On 29 May 2018, the Australian Government Actuary registered the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2018, on the Federal Register of Legislation.
This Determination provides:
- The interest rate for adjusting entitlements under certain orders or agreements made under the Family Law Act 1975 (Act) and for splitting future superannuation benefits for the adjustment period that is Financial Year 2018-19.
- The method by which the interest rate is calculated for that purpose for an adjustment period that includes a period within that financial year.
The determinations relate to the adjustment of superannuation entitlements, of separated and divorced spouses, and of separated de facto couples (except in Western Australia, which did not transfer its power over de facto couples). The entitlements are provided under certain orders, or agreements, that split particular kinds of future superannuation benefits, made in property settlements under Part VIIIB of the Act (which is about allowing certain ‘splittable payments’ in respect of ‘superannuation interests’ to be allocated between the parties to the marriage/de facto marriage).
The Family Law (Superannuation) Regulations 2001 are made under the Act, and r45D provides interest rates that are to be applied to the ‘base amount’ split, to be paid to the non-member spouse, under the Court order or Payment Agreement. This is to provide growth in the split amount, until the benefit is ultimately paid. Reg 45D applies to defined benefit funds and Self Managed Superannuation Funds (SMSF‘s). It provides that the interest rate is to be:
a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary time earnings for all persons in Australia [AWOTE], as published by the Australian Bureau of Statistics during the year ending with the November quarter immediately before the beginning of the adjustment period.
Reg 45D goes on to say that the resulting combined percentage is to be: “the rate determined by the Australian Government Actuary, and published in the Gazette”.
This 2018 ‘Determination’ gazette’s the combined percentage amount as 4.9% (which includes the 2.5% point uplift).
The Determination commences on 1 July 2018.
3.6.18 FJM
[ATO website: 2018 Determination, EM; LTN 103, 31/5/18; Tax Month – May 2018]
Study questions (answers available)
- Does the Determination relate to splitting superannuation interests, between separating or divorcing parties to a marriage, or de facto marriage?
- Does the Determination gazette an interest rate for adjusting a ‘base amount’ to be split, under the relevant Family Court order, or binding financial agreement?
- Does this Determination apply to all superannuation interests, other than ‘defined benefit’ interests or SMSF interests?
- Is the gazetted rate (including the required 2.5% uplift, above AWOTE) = 4.9%?
