House of Representatives

Explanatory Memorandum

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

Schedule 1 - Amendment of the Superannuation Act 1990

16. This schedule amends the 1990 Act as a consequence of the establishment of the PSSAP as a scheme separate to the PSS. The passage of the 2005 Bill will replace arrangements made by the 20th PSS Amending Deed to establish the PSSAP as a sub plan of the PSS.

17. Although the PSSAP is to be separated from the PSS, the PSS Board will be responsible for the PSSAP in the same way as it would have been responsible through the arrangements in the 20th Amending Deed.

18. Part 1 of this Schedule amends 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 2005 Bill and the PSSAP Trust Deed prescribe the Board's functions and powers in relation to the PSSAP.

19. Part 2 of this Schedule makes a number of amendments to the 1990 Act to replace the membership arrangements under the 20th Amending Deed. This Part ensures, in conjunction with the 2005 Bill, that the PSS is closed to most new Australian Government employees and office holders from 1 July 2005. Such persons will either join the PSSAP or a fund of their choice.

20. Part 3 of this Schedule makes a minor technical amendment correcting a reference to the trustee legislation for the ACT.

Part 1 - Amendments relating to the PSS Board Etc.

Item 1

21. Item 1 amends subsection 22(1) of the 1990 Act. This item clarifies that, following the establishment of the PSSAP and the PSS Board becoming responsible for the administration of that scheme under the 2005 Bill, the functions and powers of the PSS Board as set out in the PSS Trust Deed are limited to those in respect of the PSS. Section 22 provides for the functions and powers of the PSS Board to be set out in the PSS Trust Deed and makes the PSS Board responsible for the administration of the 1990 Act.

Item 2

22. Item 2 adds a note at the end of section 22 of the 1990 Act. The note refers to the additional functions and powers of the PSS Board following the establishment of the PSSAP under the 2005 Bill. Section 22 provides for the functions and powers of the PSS Board to be set out in the PSS Trust Deed and makes the PSS Board responsible for the administration of the 1990 Act. The additional functions and powers of the PSS Board are set out in clause 20 of the 2005 Bill, which provides for the functions and powers of the PSS Board in relation to the PSSAP and the PSSAP Fund to be set out in the PSSAP Trust Deed and gives the PSS Board responsibility for the administration of the 2005 Bill.

Item 3

23. Item 3 amends subsection 26(1) of the 1990 Act by repealing and replacing subsection 26(1) to confirm that section 26 applies to the PSS Board only insofar as the PSS Board performs functions or exercises powers in relation to the PSS. Section 26 provides that neither the PSS Board or the PSS Fund are subject to a tax under a law of the Commonwealth or a State or Territory other than certain Acts specified in subsection 26(1) or by regulation under subsection 26(3).

Item 4

24. Item 4 clarifies that the amendment to subsection 26(1) of the 1990 Act under Item 3 has no effect on existing regulations made under subsection 26(3) of the 1990 Act.

Item 5

25. Item 5 amends paragraph 28(1)(a) of the 1990 Act to limit its application to the PSS Board's performance of its functions and powers in respect of the PSS. Paragraph 28(1)(a) provides that the PSS Board must, as soon as practicable, provide a report on the performance of its functions for each financial year. The amendment clarifies that the report on the PSS Board's performance of its functions is only in relation to the PSS. This clarification is necessary as a result of the additional functions given to the PSS Board under the 2005 Bill.

Item 6

26. Item 6 amends subsection 28(4) of the 1990 Act to limit its application to the PSS Board's performance of its functions and powers in respect of the PSS. Subsection 28(4) requires the PSS Board, if it has not provided a report under paragraph 28(1)(a) of the 1990 Act within 6 months of the end of the financial year, to provide an interim report on the performance of its functions during that year. This clarification is necessary as a result of the additional functions given to the PSS Board under the 2005 Bill.

Item 7

27. Item 7 amends subsection 29(1) of the 1990 Act. This item seeks to clarify that the application of this subsection is limited to the PSS Board's performance of its functions and powers in respect of the PSS. Subsection 29(1) gives the Commissioner for Superannuation responsibility for providing administrative services to the PSS Board to assist in the performance of its functions. This clarification is necessary as a result of the additional functions given to the PSS Board under the 2005 Bill.

Item 8

28. Item 8 amends subsection 43(3) of the 1990 Act. The item clarifies that money is only paid out of the PSS Fund where the PSS Board makes a payment in respect of an action, liability, claim or demand in relation to the PSS and its governing rules (the 1990 Act, regulations under that Act and the PSS Trust Deed). Section 43 provides the PSS Board and other persons responsible for, or assisting in, the administration of the 1990 Act and the PSS Trust Deed with indemnification against actions, liabilities, claims and demands. The PSS Fund is reimbursed for any money paid out from the Consolidated Revenue Fund. This item seeks to clarify that an action, liability, claim or demand must be in relation to the performance of duties or functions under the 1990 Act, regulations under that Act or the PSS Trust Deed.

Part 2 - Amendments relating to the membership of the Public Sector Superannuation Scheme

Items 9, 12 and 13

29. Item 9 amends section 3 to include a definition of a PSS invalidity pensioner by reference to the PSS Rules. A PSS invalidity pensioner is a person receiving a pension benefit under the PSS Rules because of invalidity retirement. This definition has been inserted to assist in defining the membership arrangements for such persons who resume employment. Items 12 and 13 make consequential changes to section 6 of the 1990 Act.

Items 10, 11, 14, and 15

30. These items make various amendments to section 6 of the 1990 Act to close the PSS to new employees and office holders from 1 July 2005 and, among other things, to prescribe additional circumstances where a person may be required to become a PSS member. Section 6 of the 1990 Act provides that a person is a PSS member if the person is described in subsection 6(1) of that Act but is excluded from PSS membership if they are a person described in subsection 6(2) of the that Act.

31. The amendments made by these items to the existing membership provisions are in a similar form to provisions that apply under the 20th Amending Deed. That Deed, establishes the PSSAP as a sub plan of the PSS from 1 July 2005 and Rules B2.1.1A and Rules A2.1.2 provide that membership of the existing (defined benefit) PSS is restricted to existing employees and office holders at 30 June 2005 and to persons who have a relevant existing interest in the PSS (such as a PSS preserved benefit). However, the items noted in this Bill also provide for persons to become PSS members where this is necessary for an employer to meet the choice of fund requirements under the SG Act.

32. As noted below, the items in this Bill insert a new subsection 6(4) to close PSS membership in respect of a person who becomes an employee or office holder on or after 1 July 2005. The Bill also inserts a subsection 6(5) to mandate PSS membership in respect of an APS employee and any other person determined by the Minister in certain circumstances where it is necessary for the person to become a PSS member in order for the employer to meet the choice of fund requirements. The Bill also provides, pursuant to new subsection 6(6) that a person who would otherwise be a PSS member as a result of subsection 6(5) is not a PSS member if they are described in subsection 6(6).

33. Although PSS membership will be closed to most new employees and office holders from 1 July 2005, the 2005 Bill provides that such persons will be eligible to become PSSAP members and, subject to the choice of fund requirements, may be required to become a PSSAP member in certain circumstances.

34. Item 10 amends subsection 6(1) of the 1990 Act, which includes persons as PSS members, to provide that this subsection is subject to the new subsection 6(4) (included by item 15 of this schedule) as well as the existing subsection 6(2). This ensures that an eligible person can become a PSS member only if they are not excluded by subsection 6(2) and 6(4) effectively limiting the application of subsection 6(1) after 30 June 2005.

35. Item 11 makes a technical amendment to subsection 6(1) of the 1990 Act.

36. Item 15 amends section 6 of the 1990 Act to include a number of new subsections that:

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under new subsection 6(4), close the PSS to new members unless a person has a relevant pre-existing interest in the scheme. A relevant pre-existing interest is a right to membership in relation to particular employment engaged in at 30 June 2005 or another relevant existing interest in the Australian Government's defined benefit schemes, the PSS and the CSS, that would allow resumption of membership or provide an entitlement to join the scheme under certain circumstances;

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under new subsection 6(5), mandate PSS membership for APS employees and other prescribed persons in certain circumstances where this would be necessary for an employer to meet the choice of fund requirements; and

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under new subsection 6(6), exclude certain persons from PSS membership who would otherwise be mandated as PSS members.

2. Subsection 6(4) of the 1990 Act provides that a person cannot become a PSS member on or after 1 July 2005 unless they meet certain conditions described in that subsection. For example, a person would be permitted to become a PSS member if they are already a PSS member in respect of other employment or an appointment (paragraph 6(4)(a)), the person has a PSS preserved benefit (paragraph 6(4)(b)), the person is a PSS invalidity pensioner (paragraph 6(4)(c)) or the person is a CSS member and is eligible to become a PSS member and has made an election accordingly (paragraph 6(4)(g)).

3. Subsection 6(4) also provides that certain existing employees and office holders at 30 June 2005 will continue to be eligible to make an election under section 7 or 8 (as appropriate) and join the PSS on or after 1 July 2005. Paragraph 6(4)(d) makes it clear that a statutory office holder will be able to elect to become a PSS member only during a term of appointment that was held at the end of 30 June 2005. Once the office holder commences new employment or a new term of appointment on or after 1 July 2006, that person will not be permitted to make an election to become a PSS member in accordance with this subsection.

4. Similarly, paragraph 6(4)(e) will ensure that a temporary employee will be permitted to become a PSS member during a term of employment that was held at the end of 30 June 2005 or, if the employment is not for a fixed term, the employee will be able to elect during that employment. Once the employee commences a new term of employment or commences new employment, that employee will not be permitted to make an election to become a PSS member in accordance with this subsection.

5. In certain circumstances, a temporary employee could make an election under section 8 of the 1990 Act to become a PSS member before they have met the necessary criteria to become such a member. For example, section 8 provides that a person is eligible to become a PSS member if they have accrued periods of relevant employment and appointments of at least three months in a two year period. Paragraph 6(4)(f) will allow such a person who has made their election to become a PSS member before 1 July 2005 to become a PSS member on or after that date once they have met the relevant criteria. This paragraph ensures also that such an election would not have effect if the person does not meet the criteria during a current term of employment or if the employment is not for a fixed term, during the person's current employment at 30 June 2005.

6. In certain circumstances, a temporary employee could make an election under section 8 of the 1990 Act to become a PSS member before they have met the necessary criteria to become such a member. For example, section 8 provides that a person is eligible to become a PSS member if they have accrued periods of relevant employment and appointments of at least three months in a two year period. Paragraph 6(4)(f) will allow such a person who has made their election to become a PSS member before 1 July 2005 to become a PSS member on or after that date once they have met the relevant criteria. This paragraph ensures also that such an election would not have effect if the person does not meet the criteria during a current term of employment or if the employment is not for a fixed term, during the person's current employment at 30 June 2005.

7. Subsection 6(5) provides that APS employees and any person determined by the Minister who is not already a PSS member are required to become PSS members where this is necessary for the employer to meet the choice of fund requirements under the SG Act. This subsection will only apply in respect of a temporary employee or office holder who will be eligible to become a PSS member on or after 1 July 2006 (as a permanent employee who is eligible to become a PSS member would be required to become a member pursuant to subsections 6(1) and 6(4)).

8. Paragraph 6(5)(d) provides that a relevant person will be required to become a PSS member under subsection 6(5) where this would be consistent with the employer complying with the choice of fund requirements in respect of that employee by:

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offering the employee choice of fund and the employee does not choose a fund (subsection 32C(2) of the SG Act);

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paying contributions to the PSS in respect of the employee as provided for in an Australian Workplace Agreement or a certified agreement under the Workplace Relations Act 1996 or a certified agreement under the Industrial Relations Act 1988 (subsection 32C(6) of the SG Act).

2. Subsection 6(6) prevents membership under subsection 6(5) where a person is an eligible employee under the Superannuation Act 1976 (a CSS member), a person to whom the Judges' Pensions Act applies, a person excluded by the Minister by declaration under paragraph 6(2)(c), or a person determined by the Minister under this subsection.

3. Subsection 6(7) confirms that determinations under subparagraphs 6(5)(b)(ii) and paragraph 6(6)(d) are legislative instruments for the purposes of the Legislative Instrument Act 2003. Subsection 6(8) specifically provides that the determinations are subject to disallowance by the Parliament under section 42 of the Legislative Instruments Act 2003 and, as a consequence, Item 39 of the table under section 44 of the Legislative Instruments Act 2003 which exempts superannuation legislative instruments (except regulations) from the disallowance process does not apply.

Item 16

4. Item 16 amends paragraph 19(1)(c) to include, as employees of an authority or body (other than a State authority), a person or persons included by a determination by the Minister made under paragraph 6(5)(b)(ii). Section 19 provides for payments as determined by the Minister to be made to the Commonwealth in respect of benefits payable to PSS members employed by an authority or body under subsection 19(1).

Item 17

5. Item 17 amends paragraph (b) of the definition of "declared authority" in subsection 35(4) to include an authority or body whose employees include a person or persons included by a determination by the Minister under paragraph 6(5)(b)(ii). Section 35 allows the Minister to direct in writing a declared authority to pay to the Commonwealth amounts in relation to the estimated costs of the PSS Board for the administration of the PSS.

Item 18

6. Item 18 amends paragraph 36(d) to include an authority or body whose employees include a person or persons included in a determination made by the Minister under paragraph 6(5)(b)(ii). Section 36 provides for the authority or body to pay for any medical examination required under the PSS Rules.

Part 3 - Technical Amendment

Item 19

7. Item 19 amends section 25 of the 1990 Act to insert an updated reference to the trustee legislation of the Australian Capital Territory (ACT). Section 25 currently contains a reference to the Trustee Act 1957 (ACT) which applied the Trustee Act 1925 (NSW) to the ACT. The Trustee Act 1957 was repealed by the ACT Statute Law Amendment Act 2001 (No. 2). The remaining provisions of the Trustee Act 1957 providing for the operation of the Trustee Act 1925 in the ACT were incorporated into the Trustee Act 1925 (ACT).