OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1993 NO. 149 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) 1993 NO. 149 - TABLE OF PROVISIONS 1. Amendment 2. Regulation 17 (Financial reports and disclosure of information standards) 3. New Part 3B 1993 No. 149 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.) 1993 No. 149 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 2 2. Regulation 17 (Financial reports and disclosure of information standards) 2.1 Subregulation 17 (2): Add at the end: "; and (e) a statement as to whether or not an event that is a prescribed event for the purposes of paragraph 15D (4) (a) of the Act occurred in the period to which the report applies.". 1993 No. 149 OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS (AMENDMENT) - REG 3 3. New Part 3B 3.1 After regulation 23P, insert: "PART 3B-PRE-1 JULY 1988 FUNDING CREDITS AND DEBITS Interpretation "23PA. In this Part, unless the contrary intention appears: 'PJFC', in relation to a superannuation fund, means an amount specified in a notice given to the fund by the Commissioner under subsection 15D (2) of the Act; 'pre-1 July 88 funding amount' has the meaning given by regulation 23PB; "pre-1 July 88 funding credit balance' has the meaning given by subsection 275A (1) of the Tax Act; 'prescribed event' has the meaning given by regulation 23PJ; 'reviewable decision' means a decision of the Commissioner: (a) not to approve an application under regulation 23PL or 23PM; or (b) to revoke an approval under regulation 23PN; or (c) after reconsideration under regulation 23PQ, to confirm or vary a decision referred to in paragraph (a) or (b) ; 'shortfall-in-assets amount' means an amount determined by an actuary in accordance with regulation 23PC. Pre-1 July 88 funding amounts "23PB. (1) In this regulation: 'late payment amount', in relation to a superannuation fund, means an amount (other than an amount representing a contribution that was payable or not payable at the discretion of an employer-contributor in respect of the fund) representing contributions to the fund that were unpaid as at 30 June 1988, being contributions that an employer-contributor in respect of the fund was obliged as at 30 June 1988 to pay in accordance with: (a) except if paragraph (b) applies, the governing rules of the fund then in force; or (b) in the case of an amount representing contributions in respect of a member of a defined benefit superannuation fund who is an associate (within the meaning of Part IIIA of the Act) of an employer-contributor-the determination of an actuary; or (c) a prescribed agreement or award. "(2) Subject to subregulation (3), the following amounts are to be treated as pre-1 July 88 funding amounts for the purposes of paragraph 15D (2) (a) of the Act: (a) a late payment amount; (b) a shortfall-in-assets amount. "(3) If the pre-1 July 88 funding amount of a defined benefit superannuation fund: (a) includes a late payment amount; and (b) that late payment amount is sufficient to fund the liabilities of the fund in relation to accrued benefits of the members of the fund; the pre-1 July 88 funding amount must not include a shortfall-in-assets amount. Shortfall-in-assets amount-calculation "23PC. (1) The shortfall-in-assets amount in respect of a superannuation fund is the amount determined by an actuary as the lesser of the amounts calculated in accordance with the following formulas: net actuarially market value value A of determined of assets (a) accrued benefits - value of X actuarially fund assets determined value of fund assets (Note: A shortfall-in-assets amount is the amount of any deficiency in a superannuation fund as at 30 June 1988, other than a deficiency that is the result of contributions that are due, but have not been paid, to the fund.) "(2) In subregulation (1) , in relation to a superannuation fund: 'actuarially determined value of fund assets' means the value of the assets of the fund as at 30 June 1988, including any late payment amount, that is determined by an actuary using a method that the actuary certifies: (a) is consistent with the method used in the last actuarial investigation of the fund that was completed before 25 May 1988; and (b) as determining a value that is comparable to the value of the assets determined in that actuarial investigation; 'net market value of fund assets' means the amount that, having regard to matters specified in regulation 23PD, could reasonably be estimated to be obtained from disposal of the assets of the fund, and includes any late payment amount; 'value A of accrued benefits' has the meaning given by regulation 23PE; 'value B of accrued benefits' has the meaning given by regulation 23PF. "(3) For the purposes of this regulation: (a) an alteration made after 25 May 1988 to the governing rules of a superannuation fund that relates to benefits payable to members of the fund is to be disregarded unless the alteration is a prescribed event; and (b) in the case of the calculation of a shortfall-in-assets amount in respect of a member of a superannuation fund who is an associate (within the meaning of Part IIIA of the Act) of an employer, any amount of benefits in respect of the member that is attributable to the exercise of discretion by, or on behalf of, the trustees of the fund is to be disregarded. Estimation of net market value of fund assets "23PD. For the purposes of the definition of 'net market value of fund assets' in subregulation 23PC (2), the following matters are specified: (a) the assumptions that, when the assets are sold: (i) the buyer and seller of the assets are willing, but not anxious, to buy and sell the assets; and (ii) there is a period in which to negotiate the sale that is reasonable, having regard to the nature and situation of the assets and the state of the market for assets of the same kind; and (iii) the assets will be reasonably exposed to the market; and (iv) no account is taken of the value or other advantage or benefit, additional to market value, to the buyer incidental to ownership of the assets; (b) the value of any estate in the property comprising the assets that is not held by the trustees in the capacity of trustees; (c) deduction of the costs of disposing of the assets from the proceeds of the disposal. Value A of accrued benefits "23PE. (1) Value A of accrued benefits in relation to a superannuation fund is the total value of accrued benefits in respect of all members of the fund as at 30 June 1988 that is calculated in accordance with regulation 23PG. "(2) For the purposes of calculating value A of accrued benefits, the following assumptions apply: (a) that a member of the superannuation fund will not die or become disabled before his or her normal retirement from the workforce; (b) that the governing rules of the fund providing for benefits and the amounts of the benefits vested in members of the fund are those rules and amounts as at 25 May 1988; (c) that the value of the accrued benefits in the fund in respect of a member of the fund is not less than the amount of benefits vested in the member on 30 June 1988; (d) if the governing rules of the fund provide for adjustment of pension benefits to compensate for changes in the cost of living at the discretion of the trustees of the fund, that the rules providing for adjustment are disregarded, unless: (i) all pension benefits have been increased under that rule on at least 3 occasions before 30 June 1988; and (ii) at least 1 of those increases occurred in the period from the beginning of 1 July 1985 to the end of 30 June 1988. "(3) Subject to this regulation, the elements of the actuarial basis for the calculation of value A of accrued benefits in respect of a superannuation fund are taken to be those used in the last actuarial investigation of the fund that was completed before 25 May 1988. "(4) If an actuarial investigation of a superannuation fund was not completed before 25 May 1988, an actuary must submit to the Commissioner in writing the elements that the actuary proposes to use in respect of the fund: (a) for the purposes of subregulation 23PG (2); and (b) in substitution for the elements referred to in that subregulation. "(5) The Commissioner must approve a proposed element of the actuarial basis for the calculation of value A of accrued benefits in respect of a superannuation fund if he or she is satisfied that the proposed element corresponds reasonably closely to the element that would have been used if an actuarial investigation had been made into the fund. "(6) In special circumstances, the Commissioner may approve a proposed element of the actuarial basis for the calculation of value A of accrued benefits in respect of a superannuation fund if he or she is satisfied that application of the proposed element is reasonable in those circumstances. "(7) Liability to pay taxation on income of the fund is not a special circumstance for the purposes of subregulation (6) if the liability results directly from an amendment of the Tax Act made by the Taxation Laws Amendment (Superannuation) Act 1989. Value B of accrued benefits "23PF. (1) Value B of accrued benefits in relation to a superannuation fund is the total value of accrued benefits in respect of all members of the fund as at 30 June 1988 that is calculated in accordance with regulation 23PG. "(2) For the purposes of calculating value B of accrued benefits, the following assumptions apply: (a) that a member of the superannuation fund will not: (i) die, or become disabled, before his or her normal retirement from the workforce; or (ii) withdraw from the fund, or retire from the workforce, before the age of his or her normal retirement; (b) that the governing rules of the fund providing for benefits and the amounts of the benefits vested in the member are those rules and amounts as at 25 May 1988; (c) that the value of the accrued benefits in the fund in respect of the member is not less than the amount of benefits vested in the member on 30 June 1988; (d) that the annual earning rate of the fund, net of administrative or other costs, is 10%; (e) that if the governing rules of the fund provide for adjustment of pension benefits to compensate for changes in the cost of living at the discretion of the trustees of the fund-the adjustment factor is the lesser of: (i) the average annual percentage increase in pension benefits (if any) in the period from the beginning of 1 July 1985 to the end of 30 June 1988; and (ii) 7% annually; (f) if the governing rules of the fund provide for adjustment of benefits to compensate for changes in the cost of living, other than at the discretion of the trustees of the fund, that the adjustment factor is 7% annually; (g) if the governing rules of the fund provide for adjustment of benefits in accordance with the amount or rate of salary of members of the fund, that the amount or rate increases by 8.5% annually; (h) that the probability of survival of the member after his or her retirement from the workforce is ascertained in accordance with the Australian Life Tables 1985-1987 prepared by the Australian Government Actuary. "(3) Subject to this regulation, the elements of the actuarial basis for the calculation of value B of accrued benefits in respect of a superannuation fund are taken to be those used in the last actuarial investigation of the fund that was completed before 25 May 1988. "(4) In special circumstances, an actuary may submit to the Commissioner in writing a proposal to substitute: (a) an assumption stated in paragraph (2) (d), (e), (f), (g) or (h) in respect of a superannuation fund with another assumption; or (b) an element referred to in subregulation (3) in respect of a superannuation fund with another element. "(5) The Commissioner may approve a proposed assumption or element mentioned in subregulation (4) if he or she is satisfied that application of that assumption or element would be reasonable in the circumstances. "(6) Liability to pay taxation on income of the fund is not a special circumstance for the purposes of subregulation (4) if the liability results directly from an amendment of the Tax Act made by the Taxation Laws Amendment (Superannuation) Act 1989. Calculation of value A or B of accrued benefits "23PG. (1) In this regulation, in relation to a period that exceeds a whole number of financial years, a reference to a part of a year is a reference to a part of the period that exceeds a whole financial year. "(2) For the purposes of regulations 23PE and 23PF, the value of the benefits payable to a member in respect of a period after 30 June 1988 is the total of the amounts in respect of each financial year, or part of a financial year, in the period that are determined by an actuary: (a) in respect of each kind of benefit that the member is, or may be, entitled to receive from the superannuation fund; and (b) by using the following formula: P1 x Net present value x P2 where: 'P1' is the probability, determined by the actuary, of the member being paid a benefit in each financial year, or part of a financial year; and 'Net present value' is the value of each benefit to which the member may become entitled on exit from the fund, being an amount that is determined by the actuary as at 30 June 1988: (i) in the case of the calculation of value A of accrued benefits-using the earning rate of the fund used in the actuarial investigation of the fund mentioned in subregulation 23PE (3); and (ii) in the case of the calculation of value B of accrued benefits-using the earning rate of the fund referred to in paragraph 23PF (2) (d); and 'P2' is a proportion that is calculated: (i) in the case of the calculation of value A of accrued benefits-using the method applied in the actuarial investigation of the fund mentioned in subregulation 23PE (3); and (ii) in the case of the calculation of value B of accrued benefits-as follows: completed period of fund membership in relation to the member at 30 June 1988 --------------------------------------- completed period of fund membership in relation to the member at the member's date of exit from the fund where a reference to 'completed period of fund membership' in relation to the member at a particular time is a reference to the period from the time at which the member joined, or last joined, the fund to the particular time. Date before which applications must be made "23PH. For the purposes of paragraph 15D (3) (b) of the Act, the prescribed date is 30 June 1994. Application fees "23PI. (1) For the purposes of sub-paragraph 15D (3) (d) (ii) of the Act, the following application fees are prescribed: (a) if the application is for a PJFC that consists of a late payment amount or is the aggregate of late payment amounts-$300; (b) subject to subregulation (2), if the application is for a PJFC that consists of a shortfall-in-assets amount or is the aggregate of shortfall-in-assets amounts, an amount calculated using the formula: 0.002 x the amount of the PJFC; (c) if an application is for a PJFC that includes: (i) a late payment amount or the aggregate of late payment amounts; and (ii) a shortfall-in-assets amount or the aggregate of shortfall-in-assets amounts; the fee prescribed in paragraph (b), as if the PJFC consisted of a shortfall-in-assets amount or the aggregate of shortfall-in-assets amounts. "(2) A fee under paragraph (1) (b) must not be: (a) less than $500; or (b) more than $5,000. Prescribed events for the purposes of paragraph 15d (4) (a) of the Act "23PJ. (1) For the purposes of paragraph 15d (4) (a) of the Act, a prescribed event in relation to a superannuation fund is any alteration of the governing rules of the fund having the effect that calculation of a pre-1 July 88 funding amount under the rules as so altered produces an amount that is less than the amount calculated using the formula: PJFC originally any PJFCs any PJFCs granted + transferred - transferred to the fund to the fund from the fund "(2) A reference in subregulation (1) to a PJFC is a reference to the amount of the PJFC multiplied by the indexation factor calculated in accordance with subsection 159SG (2) of the Tax Act. Time and manner in which prescribed events must be notified to the Commissioner "23PK. (1) Subject to subregulation (3), if a prescribed event occurs in relation to a superannuation fund, the trustees of the fund must give notice in writing to the Commissioner of the event: (a) within 3 months of the date of the occurrence; or (b) on or before 30 June 1994; whichever date is the later. "(2) The notice must have with it: (a) a statement of an amount that is certified by an actuary as the amount by which the pre-1 July 88 funding credit balance of the fund is reduced as a result of the prescribed event; and (b) a statement by the trustees of the fund that describes the prescribed event in sufficient detail to allow the statement to be properly considered. "(3) The Commissioner may give notice in writing to the trustees of a superannuation fund extending the time in which the trustees must give notice to the Commissioner of a prescribed event. Transfer of PJFCs-trustees of transferor funds "23PL. (1) If the trustees of a defined benefit superannuation fund propose to transfer a PJFC, or part of a PJFC, from the fund (in this regulation called 'the transferor fund') to another superannuation fund (in this regulation called 'the transferee fund'), the trustees may apply in writing to the Commissioner to approve the transfer. "(2) The Commissioner may approve an application only if: (a) the requirements specified in regulation 23PO are satisfied; or (b) if a requirement of that kind is not satisfied-the Commissioner is satisfied that, because of special circumstances, the requirement does not need to be satisfied. "(3) The amount of a PJFC to be transferred must not exceed the lesser of: (a) the amount of the liability in respect of benefits to be transferred to the transferee fund, being benefits accrued before 1 July 1988; and (b) the amount of any pre-1 July 88 funding credit balance in the transferor fund immediately before the transfer. "(4) As soon as practicable after a decision is made by the Commissioner to approve a transfer, he or she must give notice in writing of the approval to the trustees of the transferor fund and of the transferee fund. Transfer of PJFCs-trustees of transferee funds "23PM. (1) The trustees of a superannuation fund (in this regulation called 'the transferee fund') may apply in writing to the Commissioner to approve the transfer of a PJFC, or part of a PJFC, from a defined benefit superannuation fund (in this regulation called 'the transferor fund'), if: (a) the application arises as a direct result of the transfer of a member or members of the transferor fund, and the benefit entitlements of that member or those members, to 1 or more transferee funds following reconstitution of the transferor fund into the transferee fund or transferee funds; or (b) the application arises as a direct result of the transfer of a member or members of a transferor fund, and the benefit entitlements of that member or those members, to the transferee fund following the merger of 2 or more transferor funds into the transferee fund; or (c) the transferee fund: (i) was constituted on or after 1 July 1988; and (ii) assumed responsibility for the liabilities, but not all the assets, in respect of contributions for superannuation purposes relating to the employment of persons before that date, being contributions that were made to a transferor fund. "(2) The Commissioner may approve an application only if: (a) the requirements specified in regulation 23PO are satisfied; or (b) if a requirement of that kind is not satisfied-the Commissioner is satisfied that, because of special circumstances, the requirement does not need to be satisfied. "(3) The amount of a PJFC to be transferred must not exceed the lesser of: (a) the amount of the liability in respect of benefits to be transferred to the transferee fund, being benefits accrued before 1 July 1988; and (b) the amount of any pre-1 July 88 funding credit balance in the transferor fund immediately before the transfer. "(4) As soon as practicable after a decision is made by the Commissioner to approve a transfer, he or she must give notice in writing of the approval to the trustees of the transferee fund and of the transferor fund. Transfer of PJFCs-revocation of approval "23PN. The Commissioner may revoke an approval given under regulation 23PL or 23PM only if: (a) information about matters relating to the application for approval that was not available to the Commissioner when he or she made the decision to approve the application becomes available to the Commissioner; and (b) after considering that information, the Commissioner is satisfied that: (i) a requirement specified in regulation 23PO (other than a requirement that does not need to be satisfied under paragraph 23PL (2) (b) or 23PM (2) (b) ) was not satisfied in relation to the transfer; or (ii) in the case of a requirement that, under paragraph 23PL (2) (b) or 23PM (2) (b), does not need to be satisfied-there were no special circumstances to justify the application of that paragraph. Transfer of PJFCs-requirements to be satisfied "23PO. The requirements referred to in paragraph 23PL (2) (a) and 23PM (2) (a) are that: (a) an actuary certifies that the amount of the PJFC to be transferred is reasonable having regard to: (i) the amount of unfunded liability to be transferred from the transferor fund; and (ii) the amount of the remaining unfunded liability of that fund; in relation to the amount of benefits that have accrued before 1 July 1988; and (b) the trustees of the transferor fund have been given notice by the Commissioner of the grant of the PJFC under subsection 15D (2) of the Act; and (c) at the date of the transfer the amount of the PJFC to be transferred is equal to or less than the amount of the pre-1 July 88 funding credit balance of the transferor fund; and (d) the transferee fund has received notice from the Commissioner in relation to the year of income in which the transfer is to take place: (i) under subsection 12 (3) of the Act-that the Commissioner is satisfied that the fund satisfied the superannuation fund conditions in that year of income; or (ii) under subsection 13 (1) of the Act-that the Commissioner is satisfied that the fund should be treated as if the fund had satisfied the superannuation fund conditions in that year of income; and (e) an actuary certifies that sufficient information is available about the accrued entitlements of members of the transferor fund as at 30 June 1988 to enable calculations to be made after that date to ascertain whether a prescribed event has occurred. Notice of reviewable decisions and reasons for those decisions "23PP. (1) As soon as practicable after the Commissioner makes a reviewable decision, he or she must give written notice of the decision to the person at whose request the decision was made. "(2) The notice must have with it a statement by the Commissioner of his or her reasons for making the decision. "(3) The notice must include a statement to the effect that the trustees may: (a) in the case of notice of a decision made by the Commissioner under regulation 23PL, 23PM or 23PN-if dissatisfied with the decision, request reconsideration of the decision under regulation 23PQ; and (b) in the case of notice of a decision made by the Commissioner under regulation 23PQ confirming or varying a decision to which paragraph (a) applies-if dissatisfied with the decision, apply to the Administrative Appeals Tribunal for review of the decision so confirmed or varied. "(4) Failure to comply with subregulation (3) in relation to a decision does not affect the validity of the decision. Reconsideration of certain decisions "23PQ. (1) If the trustees of a superannuation fund are dissatisfied with a decision made by the Commissioner under regulation 23PL, 23PM or 23PN, the trustees may give notice in writing to the Commissioner within: (a) the period of 21 days after the day on which the trustees first receive notice of the decision; or (b) such further period as the Commissioner reasonably allows; requesting the Commissioner to reconsider the decision. "(2) The trustees must set out in the notice the reasons for the request. "(3) Subject to subregulation (4), the Commissioner must reconsider the decision and may: (a) confirm the decision; or (b) vary or revoke the decision. "(4) If the Commissioner does not confirm, vary or revoke the decision before the end of the period of 21 days after the day on which he or she received the request, the Commissioner is taken to have confirmed the decision under subregulation (3) at the end of that period. "(5) If the Commissioner varies or revokes a decision, he or she must give the Commissioner of Taxation written notice of the variation or revocation. Review by Tribunal of reconsidered decisions "23PR. Application may be made to the Administrative Appeals Tribunal for review of a decision of the Commissioner to confirm or vary a decision under subregulation 23PQ (3), including a decision that is taken under subregulation 23PQ (4) to have been confirmed. Actuaries to certify in relation to determinations "23PS. An actuary who makes a determination under this Part must certify that the determination: (a) is consistent with this Part; and (b) except to the extent (if any) that this Part otherwise requires, is made in accordance with a method that The Institute of Actuaries of Australia would accept as a proper actuarial practice. Substituted accounting periods "23PT. The trustees of a superannuation fund for which the Commissioner of Taxation has approved a 12 month period as a substituted accounting period for the purposes of section 18 of the Tax Act may treat a reference in this Part: (a) to 30 June 1988 as a reference to the last day of the substituted accounting period corresponding to the year of income that ended on 30 June 1988; and (b) to 1 July 1988 as a reference to the day after that day.". - NOTES 1993 No. 149*1* OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS*2* (AMENDMENT) *1* Notified in the Commonwealth of Australia Gazette on 29 June 1993. *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, 387 and 463; 1993 Nos. 14 and 33.