House of Representatives

Explanatory Memorandum

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

Schedule 3 - Amendment of the Superannuation (Productivity Benefit) Act 1988

12. This schedule closes the Productivity Benefit Act to new members from 1 July 2006 when employers participating in the PSSAP will be required to provide choice of fund arrangements.

13. The schedule also amends the Productivity Benefit Act to ensure that employees who leave the PSSAP under a choice of fund arrangement offered by their employer under the SG Act before 1 July 2006 as provided for under the 2005 Bill do not inadvertently become covered by the Productivity Benefit Act.

Item 1

14. Item 1 amends subsection 3(1), the interpretation section, of the Productivity Benefit Act to include a definition of the "PSSAP" as the Public Sector Superannuation Accumulation Plan established by the 2005 Bill. This definition is used in section 3AB which is inserted by item 3 of this schedule and provides that an employee who ceases to be an ordinary employer-sponsored member of the PSSAP as part of a choice of fund arrangement is not a qualified employee under the Productivity Benefit Act.

Item 2

15. Item 2 inserts two notes after the definition of "qualified employee" in subsection 3(1) of the Productivity Benefit Act. The notes refer to the new sections inserted by item 3 of this schedule which modify the application of this definition.

Item 3

16. Item 3 inserts two new sections 3AA and 3AB into the Productivity Benefit Act.

17. Section 3AA prevents a person becoming a qualified employee on or after 1 July 2006 irrespective of whether they would otherwise fall under that definition. This effectively closes the superannuation arrangements under the Productivity Benefit Act to new employees and office holders from that date.

18. The superannuation arrangements under the Productivity Benefit Act will continue to apply to employees or office holders covered at 30 June 2005 unless they elect to join the PSS under section 7 or 8 of the 1990 Act or the PSSAP under section 14 of the 2005 Bill, as appropriate to their circumstances.

19. Section 3AB allows employers to introduce choice of fund arrangements for employees who are PSSAP members without the employee coming under the superannuation arrangements under the Productivity Benefit Act. It ensures that from 1 July 2005 or a later date of commencement of the 2005 Bill, an employee who ceases to be an ordinary employer-sponsored member of the PSSAP because they have chosen to contribute to another fund as part of a choice of fund arrangement under the SG Act do not become a qualified employee for the purposes of the Productivity Benefit Act. This section will cease to be relevant from 1 July 2006 when section 3AA comes into effect.