House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Assistant Minister for Defence, the Hon Stuart Robert MP)

General outline

OUTLINE

The Defence Legislation Amendment (Superannuation and ADF Cover) Bill 2015 (Consequentials Bill) is part of a package of three Bills to establish the Australian Defence Force Superannuation Scheme (ADF Super) and facilitate the introduction of the Australian Defence Force's new workforce model by providing permanent members of the Australian Defence Force (ADF) access to flexible service arrangements.

The other two Bills in the package are:

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The Australian Defence Force Superannuation Bill 2015 (ADF Super) which gives effect to the Government's announcement to introduce a new modern superannuation arrangement for people joining the ADF on and after 1 July 2016. The new arrangements will allow ADF members to choose which superannuation scheme they belong to and, for the first time, give those members the ability to transfer their accumulated ADF Super benefits to a scheme of their choice when they leave the ADF; and

•

the Australian Defence Force Cover Bill 2015 (ADF Cover) which provides for standalone statutory death and invalidity cover for members of ADF Super and those who would have been ADF Super members but for choosing another scheme to which the Department will make employer contributions. ADF Cover is to be deemed to be an exempt public sector superannuation scheme and benefits paid from the ADF Cover arrangements will be treated as payment of superannuation benefits.

Also included in the package are exposure drafts of both the Australian Defence Force Superannuation Trust Deed and the Military Superannuation and Benefits Amendment (Trust Deed - ADF Super Consequential) Instrument 2015 which effects consequential changes to the MSBS Trust Deed and Rules. This is to facilitate the measure and to make some administrative changes to reduce red tape.

Financial Impact Statement

Schedules 1 and 3 of the Bill will have no financial impact. However, the measures in Schedule 2 may have a financial impact depending on the number of ADF members who apply for and are approved for flexible service arrangements.

If the numbers do not increase above current levels of Defence Force Retirement and Death Benefits (DFRDB) and Military Superannuation and Benefits Scheme (MSBS) members taking part-time leave without pay in order to work flexibly, there will be no additional financial impacts flowing from the new measure.

However, if there is an increase in numbers rendering flexible service as a result of the new arrangements, then the financial implications flowing will need to be addressed within the funding provided to the Defence budget. The actuary did not undertake any financial assessment of the implications because there was insufficient information that could be provided to support any such assessment.