Mike Kelly (Eden-Monaro, Australian Labor Party, Parliamentary Secretary for Defence Support) Share this | Link to this | Hansard source

I present the explanatory memorandum to this bill and I move:

That this bill be now read a second time.

The Superannuation Legislation Amendment (Trustee Board and Other Measures) (Consequential Amendments) Bill 2008 proposes amendments which will update a range of legislation largely as a consequence of other legislative changes.

From 1 July 2008 the superannuation guarantee requirements will change by requiring employers to use ordinary time earnings (OTE) as the earnings base for an employee when calculating their superannuation guarantee obligations in all cases.

The bill therefore includes amendments to the Superannuation Act 1976, which provides for the Commonwealth Superannuation Scheme, the CSS, and to the Superannuation (Productivity Benefit) Act 1988 to reflect these new superannuation guarantee requirements. The amendments are intended to ensure that the benefits provided under those acts will, from 1 July 2008, continue to be sufficient to satisfy an employer’s superannuation guarantee obligations in respect of employees who have entitlements under those acts.

In relation to the Superannuation Act 1976, the amendments will enable the detailed changes to be made to the CSS by regulation. The CSS regulations will be made once regulations have been made under the Superannuation Guarantee (Administration) Act 1992 to apply the new OTE requirements to defined benefit schemes like the CSS. Enabling changes to the CSS to be made by regulation will ensure that the changes to the CSS can be in place by 1 July 2008.

The bill amends 24 acts as a consequence of the establishment of the Public Sector Superannuation Accumulation Plan, or the PSSAP. The PSSAP replaced the Public Sector Superannuation Scheme, the PSS, as the main superannuation scheme for new Australian government employees and office holders from 1 July 2005.

Many Commonwealth acts include references to the CSS and PSS when dealing with specific terms and conditions of employment for persons engaged under those acts, such as retirement on invalidity grounds. The bill proposes amendments to those acts to also include a reference to the PSSAP where appropriate, reflecting the likelihood that many future employees or office holders engaged under those acts could be PSSAP members.

Amendments are also proposed to 27 Commonwealth acts to reflect the consolidation of the governance arrangements for the three major superannuation schemes for Australian government employees—the CSS, the PSS and the PSSAP. Since 1 July 2006, the Australian Reward Investment Alliance, or ARIA, has been the trustee for the three schemes. The Superannuation Legislation Amendment (Trustee Board and Other Measures) Act 2006 transferred all the functions of the CSS board to the PSS board, which was already the trustee for the PSS and the PSSAP. The PSS board was renamed ARIA and the CSS board was abolished. The bill makes a number of technical amendments to reflect these changes.

The remaining changes in the bill are of a technical nature. For example, a number of acts which make superannuation arrangements for Australian government employees and members of parliament are to be amended to clarify that certain instruments made under those acts are subject to the Legislative Instruments Act 2003. The LI Act introduced a new, comprehensive regime for the making, registration, parliamentary scrutiny and sun-setting of Commonwealth delegated legislation from 1 July 2005.

Peter Dutton (Dickson, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

The Superannuation Legislation Amendment (Trustee Board and Other Measures) (Consequential Amendments) Bill 2008 is largely a replication of the Superannuation Legislation Amendment Bill 2007, passed by the House and introduced into the Senate prior to the 2007 federal election. It is a consequence of changes made in reforming and strengthening Australia’s superannuation system by the coalition government. The coalition’s reforms to superannuation and the significant long-term benefits to be gained by all Australians highlight the coalition as a party of substance when it comes to policies of this nature.

The reforms introduced by the coalition government have boosted, and will continue to significantly boost, retirement incomes for all Australians. As a result of the coalition reforms, superannuation benefits are tax free for people aged over 60 if they have paid tax on their contributions and earnings. This will be of substantial benefit to most Australians. Total contributions to superannuation increased by 230 per cent during the years under the coalition government, from $29 billion in 1997 to $96 billion in 2007. Similarly, total superannuation assets under management increased by 366 per cent, from $245.3 billion in 1996 to $1.143 trillion in 2007.

The coalition introduced the government superannuation co-contribution scheme of July 2003 as a means of assisting lower income earners to save for their retirement. Co-contributions increased from $309 million in 2004 to over $1.9 billion in 2007. To reward people for preparing for their own future, the coalition paid an additional one-off contribution to double the co-contribution in the 2005-06 financial year. From July 2007, the co-contribution extended to the self-employed, who can claim a 100 per cent deduction for all contributions. This significantly boosts the incentives for the self-employed to contribute to superannuation.

After paying down Labor’s debt, the coalition started to prepare and save for the future. We instigated the coalition government’s Intergenerational report, which shows that over the next 40 years there will be significant budget pressures from an ageing population, with the number of Australians aged over 65 expected to double by 2047. This will have significant ramifications in the areas of health, age pensions and aged care. Government spending in these areas is projected to exceed revenue by 3.5 per cent of GDP in 2046. As a result of the disciplined and far-sighted policy planning of the coalition government, this is less than the projections of the firstIntergenerational report, which predicted spending in excess of five per cent of GDP in 2041. In addition to the establishment of the Future Fund, the coalition prepared for these long-term spending pressures by delivering budget surpluses, by eliminating net debt and through careful, long-term economic management.

The government is also facing mounting unfunded Commonwealth superannuation liabilities from 2020 onwards. This is currently the largest quantifiable liability for the Commonwealth. As at May 2007, this liability was $103 billion and it is expected to grow to approximately $148 billion by 2020. To alleviate this substantial financial debt for the next generation, the coalition, when in government, established the Future Fund. The Future Fund now has $61.48 billion in assets as at 30 April 2008. Unlike Labor’s so-called investment funds, the coalition ensured the Future Fund could not be used for frivolous expenditure, only making funds available for the Commonwealth’s unfunded superannuation liability on 1 July 2020 or if sufficient funds are accumulated to fully meet the liability.

The Superannuation Act 2005 established the Public Sector Superannuation Accumulation Plan. This replaced the Commonwealth Superannuation Scheme and the Public Sector Superannuation Scheme as the main Australian government civilian superannuation scheme.

This bill ensures that the provisions relating to invalidity benefit entitlements are consistent among relevant acts in accordance with section 43 of the 2005 act.

The bill recognises the Australian Reward Investment Alliance, or ARIA, as the single superannuation board, as a number of acts still refer to the previous CSS and PSS boards. ARIA has the important responsibility of managing Australian government employees’ superannuation. ARIA aims to ensure accurate and timely information is available to its members and accordingly publishes interest determinations for the CSS, the PSS and the PSSAP on the scheme websites. This bill rightly proposes that the requirement of the Superannuation Act 1976 for gazettal of CSS interest determinations be removed on the basis that compliance with such a requirement is onerous and expensive.

In addition to technical amendments to a number of acts, this bill will amend relevant superannuation acts to reflect the replacement of provisions in the Acts Interpretation Act 1901 with provisions from the Legislative Instruments Act 2003. This bill proposes amendments to ensure benefits under the CSS comply with the Superannuation Guarantee (Administration) Act 1992. Specifically, it will ensure compliance in relation to the ordinary time earnings method of calculation, which varies to calculations based on superannuation salary used under the CSS.

In closing, can I say that the coalition does support this legislation. I thank Mr Tom Fleming for his assistance and advice in the preparation of this speech tonight. This bill is uncontroversial, and the coalition lends its support to the bill before the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

I rise to support the Superannuation Legislation Amendment (Trustee Board and Other Measures) (Consequential Amendments) Bill 2008. I believe it is long overdue. I am pleased that the coalition is supporting it, although I suspect the tenor of my speech will be not one which the coalition can support—but I should not get ahead of myself.

The main purpose of this bill is to make changes to the Superannuation Act 1976 and some other 30 acts in respect of changes to the superannuation guarantee requirements from 1 July 2008, requiring employers to use ordinary time earnings as the earnings base for an employee when calculating superannuation guarantee obligations. These changes are intended to ensure that the benefits provided under those acts will continue to be sufficient to satisfy an employer’s superannuation guarantee obligations in respect of employees who have entitlements under those acts.

Prior to this, employers could use a number of different bases for calculating nine per cent superannuation guarantee payments. For example, the superannuation salary in an award was one method of calculating entitlements. Superannuation salary often did not include allowances, over-award payments, shift loadings and commissions. But ordinary time earnings include all of these things—but do not, I must add, with certain exceptions, include overtime automatically. As the House would know, the minimum super amount that you have to pay is nine per cent of each eligible employee’s earnings base. An employee’s earnings base is generally their ordinary time earnings. From 1 July 2008, ordinary time earnings should always be used.

Some employers currently pay superannuation on an earnings base that existed before the superannuation guarantee was introduced. This has meant, historically, two employees in similar circumstances could receive different superannuation guarantee amounts. The new law standardises upwards the earnings base to ordinary time earnings for all employees, so employees in similar circumstances doing the same work receive the same contributions. This measure, in my opinion, will add certainty and consistency, and should be applauded. When I was a union official we struggled for better superannuation, and I believe this legislation is another part of Labor’s commitment to ensuring a fair go all round for working Australians.

I would like to note Senator Andrew Murray’s comments in the Senate, where he sought to amend this bill. Senator Murray’s amendment concerned the equal treatment of same-sex couples under superannuation laws, and he correctly wanted to remove discrimination. He appeared, from his speech, to believe that, because the previous Howard government never acted to change this state of affairs, despite pledging to do so, the current Labor government would follow their lead. He said in the Senate chamber:

The coalition I think needs to stand up and say to the Labor government, both in the Senate and in the House: ‘Come clean. When are you going to fix this problem?’ You now have this HREOC report and the question is not what you are going to do about it, because you have said you are going to fix it, but when you are going to fix it. I will put to the minister again for the record the main question he must answer if he rejects the very well crafted amendment that I have circulated, which is: when will you act to rectify this deplorable and highly inconsistent treatment of superannuation for de facto and interdependent partnerships?

The senator should now be satisfied on a number of fronts. First, as you are well aware, the government has introduced the Same-Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Bill 2008. This change, which has been enacted by the Rudd government, is historic, welcome and a long-overdue correction of discrimination against citizens on the basis of their sexuality.

Senator Murray should also note that the Rudd government cannot be compared to the previous government. We have no core and non-core promises. We made commitments before the election, and we are implementing them. It is easy to understand why an honourable man such as Senator Murray may have been habituated by 11½ long years of the Howard do-nothing government to accept the dissembling, the dodging and the downright untruthfulness as the norm of government in Australia. I hope that, in his remaining time in this place, he sees that not all governments are alike and that the current government—the Rudd government—is many, many cuts above what has gone before.

I have also noted the comments of Senator the Hon. George Brandis in supporting this bill. Senator Brandis claimed that the former Howard government was the great reform government in Australia’s history when it came to superannuation policy, but even he would be hard-pressed to call his party the party of superannuation reform, because it never has been and it certainly is not. I think everyone will agree and recall that the true reformer in superannuation, just as in welfare, is the Labor Party.

It was the Hawke-Keating Labor government, ably assisted and working with Bill Kelty and the Australian Council of Trade Unions, which revolutionised the superannuation system—and thank goodness they did—providing us with a $1 trillion plus savings sector in Australia. They introduced the superannuation guarantee charge, requiring employers for the first time to make private contributions to employees’ superannuation to protect workers from poverty. It is a comprehensive system that makes financial security something for all Australians, not just those who can afford it. This is reform; it is not tinkering around the edges.

When the Hawke-Keating government was enacting its changes the Liberal opposition fiercely opposed the measure, as they have every time that Labor has sought to increase the contributions from three to nine per cent. This has been very short-sighted policy, which thankfully was defeated at the time. All Australians now are the beneficiaries of the Hawke-Keating government’s commitment on superannuation.

One very good thing to come out of the changes of the Hawke-Keating era in superannuation was industry super funds, which today look after the superannuation needs of more than five million hardworking Australians. Prior to entering this place I was fortunate to be able to serve as a director on a range of superannuation and investment funds for up to a decade, so I read with real interest the research released by APRA last month on superannuation fund governance. It compared a number of governance activities of funds across different sectors. The not-for-profit part of the industry, the industry fund part, came out much better I believe than retail funds.

Here are some comparisons of note. Industry fund directors spent an average of 1,364 hours per year on their fund work and retail fund directors, according to APRA, spent 559 hours on theirs. The primary employer of 58 per cent of retail fund board directors is a fund service provider or the actual current fund. This applies to only four per cent of industry fund directors. Another finding I found very telling is that, while only 21 per cent of retail fund directors are actually members of the fund that they are a director of, 62 per cent of industry fund directors are members of theirs—taking an active interest in what goes on.

I look forward to APRA’s next report, which will consider if there is a link between governance and investment performance. Members would be aware that the performance of industry funds has for over a decade been superior to that of the retail for-profit sector. It is apparent, I am sure, that I believe that industry funds have been excellent performers for their members. I certainly believe that they have been better for workers, as they charge lower fees than the average retail fund and pay no commission to advisers and financial planners. Industry funds—part of the superannuation reforms of which this legislation is another strand—benefit their members. I am proud that they have emerged from the stable of Labor reform in superannuation.

Labor has always been the party which truly cares for and supports Australian workers and families. No amount of Johnny-come-lately revisionism from the opposition can change that. I commend this bill to the House.

Mike Kelly (Eden-Monaro, Australian Labor Party, Parliamentary Secretary for Defence Support) Share this | Link to this | Hansard source

in reply—I thank the honourable members for their contribution to this discussion on the Superannuation Legislation Amendment (Trustee Board and Other Measures) (Consequential Amendments) Bill 2008, particularly the member for Maribyrnong for the invaluable historical and contextual information he provided. I note the consensual nature of the support for this bill. I commend the bill to the Committee.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.