Explanatory Memorandum
Circulated by authority of the Minister for Superannuation and Corporate Law, Senator the Hon Nick SherrySCHEDULE 4 - AMENDMENTS RELATING TO THE SUPERANNUATION GUARANTEE (ADMINISTRATION) ACT 1992
161. Schedule 4 of the Bill amends the 1976 Act and the PB Act in relation to future changes to the Superannuation Guarantee (Administration) Act 1992 (SG Act). These amendments are required because many Australian Government employers fulfil their SG obligations through contributions for employees under those Acts.
162. The amendments are required in particular because of changes to the earnings base for the SG from 1 July 2008. From that date employers will no longer be permitted to use earnings bases that existed before 21 August 1991 to calculate their SG obligations but must use ordinary time earnings (OTE) in all cases. Both the CSS, which is provided for in the 1976 Act, and the PB Act provide for contributions and benefits that are based on earnings bases that existed before 21 August 1991 and which differ from OTE.
163. The change to the SG earning base was announced by the Treasurer on 25 February 2004 as part of the policy paper entitled A More Flexible and Adaptable Retirement Income System . Originally to apply from 1 July 2010 this date was subsequently brought forward to 1 July 2008. Amendments were made to the SG Act by the Superannuation Laws Amendment (2004 Measures No. 2) Act 2004 to apply the change to accumulation schemes from 1 July 2008. The change is to be applied to defined benefit schemes like the CSS with effect from the same date by regulations to be made under the SG Act.
Superannuation Act 1976
Items 1 and 2 - Regulation making power to ensure compliance with the SG Act
164. Item 1 of Schedule 4 repeals and substitutes subsection 155C(1) of the 1976 Act. This will enable the making of regulations to change that Act when necessary to ensure that the CSS provides benefits sufficient for an employer to avoid an individual SG shortfall in respect of an employee who is a member of the scheme. This will enable changes to be made to the CSS to comply with the 2008 change to the SG earnings base once the regulations are made under the SG Act to apply that change to defined benefit schemes. It will also ensure that any future changes to the SG Act can be reflected in the CSS where appropriate in a timely manner.
165. The date of effect proposed for this amendment is Royal Assent. This should provide sufficient time for the regulations to be made and in place by 1 July 2008.
166. Item 2 of Schedule 4 is a transitional provision which ensures that existing regulations made under subsection 155C(1) continue to have effect after that subsection is repealed and substituted.
Superannuation ( Productivity Benefit ) Act 1988
Item 3 to 7 - Amendments to ensure compliance with the SG Act
167. Item 3 of Schedule 4 inserts a definition of "quarter" which is used in the subsequent amendments. The definition reflects the definition of the same term in the SG Act.
168. Item 4 of Schedule 4 inserts a new paragraph (aa) after paragraph 4F(1)(a) of the PB Act to provide that an employer contributing under the Act is to pay an additional contribution for any quarter where it is necessary to avoid an individual SG shortfall in respect of an employee covered by that Act. This will ensure that employers contributing under the Act can meet their SG obligations once the 2008 changes to the earnings base are made and also in the event of any further relevant changes to the SG Act.
169. The proposed change will also ensure that employees whose superannuation is provided under the PB Act will not be disadvantaged as a result of the change to the SG earnings base to OTE if their current earnings base is higher than OTE.
170. Item 5 of Schedule 4 amends paragraph 4F(1)(b) of the PB Act to incorporate a reference to the new paragraph 4F(1)(aa) and to give employers the flexibility to pay contributions at any time before the day they are payable under subsection 4F(2). An early payment might occur when an employer prefers to pay contributions on an ongoing basis throughout a quarter, rather than as a lump sum at the end of a quarter.
171. Item 6 of Schedule 4 repeals and substitutes paragraph 4F(2) of the PB Act in order to specify the timeframe that employers must meet when paying contributions in accordance with the new paragraph 4F(1)(aa). Those contributions must be paid by the end of the period of 28 days after the end of the quarter for which they are payable.
172. Item 7 of Schedule 4 repeals and substitutes the definition of "notional contributions" in subsection 8A(2) of the PB Act, to incorporate a reference to the new paragraph 4F(1)(aa). This will ensure that any contributions under that paragraph are taken in account when determining the amount of any overdue contributions that must be paid by an employer as an interim benefit under section 8A of the PB Act.