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9.4 Employer Benefit or Employee Benefit?
The Commonwealth funded portion of superannuation benefits is called the ‘employer benefit’ and is considered in incapacity payment calculations.
Any part of the superannuation benefit that is attributable to a person's own contributions, the ‘employee benefit’, must be disregarded in calculations i.e. ancillary benefits.
Under the SRCA the employer benefit is added to the notional super contribution (the ‘SC’ amount) under S20, 21 and S21A. See section 6.6.6 for further information on the SC amount.
Under the MRCA the portion of a person’s superannuation pension or lump sum that is ‘employer benefit’ is used as the “person’s superannuation pension amount” or “person’s superannuation lump sum amount” in calculations under S116A – 116E and S134 -136.
9.4.1 Establishing the Commonwealth-funded component of superannuation benefits received from a scheme other than those administered by the CSC
From 1 July 2016 serving members can have their Commonwealth-funded superannuation credited to any superannuation scheme or retirement savings account they choose. This may be a scheme administered by the Commonwealth or a Commonwealth authority or an industry or private super fund. For the purposes of the legislation these are all considered to be the ‘superannuation scheme’ or ‘Commonwealth superannuation scheme’.
Alternatively, a person may roll their Commonwealth-funded superannuation over to any superannuation scheme or retirement savings account they choose after their retirement from the ADF.
In these cases the scheme may have contributions relating to both the person’s ADF employment (Commonwealth-funded contributions) and other employment.
The legislation (MRCA - section 135-6 and DRCA - section 4) outlines that the superannuation amount to be held in calculations is equal to:
1. the amount the employee’s superannuation contribution scheme identifies as employer-financed; or
2. if the superannuation scheme cannot identify the employer’s contributions, the amount the Commission assesses to be attributable to employer contributions, or
3. if the Commission cannot assess an amount to be attributable to the employer’s contribution, the amount of the pension in the week, or the lump sum the employee receives.
Once a person 'receives' (see section 9.8) a superannuation pension or lump-sum, delegates will need to establish how much of that pension or lump sum is Commonwealth-funded.
If a person voluntarily elects to roll over their Commonwealth-funded superannuation into another fund after they have reached their preservation age, the Commonwealth-funded superannuation has 'been received' and the full amount that was rolled over would be used to offset incapacity payments from the date of roll-over.
When a veteran accesses a payment from a superannuation fund that is not administered by the CSC and this payment is from (all or part) Commonwealth-funded supeannuation contributions, delegates will need to establish the value of the Commonwealth-funded portion of that payment.
Delegates will need to establish the total value of the superannuation in the fund and the current value of the Commonwealth-funded amount rolled over or orignially deposited to the fund (this is supplied by the superannuation fund).
A few possible scenarios exist;
- If the veteran accessed all of the superannuation held in that fund, then the current value of the Commonwealth-funded amount will be used to offset incapacity payments.
- If the veteran only accesses a portion of the total amount held in that fund, a ratio is applied to determine the amount to be offset.
- If the superannuation fund cannot provide the current value of the Commonwealth-funded superannuation, the same methods will be applied as above but will be based on the original value of the Commonwealth-funded amount rolled over.
A veteran accesses $50,000 from their private superannuation fund of $100,000. Prior to preservation age the veteran had rolled over $20,000 of Commonwealth-funded super into the private fund. The scheme identifies that the super that was rolled over is now worth $25,000. As one quarter of the total amount in the private fund is Commonwealth-funded, one quarter of the amount accessed (in this case $12,500) is used to offset incapacity payments.
i.e. $25,000/$100,000 = 25% (25,000/100,00 x 100)
25% x $50,000 = $12,500 (amount to be offset)
If the private fund was not able to identify the current value of the original amount rolled over, the amount used to offset incapacity payments would be $10,000 (as the original amount of Commonwealth-funded superannuation rolled over is one fifth of the total amount in the fund).
i.e. $20,000/$100,000 = 20%
20% x $50,000 = $10,000 (offset amount)
Delegates can request assitance from Benefits and Payments Policy via the Delegate Support Framework.