Explanatory Statement

Issued by the Authority of the Minister for Revenue and Assistant Treasurer

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Amendment Regulations 2001 (No. 3)

Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the SIS Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the SIS Act.

The purpose of the Regulations is to provide options to facilitate the splitting of superannuation interests between a person who holds a superannuation interest (the member spouse) and their spouse (the non-member spouse) upon their separation.

The Regulations are consequential to Part VIIIB of the Family Law Act 1975, inserted by the Family Law Legislation Amendment (Superannuation) Act 2001. Part VIIIB allows the member spouse to make an agreement with his or her non-member spouse to split the member spouse's superannuation interest between them upon separation. In the event that the parties are unable to agree, the Family Court will be able to order that the superannuation interest be split between them. Part VIIIB applies to all superannuation interests, including those that are held in a regulated superannuation fund and an Approved Deposit Fund (ADF). A superannuation payment that is liable to be split is referred to as a splittable payment.

The Regulations:

·
introduce new definitions and modify others contained in the SIS Regulations in order to conform with the Family Law Legislation Amendment (Superannuation) Act 2001;
·
require the trustee of a regulated superannuation fund or ADF to give notice to the member spouse and non-member spouse that the member spouse's superannuation interest is subject to a payment split;
·
if the interest is held in a self-managed superannuation fund, allow the member spouse to request the trustee to roll over or transfer the non-member spouse's entitlement to a regulated superannuation fund, ADF, Retirement Savings Account (RSA) or Exempt Public Sector Superannuation Scheme (EPSSS) nominated by the non-member spouse;
·
allow the non-member spouse to request the trustee to create a new interest in the regulated superannuation fund or ADF on his or her behalf, transfer the entitlement to another regulated superannuation fund, ADF, RSA or EPSSS nominated by the non-member spouse or, if the non-member spouse has met a condition of release, request the lump sum payment of his or her entitlement;
·
allow the trustee, if no request is received from the member spouse or the non-member spouse, to create an interest on behalf of the non-member spouse or roll over or transfer the non-member spouse's entitlement to another regulated superannuation fund, ADF, RSA or Eligible Rollover Fund (ERF);
·
ensure that unrestricted non-preserved, restricted non-preserved and preserved benefits are shared between the parties on an equal basis in proportion to their share of overall benefits;
·
ensure that minimum benefits held in the regulated superannuation fund or ADF are shared proportionately between the member spouse and non-member spouse, with the option of a trustee making all of the member spouse's and the non-member spouse's benefits minimum benefits, providing that the other fund members' minimum benefits are not reduced; and
·
introduce information and disclosure requirements that must be provided by the trustee to the non-member spouse before the non-member spouse has an interest created and on-going information where an interest cannot be created or transferred (e.g. in the case of defined benefit schemes).

EXPLANATION OF PROVISIONS

Regulation 1 - Name of Regulations

This clause is a formal provision specifying the mode of citation of the Regulations.

Regulation 2 - Commencement

The Regulations will commence on the commencement of the Family Law Legislation Amendment (Superannuation) Act 2001. The Family Law Legislation Amendment (Superannuation) Act 2001 commences on proclamation, but if not proclaimed, commencement will be 18 months from the date the Act received Royal Assent, which was 28 June 2001.

Regulation 3 - Amendment of Superannuation Industry (Supervision) Regulations 1994

This clause provides that the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) are amended as set out in Schedule 1.

Schedule 1 - Amendments

Items 1 to 17 - Definitions

Regulation 1.03 (1) of the SIS Regulations defines the terms used in the Regulations. Items 1 to 17 will introduce a number of new definitions and modify others contained in the SIS Regulations in order to conform with the requirements of the Family Law Legislation Amendment (Superannuation) Act 2001. Where relevant, these terms will have the same meaning under both the Family Law Legislation Amendment (Superannuation) Act 2001 and the SIS Regulations.

Item 1 defines an accumulation interest. An accumulation interest has been defined as any interest in a regulated superannuation fund or ADF that is not a defined benefit interest (see Item 3 ).

Item 2 defines adjusted base amount according to regulation 47 of the Family Law (Superannuation) Regulations 2001.

Item 3 provides for definitions of allocated pension and base amount payment split. An allocated pension is a pension that meets the standards prescribed in subregulation 1.06(4). A base amount payment split is a payment split under which the non-member spouse is allocated a base amount (within the meaning of Part VIIIB of the Family Law Act 1975).

Item 4 defines defined benefit interest according to the meaning given by regulation 1.03AA (see Item 16 ).

Item 5 defines flag lifting agreement according to Part VIIIB of the Family Law Act 1975.

Item 6 defines growth phase according to the meaning given in the Family Law (Superannuation) Regulations 2001.

Item 7 defines member spouse according to Part VIIIB of the Family Law Act 1975.

Item 8 defines non-member spouse and operative time according to Part VIIIB of the Family Law Act 1975.

Item 9 provides for definitions of payment split and payment split notice. A payment split is defined according to Part VIIIB of the Family Law Act 1975. A payment split notice is a notice that the trustee of a regulated superannuation fund or ADF is required to give to a non-member spouse and a member spouse after a payment split has occurred. The requirements for a payment split notice are set out in regulation 7A.03 (see Item 43 ).

Item 10 provides for definitions of percentage-only interest and percentage payment split. A percentage-only interest is defined according to Part VIIIB of the Family Law Act 1975. A percentage payment split is a payment split under which the non-member spouse's entitlement is calculated according to a percentage specified in a superannuation agreement, flag lifting agreement or court order.

Item 11 extends the definition of reviewable decision to ensure that, for the purposes of allocating, rolling over or transferring a non-member spouse's entitlements under subregulation 7A.16(8)(b), decisions by the Regulator to allow forms of consent other than written consent are decisions that are reviewable by the Administrative Appeals Tribunal.

Item 12 defines splittable payment and splitting order according to Part VIIIB of the Family Law Act 1975.

Item 13 defines superannuation agreement according to Part VIIIB of the Family Law Act 1975.

Item 14 defines transferable benefits. A non-member spouse's transferable benefits are an amount equal to the value of the non-member spouse's base amount, adjusted base amount or a percentage of the original interest, whichever is applicable, less the amount of any fees charged in respect of the payment split.

Item 15 extends the definition of withdrawal benefit to ensure that superannuation benefits that are payable to a non-member spouse as a result of a payment split are counted as withdrawal benefits of the member (i.e. for the purposes of determining the member spouse's benefits on leaving a regulated superannuation fund or ADF or on meeting a condition of release).

Item 16 defines a defined benefit interest. A superannuation interest is a defined benefit interest if the interest entitles the member who holds the interest to a benefit on retirement or termination of employment that is calculated with reference to one or more of the following amounts or factors:

·
the member's final salary or salary averaged over a period;
·
a specified amount;
·
specified conversion factors.

A superannuation interest is also a defined benefit interest if it is an interest in an unfunded public sector superannuation scheme that has at least one member of the fund who is entitled to receive benefits on retirement or termination of employment calculated with reference to one or more of the abovementioned amounts or factors.

An interest in a regulated superannuation fund is not a defined benefit interest if the benefit is calculated according to one or more of the above mentioned amounts or factors only when it is paid on death or invalidity.

Item 17 modifies the definition of member so that a non-member spouse is treated as a member of a regulated superannuation fund or ADF for the purposes of the SIS Act and Regulations if the interest held in the fund is subject to a payment split and the non-member spouse is not a member of the fund in his or her own right immediately before the operative time of the payment split. The modified meaning of member also ensures that self-managed superannuation funds retain their status for a six month period even if the addition of the non-member spouse means the statutory limit of four members for self-managed superannuation funds is breached. This will give self-managed funds time to restructure their affairs so that they are not in breach of the SIS Act.

Item 17 also ensures that superannuation funds with fewer than five members immediately before the operative time that are regulated by the Australian Prudential Regulation Authority (APRA) must retain an approved trustee for a period of six months after the operative time.

Under the modified meaning of member contained in Item 17, the non-member spouse is also treated as a member for the purposes of the provisions concerning lending to members (section 65 of the SIS Act) and in-house assets (Part 8 of the SIS Act).

Items 18-25

A benefit payment must adhere to prescribed minimum standards in order to be treated as a complying pension. Currently, under paragraph 1.06(2)(b), the size of pension payments can be varied as provided for in the governing rules of the regulated superannuation fund or ADF or to allow commutation to pay a contributions surcharge debt. Items 18 and 19 amend paragraph 1.06(2)(b) to allow the size of pension payments to also be varied to enable splittable payments to be made and reasonable fees to be charged. This will allow a pension payment to a primary beneficiary or a reversionary beneficiary to be split with a non-member spouse and therefore reduced, without losing complying pension status. Similarly, Items 20 and 21 allow a pension already in payment at the operative time to be commuted to pay the non-member spouse his or her entitlement under a payment split.

Subregulation 1.06(4) sets out the minimum standards for allocated pensions. Under these standards, benefit payments which do not comply with subregulation 1.06(2) currently are pensions if they occur on or after 22 December 1992, and are made at least annually and, with the exception of a payment by way of commutation, are within maximum and minimum limits calculated in accordance with Schedule 1A of the SIS Regulations. Item 22 amends this latter condition to clarify that payments made under a payment split are subject to the maximum and minimum limits contained in Schedule 1A.

Similarly, subregulation 1.06(6) sets out the minimum standards for defined pensions. Under these standards benefit payments which do not comply with subregulation 1.06(2) are pensions if they occur on or after 1 July 1994 and are fixed payments which only allow variation as specified in the governing rules of the regulated superannuation fund or ADF or for bonus payments. Item 23 amends paragraph 1.06(6)(b) to also allow the size of pension payments to be varied to enable splittable payments to be made. Items 24 and 25, like Items 20 and 21, allow a pension already in payment at the operative time to be commuted to pay the non-member spouse his or her entitlement under a payment split.

Items 26 to 29 - Information about a superannuation interest that is subject to a payment split

Regulation 2.05 ensures that a trustee of a regulated superannuation fund or ADF is not required to provide information to a member of the fund if the trustee does not have contact details for the member or is satisfied on reasonable grounds that the contact details that the trustee has for the member are incorrect. Item 26 adds a new subregulation to regulation 2.05 so that a non-member spouse in respect of an interest that is subject to a payment split is considered a member for the purposes of regulation 2.05.

Item 27 inserts a new Division, Division 2.5A, which requires the trustee of a regulated superannuation fund or ADF to give certain information when an interest in the fund becomes subject to a payment split. The information the trustee will be required to give is set out in regulations 2.36C and 2.36D and represents operating standards for the purposes of subsections 31(1) and 32(1) of the SIS Act.

The information listed in regulation 2.36C is information that will assist the non-member spouse in exercising options available to him or her under Part 7A. In order to take into account the special rules applying to percentage only interests as provided for in the Family Law (Superannuation) Regulations 2001, the information requirements contained in regulation 2.36C varies in part depending on whether the interest is a percentage only interest, a base amount split or percentage payment split.

If the interest is not a percentage only interest and the payment split is a base amount payment split, paragraph 2.36C(1)(b) applies. Under paragraph 2.36C(1)(b), the trustee is required to give the non-member spouse information about the base amount allocated to the non-member spouse, the method by which the base amount is calculated and a statement outlining whether the non-member spouse is permitted by the fund's governing rules to become a member of the fund and the options available to the non-member spouse under Part 7A.

If the interest is not a percentage only interest and the payment split is a percentage payment split, paragraph 2.36C(1)(c) applies. Under paragraph 2.36C(1)(c), the trustee is required to give the non-member spouse information about the percentage that is to apply to all splittable payments in respect of an interest and a statement outlining whether the non-member spouse is permitted by the fund's governing rules to become a member of the fund and the options available to the non-member spouse under Part 7A.

If the interest is a percentage only interest, paragraph 2.36C(1)(d) applies. Under paragraph 2.36C(1)(d), the trustee is required to give the non-member spouse information about the percentage that applies to the splittable interest and whether the percentage acts to reduce the share of each splittable payment the non-member spouse will receive in proportion to the length of time between separation and the time the interest becomes payable.

There are periodic reporting requirements if an interest is subject to a base amount payment split and is in the growth phase and under Part 7A a new interest has not been created for the non-member spouse or the non-member spouse's entitlements have not been rolled over or transferred to another regulated superannuation fund, ADF, RSA or EPSSS or the non-member spouse's entitlements have been paid to the non-member spouse as a lump sum. Regulation 2.36D requires a trustee to give both the member spouse and the non-member spouse information about the non-member spouse's adjusted base amount at the end of the fund's reporting period, the amount of the adjustment and the method used to calculate the adjusted base amount. This information must be provided to the non-member spouse as soon as practicable after the end of the fund's reporting period, and no later than 6 months after the end of the fund's reporting period. In the case of the member spouse, the information must be given at the same time as member information that must be given to a member of a regulated superannuation fund or ADF under subdivision 2.4.2. A trustee is also required to give the non-member spouse information about any event that will have an adverse effect on the non-member spouse's benefit entitlements. This information must be given before, or as soon as practicable after the occurrence of the event.

Items 28 and 29 amend paragraph 2.40(3)(b) so that, in addition to a person who is or was a member of a regulated superannuation fund or ADF in the previous 12 months or a beneficiary of the fund, a non-member spouse is a concerned person for the purposes of Regulations 2.40 and 2.41. Regulations 2.40 and 2.41 specify information and documents that must be given to a concerned person on request.

Items 30 and 31

Regulation 3.01 lists classes of persons who are considered `prescribed classes' in determining whether a superannuation fund is a public offer fund for the purposes of sub-subparagraph 18(1)(a)(ii)(b) and paragraph18A(2)(e) of the SIS Act. Items 30 and 31 amend regulation 3.01 to make persons, each of whom is a non-member spouse for whom an interest has been created in the fund under Part 7A, a prescribed class.

Item 32

Regulation 4.13 prohibits the trustee of an ADF from lending money or providing financial assistance to a member or relative of a member of the fund. Item 28 amends subregulation 4.13(4) to insert a definition of member. This definition ensures that a non-member spouse is included as a member for the purposes of regulation 4.13.

Items 33 and 34

Subregulation 5.02(2) permits the trustee of a regulated superannuation fund or ADF to include in fees charged to the member the direct costs of establishing, operating and terminating the fund, as well as any administrative, insurance and taxation costs relating to the establishment, operation and termination of the fund.

Items 33 and 34 extend subregulation 5.02(2) so that if a member's benefits in the regulated superannuation fund or ADF are subject to a payment split, the trustee of the fund is permitted to include the costs of administering the payment split in the costs that may be charged to the member. However, the trustee of the fund is not permitted to include in any determination of costs, fees in respect of the payment split that have been charged to the member separately under the payment splitting provisions contained in Part VIIIB of the Family Law Act 1975.

Items 35 and 36 - Minimum Benefits

Under SIS regulation 5.04, a member's minimum benefits in a regulated superannuation fund or ADF are currently defined to include:

·
the member's member-financed benefits (that is, the member's own contributions to the fund); and
·
the member's mandated employer-financed benefits (that is, the contributions made by, or on behalf of, the member's employer under the Superannuation Guarantee arrangements or under an industrial award).

Under regulation 5.08, the trustee of a regulated superannuation fund or ADF must ensure that a member's minimum benefits in the fund are maintained in the fund until they are cashed as benefits for the member, or rolled over or transferred as benefits of the member.

Items 35 and 36 insert a new regulation, regulation 5.06B, which establishes rules for determining minimum benefits if a new interest is created, or if benefits are rolled over or transferred, in accordance with Part 7A concerning superannuation interests subject to a payment split.

Under the new regulation ( Item 36 ), minimum benefits must be shared between the member spouse and the non-member spouse in proportion to the split of overall benefits. However, the trustee can decide to make all of the benefits of both the member spouse and the non-member spouse minimum benefits, provided that in doing so, the trustee does not reduce the minimum benefits of other members of the regulated superannuation fund or ADF. Where a non-member spouse's entitlement is transferred or rolled over to another regulated superannuation fund, ADF, RSA or EPSSS all the benefits of the non-member spouse will be minimum benefits in accordance with existing regulation 5.06 of the SIS Regulations and regulation 3.04 of the RSA Regulations.

Items 37 to 40 - Payment of benefits

Items 37 to 40 amend certain provisions contained in Divisions 6.2 and 6.3 of the SIS Regulations concerning the circumstances in which a trustee may pay a member's benefits to a person other than the member in order to facilitate the payment of benefits to a non-member spouse in accordance with Part 7A.

Item 37 extends regulation 6.17(2) concerning the general circumstances in which a member's benefits may be paid to include the regulations concerning the payment of benefits contained in Part 7A. Item 37 also removes the reference to Division 6.4A from subparagraph 6.17(2)(a)(i). Division 6.4A was previously repealed by regulation 3 and Schedule 1, Item 36 of the Superannuation Industry (Supervision) Amendment Regulations 1999 (No. 14).

Item 38 makes Regulation 6.17A(4), which sets out the conditions that must be met for a member's death benefit nomination to be binding on the trustee of a regulated superannuation fund or ADF, subject to regulations 7A.17 and 7A.18 concerning the payment and cashing of a non-member spouse's entitlements (see Item 43 ), in addition to the provisions contained in regulation 6.17B, as currently provided.

Item 39 makes regulation 6.22(1), which sets out the limitations on the cashing of a member's benefits to a person other than the member, subject to regulations 7A.13, 7A.17 and 7A.18 concerning the payment and cashing of a non-member spouse's entitlements (see Item 39 ), in addition to the provisions contained in regulation 6.22B, as currently provided.

Regulation 6.26 outlines the circumstances in which a trustee of an ADF may pay a member's benefits to a person other than the member. Item 40 makes this regulation subject to regulations 7A.13, 7A.17 and 7A.18 concerning the payment and cashing of a non-member spouse's entitlements (see Item 43 ).

Items 41 and 41

Regulation 7.04 sets out the conditions for the acceptance of contributions by regulated superannuation funds. Items 41 and 42 insert a new paragraph into subregulation 7.04(1) which permits a regulated superannuation fund to accept contributions in respect of a payment split, for example a payment split out of `other money' under subparagraph 14(3)(b)(ii) of the Family Law (Superannuation) Regulations 2001.

Item 43 - Part 7A Superannuation interests subject to payment split

Item 43 inserts a new part, Part 7A, into the SIS Regulations.

The purpose of Part 7A is to:

·
facilitate the payment splitting arrangements established under Part VIIIB of the Family Law Act 1975; and
·
provide for additional options that may be exercised in relation to a superannuation interest that is subject to a payment split under that Act. [Reg 7A.01]

Specifically, Part 7A provides:

·
rules for payment split notices;
·
options for the member spouse, non-member spouse and the trustee of a regulated superannuation fund or ADF in respect of an accumulation interest that is in the growth phase (i.e. the interest is not in the payment phase) and subject to a payment split; and
·
payment standards for non-member spouse entitlements that have become payable.

The standards set out in Part 7A are operating standards for the purposes of subsections 31(1) and 32(1) of the SIS Act. [Reg 7A.02].

Payment split notices

The amendments require a trustee of a regulated superannuation fund or ADF to give a payment split notice to both the member spouse and the non-member spouse when an interest becomes subject to a payment split. In the case of a payment split under a superannuation agreement or flag lifting agreement, notice must be given within 28 days after the operative time for the payment split. In the case of a payment split made under a court order, notice must be given by the end of 28 days after the operative time of the payment split or 28 days after the trustee receives a copy of the court order, whichever is later. The payment split notice must be in writing and state the date on which it is given (this would normally be the date that it is posted).

A trustee is not required to give a payment split notice to the member spouse and the non-member spouse if the superannuation interest ceases to be subject to the payment split before the specified period for giving notice has expired. [Reg 7A.03]

Options for an accumulation interest that is in the growth phase and subject to a payment split and an allocated pension that is subject to a payment split

Division 7A.2 provides options for an accumulation interest in a regulated superannuation fund or ADF that is in the growth phase and subject to a payment split, and an allocated pension that is being paid in respect of an interest. [Reg 7A.04]

If an accumulation interest that is in the growth phase or an allocated pension is subject to a payment split, the non-member spouse may request the trustee of the fund in which the interest is held to convert the non-member spouse's entitlement into a new interest in the fund to be held for the non-member spouse. [Reg 7A.05] Alternatively, the non-member spouse or if the interest is in a SMSF, the member spouse, may request the trustee of the fund in which the interest is held to transfer the non-member spouse's entitlement to another regulated superannuation fund, ADF, RSA or EPSSS to be held for the benefit of the non-member spouse. [Reg 7A.06].

The non-member spouse may also request the payment of his or her entitlements under a payment split as a lump sum if the non-member spouse has satisfied a condition of release at the operative time. The relevant conditions of release are contained in Schedule 1 of the SIS Regulations and relate to release on the condition of retirement, death, permanent incapacity or attaining age 65. [Reg 7A.07]

A request must be in writing, be signed by the person making the request and state the date on which the request is given to the trustee. A request by the non-member spouse must include the non-member spouse's name, date of birth and postal address, while a request from a member spouse in respect of a SMSF must include a written nomination from the non-member spouse which specifies the regulated superannuation fund, ADF, RSA or EPSSS into which the transfer is to be made. This requirement ensures that the non-member spouse's agreement to the transfer of his or her entitlement has been received prior to any request being made by the member spouse.

A request from a member spouse or a non-member spouse must be received by the trustee of the regulated superannuation fund or ADF within 28 days after the trustee gives the payment split notice to the member spouse and the non-member spouse. The trustee also has the discretion to allow a period longer than 28 days for such a request to be made. Once made, the trustee may allow the request to be withdrawn. [Reg 7A.08]

The trustee must give effect to the first request that they receive under Division 7A.2 within the time allowed. If the governing rules of the regulated superannuation fund or ADF do not allow a new interest to be created for the non-member spouse, or a regulated superannuation fund, ADF, RSA or EPSSS does not accept the transfer of a non-member spouse's entitlement, the trustee may ask the non-member spouse to nominate another regulated superannuation fund, ADF, RSA or EPSSS into which his or her entitlements can be transferred and, on receipt of a nomination, rollover or transfer the non-member spouse's entitlements into the nominated fund. Alternatively, the trustee may transfer the non-member spouse's entitlement into an ERF. The trustee must notify the non-member spouse if the trustee exercises this option. [Reg 7A.09]

If the trustee does not receive a request from a member spouse or a non-member spouse within 28 days or such longer period allowed by the trustee, the trustee may opt to create a new interest in the fund for the non-member spouse or roll over or transfer the non-member spouse's entitlements to another regulated superannuation fund, ADF, RSA or EPSSS. If the trustee opts to roll over or transfer the non-member spouse's entitlement, the trustee must notify the non-member spouse of the trustee's intention to do so and give the non-member spouse 28 days to nominate a regulated superannuation fund, ADF, RSA or EPSSS for the roll over or transfer. The trustee must also provide the non-member spouse with details of the ERF it may use if the non-member spouse does not nominate a fund within 28 days. If the non-member spouse does not nominate a regulated superannuation fund, ADF, RSA or EPSSS within 28 days, the trustee may roll over or transfer the benefits to an ERF. [Reg 7A.10] Creating a new interest in a regulated superannuation fund or ADF for a non-member spouse

An interest in a regulated superannuation fund or ADF can be created either at the non-member spouse's request (under regulation 7A.05) or at the trustee's initiative (under regulation 7A.10).

If the trustee creates a new interest for the non-member spouse, and the payment split is a base amount payment split, the value of the interest must be equal to the value of the non-member spouse's adjusted base amount at the time the new interest is created, unless there is no adjusted base amount, in which case the value of the interest must be equal to the non-member spouse's base amount at the time the new interest is created. If the payment split is a percentage payment split, the value of the non-member spouse's interest must be equal to the original value of the member spouse's interest at the time the new interest is created multiplied by the percentage applying in the superannuation agreement, flag-lifting agreement or court order. The trustee may reduce the value of the interest by the amount of any fees charged in respect of the payment split.

In creating a new interest for the non-member spouse, amounts must be taken proportionately from the member spouse's unrestricted non-preserved benefits, restricted non-preserved benefits and preserved benefits. They will have the same character in the non-member spouse's new interest.

At the time the non-member spouse's interest is created, the member spouse's benefits in the regulated superannuation fund or ADF must be reduced by the amount of the non-member spouse's interest. If some or all of the member spouse's benefits become payable before the non-member spouse's interest is created, and the payment to the member spouse is a splittable payment, the value of the non-member spouse's benefits in the new interest will be reduced by the amount that is payable to the non-member spouse out of the splittable payment prior to the interest being created.

The non-member spouse's interest in the fund is taken to be created on the day the trustee of the fund receives notice of the request from the non-member spouse. If the non-member spouse's interest has been created at the trustee's own initiative because the trustee did not receive a request from a member spouse or a non-member spouse within 28 days, or such longer period as allowed by the trustee, the interest is taken to be created from the end of that period. In both cases, the trustee has 28 days after the new interest has been created to notify the non-member spouse that the interest has been created. [Reg 7A.11] Rolling over or transferring the non-member spouse's benefits to another regulated superannuation fund, ADF, RSA or EPSSS

A non-member spouse or if the original interest is in a SMSF, a member spouse, may apply to have the non-member spouse's entitlements rolled over or transferred to another regulated superannuation fund, ADF, RSA or EPSSS nominated by the non-member spouse. A non-member spouse's entitlement can also be rolled over or transferred to another regulated superannuation fund at the trustee's initiative if the trustee has not received a request under regulations 7A.05, 7A.06 or 7A.07.

If the trustee rolls over or transfers a non-member spouse's entitlement (the non-member spouse's transferable benefits), the value of the member spouse's benefits in the regulated superannuation fund or ADF must be reduced by the amount of the non-member spouse's transferable benefits. The non-member spouse's benefits must be taken proportionately from the member spouse's unrestricted non-preserved benefits, restricted non-preserved benefits and preserved benefits.

The trustee is required to give effect to the rollover or transfer within a specified timeframe.

·
In the case of a rollover or transfer to another regulated superannuation fund, ADF, RSA or EPSSS at the request of the non-member spouse or the member spouse under regulation 7A.06, the non-member spouse's entitlements must be rolled over or transferred within 90 days of receiving the request, or a longer period if allowed by the Regulator.
·
In the case of a rollover or transfer to a regulated superannuation fund, ADF, RSA or EPSSS nominated by the non-member spouse at the trustee's initiative under paragraph 7A.10(1)(b), the non-member spouse's entitlements must be rolled over or transferred within 90 days of receiving a fund nomination from the non-member spouse.
·
In the case of a rollover or transfer to an ERF at the trustee's initiative under paragraph 7A.10(1)(c), the non-member spouse's entitlement must be rolled over or transferred within 90 days after the end of the 28 day period the non-member spouse is given in subregulation 7A.10(2) to nominate a regulated superannuation fund or RSA for the rollover or transfer and no nomination has been received from the non-member spouse.

The trustee must notify the non-member spouse (and the member spouse, if the rollover was requested by the member spouse) that the interest has been rolled over or transferred within 28 days of the rollover or transfer taking place. [Reg 7A.12]

The standards for the payment of benefits to a non-member spouse who has met a relevant condition of release and requests the payment of his or her entitlements under regulation 7A.07 are contained in regulation 7A.13. The valuation of the non-member spouse's entitlements under these payment standards mirrors the approach to the valuation of a non-member spouse's entitlements if an interest was created for the non-member spouse under regulation 7A.11. [Reg 7A.13] Payment standards for non-member spouse entitlements

Division 7A.3 establishes payment standards for non-member spouse entitlements where the non-member spouse is entitled to a payment because a splittable payment has become payable and, at the time the splittable payment becomes payable, a new interest has not been created for the non-member spouse in the fund in which the interest is held, or the non-member spouse's entitlements have not been rolled over or transferred into another regulated superannuation fund, ADF, RSA or EPSSS. In general, Division 7A.3 will only apply where an interest cannot be created for the non-member spouse, or the non-member spouse's entitlements cannot be transferred to another regulated superannuation fund, ADF, RSA or EPSSS (for example, where the member spouse's interest is a defined benefit interest). [Reg 7A.14]

Division 7A.3 provides for options for the trustee of a regulated superannuation fund or ADF depending on whether the non-member spouse has or has not satisfied a relevant condition of release. The relevant conditions of release are contained in Schedule 1 of the SIS Regulations and relate to release on the condition of retirement, death, permanent incapacity or attaining age 65. [Reg 7A.15]

Where a non-member spouse has not satisfied a relevant condition of release at the time of the splittable payment, the trustee of a regulated superannuation fund or ADF in which the interest is held is required to either allocate the non-member spouse's entitlement to an interest in the fund created for the non-member spouse or rollover or transfer the non-member spouse's entitlement to another regulated superannuation fund or RSA.

If the payment is a lump sum, the regulations provide that this should be done within 90 days of the splittable payment becoming payable, or such longer period allowed by the Regulator. If the splittable payment is derived from a pension that is being paid to a member spouse, the trustee is required to allocate, rollover or transfer the non-member spouse's entitlement in accordance with the frequency identified in the governing rules of the fund. If the governing rules of the fund do not identify a frequency for payments, the regulations ensure that the trustee must make the payments at least annually.

In the case of a rollover or transfer of a non-member spouse's entitlement, the trustee of the transferor fund is required to first obtain the consent of the non-member spouse to the rollover or transfer, or have reasonable grounds to believe that the receiving fund has received consent from the non-member spouse to the rollover or transfer. If neither of these conditions are met, the trustee must rollover or transfer the payments to an ERF in accordance with section 243(2) of the SIS Act. [Reg 7A.16]

Despite a non-member spouse not having satisfied a condition of release at the time of the splittable payment, pension payments payable to the non-member spouse must be paid to the non-member spouse if a pension was already being paid to the member spouse out of the splittable interest on or before the operative time for the payment split. [Reg 7A.17]

If the non-member spouse has satisfied a condition of release when the splittable payment becomes payable, then there are no further preservation restrictions on the payment of a splittable payment to the non-member spouse. In these circumstances, the trustee must either pay the non-member spouse's entitlement to the non-member spouse or, if the non member spouse so requests, rollover or transfer the non-member spouse's entitlements to another regulated superannuation fund or RSA or allocate the non-member spouse's entitlements to an interest created in the fund for the non-member spouse (if the fund's governing rules allow an interest to be created for the non-member spouse). Any new interest created in the fund or through a transfer will be subject to the normal SIS requirements, including the compulsory cashing standards. [Reg 7A.18] Items 44 to 47

Part 9 of the SIS Regulations sets out the financial management standards for regulated superannuation funds and ADFs pertaining to:

·
benefits vested in the member of a fund;
·
the aggregate benefit amount of a member of a fund;
·
benefits accrued to a member of a fund; and
·
obligations of a fund in respect of a member

Item 44 ensures that the standards contained in Division 9.2 apply to the entitlements of both the member spouse and the non-member spouse in respect of an interest that is subject to a payment split.

Regulation 9.15 sets out the formula for determining the minimum benefit index for a defined benefit fund. Item 45 extends the definition of benefit entitlements of former members, contained in the formula, to include any amounts payable to the former member's spouse or former spouse as a result of a payment split. Item 46 extends the definition of MRB to include any amounts payable to the member's spouse or former spouse as a result of a payment split.

Similarly, Item 47 extends the definition of accrued benefits of a member for the purposes of applying to defined benefit funds to include any amounts payable out of those benefits to the member's spouse or former spouse under a payment split. Items 48 and 49

Division 9.6 sets out standards concerning the solvency of regulated superannuation funds and ADFs that are accumulation funds. Item 48 and Item 49 extend the definition of minimum guaranteed benefit for the purposes of Division 9.6 to include any minimum benefits of a member that are allocated to a non-member spouse as a consequence of a payment split under regulation 5.06B (see Item 36 ). Item 50

Item 50 ensures that a payment of an entitlement to a non-member spouse under Part 7A is not subject to the requirements of Part 24 of the SIS Act concerning the payment of benefits to an ERF. Item 50 also ensures that where the benefits of a member of a regulated superannuation fund or ADF that are subject to a payment split are transferred to an ERF, the value of the new superannuation interest to be created in the receiving ERF on behalf of the member excludes any amount that is payable to the member's spouse or former spouse under the payment split. Items 51 to 57

Regulation 13.13 prevents the trustee of a regulated superannuation fund or ADF from recognising a charge over the assets of the fund, subject to the exceptions provided for in subregulation 13.13(2). Item 51 amends subregulation 13.13(2) to ensure that a payment split in respect of a member's interest in a regulated superannuation fund or ADF is not a charge over or in relation to the member's benefits in the fund or ADF.

Subject to some exceptions, under regulation 13.16 a trustee is prohibited from adversely altering a member's benefits in a regulated superannuation fund or ADF. Under paragraph 13.16(2)(a), this prohibition does not apply if the alteration does not relate to a member's minimum benefits and the trustee has obtained the written consent of the member or the Regulator. Item 52 amends subparagraph 13.16(2)(a)(i) so that where the trustee seeks to alter a member's benefits, and the member's benefits are subject to a payment split and a separate interest has not been created or rolled over or transferred, if the trustee opts to seek the written consent of the member, the trustee must also obtain the written consent of the non-member spouse.

Item 53 and 54 insert a new paragraph into subregulation 13.16(2) to ensure that an alteration of a member's benefits as a result of a payment split is an allowable alteration of a member's benefits under regulation 13.16 concerning restrictions on the alteration of a member's benefits.

Similarly, Item 55 inserts paragraph 13.16(3)(ab) so that where the trustee seeks to alter a member's benefits, and the member's benefits are subject to a payment split, the trustee first must give notice to both the member spouse and the non-member spouse. Item 56 ensures that both the member and, where the member's interest is subject to a payment split, the non-member spouse are given adequate time to consider any proposed alteration. Item 57 ensures that where the trustee seeks consent to the alteration from the Regulator in accordance with subparagraph 13.16(2)(a)(ii), the Regulator must consider the impact of the alteration on the benefits that may become payable to a non-member spouse in relation to an interest in the fund that is subject to a payment split.