OCCUPATIONAL SUPERANNUATION STANDARDS REGULATIONS 1987 (REPEALED)

PART I - PRELIMINARY  

REGULATION 3E   MEANING OF ANNUITY - SUBSECTION 3(1) OF THE ACT  

3E(1)   [ Benefit from life assurance or registered organisation ]  

A benefit provided by a life assurance company or a registered organisation is taken to be an annuity for the purposes of the Act if it is a benefit that:

(a) arises under a contract that meets the standards of subregulation (2), (4), (6), (7) or (8); and

(b) in the case of a benefit purchased on or after the commencement of this paragraph - is purchased with the whole or part of a rolled-over amount within the meaning of section 27A of the Tax Act.

3E(2)   [ Standards ]  

A contract for the provision of a benefit (in this subregulation called the annuity ) meets the standards of this subregulation if it contains provisions that ensure:

(a) that the annuity is paid at least annually throughout the life of the primary beneficiary in accordance with paragraphs (b) and (c) and, if there is a reversionary beneficiary:

(i) throughout the reversionary beneficiary ' s life; or

(ii) if he or she is a child of the primary beneficiary or of a former reversionary beneficiary under the annuity - at least until his or her 16th birthday; or

(iii) if the person referred to in subparagraph (ii) is a full-time student at age 16 - at least until the end of his or her full-time studies or until his or her 25th birthday (whichever occurs sooner); and

(b) that the size of the payments of benefit in a year is fixed, allowing for variation only as specified in the contract; and

(c) that, unless the Commissioner otherwise approves, the sum payable as benefit to the primary beneficiary or to the reversionary beneficiary, as the case may be, increases year by year by at least the lesser of:

(i) 5 % ; or

(ii) a rate equal to the rate of increase (if any) determined by comparing the quarterly CPI first published by the Australian Statistician for the second-last quarter preceding the date on which the payment is to be made with the quarterly CPI first published by the Australian Statistician for that quarter in the preceding year; and

(d) the amount paid as the purchase price is wholly converted into annuity income; and

(e) that the annuity does not have a residual capital value; and

(f) that the annuity cannot be commuted except:

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

(ii) if the commutation is made within 10 years after the commencement day of the annuity to the benefit of a reversionary beneficiary on the death of the primary beneficiary; or

(iii) if section 15S of the Act applies - in accordance with the section; or

(iv) if the ETP resulting from the commutation is transferred directly to the purchase of another benefit provided under a contract that meets the standards of this subregulation or subregulation (3) or provided under rules that meet the standards of subregulation 3F(2) or (3) ; and

(g) that if the annuity reverts or is commuted, it does not have a reversionary component greater than 100 % of the benefit that was payable before the reversion or the commutation; and

(h) that the annuity cannot be transferred to a person other than a reversionary beneficiary on the death of the primary beneficiary or of another reversionary beneficiary; and

(i) that the capital value of the annuity, and the income from it, cannot be used as security for a borrowing.

3E(3)   [ Effect of additional requirements ]  

An annuity is not taken not to meet the standards in subregulation (2) for the reason only that, although making provision meeting the standards of that subregulation, it additionally provides that:

(a) if the primary beneficiary dies within 10 years after the commencement day of the annuity, a surviving reversionary beneficiary may obtain a payment equal to the total payments that the primary beneficiary would have received, if the primary beneficiary had not died, from the day of the death until the end of the period of 10 years; and

(b) if the primary beneficiary dies within 10 years after the commencement day of the annuity and there is no surviving reversionary beneficiary, an amount, not exceeding the difference between the sum of the amounts paid to the primary beneficiary and the sum of the amounts that would have been so payable in the period of 10 years, is payable to the primary beneficiary ' s estate; and

(c) if the primary beneficiary dies within 10 years after the commencement day of the annuity and there is a surviving reversionary beneficiary who also dies within that period, there is payable to the reversionary beneficiary ' s estate an amount determined as described in paragraph (b) as if that paragraph applied to the reversionary beneficiary.

3E(4)   [ Annuity commencing on or after 22 December 1992 ]  

A contract for the provision of a benefit (in this subregulation called the annuity ):

(a) that does not meet the standards in subregulation (2); and

(b) that does not fix the size of payments of benefit in a year; and

(c) under which the commencement day is on or after the commencement of section 76 of the Taxation Laws Amendment (Superannuation) Act 1992 ;

meets the standards of this subregulation if the contract contains provisions that at least ensure that:

(d) the standards in paragraphs (2)(h) and (i) are met; and

(e) payments are made at least annually; and

(f) the payments in a year, except a payment by way of commutation, are not larger or smaller in total than, respectively, the maximum and minimum limits calculated in accordance with Schedule 1A .

Note:

The Taxation Laws Amendment (Superannuation) Act 1992 commenced on 22 December 1992.

3E(5)   [ Subreg (4) standards still met ]  

An annuity is not taken not to meet the standards in subregulation (4) for the reason only:

(a) that:

(i) the commencement day of the annuity occurs on or after 1 April in a financial year; and

(ii) the contract does not ensure that payments in that financial year meet the standard in that subregulation for the minimum amount; or

(b) that the contract does not ensure that the payments in the year in which the annuity is to end meet the standard in that subregulation for the minimum amount.

3E(6)   [ Annuity commencing on or after 1 July 1994 ]  

A contract for the provision of a benefit (in this subregulation called the annuity ):

(a) that does not meet the standards of subregulation (2); and

(b) that fixes the size of the payments of benefit in a year, allowing for variation only as specified in the contract; and

(c) under which the commencement day is on or after 1 July 1994;

meets the standards of this subregulation if the contract contains provisions that at least ensure that:

(d) the standards in paragraphs (2)(g), (h) and (i) are met; and

(e) variation in payments from year to year does not exceed, in any year, the average rate of increase of the CPI in the preceding 3 years; and

(f) payments in accordance with paragraph (b) are made at least annually; and

(g) the amount paid as the purchase price is wholly converted into annuity income.

3E(7)   [ Annuity with bonus payments ]  

A contract for the provision of a benefit (in this subregulation called the annuity ) that:

(a) does not meet the standards of subregulation (2); and

(b) provides for payments whose size in a year is fixed, allowing for variation only as specified in the contract; and

(c) provides for additional payments (in this subregulation called bonus payments );

(d) the commencement day of which is on or after 1 July 1994;

meets the standards of this subregulation if the contract contains provisions at least ensuring that:

(e) in respect of the fixed-size payments - the standards in subregulation (6) are met; and

(f) the fixed-size payments amount to at least 50 % of:

(i) if the provider provides annuities of the kind specified in subregulation (6) - the amount that would be payable if the annuity were wholly of that kind; or

(ii) if the provider does not provide annuities of the kind specified in subregulation (6) - the fixed-size payments are at least equal in amount to 50 % of the interest payable on Commonwealth bonds that have the same value as the purchase price of the annuity and that most closely correspond in term to the term of the annuity; and

(g) the amounts of the bonus payments (if any) are reasonably proportional to the investment income from which the payments purport to be derived; and

(h) the amount of a bonus payment (if any) is notified in writing by the provider each year and is paid to the beneficiary in the year next following (except when deferral of the payment would not result, in any future year, in the rate of increase in size of the total payments for the year exceeding the average rate of increase of the CPI in the preceding 3 years).

3E(8)   [ Annuity failing standards ]  

A contract for the provision of a benefit (in this subregulation called the annuity ):

(a) that does not meet all the standards in any other provision of this regulation; and

(b) under which the commencement day is on or after the commencement of section 76 of the Taxation Laws Amendment (Superannuation) Act 1992 ; and

(c) that provides for:

(i) payments whose size in a year is fixed, allowing for variation only as specified in the contract; and

(ii) additional payments whose size is not fixed, derived from the application of part of the purchase price to investments by allocation of the annuity provider;

meets the standards of this subregulation if the contract contains provisions that at least ensure that:

(d) in respect of fixed-size payments - if the commencement day is on or after 1 July 1994, the standards in subregulation (6) are met; and

(e) in respect of payments whose size is not fixed - the standards in subregulation (4) are met.

Note:

The Taxation Laws Amendment (Superannuation) Act 1992 commenced on 22 December 1992.