House of Representatives

Explanatory Memorandum

(Circulated by authority of the Attorney-General, the Honourable Daryl Williams AM QC MP)

Outline

The Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Bill 2001 (the Bill) makes amendments to relevant taxation legislation to ensure that appropriate tax treatment is applied for the Superannuation and Separation reforms contained in the Family Law Legislation Amendment (Superannuation) Act 2001 .

The Acts amended are as follows:

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the Family Law Act 1975;

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the Income Tax Assessment Act 1936;

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the Income Tax Assessment Act 1997;

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the Small Superannuation Accounts Act 1995;

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the Superannuation Contributions Tax (Assessment and Collection) Act 1997;

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the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection) Act 1997; and

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the Superannuation (Unclaimed Money and Lost Members) Act 1999.

The Bill will ensure appropriate tax treatment is applied when a superannuation interest is split under the superannuation and separation reforms. Specifically, the Bill provides that:

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if the non-members entitlement is paid as a lump sum, it will be treated as a separate eligible termination payment (ETP) for the non member;

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if the non-members entitlement is paid as a pension, it will be treated as a separate pension for the non member;

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the undeducted contributions, concessional, post-June 1994 invalidity, CGT exempt component and the untaxed element of the post-June 1983 component will be split on a proportionate basis to the overall split;

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the non-member spouses benefit will be assessed separately against his or her own Reasonable Benefit Limit (RBL);

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capital gains or losses that may arise from the creation or forgoing of rights when spouses enter into a binding superannuation agreement or where the agreement comes to an end will be disregarded;

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the current CGT exemption for payments made from a superannuation fund or an approved deposit fund will be extended to nonmember spouses; and

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CGT rollover relief will apply to in-specie transfers between funds with fewer than five members.

The Bill will also:

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provide for accounts held within the Superannuation Holding Accounts Reserve (SHAR) to be split;

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ensure that if a surcharge assessment is issued after a split but in respect of a period prior to the split, then the fund that holds those surchargeable contributions for the member spouse will be liable to pay the surcharge. If no fund holds those surchargeable contributions for the member spouse, then the member spouse will be liable to pay the surcharge;

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ensure that payments to a non member spouse will trigger payment of the surcharge debt account by an unfunded defined benefit scheme (or the member in a constitutionally protected fund) if the benefit payment would have triggered payment of the debt account if made to the member spouse; and

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apply the same protection and rights to the non-member spouse under the Superannuation (Unclaimed Money and Lost Members) Act 1999 that are currently given to the member spouse.

The Bill will commence immediately after the Family Law Legislation Amendment (Superannuation) Bill 2001 commences.