EXPLANATORY STATEMENT

STATUTORY RULES 1986 NO 311

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE

SUBJECT:       SUPERANNUATION ACT 1976 - SUPERANNUATION

(TRANSFER ARRANGEMENTS) REGULATIONS (AMENDMENT)

Section 168 of the Superannuation Act 1976 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which the Act requires or permits to be prescribed, or which are necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

The Act makes provision for and in relation to an occupational superannuation scheme for persons employed by the Commonwealth, and for certain other persons. Persons eligible to contribute under the Act are referred to in the Act as “eligible employees”.

Sub-section 126(2) of the Act provides that the regulations may make provision for modifying the Act, or a provision of the Act specified in the regulations, in the application of the Act or that provision to and in relation to a person who is, or has ceased to be, an eligible employee and who, at any time before he became an eligible employee, was a member of a superannuation scheme, or to and in relation to a prescribed class of such persons. Sub-section 126(3) provides that the modifications may include, but are not limited to, modifications providing for the payment of contributions and benefits in addition to, or in substitution for, those provided under the Act.

Sub-section 168(3) of the Act provides that regulations made after 31 December 1978 by virtue of sub-section 126(2) may be expressed to have taken effect from and including a day not earlier than 12 months before the making of the regulations.

Regulations made by virtue of sub-section 126(2) are contained in the Superannuation (Transfer Arrangements) Regulations.

The Regulations amend the Superannuation (Transfer Arrangements) Regulations by inserting Schedule 7 to modify certain provisions of the Act in their application to Mr L.T. MacAlister who was appointed under sub-section 52(1) of the Australian Trade Commission Act 1985 to the office of Managing Director of the Australian Trade Commission for a 7 year term from 1 February 1986. Mr MacAlister became an eligible employee for the purposes of the Act on 3 February 1986 by virtue of a direction under section 14 of the Act.

Mr MacAlister was employed by Kennecott Explorations (Australia) Ltd and Kennecott Copper corporation, USA, from 8 February 1966 to 31 December 1977 and, during that period, was a member of a superannuation scheme known as the Kennecott Pension Plan. Mr MacAlister will receive a lump sum benefit from that scheme on attaining age 55 years on 8 March 1987. It is intended that:

•           provided Mr MacAlister pays to the Commonwealth the amount he receives from the Kennecott Pension Plan, together with interest on that amount at the rate of 10 per cent per annum flat calculated from the date he became an eligible employee until such time as he pays the amount to the Commonwealth, his Kennecott service will be recognised as contributory service for the purposes of the Act;

•           Mr MacAlister may purchase from his own resources additional contributory service for the purposes of the Act to bring his total contributory service to 20 years at the end of his 7 year appointment. The additional period required is 1 year and 40 days and the amount required to purchase that period is $12,655.15; and

•           Mr MacAlister will not be required to undergo a medical examination under section 16 of the Act.

Sections 127 and 128 of the Act provide that a person who becomes an eligible employee may pay to the Commissioner for Superannuation a transfer value from a superannuation scheme of which he was previously a member in exchange for a credit of a period of contributory service for the purposes of the Act. A transfer value is a lump sum benefit from the previous scheme that includes a component based on employer contributions and that was payable upon the termination of the employment to which the previous scheme related otherwise than on the ground of invalidity or physical or mental incapacity.

Section 129 of the Act enables a lump sum benefit from a previous scheme that does not form part of a transfer value to be paid into the Superannuation Fund and treated as supplementary contributions.

Section 16 of the Act provides that a new eligible employee may be required to undergo a medical examination. Section 130 provides that section 16 does not apply in certain circumstances where the person pays a transfer value to the Commissioner.

The Regulations modify sections 127 to 130 so that:

•           provided Mr MacAlister pays to the Commissioner the amount he receives from the Kennecott Pension Plan, together with interest thereon, his period of contributory service will be increased by the period from 8 February 1966 to 31 December 1977 (11 years and 327 days);

•           provided Mr MacAlister pays the sum of $12,655.55 to the Commissioner, his period of contributory service will be increased by the period from 1 January 1978 to 9 February 1979 (1 year and 40 days);

•           the amount received by Mr MacAlister from the Kennecott Pension Plan and the amount of $12,655.15 will be treated as employer components of transfer values for the purposes of the Act and will be paid into the Consolidated Revenue Fund;

•           the amount of interest payable by Mr MacAlister in respect of the amount he receives from the Kennecott Pension Plan will be paid into the Consolidated Revenue Fund but will not form part of a transfer value; and

•           Mr MacAlister will not be required to undergo a medical examination.

The Regulations also omit section 129 as that section will not apply to Mr MacAlister.

The Regulations operate with effect from 3 February 1986, the date on which Mr MacAlister became an eligible employee for the purposes the Act.