Senate

Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018

Supplementary Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, the Hon Stuart Robert MP)
Amendments to be moved on behalf of the Government

Chapter 2 Insurance for superannuation members (Schedule 2)

Outline of chapter

2.1 Amendments 2 to 4 amend Schedule 2 to the Bill to allow trustees to provide opt out insurance to new members aged under 25 years and new members with balances below $6,000 where the member is engaged in a dangerous occupation.

Detailed explanation of the amendments

2.2 Amendments 2 and 3 add the dangerous occupation exception to the list of exceptions to which sections 68AAB and 68AAC of the SIS Act do not apply.

2.3 Those provisions prevent the trustees from providing insurance on an opt out basis to members who are under 25 years and begin to hold a new superannuation account on or after 1 July 2019, and to members with account balances below $6,000.

2.4 Amendment 4 inserts section 68AAF into Schedule 2 to provide that the Minister can prescribe an occupation to be a dangerous occupation by legislative instrument. However, the Minister must be satisfied that the occupation is inherently dangerous on reasonable grounds based on evidence of the level of risk involved in being employed in that occupation.

2.5 The legislative instrument is subject to parliamentary scrutiny and disallowable by Parliament.

2.6 The dangerous occupation exception recognises that, based on statistical evidence and other relevant factors, certain occupations carry a higher degree of risk, which provides a basis for retaining the current opt out insurance settings for members employed in these occupations.

2.7 The dangerous occupation exception applies to members who at the time that they start to hold a MySuper or choice product:

are employed in a dangerous occupation covered by the legislative instrument;
it is reasonable to expect that the contributions paid into the product will be for the member's employment in that occupation; and
the trustee or trustees of the superannuation fund have elected to apply the exception for the product and the election is in force.

Reasonable expectation of contribution payments

2.8 A reasonable expectation that contributions will be paid into a product in respect of a member's employment in a dangerous occupation must be more than the mere possibility of a contribution payment in respect of such employment. A trustee should be satisfied that such contributions will be paid, within a reasonable period of time.

2.9 Given that superannuation guarantee contributions are required to be made quarterly and allowing for extenuating circumstances, a period of six months from when the member starts to hold a product would be considered a reasonable period.

Example 2.1 The trustee of SuperAus receives a new member form from Lachlan who is employed as a police officer, which is a dangerous occupation as prescribed in the legislative instrument.While the trustee of SuperAus has not received a contribution in respect of Lachlan when it receives the new member form, it has reason to expect it will receive a contribution within the next quarter, as that is when Lachlan's employer's superannuation guarantee is due.Therefore, it is reasonable for the trustee of SuperAus to expect that the contributions to be paid into the product will be for Lachlan's employment as a police officer and can provide Lachlan with insurance on an opt out basis under the dangerous occupation exception.

Example 2.2 Angus is 23 years old and is a roof plumber, which is prescribed in the legislative instrument as a dangerous occupation.Angus commenced this job in August 2019. Orange Fund receives contributions in respect of this job and provides Angus with insurance on an opt out basis under the dangerous occupation exception.Angus starts a second job as a part-time bartender, which is not prescribed as a dangerous occupation in the legislative instrument. Purple Fund receives contributions in respect of this job, is aware of Angus' other employment as a roof plumber and his other fund, and has encouraged Angus to consolidate his superannuation accounts, but Angus has not done so.Simply knowing that Angus may make a contribution to Purple Fund in respect of a dangerous occupation is not sufficient to establish a reasonable expectation that contributions for the dangerous occupation will be paid into the product. Therefore, Purple Fund would not be able to provide Angus with insurance on an opt out basis under the dangerous occupation exception.

2.10 Trustees may have regard to the occupation that is notified by the member or member's employer upon joining the fund if applicable and reasonably believe that contributions are related to that occupation.

2.11 There is no mandatory obligation on the employer to provide the trustee with the member's occupation. If no occupation is supplied to the trustee, the member is then obliged to provide their occupation upon the trustee's request before insurance can be provided to the member on an opt out basis under the dangerous occupation exception.

2.12 The requirement for a connection between prospective contributions and the occupation allows better targeting of the exception to insurance provided on an opt out basis through the superannuation fund for that occupation.

Fund choosing to apply the exception

2.13 A fund must notify APRA that it elects to apply the exception for a MySuper or choice product with members that are employed in a dangerous occupation prescribed in the legislative instrument and are aged under 25 years or have an account balance of less than $6,000.

2.14 The applicable members who start holding the product on or after the date of notification will be provided insurance on an opt out basis under the exception.

2.15 A fund must also notify APRA when it chooses to stop applying the exception.

2.16 Trustees are prevented from providing insurance on an opt out basis to members employed in dangerous occupations that start to hold a product on or after the date of the fund's withdrawal of the exception if the members are aged under 25 years or have an account balance of less than $6,000. This would not be case if the member falls within another exception listed in subsections 68AAB(4) and 68AAC(4) of the SIS Act.

2.17 The notification to withdraw does not affect members that are already provided insurance on an opt out basis under the dangerous occupation exception, because the assessment of whether the exception applies to them is made at the point when they start to hold the product.

2.18 The exception continues to apply to those members until they reach the age of 25 and their account balance is or exceeds $6,000 when sections 68AAB and 68AAC will no longer apply to the member.

2.19 In circumstances where a fund withdraws its election, a prudent trustee would notify members, who would continue to be provided with opt out insurance under the dangerous occupation exception, of the withdrawal.

2.20 This notice would make these members aware that the trustee has changed the way insurance is provided going forward and encourage members to consider their insurance needs.

Example 2.3 On 1 July 2019, DangerSuper notifies APRA it is electing to use the dangerous occupation exception to provide opt out insurance to new members employed in dangerous occupations aged under 25 or with balances under $6,000.On 1 July 2021, DangerSuper notifies APRA that it withdraws the election to use the exception.All the members that joined the fund between 30 June 2019 and 1 July 2021, who are employed in prescribed dangerous occupations and who are under 25 or have balances below $6,000 will continue to receive opt out insurance.DangerSuper sends a notification to members who are under 25 or with balances below $6,000 to notify them that the fund has changed its approach to members employed in dangerous occupations, and that although the change does not affect them they should consider if the insurance offered by the fund is appropriate for their circumstances.New members under 25 years old or members with balances under $6,000, that start to hold a MySuper or choice product from 1 July 2021 will be provided insurance on an opt in basis only, under section 68AAB or 68AAC, regardless of their occupation.

2.21 The trustee's choice to elect to apply, or not make an election to apply, the dangerous occupation exception is not affected by a trustee's obligation under an insurance covenant. For this reason, a decision to make an election, or not make an election, cannot give rise to a contravention of a trustee's obligation under an insurance covenant.


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