Income Tax Assessment Regulations 1997

SCHEDULE 1A  

(subregulations 292-170.02(2) , 292-170.05(2) and (3) and 292-170.06(2) and (3))


METHOD OF WORKING OUT AMOUNT OF NOTIONAL TAXED CONTRIBUTIONS

PART 1 - PRELIMINARY  

SECTION 1.3   1.3  


An actuary must not certify a category of membership to be a benefit category unless the actuary is satisfied that:


(a) each hypothetical new entrant to the benefit category with the same entry age would accrue retirement benefits on substantially the same basis; or


(b) if any 2 hypothetical new entrants to the benefit category accrued retirement benefits on a different basis, the new entrant rates for each member calculated under Parts 2 and 3 would be equal.

Example

A defined benefit fund provides a benefit accrual of 10% plus twice member contribution rate of final average salary for each year of membership. Members can contribute at either 4% or 6% of salary. Member A contributes at 4% and member B contributes at 6%. An actuary must not certify that A and B are in the same benefit category unless the new entrant rates, as calculated under this Schedule, for members who contribute at 4% and 6%, are equal.

Note:

A member would not be expected to move from one benefit category to another unless 1 of the following relevant external events occurs:

  • (a) the member ceases accruing benefits under one section of the fund rules but commences accruing benefits under another section of the fund rules as a result of a change in employment status, eg promotion;
  • (b) the member continues accruing benefits under one section of the fund rules and commences accruing benefits under another section of the fund rules as a result of a change in employment status, eg promotion;
  • (c) the member ceases accruing benefits under one section of the fund rules and commences or continues accruing benefits under another section of the fund rules as a result of reaching maximum accrual or a change in employment status, eg demotion;
  • (d) the exercise of a member option which results in a material change in the level of employer support;
  • (e) a change in fund rules which directly affected the member ' s rate of accrual of retirement benefits in respect of future membership after 1 July 2007.
  • Example for paragraph (d)

    If the new entrant rates calculated for members with different member contribution rates are not equal, and, as a result, there are a number of benefit categories corresponding to the different member contribution rates, then a change in contribution rate would result in a move between benefit categories


     

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