EXPLANATORY STATEMENT

STATUTORY RULES 1990 NO 140

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE

SUPERANNUATION ACT 1976

SUPERANNUATION (TRANSFER ARRANGEMENTS) REGULATIONS

(AMENDMENT)

The Superannuation Act 1976 (the 1976 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”.

Section 168 of 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.

Subsection 126(2) of the Act provides that the regulations may modify the Act in its application to a person who is, or has ceased to be, an eligible employee and who, at any time before becoming an eligible employee, was a member of a superannuation scheme. Those regulations are contained in the Superannuation (Transfer Arrangements) Regulations (the Principal Regulations). Subsection 126(3) provides that the modifications may include, but are not limited to, the payment of contributions and benefits in addition to, or in substitution for, those provided under the Act.

Subsection 168(3) of the Act provides that regulations made after 31 December 1978 by virtue of subsection 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.

Certain persons who ceased to be contributors under the Superannuation Act 1922 (the 1922 Act) could, in accordance with section 119V of that Act, elect to preserve their superannuation rights. The benefit available as a consequence of that election was either a transfer value payable to an eligible superannuation scheme, or if a transfer value was not payable, deferred benefits payable on the person attaining his or her minimum retiring age or an death or invalidity.

A person entitled to a transfer value from a superannuation scheme in respect of previous employment who becomes an eligible employee under the 1976 Act may pay the transfer value to the Commissioner for Superannuation in return for a credit of contributory service. Where that transfer value includes a transfer value previously paid to an eligible

superannuation scheme in respect of the person under the 1922 Act that credit of contributory service shall include a period in respect of his or her period as a contributor under the 1922 Act.

Where deferred benefits under the 1922 Act apply to a person who becomes an eligible employee under the 1976 Act, those deferred benefits continue to be applicable to the person and will become payable at the usual time provided for in that Act. The 1976 Act does not provide for the person to receive a credit of contributory service in respect of his or her period as a contributor under the 1922 Act.

A preservation benefit under the 1922 Act, whether it was a transfer value or deferred benefit, was intended to represent the value of the person’s rights under that Act. However the benefits available under the 1976 Act to a person who becomes an eligible employee and pays to the Commissioner an amount including a 1922 Act transfer value exceed the total benefits available to a person with deferred benefits under the 1922 Act who becomes an eligible employee, that is, the sum of his or her deferred benefits and entitlements under the 1976 Act.

It is intended that the Act be modified to ensure more equitable treatment between eligible employees who elected to preserve their superannuation rights under the 1922 Act.

To give effect to this intention the Regulations amend the Principal Regulations by inserting regulation 13 which provides that persons to whom deferred benefits are applicable or payable under the 1922 Act who become eligible employees for the purposes of the 1976 Act are persons included in a prescribed class of persons for the purposes of section 126 of the 1976 Act. The Regulations also insert Schedule 10 in the Principal Regulations which modifies certain provisions of the 1976 Act in their application to that prescribed class of persons. Details of the amending Regulations are set out in the Attachment.

To ensure that the modifications may apply, within the limits of the allowed retrospectivity, to all possible cases of eligible employees to whom 1922 Act deferred benefits are applicable or payable, the amending Regulations are to be taken to have commenced on 7 July, 1989.