Commonwealth Numbered Regulations

1994 No. 461 INCOME TAX REGULATIONS (AMENDMENT) - REG 3

3.1 After Part 5, insert:

"PART 5A-REASONABLE BENEFIT LIMITS

"Division 1-Preliminary Introductory

"46. Divisions 2 and 3 of this Part are made, under section 140ZE of the Act,
for transitional purposes only.

Interpretation

"47. (1) In this Part, unless the contrary intention appears:
'HAS', in relation to a person, subject to regulation 49, means the highest
average annual salary of the person over any 3 consecutive financial years
(including a financial year in which the person did not earn salary for the
whole of the year) before the 1994-1995 financial year;
'HAS-based lump sum RBL', in relation to a person, means the amount worked out
by multiplying the amount of the person's HAS by the amount of the person's
lump sum reasonable benefit multiple;
'HAS-based pension RBL', in relation to a person, means the amount worked out
by multiplying the amount of the person's HAS by the amount of the person's
pension reasonable benefit multiple;
'lump sum reasonable benefit multiple', in relation to a person who is
applying for a transitional RBL, subject to subregulation (2), means:

   (a)  if the eligible service period in relation to the ETP, pension or
        annuity commenced on or after 1 July 1990-the number obtained by
        dividing the sum of:

        (i)    7 times $46,640 or, if the person's HAS is less than $46,640, 7
               times the person's HAS ; and

        (ii)   5 times the part (if any) of the person's HAS that exceeds
               $46,640 but does not exceed $86,610; and

        (iii)  3 times the part (if any) of the person's HAS that exceeds
               $86,610; by the person's HAS; or

   (b)  in any other case-the number worked out using the formula:
(OLD SP x OLD RBM) + (NEW SP x NEW RBM) where:
'OLD SP' means the number worked out by dividing the number of days in the
relevant eligible service period that occurred before 1 July 1990 by the total
number of days in the relevant eligible service period; and
'OLD RBM' means the multiple applicable to the benefit under Schedule 2A; and
'NEW SP' means the number worked out by dividing the number of days in the
relevant eligible service period that occurred on or after 1 July 1990 by the
total number of days in the relevant eligible service period; and
'NEW RBM' means the number that would be the person's lump sum reasonable
benefit multiple if the relevant eligible service period had commenced on or
after 1 July 1990;
'net business income', in relation to a business the gross income of which in
respect of a financial year exceeds all deductions for that year with respect
to the business that are allowable deductions for the purposes of the Act
(other than any deductions allowable under section 82AAC or 82AAT, or Division
16C of Part III, of the Act), means the amount of that excess;
'net business losses', in relation to a business where all deductions for the
financial year commencing on 1 July 1990 or a later financial year with
respect to the business that are allowable deductions for the purposes of the
Act (other than any deductions allowable under section 82AAC or 82AAT, or
Division 16C of Part III, of the Act) exceed the gross income of the business
in respect of that year, means the amount of that excess;
'pension reasonable benefit multiple', in relation to a person who is applying
for a transitional RBL, subject to subregulation (2), means:

   (a)  if the eligible service period in relation to the benefit commenced on
        or after 1 July 1990-the number worked out using the formula:
M
HAS x 15 where:
'M' means the sum of:

        (i)    0.75 times $46,640 or, if the person's HAS is less than
               $46,640, 0.75 times the person's HAS; and

        (ii)   0.55 times the part (if any) of the person's HAS that exceeds
               $46,640 but does not exceed $86,610; and

        (iii)  0.35 times the part (if any) of the person's HAS that exceeds
               $86,610; or

   (b)  in any other case-the number worked out using the formula:
(OLD SP x OLD RBM) + (NEW SP x NEW RBM) where:
'OLD SP' means the number worked out by dividing the number of days in the
relevant eligible service period that occurred before 1 July 1990 by the total
number of days in the relevant eligible service period; and
'OLD RBM' means the multiple applicable to the benefit under Schedule 2A; and
'NEW SP' means the number worked out by dividing the number of days in the
relevant eligible service period that occurred on or after 1 July 1990 by the
total number of days in the relevant eligible service period; and
'NEW RBM' means the number that would be the person's pension reasonable
benefit multiple if the relevant eligible service period commenced on or after
1 July 1990;
'salary', subject to subregulations (3) and (4), means salary, wages,
commissions, bonuses, fees, allowances or gratuities paid to a person during a
financial year, and includes:

   (a)  subject to paragraph (k), other earnings; and

   (b)  the amount that would be the value of a benefit to which section 57,
        57A or 58 of the Fringe Benefits Tax Assessment Act 1986 applies if
        that benefit were not an exempt benefit; and

   (c)  a payment made by a company by way of remuneration to a director of
        the company; and

   (d)  in the case of a person who is an Australian citizen, or a resident of
        Australia-any amounts paid to the person from a source outside
        Australia that would fall within this definition if they had been paid
        from a source in Australia; but does not include:

   (e)  a distribution from a trust estate; or

   (f)  allowances to cover expenses incurred on behalf of the person's
        employer or business; or

   (g)  any ETP; or

   (h)  a superannuation pension or an annuity; or

   (j)  a payment to which section 26AC or 26AD of the Act applies; or

   (k)  earnings on investments;
'vested superannuation benefits' has the meaning given by subregulation (5).



"(2) For the purposes of the definitions of 'lump sum reasonable benefit
multiple' and 'pension reasonable benefit multiple', if a person has more than
1 benefit entitlement, the person's relevant eligible service period for
transitional RBL purposes is taken to have started on the earliest date of the
longest eligible service period in relation to the person's benefit
entitlements.



"(3) For the purposes of the definition of 'salary' in subregulation (1):

   (a)  amounts to which paragraph (d) of that definition applies are to be
        converted into Australian currency at the rate that is the average of
        the exchange rates for the currency in which the foreign source
        amounts were paid at the start, and at the end, of the financial year
        in which the amounts were paid; and

   (b)  if a person carries on a business (either alone or in partnership with
        another person):

        (i)    the person's salary is to be increased by the person's share of
               the net business income; or

        (ii)   the person's salary is to be decreased by the person's share of
               the net business losses; and

   (c)  if:

        (i)    a person is an associate of the person's employer; and

        (ii)   the person's salary is greater or lesser than the amount (in
               this paragraph called the 'arm's length salary') that would, in
               the opinion of the Commissioner, acting in accordance with
               subregulation (4), be the person's salary if the person had not
               been an associate of the employer; the person's salary for the
               purposes of this Part is taken to be the arm's length salary.



"(4) In determining the arm's length salary under subregulation (3), the
Commissioner is to have regard to:

   (a)  the nature of the work performed; and

   (b)  the hours worked; and

   (c)  the salary that would be payable to a person who is not an associate
        of the employer for performing similar work for similar hours; and

   (d)  any other relevant matters.



"(5) Subject to subregulation (6), the amount of vested superannuation
benefits in relation to a person is the sum of: Lump sum benefit in a
superannuation fund or an ADF

   (a)  if the person has a benefit entitlement, in the form of a lump sum, in
        a superannuation fund or an ADF-the greatest of the following amounts:

        (i)    the RBL amount (worked out under section 140ZH of the Act) of
               the person's accumulated benefit on 30 June 1994;

        (ii)   the RBL amount (worked out under that section) of the benefit
               payable to the person if he or she resigned on 30 June 1994;

        (iii)  the RBL amount (worked out under that section) of the benefit
               payable to the person if he or she became redundant on that
               date; Deferred annuity held by a life assurance company or
               registered organisation

   (b)  if the person has a benefit entitlement, in the form of a deferred
        annuity, in a life assurance company or a registered organisation-the
        RBL amount (calculated under section 140ZI of the Act) of the benefit
        payable to the person if he or she commuted the entitlement on 30 June
        1994; Lump sum benefit payable under a contract of employment

   (c)  if the person has a benefit entitlement, in the form of a lump sum,
        payable under a contract of employment-the greater of the following
        amounts:

        (i)    the RBL amount (worked out under section 140ZJ of the Act) of
               the benefit payable to the person under the contract if he or
               she resigned on 30 June 1994;

        (ii)   the RBL amount (worked out under that section) of the benefit
               payable to the person under the contract if he or she became
               redundant on that date; Pension benefit in a superannuation
               fund

   (d)  if the person has a benefit entitlement, in the form of a pension that
        has not become payable, in a superannuation fund-the greatest of the
        following amounts:

        (i)    the RBL amount (worked out under section 140ZK of the Act) of
               the amount of the person's accumulated benefit on 30 June 1994;

        (ii)   the RBL amount (worked out under that section) of the capital
               value of the benefit payable to the person if he or she
               resigned on 30 June 1994;

        (iii)  the RBL amount (worked out under that section) of the capital
               value of the benefit payable to the person if he or she became
               redundant on that date.



"(6) For the purposes of subregulation (5), there must be added to an amount
worked out in accordance with that subregulation in relation to a person the
sum of adjusted RBL amounts of previous benefits in relation to the person,
where that sum is worked out:

   (a)  in accordance with subsection 140ZA (4) of the Act; and

   (b)  on the basis that, in using the formula in the subsection to work out
        the portion, the 'second-last quarter' in the formula is the quarter
        ending on 30 June 1994; and

   (c)  on the basis that subsection 140ZA (5) of the Act does not apply.



"(7) Unless the contrary intention appears, a term defined in section 140C of
the Act and not defined in this regulation has the same meaning in this Part
as it has, under that section, in Division 14 of Part III of the Act.

Rules for working out ETPs for transitional RBL purposes

"48. Where a person has a benefit entitlement that is to be taken into account
for transitional RBL purposes, the following rules apply in working out the
person's transitional RBL:

   (a)  if the benefit is in a superannuation fund or an ADF in the form of a
        lump sum-the payment of the lump sum to which the person would be
        entitled if he or she ceased on 30 June 1994 to be a member of the
        superannuation fund or ADF is taken to be the retained amount of an
        ETP;

   (b)  if the benefit is in a superannuation fund in the form of a
        pension-the entitlement to the pension that would accrue to the person
        if he or she ceased on 30 June 1994 to be a member of the fund is
        taken to commence on 1 July 1994;

   (c)  if the benefit is a deferred annuity in a life assurance company or a
        registered organisation-the lump sum to which the person would be
        entitled if he or she commuted the annuity entitlement on 30 June 1994
        is taken to be the retained amount of an ETP;

   (d)  if the benefit is a lump sum payable under a contract of
        employment-the lump sum to which the person would be entitled if the
        employment terminated on 30 June 1994 is taken to be the retained
        amount of an ETP that is paid after 30 June 1994.

Special rules relating to HAS

"49. (1) For the purposes of the definition of 'HAS' in subregulation 47 (1),
where a person has earned salary but not during 3 consecutive financial years,
that definition applies to:

   (a)  if the person has earned salary for at least 2 full consecutive
        financial years-the person's average salary for those 2 years; or

   (b)  if the person has earned salary for at least one full financial year
        but less than 2 full consecutive financial years-the person's salary
        for that financial year; or

   (c)  in any other case-the person's final annualised salary.



"(2) Subject to this regulation, if the period of a person's HAS does not
include the financial year 1993-1994:

   (a)  the HAS is multiplied by the index number for the quarter ending on 30
        June 1994; and

   (b)  the product of that multiplication is divided by the index number for
        the last quarter in the period of the person's HAS.



"(3) Subregulation (2) does not apply to a person in relation to a benefit if
that subregulation would result in a reduction of the person's HAS.



"(4) Where an amount worked out under subregulation (2) is not a multiple of
$10, it is to be increased to the nearest multiple of $10.



"Division 2-Specific RBLs Introductory

"50. This Division applies subject to Division 1. (NOTE: In particular,
provisions in this Division concerning the amount of a person's transitional
RBL must be read subject to any applicable provision of regulations 47 to 49.)

Commissioner may determine RBLs at higher amount

"51. The Commissioner may determine that, because of special circumstances, a
person's transitional lump sum RBL or transitional pension RBL is to be an
amount that is higher than it would be under another provision of this Part.

RBLs-persons aged under 45 on 1 July 1994

"52. (1) In this regulation, 'eligible person' means a person born after 1
July 1949.



"(2) An eligible person has a transitional lump sum RBL if:

   (a)  the amount of the person's vested superannuation benefits as at 30
        June 1994 exceeds $400,000; and

   (b)  the amount of the person's HAS-based lump sum RBL exceeds $400,000.



"(3) Subject to regulation 53B, if a person has a transitional lump sum RBL
under subregulation (2), the amount of that RBL is the lesser of:

   (a)  the amount of the person's vested superannuation benefits as at 30
        June 1994; and

   (b)  the amount of the person's HAS-based lump sum RBL.



"(4) An eligible person has a transitional pension RBL if:

   (a)  the amount of the person's vested superannuation benefits as at 30
        June 1994 exceeds $800,000; and

   (b)  the amount of the person's HAS-based pension RBL exceeds $800,000.



"(5) Subject to regulation 53B, if a person has a transitional pension RBL
under subregulation (4), the amount of that RBL is the lesser of:

   (a)  the amount of the person's vested superannuation benefits as at 30
        June 1994; and

   (b)  the amount of the person's HAS-based pension RBL.

RBLs-persons aged at least 45, but under 50, on 1 July 1994

"53. (1) In this regulation, 'eligible person' means a person born:

   (a)  after 1 July 1944; and

   (b)  on or before 1 July 1949.



"(2) An eligible person has a transitional lump sum RBL if:

   (a)  the amount of the person's HAS-based lump sum RBL exceeds $400,000;
        and

   (b)  an amount exceeding $400,000 is obtained by adding:

        (i)    the amount of the person's vested superannuation benefit; and

        (ii)   the amount calculated in accordance with the following formula:
(HAS-based lump sum RBL - vested superannuation benefit) x N
1826 where N is the number of days by which the person's age on 1 July 1994
exceeds the person's age on his or her 45th birthday. (NOTE: The number '1826'
in the formula is the number of days in the period commencing on 1 July 1944
and ending on 30 June 1949.)



"(3) Subject to regulation 53B, if an eligible person has a transitional lump
sum RBL under subregulation (2), the amount of that RBL is the lesser of:

   (a)  the amount worked out, in relation to the person, under paragraph (2)
        (b); and

   (b)  the person's HAS-based lump sum RBL.



"(4) An eligible person has a transitional pension RBL if:

   (a)  the amount of the person's HAS-based pension RBL exceeds $800,000; and

   (b)  an amount exceeding $800,000 is obtained by adding:

        (i)    the amount of the person's vested superannuation benefit; and

        (ii)   the amount calculated in accordance with the following formula:
(HAS-based pension RBL - vested superannuation benefit) x N
1826 where N is the number of days by which the person's age on 1 July 1994
exceeds the person's age on his or her 45th birthday. (NOTE: The number '1826'
in the formula is the number of days in the period commencing on 1 July 1944
and ending on 30 June 1949.)



"(5) Subject to regulation 53B, if an eligible person has a transitional
pension RBL under subregulation (4), the amount of that RBL is the lesser of:

   (a)  the amount worked out, in relation to the person, under paragraph (4)
        (b); and

   (b)  the person's HAS-based pension RBL.

RBLs-persons aged at least 50 on 1 July 1994

"53A. (1) In this regulation, 'eligible person' means a person born on or
before 1 July 1944.



"(2) An eligible person has a transitional lump sum RBL if the amount of the
person's HAS-based lump sum RBL exceeds $400,000.



"(3) Subject to regulation 53B, if an eligible person has a transitional lump
sum RBL under subregulation (2), the amount of that RBL is the amount of the
person's HAS-based lump sum RBL.



"(4) An eligible person has a transitional pension RBL if the amount of the
person's HAS-based pension RBL exceeds $800,000.



"(5) Subject to regulation 53B, if an eligible person has a transitional
pension RBL under subregulation (4), the amount of that RBL is the amount of
the person's HAS-based pension RBL.

Amount of transitional RBLs

"53B. (1) If:

   (a)  an ETP is paid to a person on a day (the 'ETP day') occurring before
        the person's 55th birthday; or

   (b)  a superannuation pension or annuity that does not meet the pension and
        annuity standards is paid to a person with a commencement day
        occurring before the person's 55th birthday; the person's transitional
        lump sum RBL worked out in accordance with subregulation 52 (3), 53
        (3) or 53A (3) is discounted by 2.5% for each whole year in the
        period:

   (c)  beginning on the birthday of the recipient immediately before the ETP
        day or the commencement day or, if the ETP day or the commencement day
        falls on the birthday of the recipient, on that birthday; and

   (d)  ending immediately before the day that is or will be the recipient's
        55th birthday.



"(2) The amount of transitional lump sum RBL or transitional pension RBL that
applies to a person under regulation 52, 53 or 53A (reduced, where applicable,
under subregulation (1)) is:

   (a)  in the case of the 1994-1995 year of income-the amount of transitional
        lump sum RBL or transitional pension RBL; or

   (b)  in the case of a later year of income-the amount that, under
        subsection 140ZD of the Act would replace the amount of transitional
        lump sum RBL or transitional pension RBL, on the basis that the
        indexable amount for the purposes of that subsection is:

        (i)    the amount of transitional lump sum RBL or transitional pension
               RBL; or

        (ii)   if that amount has been previously altered in accordance with
               this paragraph, the amount or the latest amount (as the case
               requires) obtained by that alteration.



"(3) This regulation applies subject to regulations 53C and 53D.

Reasonable benefit limit where amount in ADF, life assurance company or
registered organisation

"53C. (1) Where:

   (a)  the Commissioner is to make a determination under section 140R or 140T
        of the Act in relation to a benefit paid, or commencing to be paid, to
        the person; and

   (b)  on 15 February 1990 an amount was held in relation to the person by:

        (i)    an ADF, other than a continuously non-complying ADF, in respect
               of an amount deposited with the ADF on or before that date; or

        (ii)   a life assurance company or a registered organisation in
               respect of a rolled-over amount deposited with the company or
               organisation on or before that date; the amount of the person's
               transitional lump sum RBL or transitional pension RBL is the
               greater of:

   (c)  the amount of the person's transitional lump sum RBL or transitional
        pension RBL, worked out in accordance with subregulation 53B (2); and:

   (d)  subject to subregulations (2) and (3), if the person was at least 50
        years old on 15 February 1990-the sum of:

        (i)    the aggregate of the rolled-over amounts held in ADFs, life
               assurance companies or registered organisations on behalf of
               the person on that day; and

        (ii)   the amount of earnings that have accrued after that day on
               those amounts while held in those funds, companies or
               organisations or in:

                (A)  other ADFs, life assurance companies or registered
                     organisations; or

                (B)  superannuation funds; and

        (iii)  the amount of earnings on the amount referred to in
               subparagraph (ii); or

   (e)  in any other case-the aggregate of the rolled-over amounts held in
        ADFs, life assurance companies or registered organisations on behalf
        of the person on that day.



"(2) For the purposes of subparagraph (1) (d) (ii), earnings are to be taken
to accrue on amounts rolled-over to a superannuation fund and used to provide
defined benefits at the rate of 10% annually.



"(3) For the purposes of applying paragraph (1) (d) to a person, where:

   (a)  after 15 February 1990, an amount is paid out of a superannuation
        fund, an ADF, life assurance company or registered organisation in
        respect of the person; and

   (b)  after that day the person rolled-over an amount to the fund, company
        or organisation (not being an amount that was held in another ADF,
        life assurance company or registered organisation on behalf of the
        person on that day); the amount referred to in paragraph (a) is taken
        to be applied first in reduction of the amount referred to in
        paragraph (b), and any earnings attributable to that amount, before
        being applied in reduction of the amount that was held in the fund,
        company or organisation on that day.

Reasonable benefit limit where recipient member of certain fund on 15 August
1989

"53D. Where:

   (a)  the Commissioner is to make a determination under section 140R or 140T
        of the Act in relation to a superannuation pension that:

        (i)    has commenced to be paid to a person; and

        (ii)   is payable under rules that meet the pension and annuity
               standards; and

   (b)  the pension is payable by a superannuation fund of which the person
        was a member on 15 August 1989; the amount of the person's
        transitional lump sum RBL or transitional pension RBL is the greater
        of:

   (c)  the amount of the person's transitional lump sum RBL or transitional
        pension RBL, worked out in accordance with subregulation 53B (2); and:

   (d)  the capital value of the pension under the governing rules of the fund
        as at 15 August 1989.



"Division 3-Procedure Registration of transitional RBLs

"53E. A person who, under regulation 52, 53 or 53A is an eligible person, must
register a transitional RBL with the Commissioner:

   (a)  not later than 31 December 1996; or

   (b)  if in a particular case the Commissioner allows registration at a
        later date-by that date.

Form of registration

"53F. Registration under regulation 53E must be in a form approved by the
Commissioner for the purpose.



"Division 4-Provisions under Division 14 of Part III of the Act Interpretation

"53G. In this Division:
'SIS Regulations' means the Superannuation Industry (Supervision) Regulations
as in force from time to time.

Pension valuation factor (s. 140C of the Act)

"53H. For the purposes of the definition of 'pension valuation factor' in
section 140C of the Act, the factor mentioned in the definition is to be
ascertained in accordance with Schedule 1B of the SIS Regulations.

Pension and annuity standards (s. 140L of the Act)

"53J. For the purposes of section 140L of the Act, a pension or an annuity is
treated as meeting the pension and annuity standards mentioned in that section
if it meets the standards set out:

   (a)  in the case of a pension-in subsection 1.06 (2) of the SIS
        Regulations; or

   (b)  in the case of an annuity-in subsection 1.05 (2) of the SIS
        Regulations.

Payers of benefits-specified information (s. 140M of the Act)

"53K. For the purposes of subsection 140M (1) of the Act, the information that
a payer mentioned in that section must give to the Commissioner is the
information specified in Schedule 2B.

Payers of ETPs that are rolled-over-specified information (s. 140Q of the Act)

"53L. For the purposes of subsection 140Q (1) of the Act, the information that
a payer mentioned in that section must give to the Commissioner is the
information specified in Schedule 2B.

Interpretation of Schedules 2A and 2B

"53M. So far as the provisions of Division 1 of Part 5A are relevant, those
provisions apply:

   (a)  subject to clause 1 of Schedule 2A-in relation to that Schedule; and

   (b)  in relation to Schedule 2B.".