Bills Digest no. 107 2009–10
Governance of
Australian Government Superannuation Schemes Bill 2010
This Digest
replaces an earlier version dated 19 February 2010 to remove some references to
the role of the proposed Commonwealth Superannuation Corporation (CSC) in
respect of the Parliamentary Contributory Superannuation Scheme (PCSS), and make
some minor technical corrections.
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Governance of
Australian Government Superannuation Schemes Bill 2010
Date introduced: 4 February 2010
House: House of Representatives
Portfolio: Finance and Deregulation
Commencement: 1 July 2010
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
This Bill establishes a single trustee
entity responsible for the operations of most Commonwealth government
superannuation schemes.[1] This new entity will be known as the Commonwealth Superannuation Corporation
(CSC).
The Commonwealth superannuation schemes for which the
proposed CSC will be responsible will be:
- the scheme established under the Superannuation Act 1922 (the 1922 scheme)
- the Commonwealth Superannuation Scheme (CSS)
- the Public Sector Superannuation Scheme (PSS)
- the Public Sector Superannuation Accumulation Plan (PSSAP)
- the scheme provided for under the Papua New Guinea (Staffing
Assistance) Act 1973 (PNG Scheme)
- the Defence Forces Retirement Benefits Scheme (DFRB)
- the Defence Forces Retirement and Death Benefits Scheme (DFRDB)
- the Military Superannuation and Benefits Scheme (MSBS).
This Bill is one of three related Bills introduced at the
same time that will be debated together. The other Bills are:
- the Comsuper Bill 2010, and
- Superannuation Legislation (Consequential Amendments and
Transitional Provisions) Bill 2010.
Except for the PSSAP, the above schemes are wholly or
chiefly defined benefit schemes,[2] under which the final benefit is generally determined by a member’s years of
service and final salary on retirement.
Again, except for the PSSAP, these schemes will be
administered by Comsuper, a new administrative entity set up under the
provisions of the Comsuper Bill 2010, also before Parliament.[3]
The PSSAP is an accumulation scheme, under which a member’s
benefits are determined by their contributions and the scheme’s investment
returns. They are comparatively simple to administer, compared to the defined
benefit schemes.
Only the MSBS and the PSSAP are open to new members. The
other schemes have been closed to new members for some time and now have either
very low, or declining, numbers of active members. However, there are a
significant number of members receiving benefits (mainly pensions), and those
payment will continue to be made for some time to come.
Currently the trustee functions for the above Commonwealth
superannuation schemes are undertaken by:
- the Australian Reward Investment Alliance (ARIA) for the PSS,
PSSAP and CSS
- the Military Superannuation and Benefits Board (MSBS Board) for
the MSBS
- the Defence Force Retirement and Death Benefits Authority (the
Authority) for the DFRB and DFRDB
- the Commissioner for Superannuation for the 1922 and PNG schemes.
Generally, these trustee entities will be combined to form
the new CSC. The position of Commissioner for Superannuation will be abolished
under the provisions of the Superannuation Legislation (Consequential
Amendments and Transitional Provisions) Bill 2010 and its responsibilities for
the PNG and 1922 scheme transferred to the CSC.
The creation of the new CSC is complementary to the
streamlining of the administration of Commonwealth superannuation schemes
announced by the Minister for Finance and Deregulation in November 2009.[4]
The proposed changes were announced by the Minister for
Finance and Deregulation and the then Minister for Superannuation and Corporate
Law on 31 October 2008.[5]
At the time of writing, the Bill has not been referred to a
committee for inquiry and report.
Little interest has been shown in the proposed changes.
There are several points in favour of the proposed changes:
- there will be a single trustee to deal with a single scheme
administrator for the majority of the above superannuation schemes,[6] and
- there are a number of economies of scale to be gained from the
merging of the current separate trustee entities. The most important is the
reduction in fees for external services, such as asset consulting, investment
brokage and securities custody arrangements that a large investment fund can achieve.[7]
However, these superannuation schemes have different
memberships. For example the membership of the DFRDB and DFRB are largely
retired military personal. They may consider that their needs are not being
adequately represented by the new CSC. The Government has emphasised that there
will be several military representatives on the CSC’s Board (the Board).[8] Further, the CSC Board will be able to delegate decision concerning the
military superannuation schemes to a committee made up of military
representatives (Clause 58 of Schedule 1 of the Consequentials Bill).
The Explanatory Memorandum notes that ARIA, the MSB Board
and the Authority will jointly incur a cost of $1.1 million related to their
merger.[9]
Clause 4 continues the existence of the board established
by the Superannuation Act 1990, currently known as ARIA and gives it a
new name, the Commonwealth Superannuation Corporation (CSC). All other trustee
entities noted above will be merged into this entity.
Clause 7 sets out the functions of the proposed CSC which
will include all functions conferred on CSC by the Governance of Australian
Government superannuation Schemes Act (when enacted) and each and every Act
administered by CSC.
Clause 8 provides that CSC will have a Board, while clause
10 specifies that it will have a Chair and ten other members (called ‘directors’
in this Bill). Subclause 10(2)provides that:
- three Board members may be nominated by the President of the
Australian Council of Trade Unions, and
- two Board members may be nominated by the Chief of the Defence
Force.
All directors must meet the fitness and propriety standard
specified in Part 3 of the Superannuation Industry (Supervision) Act 1993: clause 11. The term of appointment may be for not more than three years: clause 12.
Clause 13 specifies that a director’s payments will
be determined by the Remuneration Tribunal.
Clause 16 allows the responsible Minister[10] to terminate a director’s appointment for a variety of reasons, including but
not limited to, the director’s:
- misbehaviour
- physical or mental incapacity
- bankruptcy or insolvency, and
- unexplained absences from three consecutive board meetings.
However, the Minister must not terminate the appointment of
a director nominated by the President of the Australian Council of Trade Unions
under any of the prescribed grounds unless the President consents to the
termination: subclause 16(5). Subclause 16(6) applies in similar
terms to a director nominated by the Chief of Defence Force. This consent
requirement does not apply termination under subclauses 16(3)-(4).
Clause 21 requires directors to disclose any conflict
of interest in relation to matters considered by the CSC Board.
Clauses 27 and 28 set out the accounting
requirements for CSC.
Clause 29 requires CSC to submit annual reports to
the responsible Minster in relation to the superannuation schemes and funds
administered by it. This will be a single report covering all these schemes. The
financial statements of CSC will be subject to an Auditor-General’s examination: subclause 29(3).
Under clause 30, the Trustee Act 1925 (ACT) applies to the directors acting in the performance of their duties, for those
matters not otherwise covered in relevant Commonwealth legislation.
According to items 31 and 32 CSC, and the
superannuation schemes administered by it, are not subject to taxation under a
law of the Commonwealth except for the provisions of:
- A New Tax System (Goods and Services Tax) Act 1999
- the Fringe Benefits Tax Assessment Act 1986[11]
- the Income Tax Assessment Act 1936
- the Income Tax Assessment Act 1997
- the Superannuation Contributions Tax (Assessment and
Collection) Act 1997.[12]
In addition CSC is not subject to a tax law of a State of
Territory.
This appears to be consistent with the normal taxation
arrangements applying to all other superannuation funds.
Clause 33 specifies the source of funds for paying
remuneration and allowances for the Chair and directors. Briefly, this source
of funds is:
- where a function is performed in relation to the 1922 and PNG
schemes or the DFRB and DFRDB, out of consolidated revenue
- where a function is performed in relation to other superannuation
funds administered by CSC, payments are to come from either that fund, the
consolidated revenue fund or partly out of the specific superannuation fund and
partly out of the consolidated revenue fund.
The 1922, PNG, DFRB and DFRDB superannuation schemes do not
have separate invested assets under management. Rather, their member
entitlements are now paid directly from consolidated revenue. In these
circumstances it is appropriate that all Board member’s remuneration in respect
of these schemes comes from that source.
The CSS, MSBS, PSS, and the PSSAP all have assets under
management. Thus it is appropriate that a portion of the Board member’s
remuneration comes from these assets.
Clause 34 deals with the indemnification of directors
of the Board of the Commonwealth Superannuation Corporation (CSC). It draws a
distinction between the directors of the Board of CSC and CSC itself. For
example, subsection 34(1) provides that anything done, or omitted to be done,
in good faith by a director or delegate of the Board of the CSC in the
performance of his or her functions under that Act, an Act administered by CSC
or a governing deed, ‘does not subject him or her personally to any action,
liability, claim or demand’. However, proposed subsection 34(2) of that Act
states that subsection 34(1) does not preclude CSC itself from being
subject to any action, liability, claim or demand.
Subclause 35(1) provides that CSC may delegate all or
any of its powers to various, named positions, including a member of the staff
of CSC; the CEO or a member of the staff of ComSuper; a member of the
Australian Defence Force; or an officer or employee of a person who is
responsible for investing money forming part of a superannuation fund
administered by CSC.[13] Subclause 35(2) states that despite proposed subsection 35(1), CSC may
only delegate its power to reconsider certain decisions to specified bodies.
For example, if the original decision was made by CSC or its delegate under the Defence Force Retirement and Death Benefits Act 1973, then CSC may only
delegate its power to reconsider the decision to the Defence Force Case
Assessment Committee established under section 100 of that Act.
Clause 36 provides for the Governor-General to make
regulations on matters arising from this particular Act, once it passes through
Parliament.
Leslie Nielson
26 February 2010
Bills Digest Service
Parliamentary Library
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2495.
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
