Superannuation Legislation Amendment Bill (No. 4) 1999

Introduction

The Committee dealt with this bill in Alert Digest No. 12 of 1999, in which it made various comments. The Assistant Treasurer has responded to those comments in a letter dated 29 September 1999. A copy of the letter is attached to this report. An extract from the Alert Digest and relevant parts of the Assistant Treasurer's response are discussed below.

Extract from Alert Digest No. 12 of 1999

This bill was introduced into the House of Representatives on 11 August 1999 by the Parliamentary Secretary to the Minister for Finance and Administration. [Portfolio responsibility: Treasury]

The bill proposes to amend the Superannuation Industry (Supervision) Act 1993 to:

• provide a definition of a related party of a superannuation fund, a Part 8 associate of a member of a fund, a standard employer-sponsor of a fund, and a Part 8 associate of a standard employer-sponsor of a fund;
• provide definitions of a Part 8 associate and of a related trust;
• amend the coverage of in-house asset rules to include investments in, loans to, and leases and lease arrangements with, a related party of the fund. In-house investments will also include investments in a related trust;
• provide that in-house asset rules do not cover business real property leased by a superannuation fund with less than 5 members, or investments in widely held unit trusts;
• provide transitional arrangements for the changes to the in-house asset provisions;
• amend provisions applicable when an investment is not an in-house asset, but has the effect of achieving an investment in an in-house asset;
• amend provisions relating to the acquisition of assets from members and relatives, so that they apply to acquisitions from all related parties, with specified exceptions; and
• enable superannuation funds with fewer than 5 members to use up to 100 per cent of their assets to purchase business real property.

Retrospective application

Schedule 1, item 45

Item 45 of Schedule 1 to this bill provides that most of the proposed amendments are to apply either from 12 May 1998 (the night of the 1998 Budget) or from the date on which the bill was introduced into the Parliament. The bill, therefore, has a measure of retrospective effect.

However, subitem 45(6) provides that neither the criminal sanctions nor the civil penalty sanctions of the Principal Act are to apply to conduct engaged in before the commencement of the provisions contained in the bill if that conduct would not have constituted an offence or contravention under the law as it stood before those amendments came into force.

Subitem 45(6) provides some protection against the inherent problems when legislation is made to operate retrospectively. However, the period of retrospective application in the case of this bill is approximately 15 months. The Explanatory Memorandum observes that a decision to amend the investment rules was announced in the 1998-99 Budget. A number of representations were then received, but an exposure draft bill was not released until 22 April 1999 (more than 11 months later). Various submissions were then received in response to that exposure draft.

The Committee is aware of the value of consultation in developing legislative proposals. It also notes the mitigating effect of proposed subitem 45(6) on the application of offence and penalty provisions. However a period of 11 months between the announcement of a proposal and the appearance of exposure draft legislation giving effect to that proposal seems somewhat lengthy. The Committee, therefore, seeks the Treasurer's advice on whether the consultation process was the sole reason for the delay in introducing this bill, and whether those consultations differed from the process typically followed.

Pending the Treasurer's advice, the Committee draws Senators' attention to the provisions, as they may be considered to trespass unduly on personal rights and liberties, in breach of principle 1(a)(i) of the Committee's terms of reference.

Relevant extract from the response from the Assistant Treasurer

The Committee has sought the Treasurer's advice as to:

• whether the consultation process was the sole reason for the delay in introducing this Bill and whether those consultations differed from the process typically followed.

The consultations undertaken and the consideration of view raised by interested parties was a significant factor underlying the timing of the legislation. As noted by the Committee, the process included the release of an exposure draft of the legislation for public comment. A number of amendments were made to the legislation as a result of this part of the consultation process, including the provision of broader transitional arrangements.

Consultation processes vary between different pieces of legislation, having regard to the subject matter and interest groups involved. The Government considers the approach chosen was appropriate for this legislation.

As noted by the Committee, provisions in the Bill ensure that a person is not guilty of an offence and civil penalty sanctions do not apply in respect of conduct engaged in before the commencement of the provisions contained in the Bill, if the conduct would not have been an offence or a contravention before those amendments.

The Bill also contains transitional provisions that ensure that a range of transactions are not affected by the new provisions. For instance, a small superannuation fund (with fewer than 5 members) can elect to have grandfathering provisions apply to investments made in a related trust until 30 June 2009, up to the amount of the outstanding debt of the trust at 12 May 1998.

I also note that, given the objective of preserving the integrity of the superannuation investment rules, it is appropriate that aspects of the provisions take effect from the date of the original announcement.

In view of these considerations, I do not believe that these provisions should be regarded as breaching principal 1(a)(i) of the Committee's terms of reference.

I trust this information satisfies the concerns raised by the Committee.

The Committee thanks the Assistant Treasurer for this response.

Barney Cooney

Chairman