragraph (b), the person is entitled to a retiring allowance during his or her lifetime at a rate equal to such percentage of the rate of parliamentary allowance for the time being payable to a member as is worked out using the formula:

where:

basic rate means the rate at which, at the most recent benefit start-up time, a retiring allowance under subsection (1A) or (1B) or paragraph (2)(a) or (aa) or (2AA)(a), (b), (c) or (d) would have become payable to the person if this subsection and subsection (8A) did not apply to the person.

percentage means:

(a) if, apart from this subsection and subsection (8A), the person would have been entitled at the most recent benefit start-up time to a retiring allowance under subsection (1A) or (1B) or paragraph (2)(a) or (aa) or (2AA)(a)—the percentage of the rate of parliamentary allowance by reference to which the rate of that retiring allowance would be ascertained (see subsection (6) and, if applicable, subsections (7) and (8)); or

(b) if, apart from this subsection and subsection (8A), the person would have been entitled at the most recent benefit start-up time to a retiring allowance under paragraph (2AA)(b), (c) or (d)—the percentage of the rate of parliamentary allowance specified in that paragraph.

surcharge adjustment means the total of:

(a) the person’s notional adjustment debits arising under any or all of the following provisions before the end of the election day:

(i) subsection 18A(6);

(ii) subsection (8AA);

(iii) subsection (8AB); and

(b) the person’s notional adjustment debits arising under subsection 18B(15) after the most recent benefit start-up time and before the end of the election day.

13 After section 18

Insert:

18A Commutation of retiring allowance—payment of surcharge liability

Election

 1

If:

(a) a person is entitled to a retiring allowance under subsection 18(1A), (1B), (8A) or (8AC) or paragraph 18(2)(a) or (aa) or 18(2AA)(a), (b), (c) or (d); and

(b) an assessment is made of the surcharge on the person’s surchargeable contributions for a financial year; and

(c) the person becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(c) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the person may, within:

(d) 3 months after the assessment was made; or

(e) such longer period as the Trust allows;

give the Secretary of the Department of Finance and Administration a written notice electing to commute the whole or a part of the person’s retiring allowance to a lump sum benefit equal to the amount specified in the election.

 2

The election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in the election:

(a) must be equal to or less than the amount of surcharge under the assessment; and

(b) must not have the effect of reducing the person’s retiring allowance below zero; and

(c) is to be known as the surcharge commutation amount for the purposes of this section.

Entitlement to lump sum benefit

 4

If a person makes an election under subsection (1), the person is entitled to a lump sum benefit equal to the surcharge commutation amount.

Note: The person’s retiring allowance will be reduced under subsection 18(8AC).

 5

If a person is entitled to a lump sum benefit under subsection (4), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the person’s request; and

(b) informing the Commissioner of Taxation of the person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Notional adjustment debit

 6

If a person makes an election under subsection (1) on a particular day, there is taken to have arisen at the start of that day a notional adjustment debit of the person equal to the amount worked out using the following formula:

where:

conversion factor means the factor applicable to the person under the determination made by the Trust under section 22B.

One election per assessment

 7

A person is not entitled to make more than one election under subsection (1) in relation to a particular assessment.

14 At the end of section 18B

Add:

 15

If:

(a) a person makes an election under subsection 18A(1) on a particular day (the election day) in relation to his or her retiring allowance; and

(b) the person has already made an election under subsection (3) of this section in relation to the retiring allowance; and

(c) the person has not made an earlier election under subsection 18A(1) in relation to his or her retiring allowance;

there is taken to have arisen at the start of the election day a notional adjustment debit of the person equal to the amount worked out using the following formula:

where:

basic rate has the same meaning as in subsection 18(8AC).

earlier notional adjustment debits means the total of the person’s notional adjustment debits arising under any or all of the following provisions before the start of the election day:

(a) subsection 18(8AA);

(b) subsection 18(8AB);

(c) subsection 18A(6).

 16

If:

(a) a person makes an election under subsection 18A(1) on a particular day (the election day) in relation to his or her retiring allowance; and

(b) the person has already made an election under subsection (3) of this section in relation to the retiring allowance;

paragraph (6)(a) ceases to apply to the retiring allowance on the election day.

 17

If a person makes an election under subsection 18A(1) in relation to his or her retiring allowance, the person is not entitled to make a subsequent election under subsection (3) of this section in relation to the retiring allowance.

Note: The heading to —general”.section 18B is altered by adding at the end “

15 Subsection 19(2)

Omit “section 21AA”, substitute “sections 19AAA and 21AA”.

16 After section 19

Insert:

19AAA Commutation of spouse’s annuity—payment of surcharge liability

Election

 1

If:

(a) a person (the deceased person) dies and:

(i) the deceased person was entitled to a parliamentary allowance; or

(ii) the deceased person was entitled to a retiring allowance, whether or not the retiring allowance was immediately payable; and

(b) the deceased person is survived by a spouse; and

(c) the spouse is entitled to an annuity; and

(d) an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

(e) the spouse becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the spouse may, within:

(f) 3 months after the assessment was made; or

(g) such longer period as the Trust allows;

give the Secretary of the Department of Finance and Administration a written notice electing to commute the whole or a part of the annuity to a lump sum benefit equal to the amount specified in the election.

 2

The election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in the election:

(a) must be equal to or less than the amount of surcharge under the assessment; and

(b) must not have the effect of reducing the annuity below zero; and

(c) is to be known as the surcharge commutation amount for the purposes of this section.

Entitlement to lump sum benefit

 4

If a spouse makes an election under subsection (1), the spouse is entitled to a lump sum benefit equal to the surcharge commutation amount.

 5

If a spouse is entitled to a lump sum benefit under subsection (4), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the spouse’s request; and

(b) informing the Commissioner of Taxation of the spouse’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of annuity

 6

If a spouse makes an election under subsection (1) in relation to an annuity, the rate of the annuity is to be reduced in accordance with the method determined in writing by the Trust in relation to the spouse following consultation with the Australian Government Actuary. The reduction takes effect from the beginning of the day of the election.

 7

A method determined by the Trust under subsection (6) is to be a method that, having regard to:

(a) the age of the spouse when the election is made under subsection (1); and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the spouse, the rate by which the annuity would have to be reduced to discharge a liability equal to the surcharge commutation amount.

One election per assessment

 8

A spouse is not entitled to make more than one election under subsection (1) in relation to a particular assessment.

17 Subsection 19AA(2)

Omit “section 21AA”, substitute “sections 19ABA and 21AA”.

18 After section 19AA

Insert:

19ABA Commutation of orphaned child’s annuity—payment of surcharge liability

Election

 1

If:

(a) a person (the deceased person) dies and:

(i) the deceased person was entitled to a parliamentary allowance; or

(ii) the deceased person was entitled to a retiring allowance, whether or not the retiring allowance was immediately payable; and

(b) either:

(i) the deceased person is survived by a child of the deceased person or of a former spouse of the deceased person; or

(ii) the deceased person is survived by a spouse, the spouse dies, and the spouse is survived by a child of the spouse or of the deceased person; and

(c) an annuity is payable in respect of the child; and

(d) an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

(e) the person to whom the annuity is payable (the eligible person) (who may be the child) becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the eligible person may, within:

(f) 3 months after the assessment was made; or

(g) such longer period as the Trust allows;

give the Secretary of the Department of Finance and Administration a written notice electing to commute the whole or a part of the annuity to a lump sum benefit equal to the amount specified in the election.

 2

The election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in the election:

(a) must be equal to or less than the amount of surcharge under the assessment; and

(b) must not have the effect of reducing the annuity below zero; and

(c) is to be known as the surcharge commutation amount for the purposes of this section.

Entitlement to lump sum benefit

 4

If an eligible person makes an election under subsection (1), the eligible person is entitled to a lump sum benefit equal to the surcharge commutation amount.

 5

If an eligible person is entitled to a lump sum benefit under subsection (4), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the eligible person’s request; and

(b) informing the Commissioner of Taxation of the eligible person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of annuity

 6

If an eligible person makes an election under subsection (1) in relation to an annuity, the rate of the annuity is to be reduced in accordance with the method determined in writing by the Trust in relation to the child following consultation with the Australian Government Actuary. The reduction takes effect from the beginning of the day of the election.

 7

A method determined by the Trust under subsection (6) is to be a method that, having regard to:

(a) the age of the child when the election is made under subsection (1); and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the child, the rate by which the annuity would have to be reduced to discharge a liability equal to the surcharge commutation amount.

One election per assessment

 8

An eligible person is not entitled to make more than one election under subsection (1) in relation to a particular assessment.

Definition

 9

In this section:

child has the same meaning as in section 19AA.

19 Subsection 20(3)

Omit “subsection (3A)”, substitute “subsections (3A) and (3D)”.

20 After subsection 20(3A)

Insert:

 3B

Subsection (3A) does not apply to an election under subsection 18A(1).

21 After subsection 20(3C)

Insert:

 3D

The rule in subsection (3) does not apply in working out a person’s notional adjustment debits that have arisen under any of the following provisions:

(a) subsection 18(8AA);

(b) subsection 18(8AB);

(c) subsection 18A(6).

22 After subsection 21AA(2)

Insert:

 2A

For the purposes of paragraph (2)(a), in determining the needs of a particular spouse, disregard any need that results from an election made by the spouse under section 19AAA.

 2B

For the purposes of paragraph (2)(b), in determining the needs of a child who is entitled to a benefit under section 19AA, disregard any need that results from an election made in relation to the child under section 19ABA.

 2C

The Trust must ensure that so much of an annuity as is commuted under section 19AAA or 19ABA is not allocated under this section.

23 At the end of section 21AA

Add:

 6

This section has effect subject to sections 19AAA and 19ABA.

24 Before paragraph 21B(4)(a)

Insert:

(aa) if subsection 18A(6) applies, whether directly or indirectly, in relation to the relevant benefit—that subsection; and

25 At the end of Part V

Add:

22B Determination with respect to surcharge commutation amount

 1

The Trust must, in accordance with advice received from the Australian Government Actuary, determine in writing the conversion factor that, having regard to:

(a) the age of a person when he or she makes an election under subsection 18A(1); and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 18A).

 2

(2) A determination under subsection (1) must be published in the Gazette.

26 After section 24D

Insert:

24E Trust may give advice to recipients of retiring allowances and annuities who are contemplating a commutation in order to pay surcharge

 1

This section applies to a person who is considering making an election under subsection 18A(1), 19AAA(1) or 19ABA(1).

 2

The person may ask the Trust for advice that will be likely to assist the person’s consideration of whether to make the election.

 3

The Trust may give the person such advice as it thinks appropriate.

27 After section 26C

Insert:

26D Appropriation for surcharge payable by the Trust

Amounts payable by the Trust on or after 1 July 2001 under subsection 16(6) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 are to be paid out of the Consolidated Revenue Fund, which is appropriated accordingly.

28 Application—section 18 of the Parliamentary Contributory Superannuation Act 1948

If a person was entitled to a retiring allowance under subsection 18(8A) of the Parliamentary Contributory Superannuation Act 1948 immediately before the commencement of this item, the amendments of that subsection made by this Schedule do not apply in relation to the person unless and until:

(a) the person subsequently makes an election under subsection 18A(1) of the Parliamentary Contributory Superannuation Act 1948 as amended by this Schedule; or

(b) the person again becomes a member and subsequently ceases to be entitled to a parliamentary allowance.

29 Application—sections 18A, 19AAA and 19ABA of the Parliamentary Contributory Superannuation Act 1948

Sections 18A, 19AAA and 19ABA of the Parliamentary Contributory Superannuation Act 1948 as amended by this Schedule apply in relation to an assessment, whether made before, at or after the commencement of this item.

30 Application—sections 19AAA and 19ABA of the Parliamentary Contributory Superannuation Act 1948

Subsections 19AAA(1) and 19ABA(1) of the Parliamentary Contributory Superannuation Act 1948 as amended by this Schedule apply in relation to a death, whether the death occurs before, at or after the commencement of this item.

31 Transitional—section 22B of the Parliamentary Contributory Superannuation Act 1948

The first set of determinations made under subsection 22B(1) of the Parliamentary Contributory Superannuation Act 1948 as amended by this Schedule may be expressed to have taken effect at the commencement of that subsection.

Schedule 2—Amendment of the Superannuation Act 1976

1 At the end of section 109AB

Add:

 12

For the purposes of this section, in determining the needs of a spouse, disregard any need that results from an election made by the spouse under section 146E.

 13

The Board must ensure that so much of a spouse’s pension as is commuted under section 146E is not attributed under this section to a child.

2 At the end of section 110

Add:

 17

For the purposes of this section, in determining the needs of a spouse, disregard any need that results from an election made by the spouse under section 146E.

 18

The Board must ensure that so much of a spouse’s pension as is commuted under section 146E is not allocated under this section.

3 After subsection 115(2)

Insert:

 2A

For the purposes of subsection (2), in determining the needs of a child or children, disregard any need that results from an election made under section 146G in relation to the child or children.

 2B

The Board must ensure that so much of an orphan pension as is commuted under section 146G is not apportioned under subsection (2) of this section.

4 After Part IX

Insert:
IXA Commutation of pension: payment of surcharge liability 1 Introduction

146A Simplified outline

The following is a simplified outline of this Part:

• If a person is receiving a pension and becomes liable to pay surcharge under an assessment, the person may elect to commute the whole or a part of the pension.

• If an election is made, the person will be entitled to a lump sum benefit.

• The lump sum benefit must be used to pay the surcharge.

• If an election is made, the pension will be reduced.

146B Definitions

In this Part:

assessment has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

surcharge has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

surchargeable contributions means surchargeable contributions (within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997) that are attributable to the operation of this Act.

 2 Commutation of former eligible employee’s pension

146C Commutation of former eligible employee’s pension—payment of surcharge liability

Election

 1

If:

(a) a person is receiving (whether or not by virtue of section 136):

(i) a standard age retirement pension; or

(ii) a standard early retirement pension; or

(iii) an invalidity pension; or

(iv) an additional age retirement pension; or

(v) an additional early retirement pension; and

(b) an assessment is made of the surcharge on the person’s surchargeable contributions for a financial year; and

(c) the person becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(c) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the person may, within 3 months after the assessment was made, give the Board:

(d) if the person is receiving only one such pension—a written notice electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

(e) if the person is receiving 2 such pensions and wishes to make an election under this subsection in relation to only one of those pensions—a written notice:

(i) identifying that pension; and

(ii) electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

(f) if the person is receiving 2 such pensions and wishes to make an election under this subsection in relation to both of those pensions—a written notice:

(i) identifying one of these pensions as the first pension to be commuted; and

(ii) electing to commute all of the first pension to a lump sum benefit equal to the amount specified in the election in relation to the first pension; and

(iii) electing to commute the whole or a part of the other pension to a lump sum benefit equal to the amount specified in the election in relation to the other pension.

 2

An election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in an election in relation to a particular pension:

(a) must be equal to or less than the amount of the surcharge under the assessment; and

(b) must not have the effect of reducing the pension below zero; and

(c) is to be known as the surcharge commutation amount in relation to the pension for the purposes of this section.

 4

The sum of the amounts specified in the elections set out in a notice under paragraph (1)(f) must be equal to or less than the amount of the surcharge under the assessment.

Entitlement to lump sum benefit

 5

If a person makes an election under subsection (1) in relation to a pension, the person is entitled to a lump sum benefit equal to the surcharge commutation amount.

 6

If a person is entitled to a lump sum benefit under subsection (5), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the person’s request; and

(b) informing the Commissioner of Taxation of the person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

 7

If a person makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced, with effect from the beginning of the day of the election, so that it equals the amount worked out using the following formula:

where:

conversion factor means the factor that is applicable to the person under the determination made by the Board under section 146D.

pre-commutation election pension rate means the annual rate at which the pension was payable to the person immediately before the election was made.

One election per assessment

 8

A person is not entitled to make more than one election under subsection (1) in relation to a particular assessment unless the elections:

(a) relate to different pensions; and

(b) are made on a single occasion; and

(c) are set out in the same notice under paragraph (1)(f).

Elections made before the first pension pay day in a financial year

 9

If an election under subsection (1) is made during the period:

(a) beginning at the start of a financial year; and

(b) ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

146D Conversion factor in relation to surcharge commutation amount

Standard age retirement pension, standard early retirement pension or invalidity pension

 1

The Board must, in accordance with advice received from an actuary, determine in writing, in relation to persons to whom standard age retirement pension, standard early retirement pension, invalidity pension or a deferred benefit by way of any such pension has become payable, the conversion factor that, having regard to:

(a) a person’s age when he or she makes an election under section 146C; and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146C).

Additional age retirement pension or additional early retirement pension

 2

The Board must, in accordance with advice received from an actuary, determine in writing, in relation to persons to whom an additional age retirement pension, an additional early retirement pension or a deferred benefit by way of any such pension has become payable, the conversion factor that, having regard to:

(a) a person’s age when he or she makes an election under section 146C; and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146C).

Gazette notice

 3

(3) A determination under this section must be published in the Gazette.

 3 Commutation of spouse’s pension

146E Commutation of spouse’s pension—payment of surcharge liability

Election

 1

If:

(a) a person (the deceased person) dies and:

(i) the deceased person was an eligible employee; or

(ii) the deceased person was a pensioner to whom age retirement pension, early retirement pension or invalidity pension was payable; and

(b) the deceased person is survived by a spouse; and

(c) the spouse is receiving one or more spouse’s pensions (whether or not by virtue of section 136); and

(d) an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

(e) the spouse becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the spouse may, within 3 months after the assessment was made, give the Board:

(f) if the spouse is receiving only one spouse’s pension—a written notice electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

(g) if the spouse is receiving 2 spouse’s pensions and wishes to make an election under this subsection in relation to only one of these pensions—a written notice:

(i) identifying that pension; and

(ii) electing to commute the whole or a part of that pension to a lump sum benefit equal to the amount specified in the election in relation to the pension; or

(h) if the spouse is receiving 2 spouse’s pensions and wishes to make an election under this subsection in relation to both of those pensions—a written notice:

(i) identifying one of those pensions as the first pension to be commuted; and

(ii) electing to commute all of the first pension to a lump sum benefit equal to the amount specified in the election in relation to the first pension; and

(iii) electing to commute the whole or a part of the other pension to a lump sum benefit equal to the amount specified in the election in relation to the other pension.

 2

An election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in an election in relation to a particular pension:

(a) must be equal to or less than the amount of the surcharge under the assessment; and

(b) must not have the effect of reducing the pension below zero; and

(c) is to be known as the surcharge commutation amount in relation to the pension for the purposes of this section.

 4

The sum of the amounts specified in the elections set out in a notice under paragraph (1)(h) must be equal to or less than the amount of the surcharge under the assessment.

Entitlement to lump sum benefit

 5

If a spouse makes an election under subsection (1) in relation to a pension, the spouse is entitled to a lump sum benefit equal to the surcharge commutation amount.

 6

If a spouse is entitled to a lump sum benefit under subsection (5), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the spouse’s request; and

(b) informing the Commissioner of Taxation of the spouse’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

 7

If a spouse makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced in accordance with the method determined by the Board under section 146F. The reduction takes effect from the beginning of the day of the election.

One election per assessment

 8

A spouse is not entitled to make more than one election under subsection (1) in relation to a particular assessment unless the elections:

(a) relate to different pensions; and

(b) are made on a single occasion; and

(c) are set out in the same notice under paragraph (1)(h).

Elections made before the first pension pay day in a financial year

 9

If an election under subsection (1) is made during the period:

(a) beginning at the start of a financial year; and

(b) ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

 of spouse’s pension 10

To avoid doubt, if subsection 109AB(9) or 110(12) applies to an election under subsection (1) of this section, this section has effect, in relation to the election, as if a reference to the spouse’s pension were a reference to the part of the spouse’s pension concerned.

146F Method for reduction of spouse’s pension in relation to surcharge commutation amount

 1

The Board must, following consultation with an actuary, determine in writing, in relation to persons who are receiving a spouse’s pension, the method that, having regard to:

(a) a person’s age when he or she makes an election under section 146E; and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146E).

 2

(2) A determination under this section is to be published in the Gazette.

 4 Commutation of orphan pension

146G Commutation of orphan pension—payment of surcharge liability

Election

 1

If:

(a) a person (the deceased person) dies; and

(b) either:

(i) the deceased person is not survived by a spouse but is survived by a child or children of the deceased person; or

(ii) the deceased person is survived by a spouse, the spouse dies, and the spouse is survived by a child or children of the deceased person; and

(c) an orphan pension is payable in respect of the child or children (whether or not by virtue of section 136); and

(d) an assessment is made of the surcharge on the deceased person’s surchargeable contributions for a financial year; and

(e) the person to whom the pension is payable (the eligible person) (who may be the child or one of the children) becomes liable to pay the surcharge under the assessment in accordance with paragraph 10(4)(ca) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

the eligible person may, within 3 months after the assessment was made, give the Board a written notice electing to commute the whole or a part of the orphan pension to a lump sum benefit equal to the amount specified in the election.

 2

The election must be accompanied by:

(a) a written notice requesting that the amount of the lump sum benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under the assessment; and

(b) a copy of the notice of assessment.

Surcharge commutation amount

 3

The amount specified in the election:

(a) must be equal to or less than the amount of the surcharge under the assessment; and

(b) must not have the effect of reducing the pension below zero; and

(c) is to be known as the surcharge commutation amount for the purposes of this section.

Entitlement to lump sum benefit

 4

If an eligible person makes an election under subsection (1) in relation to a pension, the eligible person is entitled to a lump sum benefit equal to the surcharge commutation amount.

 5

If an eligible person is entitled to a lump sum benefit under subsection (4), the liability to pay that benefit must be discharged by:

(a) paying the amount of that benefit to the Commissioner of Taxation in accordance with the eligible person’s request; and

(b) informing the Commissioner of Taxation of the eligible person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

Reduction of pension

 6

If an eligible person makes an election under subsection (1) in relation to a pension, the annual rate of the pension is to be reduced in accordance with the method determined by the Board under section 146H. The reduction takes effect from the beginning of the day of the election.

One election per assessment

 7

An eligible person is not entitled to make more than one election under subsection (1) in relation to a particular assessment.

Elections made before the first pension pay day in a financial year

 8

If an election under subsection (1) is made during the period:

(a) beginning at the start of a financial year; and

(b) ending at the end of the first pension pay day in that year;

this section has effect as if the election had been made on the first day after that pension pay day.

 of orphan pension 9

To avoid doubt, if an orphan pension is apportioned under subsection 115(2), this section has effect, in relation to the portion applicable to a particular child or to particular children, as if a reference to the orphan pension were a reference to that portion.

146H Method for reducing orphan pension in relation to surcharge commutation amount

 1

The Board must, following consultation with an actuary, determine in writing, in relation to persons to whom orphan pension is payable in respect of a child or children, the method that, having regard to:

(a) the age of the child, or the ages of the children, when the person makes an election under section 146G; and

(b) other relevant factors (if any);

is applicable for the purpose of working out, in relation to the person, the yearly amount that would have to be paid to discharge a liability equal to the person’s surcharge commutation amount (within the meaning of section 146G).

 2

(2) A determination under this section is to be published in the Gazette.

5 At the end of section 157

Add:

 4

If:

(a) a person makes an election under section 146C, 146E or 146G; and

(b) no payment has been made in accordance with the election; and

(c) the Board, having regard to:

(i) such matters (if any) as are prescribed; and

(ii) such other matters as it considers relevant;

is satisfied that the election should be cancelled;

the Board may direct that the election is to be cancelled and, if it so directs, this Act has effect as if the election had not been made.

6 At the end of section 168

Add:

 18

(18) Regulations made within one year after the commencement of this subsection for purposes arising from any amendment of this Act made by the Superannuation Legislation Amendment (Post-retirement Commutations) Act 2001 may commence on a day:

(a) earlier than the day on which they are made; but

(b) not earlier than the commencement of this subsection.

7 Application—sections 146C, 146E and 146G of the Superannuation Act 1976

Sections 146C, 146E and 146G of the Superannuation Act 1976 as amended by this Schedule apply in relation to an assessment, whether made before, at or after the commencement of this item.

8 Application—sections 146E and 146G of the Superannuation Act 1976

Subsections 146E(1) and 146G(1) of the Superannuation Act 1976 as amended by this Schedule apply to a death, whether the death occurred before, at or after the commencement of this item.

9 Transitional—sections 146D, 146F and 146H of the Superannuation Act 1976

The first set of determinations made under Superannuation Act 1976 as amended by this Schedule may be expressed to have taken effect at the commencement of the section concerned.section 146D, 146F or 146H of the

Schedule 3—Amendment of the Superannuation Act 1990

1 Subsection 16(1)

After “preserved benefit”, insert “or a post-retirement commutation benefit”.

2 At the end of section 16

Add:

 7

If a post-retirement commutation benefit becomes payable under the Rules to, or in respect of, a person who has ceased to be a member, the Commonwealth is liable to pay the benefit.

 8

If:

(a) a person becomes entitled to a post-retirement commutation benefit under the Rules; and

(b) the person has, under the Rules, requested that the amount of the benefit be:

(i) paid to the Commissioner of Taxation; and

(ii) wholly applied in payment of surcharge under an assessment;

the liability to pay that benefit must be discharged by:

(c) paying the amount of that benefit to the Commissioner of Taxation in accordance with the person’s request; and

(d) informing the Commissioner of Taxation of the person’s request that the amount be wholly applied in payment of surcharge under the assessment concerned.

 9

In this section:

assessment has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

post-retirement commutation benefit means a lump sum benefit payable by way of the commutation of the whole or a part of a pension, where the amount of the benefit is to be wholly applied in payment of surcharge.

surcharge has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

[Minister’s second reading speech made in—

House of Representatives on 7 December 2000

Senate on 1 March 2001]

(198/00)