Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The purpose of the Superannuation Legislation Amendment Bill 2007 is to make changes to the Australian government civilian and military superannuation schemes. Labor supports this bill, but our concern is not about what is in it; it is about what is not. From 1 July 2008 this bill will remove the requirement for contributory members of the Commonwealth Superannuation Scheme, or the CSS, to make member contributions to the CSS, thereby making all member contributions voluntary and providing members with the same flexibility and incentives to contribute to superannuation that are available to the broader community.

It also allows, from 1 July 2008, eligible members of the Public Sector Superannuation Scheme, or PSS, to elect to leave that scheme to join another superannuation arrangement for the payment of future contributions, which will allow eligible members the flexibility for future contributions that is already available to most of the Australian workforce. From 1 January 2008 it enables members of the CSS to obtain early release of their funded account balances on severe financial hardship and compassionate grounds.

It provides from 1 January 2008 for the prospective restoration of previously cancelled spouse pensions. It makes consequential and technical amendments and ensures that the entitlement to benefits in the Defence Force Retirement and Death Benefits Act 1973, or the DFRDB Act, relating to post-retirement marriages is consistent with the treatment in civilian schemes. Finally, it addresses an anomaly in the treatment of the benefits payable in that act upon marriage breakdown.

A hearing was conducted by the Senate Standing Committee on Finance and Public Administration on the act, which I will be referring to later. The Superannuation Act 1976 includes a requirement for contributory members of the CSS to pay basic member contributions of five per cent of their salary for superannuation purposes. This bill includes amendments to the CSS Act that will remove the requirement and allow CSS contributors to elect, on or after 1 July 2008, to cease making member contributions. Amendments to the Superannuation Act 1990 are not required as the necessary changes for the PSS will be made by the APSS amending deed.

The PSS Act provides eligibility requirements for membership of the PSS and generally only allows members to cease contributing on leaving employment or retirement. The bill includes amendments to that act that would allow eligible PSS members to elect to cease membership of the scheme, preserve their accumulated PSS benefit and have their future employer contributions paid to an accumulation scheme, thereby having access to the government’s broader fund arrangements. These changes will commence on 1 July 2008.

The bill also amends the Superannuation Act 2005 to allow eligible PSS members who have elected to join the Public Sector Superannuation Accumulation Plan, or the PSSAP, to become members of that plan. Whilst Labor is supportive, I must say, frankly, individuals who elect to reduce contributions will be disadvantaging themselves and should carefully consider such action, particularly seeking advice from the fund or other financial advice about the financial detriment of doing so.

The bill contains amendments to the CSS Act that will, from 1 January 2008, enable CSS members to obtain early release of their funded account balances on severe financial hardship or compassionate grounds to the extent allowed under the regulatory framework established under the Superannuation Industry (Supervision) Act 1993. The bill will enable the positive restoration of pensions for persons who have previously had their spouse pensions cancelled upon remarriage. Prior to 1976 in the Superannuation Act 1922 civilian scheme and 1997 in the Defence Force Retirement Benefits Act 1948 and the DFRDB Act, spouse pensions were cancelled on remarriage.

Cancellation never applied in the PSS, CSS or military superannuation scheme. Although provisions cancelling spouse pensions on remarriage were removed from the 1922 act scheme in 1976 and the DFRB Act and the DFRDB Act schemes in 1977, spouses who remarried before the cancellation provisions were removed continued to be affected by the former provisions. From 1 January 2008 restrictions on the restoration of spouse pensions that were previously cancelled when a spouse remarried will be removed prospectively upon successful application. The changes will also apply to persons who have previously had their spouse pension only partially restored.

The bill also includes, as I referred to earlier, amendments to the CSS act as a consequence of the government’s Better Superannuation reforms. The main amendment will ensure the continued payment of employer productivity contributions for a member who cannot make member contributions because they have not provided their tax file number. This is consistent with the arrangements in the broader community, where employer contributions would still be payable even though the member has not provided their tax file number.

The Better Super reforms generally commence from 1 July 2007. The amendments in relation to the CSS Act may commence between 1 July 2007 and 1 July 2008, depending on the particular amendment. Amendments to the PSS Act are not required as the necessary changes will be made by the PSS amending deed.

The bill also amends the DFRDB Act to improve access to reversionary benefits in certain circumstances where the retired pensioner commenced a marital relationship after the age of 60. Currently a spouse’s pension under the DFRDB Act scheme is generally not payable if the pensioner who commences a marital relationship after the age of 60 dies within five years of the relationship commencing. The bill removes the restrictions on the payment of benefits following such post-retirement relationships. However, a pro rata rate of a spouses pension will be payable where the relationship existed for less than three years immediately before the pensioner’s death. Where the resulting rate of the pension is small, it may be commuted to a lump sum in some cases. These amendments will also apply to the MSBS and the necessary changes will be made by amending the MSBS trust deed and rules.

It is proposed that the new postretirement marriage arrangements will commence on a day or days to be fixed by proclamation or six months after this act receives royal assent. These changes will ensure consistency between the military schemes and the civilian schemes. Labor believes that this should date from the operative date for the civilian schemes—namely, 1 July 2003. There was no satisfactory explanation given to the Senate Standing Committee on Finance and Public Administration for why this did not happen. The parliamentary secretary has indicated consideration of act of grace payments. The number of people advantaged by greater retrospectivity is very small—less than 10 a year—so the associated cost is negligible. Certainty and consistency should apply to widows and Labor asserts that it would be better if this were covered by the act rather than act of grace payments.

The bill will address an anomaly in the family law provisions of the DFRDB Act to allow family law orders to be applied as intended. As the current legislation stands, family law orders only apply to a current lump sum or pension. This amendment only applies to a second and subsequent or later pension or lump sum that is paid as a result of a period of effective service that begins on or after the day on which this amendment commences.

The amendments relating to voluntary member contributions for CSS members and a choice of fund for PSS members are part of a package of measures announced in the 2007-08 budget which overall will cost approximately $160 million over four years.

As I said in my opening remarks, what causes the opposition concern is not what is in the bill; it is what is not in the bill. There are a range of contemporary issues that need to be considered, particularly against the background of the various reforms to private sector superannuation that have occurred over the past 20 years. These issues include indexation provisions of pension entitlements; interdependent relationship reversion pension benefits, a promise made by the Prime Minister but not delivered upon; the tax increase that members of the MSBS will suffer as a consequence of the 1 July Better Super changes; the ability to salary sacrifice; real super choice and portability; the value of the 10 per cent rebate for untaxed schemes and income tax treatment of non-super income at age 60; the foreign defined benefits schemes such as those covering the Australian staff working for the United Nations—again, consequences of the 1 July Better Super changes; transition to retirement provisions; and the tax treatment for class A military invalidity pensions.

Again, many of these matters were canvassed at the Senate finance and public administration committee hearing into the bill, but very few answers were received from the government. Labor is particularly concerned that the various actuarial and other modelling carried out by the Treasury on a number of these matters has not been made public, despite constant requests by the shadow minister for intergenerational finance, Senator Sherry, at many Senate committee hearings over many years.

The government’s response to Labor’s concerns in the matter of superannuation in military matters has been arrogant to say the least. They have arrogantly said there is no problem and that the Labor Party do not know what we are talking about. The veterans community would certainly beg to differ and has certainly been very vocal in support of the Labor Party’s position, as the Labor Party has been very vocal in support of the needs of veterans. That has been articulated by the shadow minister for veterans affairs and by the Leader of the Opposition, who has made this a priority for the opposition. The shadow minister for veterans affairs will be following later in the debate. He will be moving a second reading amendment which refers to some of the matters I have addressed in these remarks.

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