House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon Michael Sukkar MP)

General outline and financial impact

Choice of fund for workplace determinations and enterprise agreements

This Bill reintroduces amendments to the SGAA 1992 that were previously introduced into the 45th Parliament on 14 September 2017 through Schedule 1 to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017.

The amendments ensure employees under workplace determinations or enterprise agreements have an opportunity to choose the superannuation fund for their compulsory employer contributions.

Date of effect: This measure applies to new workplace determinations and enterprise agreements made on or after 1 July 2020.

Proposal announced: This measure was announced on 20 October 2015 in the Government's response to the Financial System Inquiry.

Financial impact: Nil.

Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.1 to 2.4.

Compliance cost impact: Low.

Summary of regulation impact statement

The following summary is for the regulation impact statement that was published for this measure when it was introduced through Schedule 1 to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017. ^[1]

To prevent retrospective application, this Bill revises the original start date considered by Option 2 to 1 July 2020.

Regulation impact on business

Impact: Total annual average regulatory cost is $5.646 million; $2.245 million for business and superannuation funds and $3.401 million for individuals.

Main points:

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Some workers cannot choose the superannuation fund into which their compulsory employer superannuation is paid. This puts them out-of-step with the majority of workers and prevents them making key decisions around their retirement savings, can result in the payment of unnecessary fees and insurance premiums, and can reduce competition between superannuation funds.

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Choice of fund for compulsory contributions can be restricted by some employers under Commonwealth legislation. Without Government action individuals under certain collective agreements will continue to face restricted choice of fund.

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Three options were considered.

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Maintain the status quo (Option 1)

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Extend choice to employees under new enterprise agreements and workplace determinations (Option 2)

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Extend choice to all employees under existing and new enterprise agreements and workplace determinations, and employers must offer a choice of fund form to all existing employees (Option 3)

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Treasury undertook public consultation (for 6 weeks) on draft legislation and explanatory material for Option 2.

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Option 2 is considered the best option because it extends choice in a meaningful way while minimising compliance costs for employers.

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Legislative amendments are required to implement Option 2. The associated obligations on industry are an established part of the superannuation regime and can be readily made. There are multiple official Government-Industry working groups for participants in the superannuation industry to communicate any issues with the implementation of the policy. The Australian Taxation Office also provides guidance on compliance with superannuation obligations.