Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Finance and Administration Senator the Hon Nick Minchin)

Schedule 2 - Amendment of the Superannuation Act 1990

Part 1 - Amendments relating to the scope and administration of the Act and the Trust Deed

Item 1 - Definition of 'approved authority'

176. Item 1 repeals the existing definition of 'approved authority' in section 3 of the 1990 Act and provides that the new section 3AAA inserted by item 3 defines the term.

Item 2 - Definition of 'voting share'

177. Item 2 inserts a definition of 'voting share' in section 3 of the 1990 Act. The term is used in the new definition of 'approved authority' as inserted by item 3 of this Schedule.

Item 3 - Approved authority

178. Item 3 inserts a new provision into the 1990 Act.

179. New section 3AAA determines whether or not an authority or body is an approved authority for the purposes of the 1990 Act and replaces the definition repealed by item 1 of this Schedule. Staff of approved authorities may be eligible to be PSS members. The intention is to streamline the administration of the provision that currently requires case-by-case consideration of each request for a body to be declared to be an approved authority. The revised definition, however, does not cease approved authority status for any approved authority covered by the repealed definition while it retains its present character (see paragraph 184).

180. Paragraph (b) of the existing definition describes the type of authority or body that could be declared by the Minister to be an approved authority for the purposes of the Act and provides for the Minister to make the declaration. Paragraph (a) of the existing definition provides that a body that was an approved authority for the purposes of the 1976 Act on 30 June 1990 continued to be an approved authority under the 1990 Act.

181. New section 3AAA describes a body that is an approved authority for the purposes of the Act unless the Minister declares otherwise under subsection 3AAA(9).

182. Subsection 3AAA(2) includes an authority or body that is an approved authority at the time of commencement of the section.

183. Subsection 3AAA(3) provides that a body that is an approved authority prior to the commencement of the subsection, will cease to be an approved authority automatically where there has been a change of character. However, this will only apply to future changes of character. If this does occur the Minister may still, if appropriate, declare the body to continue to be an approved authority under subsection 3AAA(8) or provide for continuing membership for existing employees of the body through a Membership Inclusion Declaration under section 6.

184. An authority or body changes its character if the level of Commonwealth control reduces, or if in the last financial year the level of the funding received from the Commonwealth Budget is below 30% and further reduces.

185. Subsection 3AAA(4), (5), (6) and (7) provide that certain Commonwealth bodies are approved authorities if their Chief Executive Officer agrees to contribute towards the cost of providing membership to employees of the body. This applies provided the body:

(a)

is fully Commonwealth controlled;

(b)

is not operating in a competitive environment; or

(c)

30% or more of its funding is received from the Commonwealth Budget (otherwise than by way of taxes imposed by the Commonwealth.

186. One of the effects of these provisions is that, if a body that has automatically been an approved authority in the past changes its character so that it would not automatically be an approved authority, it will cease to be an approved authority.

187. Subsection 3AAA(8) provides that the Minister may declare any authority or body to be an approved authority including one that lost that status because of a change in character.

188. Subsection 3AAA(9) provides that the Minister may, despite the other provisions of the section, declare that an authority or body is not an approved authority for the purposes of the Act.

189. The declarations under section 3AAA are all Statutory Rules and disallowable instruments as provided by section 45 of the Act as amended by items 4 to 7 of this Schedule. They may be made with retrospective effect in circumstances as provided by that section as amended.

Items 4 to 7 - Consequential amendments

190. Items 4 to 7 amend section 45 of the 1990 Act as a consequence of the insertion of section 3AAA by item 3 of this Schedule. New subsections 45(3A) and (3B) allow the Minister to make declarations concerning the status of an authority or body with retrospective effect in certain specified circumstances. In particular, declarations to include an authority or body as an approved authority with retrospective effect can be made effective from a date earlier than the commencement of the new definition. The section also allows an authority or body to be excluded from the definition retrospectively to the commencement of the new definition if employees of the authority or body have not been treated as PSS members.

Part 2 - Miscellaneous

Item 8 - Consequential amendment

191. Item 8 amends the definition of Trust Deed in section 3 of the 1990 Act by omitting the reference to section 5 of the Act as a consequence of amendments made to the Tenth Amending Deed.

Item 9 - Continuity of membership

192. Item 9 inserts new subsection 12(2) into the 1990 Act which clarifies that where the PSS Rules currently or in the future provide for continuity of membership of the PSS for specified categories of persons, those situations are to be covered by the provisions in the 1990 Act that provide for continuation of membership in certain circumstances.

193. Section 12 of the 1990 Act currently provides for continuity of membership in certain circumstances where there is a break in employment. The existence of this section raises the question whether there is power for the PSS Rules to cover other situations involving continuity of membership. Such provisions include where a person resigns to contest an election for Commonwealth, State or Territorial legislature or persons who are re-appointed or re-employed after termination of appointment or employment under provisions in the Public Service Act.

Item 10 - Delegation by PSS Board

194. Section 28A of the 1990 Act provides for the PSS Board to be able to delegate its powers. Item 10 repeals the section and replaces it with a new section. New subsection 27A(1) enables the Board to delegate all or any of its powers (other than the power to review its own, or its delegates', decisions) under the Act, to certain specified persons as well as to a committee of 2 or more of those persons.

195. New subsection 28A(2) provides that a person to whom the Board has delegated its power may subdelegate that power to one of the other persons to whom the power may be delegated. Generally a delegated power may be subdelegated to a person referred to by the same or a later paragraph of the section.

196. Provisions of the Acts Interpretation Act 1901 will apply to the subdelegation as if it were a delegation.

Item 11 - Transfer of power to the PSS Board

197. Section 33D of the 1990 Act requires that the Minister and the PSS Board agree concerning the transfer of assets from the PSS Fund to an approved fund on behalf of PSS members who transfer to that approved fund. As the Board has full responsibility for the PSS Fund it is appropriate that the Board have full responsibility for transfers from that Fund.

198. Item 11 amends section 33D to transfer the Minister's powers under that section to the Board.

Item 12 - Reference to the PSS Rules

199. Item 12 amends subsection 33G(2) of the 1990 Act to remove a reference to Part 6 of the PSS Rules. This subsection was not amended when amendments were made in the Superannuation Legislation Amendment Act (No 1) 1995 to replace references to specific Parts and Divisions of the PSS Rules with more general references. The amendments were made to avoid the need for amendment of the 1990 Act every time the PSS Rules are amended.

Item 13 - Employers to distribute information

200. Item 13 inserts a new section 42A into the 1990 Act to allow the PSS Board to send certain information to designated employers under the Act and request those employers to distribute the information to PSS members. The section requires the employer to distribute that information.

Item 14 - Indemnification of PSS Board members etc

201. Item 14 amends section 43 of the 1990 Act to ensure that PSS Board members may only be indemnified in circumstances permitted by SIS.

Item 15 - Consequential amendment

202. Item 15 amends section 45 of the 1990 Act as a consequence of the amendment made by item 11 of this Schedule.

Item 16 - Retrospective amendments

203. Item 16 inserts new subsection 45(6) into the 1990 Act to provide that subsection 48(2) of the Acts Interpretation Act 1901 does not apply in relation to an Amending Deed. This will allow retrospective amendments to be made to the Trust Deed in any circumstances permitted by SIS. Members' rights and benefits will be protected in accordance with the SIS that limits the circumstances in which retrospective amendments can be made to the rules of a superannuation scheme.

Item 17 - Commencement of certain provisions of the Tenth Amending Deed

204. The Ninth Amending Deed, effective from 1 July 1995, remade the PSS Rules in a simplified form. The simplified Rules were, in the main, a translation of the Rules in force before 1 July 1995. Some of these translated Rules contained errors that inadvertently advantaged some groups of members, eg the amount of pension benefits to be received on retirement. The revised provisions including these errors were never implemented administratively as they were intended to be a direct translation of the "old" Rules. The errors were corrected by the Tenth Amending Deed (effective 1 February 1996) after the PSS Board and the ISC approved the changes under SIS regulation 13.16(d).

205. The Senate Standing Committee on Regulations and Ordinances questioned the validity of the administration of the affected provision for the period 1 July 1995 to 1 February 1996, between the Ninth and Tenth Amending Deeds. The Committee agreed with the proposal that, to address their concerns, the 1990 Act be amended to validate the administration of those Rules.

206. Item 17 provides for the amendments made by the Tenth Amending Deed to have retrospective effect.