RETIREMENT SAVINGS ACCOUNTS AMENDMENT REGULATIONS 2004 (NO. 2) 2004 NO. 147 - SCHEDULE 3 Amendments commencing on 20 September 2004

RETIREMENT SAVINGS ACCOUNTS AMENDMENT REGULATIONS 2004 (NO. 2) 2004 NO. 147 - SCHEDULE 3

(regulation 3)

[1] Subregulation 1.03 (1), after definition of investment earnings

insert

"life expectancy" has the same meaning as life expectation factor in section 27H of the Tax Act.

[2] Subregulation 1.03 (1), after definition of mandated employer-financed benefits

insert

"market linked pension" means a pension provided under terms and conditions of an RSA that meet the standards of subregulation 1.07 (3A).

[3] Subregulation 1.07 (1)

omit

subregulation (2).

insert

subregulation (2) or (3A).

[4] After subregulation 1.07 (3)

insert

(3A) Terms and conditions of an RSA that provides a benefit ( the market linked pension ) meet the standards of this subregulation if they at least ensure that:

(a) the market linked pension:

(i)

is paid at least annually to the primary beneficiary or to a reversionary beneficiary throughout a period equal to the primary beneficiary's life expectancy on the commencement day of the pension, rounded up to the next whole number if the primary beneficiary's life expectancy does not consist of a whole number of years; or

(ii)

is paid at least annually to the primary beneficiary or to a reversionary beneficiary throughout a period equal to the primary beneficiary's life expectancy mentioned in subparagraph (i) calculated, at the option of the primary beneficiary, as if the primary beneficiary were up to 5 years younger on the commencement day; or

(iii)

if:

(A) the pension is a pension that reverts to a surviving spouse on the death of the primary beneficiary; and

(B) the life expectancy of the primary beneficiary's spouse is greater than the life expectancy of the primary beneficiary; and

(C) the primary beneficiary has not chosen to make an arrangement mentioned in subparagraph (i) or (ii) for the pension;

the pension is paid at least annually to the primary beneficiary or to a reversionary beneficiary throughout a period equal to:

(D) the life expectancy of the spouse on the commencement day; or

(E) the life expectancy of the spouse calculated, at the option of the primary beneficiary, as if the spouse were up to 5 years younger on the commencement day;

at the option of the primary beneficiary, and rounded up to the next whole number if the life expectancy of the spouse does not consist of a whole number of years; and

(b)

the total amount of the payments to be made in a year (excluding payments by way of commutation but including payments made under a payment split) is determined in accordance with Schedule 4; and

(c)

the market linked pension does not have a residual capital value; and

(d)

the terms and conditions of the market linked pension meet the standards of regulation 1.08; and

(e)

the market linked pension cannot be commuted except:

(i)

if the pension:

(A) is not funded from the commutation of:

(I) another pension that is provided under terms and conditions that meet the standards of this subregulation; or

(II) an annuity that is provided under a contract that meets the standards of subregulation 1.05 (2), (3), (9) or (10) of the SIS Regulations; or

(III) a pension that is provided under rules that meet the standards of subregulation 1.06 (2), (3), (7) or (8) of the SIS Regulations; and

(B) if the commutation is made within 6 months after the commencement day of the pension; or

(ii)

subject to subparagraph (iii), on the death of the primary beneficiary or reversionary beneficiary, by payment of:

(A) a lump sum or a new pension to one or more dependants of either the primary beneficiary or reversionary beneficiary; or

(B) a lump sum to the legal personal representative of either the primary beneficiary or reversionary beneficiary; or

(C) if, after making reasonable enquiries, the provider of the pension is unable to find a person mentioned in sub-subparagraph (A) or (B) — a lump sum to another individual; or

(iii)

for subparagraph (ii), if the primary beneficiary has opted, under subparagraph (a) (iii), for a period worked out in relation to the life expectancy of the primary beneficiary's spouse — the market linked pension cannot be commuted until the death of both the primary beneficiary and the spouse; or

(iv)

if the eligible termination payment resulting from the commutation is transferred directly to the purchase of:

(A) another pension that is provided under terms and conditions that meet the standards of this subregulation; or

(B) an annuity that is provided under a contract that meets the standards of subregulation 1.05 (2), (3), (9) or (10) of the SIS Regulations; or

(C) a pension that is provided under rules that meet the standards of subregulation 1.06 (2), (3), (7) or (8) of the SIS Regulations; or

(v)

to pay a superannuation contributions surcharge; or

(vi)

to give effect to an entitlement of a non-member spouse under a payment split; and

(f)

if the market linked pension reverts, it does not have a reversionary component greater than 100% of the account balance immediately before the reversion; and

(g)

if the market linked pension is commuted, the commutation amount cannot exceed the account balance immediately before the commutation; and

(h)

the market linked pension can be transferred only:

(i)

on the death of the primary beneficiary:

(A) to 1 of the dependants of the primary beneficiary; or

(B) to the legal personal representative of the primary beneficiary; or

(ii)

on the death of the reversionary beneficiary:

(A) to 1 of the dependants of the reversionary beneficiary; or

(B) to the legal personal representative of the reversionary beneficiary; and

(i)

the capital value of the market linked pension, and the income from it, cannot be used as security for a borrowing.

(3B)

Terms and conditions mentioned in subregulation (3A) are not prevented from meeting the standards of that subregulation by reason only that the terms or conditions provide that, if the commencement day of the pension is on or after 1 June in a financial year, no payment is required to be made for that financial year.

(3C)

Despite regulation 9 of the Income Tax Regulations 1936 , for a pension that has a commencement day on or after 20 September 2004 and on or before 31 December 2004, one of the following life tables are to be used in ascertaining the life expectancy of a person under this regulation:

(a)

the most recently published Australian Life Tables;

(b)

the 1995-97 Australian Life Tables .

[5] After regulation 1.07

insert

1.08 Commutation of market linked pension

(1)

This regulation applies in relation to the terms and conditions of an RSA mentioned in paragraph 1.07 (3A) (d) for a market linked pension.

(2) The terms and conditions meet the standards of this regulation if they ensure that the pension cannot be commuted, in whole or in part, unless:

(a)

the commutation results from the death of a pensioner or a reversionary pensioner; or

(b) the sole purpose of the commutation is:

(i)

to pay a superannuation contributions surcharge; or

(ii)

to give effect to an entitlement of a non-member spouse under a payment split; or

(iii)

to meet the rights of a client to return a financial product under Division 5 of Part 7.9 of the Corporations Act 2001 ; or

(c)

the pension has paid, in the financial year in which the commutation is to take place, at least the minimum amount under subregulation (3).

(3) For paragraph (2) (c), the minimum amount is calculated using the formula:



where:

"annual amount" for the financial year means the amount worked out in accordance with Schedule 4 for the pension, rounded to the nearest 10 whole dollars.

days in payment period means the number of days in the period that:

(a) starts on:

(i)

if the pension commenced in the financial year in which the commutation is to take place — the commencement day; or

(ii)

in any other case — 1 July in that financial year; and

(b)

ends at the end of the day on which the commutation is to take place.

"days in financial year" means the number of days in the financial year in which the commutation is to take place.

[6] Paragraph 4A.04 (1) (b)

omit

allocated pension

insert

allocated pension or market linked pension

[7] Paragraph 4A.05 (6A) (b)

omit

allocated pension —

insert

allocated pension or market linked pension —

[8] Paragraph 4A.08 (1) (b)

omit

allocated pension

insert

allocated pension or market linked pension

[9] Subparagraph 4A.15 (1) (b) (ii)

omit

allocated pension

insert

allocated pension or market linked pension

[10] Paragraph 4A.18 (1) (b)

omit

allocated pension

insert

allocated pension or market linked pension

[11] Paragraphs 4A.27 (1) (b) and 4A.28 (1) (b)

omit

allocated pension.

insert

allocated pension or market linked pension.

[12] After Schedule 3

insert

Schedule 4 Payments for market linked pensions

(paragraph 1.07 (3A) (b))

1. Subject to the following clauses, the total amount of the payments mentioned in paragraph 1.07 (3A) (b) is determined using the formula:

where:

AB means the amount of the market linked pension account balance:

(a)

on 1 July in the financial year in which the payment is made; or

(b)

if that year is the year in which the pension commences — on the commencement day; and

"PF" means the payment factor set out in Column 3 in the Table in relation to the item in the Table that represents the term of the pension remaining, expressed in whole years in accordance with clause 5, on:

(a)

1 July in the financial year in which the payment is made; or

(b)

if that is the year in which the pension commences — the commencement day.

2. Payment of the account balance is sufficient to meet the payment for the financial year if, during the year, the account balance becomes less than the lesser of the following amounts:

(a)

the amount determined under clause 1;

(b)

the balance of the amount determined under clause 1 that remains to be paid for the year.

3. If, in the final year of the pension, after payment of the amount determined under clause 1, there is a residual balance in the account — payment of the account balance must be made within 28 days after:

(a)

the end of the term or the pension; or

(b)

if a period is chosen under clause 7 — the end of that period.

4. An amount determined under the formula in clause 1 is rounded to the nearest 10 whole dollars.

5. For clause 1, the remaining term of a market linked pension is rounded as follows:

(a)

if the commencement day of the pension is on or after 1 January in a financial year — rounded up to the nearest whole year;

(b)

if the commencement day of the pension is on or before 31 December in a financial year — rounded down to the nearest whole year.

6. If the commencement day of the pension is a day other than 1 July — the appropriate factor set out in Column 3 of the Table must be applied proportionally to the number of days in the financial year that include and follow the commencement day in that financial year.

7. If, on 1 July in a financial year ( current year ):

(a)

the payment factor that applies to an account balance for a market linked pension is 1.00; and

(b)

the payment factor that applied on 1 July in the previous financial year was not 1.00;

payments made in respect of the current year and the period after (if any) are taken to be determined in accordance with clause 1 if they comply with the following conditions:

(c)

payment of the account balance over one of the following periods:

(i)

if the remaining term of the pension is greater than 12 months — that period;

(ii)

12 months;

(d)

if payments are made in accordance with paragraph (c) — the provider has no obligation to make any other payment that, but for this clause, would have been determined on 1 July in the subsequent financial year.

Table