Explanatory Memorandum
(Circulated by the authority of the Minister for Finance and Administration, Senator the Hon Nick Minchin)General outline and financial impact
Outline
The Superannuation (Consequential Amendments) Bill 2005 (the Bill) amends various Acts as set out in the schedules to the Bill. The amendments are a consequence of changes to the Australian Government's superannuation arrangements and in particular as a direct or indirect consequence of the Superannuation Bill 2005 (the 2005 Bill) which will establish the Public Sector Superannuation Accumulation Plan (PSSAP) as a separate accumulation superannuation fund and allow Australian Government employers to offer new employees and statutory office holders choice of fund arrangements like most private sector employers. This Bill and Explanatory Memorandum should be considered in conjunction with the 2005 Bill and the Explanatory Memorandum to that Bill.
This Bill will amend the:
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- Superannuation Act 1990 (1990 Act);
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- Superannuation Guarantee (Administration) Act 1992 (SG Act);
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- Superannuation (Productivity Benefit) Act 1988 (Productivity Benefit Act);
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- Superannuation Benefits (Supervisory Mechanisms) Act 1990 (Supervisory Mechanisms Act);
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- Governor-General Act 1974 (Governor-General Act);
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- Judges' Pensions Act 1968 (Judges' Pensions Act);
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- Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997; and
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- Trust Deed under the 1990 Act.
Amendments to the 1990 Act and Trust Deed under the 1990 Act (Schedules 1 and 8)
The 2005 Bill will provide that the PSS Board will continue to be responsible for the PSSAP to be established pursuant to that Bill. The PSSAP would, but for the passage of the 2005 Bill, be established as a sub plan of the Public Sector Superannuation Scheme (PSS) from 1 July 2005 by the 20th Amending Deed (which will amend the Trust Deed and Rules under the 1990 Act).
As a consequence of establishing the PSSAP as a separate scheme and the 2005 Bill prescribing the PSS Board's functions and powers in relation to that scheme, this Bill will amend the 1990 Act and the Trust Deed under the 1990 Act to clarify that the provisions referring to the functions and powers of the PSS Board in the 1990 Act and in the Trust Deed are limited to its responsibilities in respect of the PSS established under that Act.
The Bill will also make a number of amendments to the 1990 Act to replace the PSS membership arrangements under the 20th Amending Deed which would have closed the (existing) defined benefit arrangements of the PSS to most new Australian Government employees and office holders from 1 July 2005. The Bill will ensure, in conjunction with the 2005 Bill, that the PSS is closed to most new Australian Government employees and office holders from 1 July 2005. Certain new employees and office holders with a relevant existing interest in the current Australian Government superannuation arrangements, such as a PSS preserved benefit, will continue to be eligible to resume PSS membership. Existing PSS members will not be affected by the changes.
Generally, existing PSS membership arrangements will require those new employees and office holders with a relevant existing interest to become PSS members if they resume Australian Government employment. However, certain persons, such as temporary employees and office holders, may have the option to resume PSS membership. Employees who do not choose PSS membership will have superannuation provided for them in accordance with the Productivity Benefit Act (subject to the closure of that Act to new employees and office holders from 1 July 2006 - see below) or will be able to have choice of fund arrangements under the SG Act. APS employees and certain other persons who have the option to join the PSS and who do not choose a fund offered by their employer will be required to join the PSS as the employer (default) fund.
Amendments to the SG Act (Schedule 2)
The SG Act will provide from 1 July 2005 that employers participating in the PSS are taken to comply with the choice of fund requirements under that Act in respect of PSS members. Following the establishment of the PSSAP as a separate scheme in accordance with the 2005 Bill, this Bill will amend the SG Act to provide that employers contributing to the PSSAP in respect of an employee will be taken to have complied with the choice of fund requirements under that Act until 30 June 2006. From that time relevant employers will become subject to the broader choice of fund requirements in the SG Act as they apply to most private sector employers.
Amendments to the Productivity Benefit Act (Schedule 3)
The Bill will amend the Productivity Benefit Act to close the superannuation arrangements provided under that Act to new employees and office holders from 1 July 2006. Employers will be required to offer these employees choice of fund arrangements under the SG Act from that date. The Productivity Benefit Act will continue to apply to employees and office holders who are qualified employees at 30 June 2005.
The Productivity Benefit Act will also be amended to facilitate employers offering choice of fund arrangements under the SG Act from as early as 1 July 2005 to members of the PSSAP.
Amendments to the Supervisory Mechanisms Act (Schedule 4)
The Bill will amend the Supervisory Mechanisms Act to recognise the superannuation arrangements provided for under the 2005 Bill and to facilitate the introduction of choice of fund arrangements by Australian Government employers from 1 July 2006. Australian Government employers will be able to introduce choice of fund arrangements from as early as 1 July 2005. The Supervisory Mechanisms Act controls the provision of superannuation benefits to Australian Government employees.
Amendments to the Governor-General Act and the Judges' Pensions Act (Schedules 5 and 6)
The Bill amends the Governor-General Act and the Judges' Pensions Act as a consequence of the closure of the Productivity Benefit Act to new employees, to replace arrangements made under that Act for a Governor-General or a Judge. The amendments provide a lump sum benefit to Governors-General and Judges in circumstances where the superannuation benefit payable to or in respect of a Governor-General or a Judge otherwise would be less than the Superannuation Guarantee minimum level of employer superannuation.
Amendments to other Acts (Schedule 7)
The Bill will amend the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to extend their application to the 2005 Bill and to the Trust Deed of the PSSAP established under the 2005 Bill.
Financial Impact Statement
The Bill will have no financial impact.