Michael Sukkar (Deakin, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

I present a supplementary explanatory memorandum to the bill.

Tony Smith (Speaker) Share this | Link to this | Hansard source

I thank the Minister. The question is that the bill be agreed to.

Michael Sukkar (Deakin, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

By leave—I move government amendments (1) and (2) together:

(1) Schedule 3, item 4, page 29 (lines 11 and 12), omit the item.

(2) Schedule 3, items 18 and 19, page 32 (lines 6 to 24), omit the items.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the amendments be agreed to.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

This is a bill that was half-baked when it was announced, it was half-baked when it went through their party room and it was half-baked when it entered this parliament today. Let me just go through some of the issues. A bill that was supposed to have the effect of reducing the fees that members paid on their superannuation account, because of their incompetence, actually did the opposite! They had to be browbeaten into including administration fees to the benchmarks. A bill that was supposed to strengthen superannuation and their investments did the opposite, because it actually created a disincentive for Australian workers' money to be invested in Australian infrastructure and Australian agricultural investments. They had to be browbeaten into changing this. We thought after two embarrassing backflips they would've got the message and listened to the sensible suggestions that were being made by Labor. This bill, in the form that it was brought into the House, was so bad that even members on their backbench weren't going to vote for it.

This is the royal commission. We weren't surprised that a government that voted against this royal commission document 27 times wasn't going to implement all of its recommendations, but this is Das Kapital. We were absolutely flabbergasted that a government that calls themselves conservatives and liberals would introduce a bill with a power that is more inspired by Karl Marx than Ken Hayne. But that's exactly what they've done, and that's why we are here today—because they have introduced a bill into the House more inspired by Karl Marx and more befitting of Soviet-era Russia than modern Australia. Never again will the Treasurer be able to lecture Labor on economic responsibility. We will remind Australians that the Treasurer and the government that can't balance their own budget wants to take over the savings of ordinary Australians. We will remind them every day until the next election.

I want to congratulate those members of the government backbench who, having originally voted for it when it went through their party room, woke up to the enormous threat that it presents to Australians and their savings. They have raised their concerns with me, with members of the Labor opposition, with members of the crossbench and eventually with members of the government. I want to congratulate those members of the backbench of the coalition parties for doing the right thing. Many of them have raised their concerns in this place, and I want to congratulate them for doing the right thing.

As bad as the directions power is, it is not the only problem with this bill. Labor wants to foreshadow that we have a range of amendments. If this amendment fails, we have an amendment which covers the field. We have a range of other amendments that we propose to move in the House today. I'll go through the issues that they cover off.

Firstly, this government has said the purpose of this bill is to ensure that members have funds that are performing for them, and, to give effect to that, they want to introduce a performance measure so that we can weed out the underperforming funds. Members of this House, Labor wholly supports that objective. We want to see that happen. But why on earth would a government that says that what it wants to do is weed out underperforming funds introduce a bill in the House which actually staples members to underperforming funds? There aren't a small number of them. According to the Treasury, three million Australians are going to be stapled to underperforming funds because of the legislation that you are foreshadowing that you will vote for. So, we encourage you to contemplate that fact. Are you going to be on the side of the three million Australians who, if you let this bill through, are going to be stapled to an underperforming fund, or are you going to support this sensible amendment?

I call on the crossbench to contemplate that fact. You were so confident in the advice that you were given by the government and by the Treasurer that they had this bill right. You were so confident the government had this right. I say the same thing to members on the coalition backbench as well. A couple of weeks ago the government said they had this bill right— (Time expired)

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

Order! The honourable member's time has expired. The question is that the amendments be agreed to. I call the member for Whitlam.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Thank you, Deputy Speaker. A few weeks ago the Treasurer stood in your party room and said, 'This bill is ready to go.' But today they have been forced into an embarrassing admission that the bill was anything but ready to go. How can you have faith in what they are telling you now, when it has been pointed out to you that three million Australians are about to be stapled to dud funds? You can have no faith in what the government is telling you. You can have no faith in what your Treasurer is telling you. I ask the crossbench to consider this as well.

Another factor that our amendment goes to is the timing of this bill, because in four weeks time this bill will become effective in every Australian workplace. The tax office isn't ready to implement it. Small-, medium- and large-sized businesses aren't ready to implement it. Australian workers know next to nothing about it—and certainly the superannuation funds will not be able to implement this bill either. So the timing needs to be considered. Our sensible amendment is on the side of small and medium-sized businesses in this country. It will push back the implementation of this bill as amended and as proposed to be amended by Labor.

One of the excellent speeches that was made in the second reading contribution on this debate was the speech given by the member for Warringah, a former barrister, a law officer, of New South Wales, who pointed out that the reverse onus included in schedule 3 of this bill turns the law on its head. Normally a reverse onus in law is something that is only confined to the most egregious of criminal offences. We don't, for example, apply a reverse onus for heinous sex crimes. We don't apply a reverse onus for heinous drug crimes. But apparently not having your books in order is a worse offence than a serious sex offence. Apparently, not having your books in order is a worse offence than importing drugs into this country. This government has got their priorities all wrong. It is a simple amendment, a sensible amendment, and I ask all members of the House to support it.

We want this bill to work. We support performance management. We support the amendment that has been moved by the government in removing this heinous power—more appropriate to this book here, Das Kapital, than a modern Australian economy. So, if these amendments fail, we ask all members of the House to support the amendments that Labor has foreshadowed and I have just spoken to.

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendments be agreed to.

Question agreed to.

Craig Kelly (Hughes, Independent) Share this | Link to this | Hansard source

I move:

(1) Section 2 (Commencement), where the Bill specifies "the day this Act receives Royal Assent" or "1 July 2021", replace with "1 July 2022"

Note: The intent of amendment 1 is to delay the start of all elements of the legislation until 1 July 2022.

This is very significant legislation that requires an enormous amount of change for the superannuation industry—and much of it justified. However, we are now in June. To have a start date for this legislation of 1 July when it is yet to even go to the Senate is, I believe, rush and haste. When you rush and you do things in haste, you make mistakes. I believe it would be far more prudent and wise of this House if we moved the start date for this legislation to 1 July 2022 rather than 2021. I believe that, if we are doing our job, that would give time for all the vested stakeholders to go through all the detail, and it would be far more prudent for our economy to get the best outcomes, which is what we all require.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the amendment be disagreed to.

Craig Kelly (Hughes, Independent) Share this | Link to this | Hansard source

by leave—I move amendments (2) and (3), as circulated in my name, together:

(2) Schedule 1, item 18, page 9 (after line 22), after section 32R, insert:

32S Excluded occupations

(1) This section applies in relation to an employer and an employee if the employee is employed in an occupation where the rate of death in the workplace is more than one in 100,000 per year, averaged over a five-year period, as determined by the Australian Government Actuary.

(2) For the purposes of this Act, the most recent notification to the employer:

(a) by the Commissioner; and

(b) relating to a request by the employer (or by the employer's agent) for the Commissioner to identify any stapled fund for the employee;

is taken to be that the Commissioner is satisfied that there is no stapled fund for the employee.

(3) On 1 July each year, the Australian Government Actuary must publish a list of occupations where the rate of death in the workplace is more than one in 100,000 per year, averaged over a five-year period.

(4) An employee in an occupation identified by this section is considered not to have a stapled fund.

Note: The intent of amendment 2 is to ensure that the stapling provisions do not apply to workers employed in dangerous occupations.

(3) Schedule 3, items 18 and 19, page 32 (lines 6 to 24), after section 117A, insert:

117B Excluded occupations

(1) Regulations made for the purposes of section 117A may not prescribe any investment or type of investment, under any circumstances, in any of the following industries:

a. mining;

b. agriculture;

c. energy production;

d. oil or gas extraction;

e. oil or gas refining;

f. steel or mineral refining;

g. cement or concrete products;

h. salt mining and refining;

i. defence industries;

j. shipbuilding;

k. firearms and ammunition production;

l. hunting and the export of kangaroo meat;

m. manufacturing;

n. horticulture;

o. aquaculture;

p. grain handling;

q. sugar industries;

r. timber and paper products;

s. pet food manufacturing;

t. rubber, plastic and cable-making industries;

u. hair and beauty;

v. dredging and port authorities;

w. fisheries;

x. retail;

y. textiles;

z. telecommunications;

aa. information technology;

bb. pharmaceuticals and health products;

cc. construction services;

dd. science, education, and universities;

ee. Australian cultural productions;

ff. dams and weirs;

gg. deep sea fishing;

hh. live cattle, sheep, and other animal exports;

ii. train manufacturing;

jj. electric vehicle manufacturing;

kk. tourism;

ll. accommodation;

mm. healthcare;

nn. childcare;

oo. infrastructure;

pp. road or rail transport; or

qq. air or sea transport.

Note: The intent of amendment 3 is to prevent the use of the regulation-making power prohibiting an investment in any of the specified industries.

When I was 14 years of age, my family moved out of my family home. I could no longer go to my old school. But one of the guys that was working for my father at the time, a gentleman called Paul, was about three years older than me. He came and picked us up every day and drove me to school and drove me home. He was like a bit of an elder brother. A year later, he was involved in a car accident while doing a delivery to Newcastle. He lost his arm and lost part of the sight in his right eye. I've seen, over my career before I came to this place, many terrible accidents in the workplace. When I look at this legislation, there is a risk—and I acknowledge it's a small risk, but it only has to be one person—that, when we staple someone's funds, we will also staple their insurance policy. And there is a risk that, when someone moves from a job in an office—where the risk could be a paper cut or the photocopier lid closing down hard on their arm—to a dangerous occupation, they could suffer an injury and they might be underinsured. My conscience will not allow me to vote for any legislation that allows that risk, even if it is for one person. I hope I have support from the entire House on that.

On amendment (3), I agree that we should be very careful in government about giving powers to ourselves to make decisions that override the private economy. I appreciate there are many decisions that we see from the large union-controlled super funds that are not necessarily in the best interests. Rather than get rid of that whole section, I have suggested that we have a list of special industries that are excluded from this provision. They would include mining; oil and gas extraction; oil and gas refining; cement and concrete products; hunting and the export of kangaroo meat; rubber, plastic and cable making industries; dredging and port authorities; dams and weirs; live cattle, sheep and other animal exports; and, of course, health and beauty. There is a longer list which everyone can read. I commend those amendments to the House.

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendments be disagreed to.

Question agreed to.

Zali Steggall (Warringah, Independent) Share this | Link to this | Hansard source

by leave—I move amendments (1) to (14), as circulated in my name, together:

(1) Schedule 3, heading, page 29 (line 1), omit "Best financial interests duty", substitute "Duties of trustees".

(2) Schedule 3, item 9, page 30 (lines 21 and 22), omit the item.

(3) Schedule 3, item 11, page 31 (line 1), omit "financial".

(4) Schedule 3, item 13, page 31 (lines 14 and 15), omit the item.

(5) Schedule 3, item 15, page 31 (line 21), omit "financial".

(6) Schedule 3, item 16, page 31 (lines 26 and 27), omit the item.

(7) Schedule 3, item 17, page 32 (line 1), omit "financial".

(8) Schedule 3, item 20, page 32 (line 28), omit "financial".

(9) Schedule 3, item 20, page 33 (line 1), omit "financial".

(10) Schedule 3, item 20, page 33 (line 10), omit "financial".

(11) Schedule 3, item 21, page 33 (line 14), omit "financial".

(12) Schedule 3, item 21, page 33 (line 18), omit "9, 11, 16", substitute "11".

(13) Schedule 3, item 21, page 33 (line 23), omit "amendments made by items 13 and 15 of this Schedule apply", substitute "amendment made by item 15 of this Schedule applies".

(14) Schedule 3, item 22, page 34 (line 16), omit "financial".

These amendments are in respect of the change that is identified in relation to the definition of 'best financial interests' duty. Item 9 of the amendment bill omits 'best interests' and replaces it with 'best financial interests' in the Superannuation Industry (Supervision) Act 1993. The government states that it wishes to increase the accountability of trustees in their day-to-day operations and investing members' money. Whilst this may, at first blush, appear sensible, it has significant potential consequences for the interests and wellbeing of super members and is in fact not founded on any recommendation or proper basis. This is because, when considering whether something is in best financial interests alone, we also capture a large number of activities and investments that exist in a grey area and that may in fact be beneficial to members of super funds but are potentially now going to be excluded as a result of this amendment. For example, an ethical super fund purchasing carbon offsets or spending money planting trees to reduce emissions to achieve an overarching goal of reaching a net zero emissions goal around their investment portfolio—something which the member would arguably want—could now be prohibited under the best financial interests covenant, unless we have a major change from this government, in accepting putting a price on carbon or in actually ensuring that there is proper financial recognition of the impact of our emissions.

I don't think the change that is proposed in this bill by the government is necessary. Commissioner Hayne was clear that he saw the existing best interests covenant as adequate. The common-law definition was also upheld by Justice Jagot in APRA v Kelaher. Therefore, amendments (1) to (14) seek to omit any reference to 'financial' in the best interests covenant. This will amend schedule 3 of the bill and remove that reference to 'financial'. The government has refused to clarify that social corporate programs will not be excluded or targeted. In fact, they are likely to be targeted by this amendment. This raises serious questions as to the motivation and the true intent of the government with this amendment, and therefore I commend my amendments to the House.

Helen Haines (Indi, Independent) Share this | Link to this | Hansard source

I wish to make a short statement about the detailed amendments from the member for Warringah. Last night I set out my criticisms of schedule 3 of this bill. While I'm pleased to see the government capitulate on the absurd directions power that section 117A would have given to the Treasurer, there are still serious deficiencies in schedule 3. The Hayne royal commission explicitly opposed a revision of the best interests covenant. The Superannuation Committee of the Law Council of Australia have also done the same, and they've done so for good reason, because there's no clear rationale for the wholesale revision of the best interests test. Schedule 3, as amended, would wipe out years of jurisprudence overnight and create needless uncertainty, and the last thing our super savings need is needless uncertainty.

Limiting the best interests test to pure financial interests misunderstands people's relationship with their super. There are good reasons to use a stick to focus the minds of superannuation trustees to ensure that they're acting in their members' best interests, especially when it comes to political advertising or lobbying. But, if you have to use a sharp stick, do that, not a blunt rock like this. If the government wanted a sharp stick, it could have refined the existing covenants set out in section 52 of the Superannuation Industry (Supervision) Act. That would have allowed the government to weed out excessive spend on political advertising and lobbying without punishing ethical investments that are good for bank accounts and for our environment. If that's not what the government is intending then it should say so right now explicitly in this bill, not in regulations.

There are also many other parts of this bill outside of schedule 3 that could be improved with good amendments, including the sequencing issue, stapling in high-risk industries and the selective performance testing of some funds but not others. I'm committed to working with my crossbench colleagues in the Senate to continue to improve this bill, and I'll reserve my final judgement when it comes back to this House, amended, for final consideration.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the amendments moved by the member for Warringah be disagreed to.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

by leave—I move amendments (1) to (15), (17) to (19) and (23), as circulated in my name:

(1) Schedule 1, item 1, page 4, after line 5, insert:

emergency services worker has the same meaning as in the Work Health and Safety Act 2011.

front -line health worker: see subsection 32S(3).

health professional means a person who, under a law of a State or Territory, is registered or licensed as a member of any health profession.

(2) Schedule 1, item 17, page 8 (line 14), omit "1 July 2021", substitute "1 July 2022".

(3) Schedule 1, item 17, page 8 (line 15), omit "1 July 2021", substitute "1 July 2022".

(4) Schedule 1, item 18, page 8 (lines 19 to 22), repeal section 32Q, substitute:

32Q What is the stapled fund for an employee

A fund is the stapled fund, for an employee at a particular time in a financial year, if all of the following requirements are met at that time:

(a) APRA has made a determination under section 60C of the Superannuation Industry (Supervision) Act 1993 in relation to the previous financial year for each Part 6A product (within the meaning of that Act) that, at that time, is:

  (i) offered by the fund; and

  (ii) held by the employee;

(b) the determination is that the requirements of subsection 60D(1) of that Act are met in relation to that previous financial year for each of those products;

(c) any requirements prescribed by the regulations for the purposes of this section are met in relation to the fund.

(5) Schedule 1, item 18, page 9 (after line 22), at the end of section 32R, add:

(4) Without limiting subsection (3), the Commissioner must, under that subsection, change an earlier notification given in relation to the employee if:

(a) the earlier notification was that the Commissioner was satisfied that there was a stapled fund for the employee; and

(b) because of a notification given to the Commissioner by APRA under section 60CA of the Superannuation Industry (Supervision) Act 1993, the Commissioner is no longer satisfied that the fund is a stapled fund for the employee.

(6) Schedule 1, item 18, page 9 (after line 22), after section 32R, insert:

32S Excluded occupations

(1) This section applies in relation to an employer and an employee if the employee is employed:

(a) in an occupation that a Fellow of the Institute of Actuaries of Australia has certified:

  (i) based on rates of death, or death and total and permanent disability; and

  (ii) using information from the most recent 5 years in relation to Australian occupations;

is in the riskiest quintile of Australian occupations; or

(b) as an emergency services worker; or

(c) as a front-line health worker.

(2) For the purposes of this Act, the most recent notification to the employer:

(a) by the Commissioner; and

(b) relating to a request by the employer (or by the employer's agent) for the Commissioner to identify any stapled fund for the employee;

is taken to be that the Commissioner is satisfied that there is no stapled fund for the employee.

Meaning of front -line health worker

(3) A person is employed as a front-line health worker if:

(a) the person is employed as health professional; or

(b) the person is employed for the purposes of providing supports or services to people with disability under the National Disability Insurance Scheme; or

(c) the person's principal place of work is:

  (i) a hospital; or

  (ii) a surgery; or

  (iii) a health clinic; or

  (iv) a residential aged care facility; or

  (v) the place of business of another business that provides health or disability services.

(7) Schedule 1, item 24, page 10 (line 26), omit "1 July 2021", substitute "1 July 2022".

(8) Schedule 2, item 5, page 15, after line 2, insert:

defined benefit interest has the meaning given by the regulations.

(9) Schedule 2, item 9, page 16 (line 30) to page 17 (line 4), omit section 60B, substitute:

60B Meaning of Part 6A product

A Part6A product is any class of beneficial interest in a regulated superannuation fund, other than a defined benefit interest.

(10) Schedule 2, item 9, page 17 (after line 23), after section 60C, insert:

60CA APRA to notify Commissioner of Taxation of fail assessment

(1) This section applies if:

(a) APRA gives the trustee or trustees of an entity a notification of a determination under subsection 60C(2); and

(b) the determination is that the requirement in subsection 60D(1) has not been met, for a Part 6A product offered by the entity, in relation to a financial year.

(2) APRA must notify the Commissioner of Taxation in writing of the fact mentioned in paragraph (1) (b) of this section.

(11) Schedule 2, item 9, page 17 (line 25) to page 18 (line 3), omit subsection 60D(1), substitute:

Meeting requirements specified in regulations

(1) The requirement in this subsection is met for a Part 6A product in relation to a financial year if:

(a) the regulations specify requirements, for the purposes of this subsection, in relation to a class of Part 6A products that include that Part 6A product; and

(b) those requirements are met for that Part 6A product in relation to the financial year.

(12) Schedule 2, item 9, page 18 (line 11), omit "fees and/or".

(13) Schedule 2, item 9, page 20 (after line 12), at the end of section 60D, add:

Fees

(14) Before the Governor-General makes regulations for the purposes of subsection (1), the Minister must have regard to the impact of fees on Part 6A products.

(15) The investment returns mentioned in paragraph (2) (a) must be net of fees.

(14) Schedule 2, item 9, page 26 (after line 16), after subsection 60J(3), insert:

(3A) Methods under paragraph (1) (a) must include methods for ranking Part 6A products according to long-term investment returns.

(3B) For the purposes of subsection (3A), long-term means 10 years or longer.

(15) Schedule 2, item 10, page 27 (lines 6 to 8), omit "identified by regulations made for the purposes of paragraph 60B(b) of the Superannuation Industry (Supervision) Act 1993".

(17) Schedule 3, item 5, page 29 (lines 13 to 17), omit the item.

(18) Schedule 3, item 6, page 30 (after line 6), after subsection 34(2A), insert:

(2AA) Subsection (2A) does not apply to the extent that the standards relate to keeping or retaining records in relation to a non-material matter.

(2AB) For the purposes of subsection (2AA), a non-material matter includes a payment or investment made:

(a) by or on behalf of the superannuation entity; and

(b) that a reasonable person would not expect to impact materially the financial interests of the beneficiaries of the entity.

(19) Schedule 3, item 6, page 30 (line 7), omit subsection 34(2B).

(23) Schedule 3, item 20, page 32 (line 25) to page 33 (line 13), omit the item.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the amendments moved by the member for Whitlam be disagreed to.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question now is that this bill, as amended, be agreed to.

Question agreed to.

Bill, as amended, agreed to.