Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)Chapter 3 - Accounts within the Reserve
Overview
2.1 This chapter provides for the establishment of the Superannuation Holding Accounts Reserve to receive payments from employers instead of superannuation contributions for employees. The provisions relevant to this chapter are contained in Part 2 of the Bill. The chapter also provides for the continued use of the Audit Act 1901 until the enactment of the Financial Management and Accountability Bill 1995.
2.2 The purpose of the provisions is to establish a fund capable of receiving and combining payments instead of superannuation contributions from employers. The fund is to operate as an aggregation mechanism between employers and the superannuation industry.
Explanation of the provisions
2.3 The Bill establishes a reserve to be known as the Superannuation Holding Accounts Reserve. This Reserve will receive payments from employers and shall credit those payments to accounts of employees. The Reserve shall also combine multiple payments from a particular employer or from different employers. See chapters 3 to 6 for more detailed explanations of the operations of the Reserve. [Subclause 8(1) of Part 2]
2.4 After the commencement of the Financial Management and Accountability Act 1995 the Reserve shall form a component of the Reserved Money Fund. The Reserve component of the Reserved Money Fund is established by, and for the purposes of, this Bill. This is in accordance with subclause 20(5) of the Financial Management and Accountability Act 1995 . [Subclause 8(2) of Part 2]
2.5 The Bill allows for the transitional use of the Audit Act 1901 until enactment of the Financial Management and Accountability Bill 1995. The Reserve is to be a trust account for the purposes of section 62A of the Audit Act 1901 . This enables the Reserve to make payments and debits from the Reserve, to invest the money in the Reserve and authorises the expenditure of money from the Reserve. [Subclause 8(3) of Part 2]
Investment of money in the Reserve
2.6 The money in the Reserve that is not required for the making of payments out of the Reserve may be invested in accordance with section 40 of the Financial Management and Accountability Act 1995 . Section 40 of that Act provides that those funds may be invested in the following areas:
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- securities of the Commonwealth or of a State or Territory;
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- securities guaranteed by the Commonwealth, a State or a Territory;
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- a deposit with a bank, including a deposit evidenced by a certificate of deposit; and
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- any other form of investment prescribed by the regulations. [Note 1, Clause 8 of Part 2]
2.7 The Bill provides for the transitionary application of the Audit Act 1901 . Section 62B of that Act authorises the investment of balances in the Reserve. The catchall provision in section 62B of that Act is slightly more restrictive than section 40 of the Financial Management and Accountability Act 1995 in that section 62B of the Audit Act 1901 allows investment in 'any other form of investment approved by the Minister'. Section 40 of the Financial Management and Accountability Act 1995 allows other forms of investment to be prescribed by the regulations. [Note 2, clause 8 of Part 2]
2.8 Section 81 of the Constitution provides that all revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by the Constitution. In accordance with section 81 of the Constitution, income from investments must be paid into the Consolidated Revenue Fund. Any gain from the investment of money held in the Superannuation Holding Accounts Reserve shall be transferred from the Consolidated Revenue Fund to the Superannuation Holding Accounts Reserve. Further details of the investment of money held in the Reserve are contained in chapter 6 . [Note 2, Clause 8 of Part 2]
The Reserve not a superannuation fund
2.9 The Superannuation Holdings Account Reserve is not a superannuation fund or a superannuation scheme. This is to ensure that there is no misunderstanding as to the nature of the Superannuation Holding Accounts Reserve. [Subclauses 9(1) and (2) of Part 2]
2.10 The Reserved Money Fund is to be appropriated as necessary for the purposes of the Bill. This provides that where funds are needed to be applied for the purpose of this Bill the Reserve Money Fund is to be appropriated for that purpose. This is in accordance with Division 2 of the Financial Management and Accountability Act 1995 . [Subclause 10(1) of Part 2]
2.11 The appropriation from the Reserved Money Fund does not take effect until the commencement of the Financial Management and Accountability Act 1995 . [Subclause 10(2) of Part 2]