Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
(Circulated by the authority of the Minister for Finance and Administration
the Hon John J Fahey, MP)
ISBN: 0642 37712X
This Bill includes amendments to twelve Acts. The Acts to be amended are the Superannuation Act 1922, the Superannuation Act 1976, the Superannuation Act 1990, the Superannuation Amendment Act 1976, the Superannuation (Productivity Benefit) Act 1988, the Superannuation Benefits (Supervisory Mechanisms) Act 1990, the Papua New Guinea (Staffing Assistance) Act 1973, the Parliamentary Contributory Superannuation Act 1948, the Superannuation Legislation Amendment Act (No. 1) 1995, the Administrative Appeals Tribunal Act 1975, the Law Officers Act 1964 and the Workplace Relations Act 1996.
Although the Bill includes a range of amendments in relation to superannuation arrangements for Commonwealth employees, its main purpose is to ensure that Commonwealth civilian employees can participate in the new choice of fund arrangements announced by the Treasurer in the 1997 Budget. Also, as a consequence of the changes to facilitate choice of fund for these employees, the Bill will rationalise the administrative arrangements for the Commonwealth’s closed civilian superannuation schemes and simplify the rules of those schemes and the processes for maintaining those rules.
To ensure that Commonwealth employees are not tied to compulsory membership of a Commonwealth superannuation scheme, and can therefore take advantage of the choice of fund to be offered by employers, the Bill will amend the Superannuation Act 1990 (the 1990 Act) to close the Public Sector Superannuation Scheme (the PSS) to new members from 1 July 1999. Inactive PSS or Commonwealth Superannuation Scheme (CSS) members who have ceased active membership of their scheme before 1 July 1999 (ie, they have resigned and have preserved benefits or have invalidity pensions) will be able to return to active membership of the CSS or PSS, as appropriate, on becoming employed by an employer participating in their scheme.
To allow choice to apply to CSS and PSS members from 1 July 2000, the Bill will amend the Superannuation Act 1976 (the 1976 Act) and the 1990 Act to allow CSS and PSS members to choose to leave those schemes for another scheme offered by, or arranged with, their employer.
The Bill describes the entitlements of a CSS member who chooses to leave the CSS to join another scheme. These entitlements will be based on existing deferred resignation benefits but adjusted by actuarial factors to ensure no increase in unfunded liabilities or windfall gains.
The Bill, together with the Commonwealth Superannuation Board Bill 1998, provides for the replacement of the CSS and PSS Boards by a new Board, the Commonwealth Superannuation Board, and for the abolition of the statutory position of Commissioner for Superannuation. These Bills and the Superannuation Legislation (Commonwealth Employment – Saving and Transitional Provisions) Bill 1998 propose that the new Board will assume the powers, functions and duties of the replaced CSS and PSS Boards and of the Commissioner for Superannuation as well as certain other functions.
It is intended that there are no unnecessary costs to either the scheme members, the Commonwealth or the Funds arising from the amalgamation of the two Boards.
Other Amendments to the Superannuation Act 1976
The Bill proposes to amend the 1976 Act to improve access to superannuation spouse benefits in certain circumstances where the retirement pensioner commenced a marital relationship after age 60 years. Generally, a spouse’s pension is not payable if the pensioner dies within 5 years of the post-retirement relationship commencing. The Bill proposes to remove the restrictions on the payment of benefits following a post-retirement relationship. However, the Bill provides for payment of a pro-rata rate of spouse’s pension where the relationship existed for less than 3 years immediately before the pensioner’s death. Where the relationship has existed for less than 3 years, the Bill provides that spouse’s pension is to be proportional to the length of the relationship and 3 years.
In addition, the Bill provides that where a spouse pension is reduced because the relationship was less than 3 years and the pension is less than an amount per annum determined by the CSS Board, the spouse may elect that the pension be commuted to a lump sum.
The Bill amends the 1976 Act to provide an option for age and early age retirees to reduce their pension entitlements and increase reversionary benefits payable to their spouse or to any children of the retiree. The proposed amendments provide age or early age retirees with an option to elect when their benefit first becomes payable to reduce their pension entitlement to 93 percent of their original entitlement. The resulting reversionary benefits will increase from 67 percent of the retiree’s pension to 85 percent of the pension being paid at the time of the retiree’s death. Corresponding increases would apply in relation to pensions paid in respect of any children.
The Bill amends the 1976 Act to allow for certain payments payable from other superannuation funds or superannuation schemes to be paid into the CSS Fund. This will enable CSS members who have superannuation amounts held in other funds to be able to transfer those amounts into the CSS Fund. The transfer of such amounts will not increase Commonwealth liabilities for the CSS.
The Bill restores, with effect from 5 December 1997, the original intention in relation to late elections to preserve benefits. The Bill proposes also that, where such a late election is accepted, in addition to repaying any benefit received on ceasing to be a member, the member or former member must also repay interest that would have accrued on the benefit had it not been received but had remained in the CSS Fund. This would restore the situation that would have existed if the election for preservation had been made within the time allowed.
The Bill also includes certain other minor amendments of a technical nature to the Superannuation Act 1976, the Superannuation Legislation Amendment Act 1976, the Superannuation Act 1990 and the Superannuation Legislation Amendment Act (No. 1) 1995.
Amendments to the CSS and PSS rules in relation to the cessation of membership through sale or transfer
The Bill amends the 1976 Act and the PSS Trust Deed within the meaning of the 1990 Act to remove restrictions on the payment of lump sum involuntary retirement benefits where a person ceases membership as a result of the sale of an asset or the outsourcing of a function with effect from the date of announcement of these changes, ie 27 June 1997. These amendments also ensure that, where a lump sum becomes payable, on involuntary retirement, on or after 1 July 1999, it is to be paid to a preservation fund.
Repeal of various Acts
The Bill will repeal the Superannuation Act 1922, the Superannuation Act 1976, the Superannuation Act 1990, the Superannuation (Productivity Benefit) Act 1988 and the superannuation and retirement incomes provisions of the Papua New Guinea (Staffing Assistance) Act 1973. However, in most circumstances, the repealed legislation will continue to operate through the application of the Superannuation Legislation (Commonwealth Employment – Savings and Transitional Provisions) Act 1998. The repealed legislation will be administered and maintained by the Commonwealth Superannuation Board, which is to be established by the Commonwealth Superannuation Board Bill 1998.
Superannuation Benefits (Supervisory Mechanisms) Act 1990
The Bill will amend this Act to provide that a determination made under the Act in relation to agencies meeting certain requirements in setting up superannuation arrangements for their employees will be a disallowable instrument.
Parliamentary Contributory Superannuation Act 1948
The Bill amends the Parliamentary Contributory Superannuation Act to improve access to spouse benefits where a retiring member entitled to pension commenced a post-retirement marital relationship after age 60, in line with the arrangements proposed under the 1976 Act. The Bill also rectifies anomalies and technical deficiencies in relation to orphan benefits, the maximum reversionary benefit payable where there is more than one beneficiary and the arrangements relating to transfer values.
In addition, the Bill will cease the application of the inwards transfer value arrangements to persons who become Members of Parliament after the date of Royal Assent of the Bill.
Administrative Appeals Tribunal Act 1975, the Law Officers Act 1964 and the Workplace Relations Act 1996.
Provisions in these Acts in relation to people who leave the CSS or the PSS to join the Judges’ Pension Scheme will be amended by the Bill to assist those schemes to comply with the national regulatory system for superannuation schemes.
There are three elements in the Bill that have financial implications. These relate to post retirement reversionary benefits, the full funding of future benefit accruals for new employees and those CSS and PSS members who exercise choice and CSS late elections for preservation.
The changes to post retirement reversionary benefit arrangements are estimated to increase outlays by $2.2 million per year. The increased outlays arise from the expected increase in the number of reversionary benefits that will be paid under the changed arrangements.
The Bill will result in the funding of future superannuation accruals for new employees and for existing CSS and PSS members who elect to join another complying superannuation fund or Retirement Savings Account. The estimated additional outlays over the next three years are $12 million in 1999-00, $265 million in 2000-01 and $295 million in 2001-02. However, these increased cash flows do not represent any additional expense; they are in effect a bring forward of future cash flows in lieu of an increase in unfunded liabilities.
The amendments to restore the intention of the Superannuation Act 1976 in relation to late elections for preservation are expected to avoid a potential increase on outlays of around $10 million per year.
NEW SUPERANNUATION ARRANGEMENTS FOR COMMONWEALTH EMPLOYEES
On 23 September 1997, the Minister for Finance and Administration announced new superannuation arrangements for Commonwealth civilian employees. Under the new arrangements:
a) from 1 July 1999, new employees will be able to have their employer superannuation paid into a complying superannuation fund, other than the Public Sector Superannuation Scheme (PSS), or Retirement Savings Account (RSA) of their choice;
b) from 1 July 2000, Commonwealth Superannuation Scheme (CSS) and PSS members will be able to choose to cease their membership and have their future employer superannuation paid into another complying superannuation fund or RSA of their choice; and
c) employer contributions for new employees and employees who choose to leave the PSS/CSS will be fully funded and able to be negotiated with the employer subject to a safety net (minimum) of the Superannuation Guarantee (SG) rate.
Implementation arrangements have been developed which, among other things, will put in place the structural arrangements necessary for implementing the Government’s decision.
For example, the ‘fund choice’ arrangements for Commonwealth employees will be implemented consistently with the 1997-98 Budget ‘choice of fund’ policy. Each Department and agency will select the required number of funds or RSAs, including a default fund, or will be free to agree on superannuation arrangements through workplace agreements, provided there is ‘individual’ choice for employees who wish to leave the CSS or PSS.
As well, from 1 July 1999 the current trustee and administrative arrangements for the Commonwealth’s schemes will be rationalised and responsibilities clarified. As part of these changes Commonwealth Superannuation Administration (ComSuper) will operate on a commercial basis and be responsible (under contract) for the provision of administrative services to a new consolidated Board.
To what extent should the Commonwealth regulate arrangements for Commonwealth civilian employees in order to comply with the wider Budget decision?
As the fund choice arrangements for Commonwealth civilian employees are to be implemented consistently with the 1997-98 Budget choice of fund policy, the main issue arising from the new arrangements is whether or not implementation of the new arrangements should be regulated and, if regulated, to what extent.
Should existing superannuation arrangements and new superannuation arrangements be centralised within Government or decentralised?
The outcome of this issue will assist in making decisions about other issues including:
- whether Departments and agencies should be able to individually select the required number of funds/RSAs and whether each employer can agree on superannuation arrangements through workplace agreements.
- whether the Commonwealth should allow other superannuation funds and administrators to participate in superannuation arrangements for Commonwealth employees.
The Government’s main objectives in developing the new arrangements are:
- to provide Commonwealth employees with greater choice, flexibility and control over their superannuation savings consistent with the wider choice of superannuation policy announced by the Treasurer in the 1997-98 Budget; and
- to put in place rationalised administrative structural arrangements for the Commonwealth’s superannuation schemes.
1. Full legislation (to mirror the overall Budget choice of fund policy as it applies to Commonwealth employees) and full centralisation of arrangements;
2. Partial legislation and full centralisation of arrangements;
3. Full legislation and decentralisation of arrangements; and
4. Partial legislation and decentralisation of arrangements
CLARIFICATION OF OPTIONS
Under full legislation (options 1 and 3) new superannuation arrangements for Commonwealth employees would be fully provided for by the Superannuation (Productivity Benefit) Act 1988 (the PB Act) which would continue to operate and provide for the minimum superannuation guarantee framework for Commonwealth employees. This legislation would be amended to comply with the Government’s choice of fund policy.
If a less rather than more legislation approach is adopted (options 2 and 4) this would mean that the PB Act would be repealed and individual Commonwealth employers would then be responsible for complying with the overall superannuation guarantee framework, including in respect of choice of fund. However, prescribed requirements under the Superannuation (Supervisory Mechanisms) Act 1990 would need to be issued to allow Commonwealth Departments and certain Commonwealth agencies to provide appropriate superannuation arrangements.
Under a centralised approach (options 1 and 2), the Commonwealth as a whole would retain involvement in superannuation arrangements for Commonwealth employees. AGEST would continue as the default superannuation scheme for all Commonwealth employees and the Commissioner for Superannuation would continue to have the legislative monopoly over the administration of certain superannuation schemes.
However, a decentralised approach (options 3 and 4) would mean that Commonwealth employers could select the required number of funds/RSAs and could agree on superannuation arrangements through workplace agreements. This proposed option would also mean that AGEST would lose its legislative default monopoly and that the responsibilities and accountabilities of the parties involved in the administration of the Commonwealth’s civilian schemes would be clarified. Under this option, the Commissioner would no longer have a monopoly on administrative services for the CSS/PSS and ComSuper’s funding would be devolved to employing agencies which would pay the Board for administrative services. The Board would then use these funds to contract with ComSuper and/or other service providers to provide administrative services.
ASSESSMENT OF IMPACTS (COSTS AND BENEFITS) OF EACH OPTION
The new arrangements will impact on Commonwealth employers, the ACT Government and employees of those Governments by allowing greater choice and flexibility in superannuation arrangements (as at 30 June 1996 Commonwealth employees who were active contributing members were 76,000 (CSS), 115,000 (PSS) and 24,000 (AGEST)). Less Commonwealth specific regulation of superannuation arrangements and greater reliance on legislation applying to the wider community (options 2 and 4) will ensure Government employers and employees are treated equitably and may reduce the level of complexity and therefore compliance costs that currently exist for these groups.
The new arrangements will also allow other superannuation funds/RSAs to provide superannuation for new Commonwealth employees and employees who choose to leave the CSS, PSS or AGEST. Allowing Commonwealth employers to choose the default superannuation scheme (options 2 and 4) instead of legislating that AGEST be the default scheme (options 1 and 3) will also impact on fund managers which will be able to compete openly with AGEST for the provision of default superannuation arrangements.
The changes in relation to the provision of administrative services impact directly on the Board responsible for the administration of the CSS and PSS and on the Commissioner for Superannuation and the Commissioner’s staff in ComSuper. Options 3 and 4 allow the Board to contract for the administration services it requires. In turn, this means that ComSuper will become more accountable and, at the Board’s instigation, will benefit other fund administrators by allowing them to openly compete with ComSuper in the future for the provision of all or part of the administrative services.
Whatever options are adopted, the new arrangements will not result in a cost to business (ie, the superannuation fund providers or administrators). However, under a decentralised approach (options 3 and 4), the new arrangements will result in some minimal administrative costs to Commonwealth employers in selecting and offering the required number of superannuation funds and RSAs to employees and ongoing costs in monitoring the funds selected. This cost will be equivalent to the costs incurred by employers in the wider community and, in respect of Budget funded agencies, the Commonwealth proposes will be absorbed in current funding received by those agencies. Under a decentralised arrangement, the collective administrative cost to all Commonwealth employers may be less than the cost that would apply if the Commonwealth undertook a more centralised approach. However, the costs that would apply under any of these options are unable to be quantified.
Under any of the options and like AGEST members, new employees and CSS and PSS members who choose another superannuation fund or Retirement Savings Account (RSA) may incur small administration costs. However, these costs, if any, may be absorbed by the employer. In any event, these costs will be no different to those that apply to the wider community.
The new arrangements will result in substantial benefits to superannuation funds and administrators. However, a more centralised approach to administering existing superannuation schemes and the selection of the required number of funds/RSAs (options 1 and 2) would limit the opportunity for funds managers to participate in the new arrangements. Similarly, under a decentralised approach (options 3 and 4), fund administrators and other relevant service providers will also benefit from a decision to allow the Board to choose the provider of administrative services.
The new arrangements will benefit Commonwealth employees by treating them equitably with their counterparts in the private sector and, consistent with the choice of fund policy, allow greater choice and flexibility in their superannuation arrangements to allow them to meet their individual circumstances. These benefits are enhanced under a more decentralised approach (options 3 and 4).
Reduced legislative arrangements for the provision of Commonwealth superannuation (options 2 and 4) will ensure that Commonwealth employers and employees have arrangements that are consistent with those applying to the wider community.
A more decentralised approach (options 3 and 4) will enhance this competition by opening up superannuation arrangements for Commonwealth employees to an almost unlimited range of service providers. A more centralised approach (options 1 and 2) may restrict competition as some smaller superannuation providers may not be able to compete for the provision of superannuation services for the whole of Government but may be able to do so in respect of individual Commonwealth employers.
Under the decentralised approach, the Government would not impose any limits or restraints on the competitiveness of superannuation providers subject to them meeting community wide regulatory requirements.
CONSULTATION
The changes to superannuation arrangements for Commonwealth civilian employees have arisen as a direct result of the choice of fund arrangements that will apply to the general workforce as announced by the Treasurer in the 1997-98 Budget. Further, the implementation of these changes are to be broadly consistent with the Budget policy as it applies to the wider community.
The new arrangements were prepared following consultation with the Departments of the Treasury, Prime Minister and Cabinet and Workplace Relations and Small Business, together with the Public Service and Merit Protection Commission, the Australian Taxation Office, and ComSuper. In addition, CSS and PSS members were widely informed of the new arrangements following the announcement by the Minister for Finance and Administration on 23 September 1997.
CONCLUSION AND RECOMMENDED OPTION
Options 2 and 4 that provide for minimum additional regulation avoid the need for the reproduction of choice of fund arrangements and places Commonwealth employers and employees on the same footing as the rest of the community. Neither option considered should have any impact on the wider community. Therefore either of these options would be acceptable from this perspective.
It is also considered that the new arrangements adopt a more decentralised approach to Commonwealth superannuation arrangements (options 3 and 4). This approach is consistent with the Government’s overall policy of devolution of responsibility to employing agencies in line with the new Public Service Bill and the Workplace Relations arrangements, will have a more significant beneficial impact on the private sector and removes potential restrictions on competition. Therefore these options will not disadvantage smaller superannuation providers. These options meet the Commonwealth’s obligations under the Competition Principles Agreement to remove impediments to competition where feasible and in the public interest. While there is some minimal cost to Commonwealth employers in administering the new arrangements under a decentralised approach the overall benefits significantly outweigh these costs which, consistent with the wider community, are expected to be absorbed by employers.
On balance, option 4 provides the appropriate preferred framework both for decentralisation of superannuation arrangements and a less regulatory framework.
IMPLEMENTATION AND REVIEW
The new superannuation arrangements will require amendments to the Superannuation Act 1976, the Superannuation Act 1990, the Superannuation (Productivity Benefit) Act 1988 and the Superannuation Benefits (Supervisory Mechanisms) Act 1990. Consequential amendments will also need to be made to other legislation including the Judges’ Pensions Act 1968 and the Governor-General Act 1974.
The regulatory framework and monitoring arrangements will be those implemented as part of the wider choice arrangements applying to the general community.
"1922 Act" means the Superannuation Act 1922;
"1976 Act" means the Superannuation Act 1976;
"1990 Act" means the Superannuation Act 1990;
"APS" means the Australian Public Service;
"AWOTE" means average weekly ordinary time earnings;
"Board Bill" means the Commonwealth Superannuation Board Bill 1998;
"Commissioner" means the Commissioner for Superannuation;
"ComSuper" means the organisation called Commonwealth Superannuation Administration;
"CRF" means the Consolidated Revenue Fund;
"CS Board" or “Commonwealth Superannuation Board” means the Commonwealth Superannuation Board as provided for in the Commonwealth Superannuation Board Bill 1998;
"CSS" means the Commonwealth Superannuation Scheme;
"CSS member" is used to describe a person who makes personal contributions to the CSS (the 1976 Act uses the term "eligible employee" for such a person);
"Disallowable instrument" means an instrument described as a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901;
“ISC” means the Insurance and Superannuation Commissioner;
“PCSS” means the Parliamentary Contributory Superannuation Scheme;
"PNG Act" means the Papua New Guinea (Staffing Assistance) Act 1973;
"Parliamentary Contributory Act" means the Parliamentary Contributory Superannuation Act 1948;
"PB Act" means the Superannuation (Productivity Benefit) Act 1988;
"PSS" means the Public Sector Superannuation Scheme;
"PSS Rules" means the rules for the administration of the PSS;
"Saving and Transitional Bill" means the Superannuation Legislation (Commonwealth Employment – Saving and Transitional Provisions) Bill 1998;
"SG Act" means the Superannuation Guarantee (Administration) Act 1992;
"SIS" means the Superannuation Industry (Supervision) Act 1993 including the regulations under that Act;
"SIS Act" means the Superannuation Industry (Supervision) Act 1993;
"Statutory Rule" means an instrument described as a Statutory Rule for the purposes of the Statutory Rules Publication Act 1903;
"Supervisory Mechanisms Act" means the Superannuation Benefits (Supervisory Mechanisms) Act 1990.
Clause 1 – Short title
Clause 1 provides for the short title of the Act to be the Superannuation Legislation (Commonwealth Employment) Repeal and Amendment Act 1998.
Clause 2 – Commencement
2. Clause 2 provides for the commencement of the Act on Royal Assent with the following exceptions:
(a) the amendments required to bring about the changes to superannuation arrangements for Commonwealth civilian employees are to take effect from 1 July 1999. These include amendments to:
(i) close the PSS to new members from that date;
(ii) provide for existing CSS and PSS members to choose to leave the scheme after 1 July 2000;
(iii) change the arrangements for the administration of the CSS, the PSS and the PB Act;
(iv) simplify some of the CSS and PSS provisions to allow the closed schemes to be administered in a more cost-effective way;
(v) repeal the 1922 Act;
(b) amendments to the benefits available to CSS and PSS members who leave their employment because of the sale of an asset or the transfer of a function take effect from 27 June 1997, the date of announcement of the new arrangements;
(c) an amendment to clarify a provision of the 1976 Act inserted into the Act on 1 July 1995 is taken to have commenced on that day along with various amendments intended to ensure that the CSS complies with SIS;
(d) amendments to clarify the extent of a regulation-making power is taken to have commenced on 18 December 1992 the day on which the regulation-making power came into effect;
(e) an amendment to restore the original intention of the 1976 Act in relation to late elections for preservation of rights under that Act is taken to have commenced on 5 December 1997;
(f) the repeals of the 1976 Act, the 1990 Act and the PB Act have effect on 1 July 1999 immediately after the amendments described in paragraph (a); and
(g) certain minor and technical amendments are taken to have commenced on the day on which a previous amending Act received Royal Assent.
Clause 3 - Schedules
3. Clause 3 provides that the Acts and the PSS Trust Deed as specified in the Schedules are to be amended or repealed according to the applicable items set out in each of the Schedules.
SCHEDULE 1 – AMENDMENT OF THE SUPERANNUATION ACT 1976
PART 1 – AMENDMENTS RELATING TO THE SCOPE AND ADMINISTRATION OF THE ACT AND THE RIGHTS OF CONTRIBUTORS TO TRANSFER TO OTHER SUPERANNUATION SCHEMES
4. The CSS has been closed to new entrants since 1 July 1990 when it was replaced as the principal scheme for Commonwealth civilian employees by the Public Sector Superannuation Scheme (the PSS). As part of the arrangements to offer choice of fund to Commonwealth civilian employees the PSS will be closed to new entrants from 1 July 1999 (see Schedule 3). Existing CSS and PSS members are to be able to choose to leave those schemes from 1 July 2000 where their employer offers choice. Some inactive members of the CSS and the PSS (eg, people with preserved entitlements) will be able to rejoin their scheme if they take up employment with an employer which participates in that scheme.
5. As both the closed CSS and the closed PSS will continue to operate for existing members for some considerable time, it is intended to streamline and simplify both the administrative arrangements for the schemes and, in some aspects, the rules of the schemes.
6. The Board Bill will provide for a new Commonwealth Superannuation Board to administer the CSS and PSS and take over management of the CSS and PSS Funds, which will continue to be maintained as separate Funds for members of the schemes.
7. The statutory office of the Commissioner for Superannuation is to be abolished, however, the Saving and Transitional Bill will provide that, for the three years commencing on 1 July 1999, the administration of the CSS and the PSS along with certain other superannuation arrangements is to be undertaken on behalf of the CS Board by the organisation currently known as ComSuper.
Item 1 – Definition of 'approved authority'
8. Item 1 repeals the existing definition of "approved authority" and provides that the term is defined by the new section 3D inserted by item 18.
Item 2 – Definition of 'AWOTE'
9. Item 2 inserts a definition of AWOTE. This term is used in the provisions of the Act which deal with indexation of salary in certain circumstances.
Item 3 – Definition of 'Board'
10. Item 3 repeals the definition of Board and replaces it with one referring to the new Board.
Item 4 – Definition of CSS Board
11. Item 4 inserts a definition of the CSS Board.
Item 5 – Definition of ‘Commissioner for Superannuation’
12. Item 5 repeals and inserts a new definition of the term ‘Commissioner’.
Items 6 to 10 – Definition of ‘eligible employee’
13. These items, together with item 32 which repeals section 14A, simplify the provisions which describe a CSS member, ensure that members covered by the repealed section 14A can continue to be members and make a consequential change as a result of the repeal of the provisions providing for the office of Commissioner for Superannuation.
14. Items 6 and 8 amend the definition of 'eligible employee' as a consequence of item 32 of this Schedule.
15. Item 7 repeals the paragraph of the definition that provides for automatic membership of the CSS for the Commissioner. The item then inserts a new paragraph (g) which gives the Minister the power to declare a class of persons to be CSS members.
16. Item 9 repeals paragraph (j) which provides for the making of regulations to exclude classes of persons from CSS membership and replaces it with two paragraphs. Paragraph (i) ensures that persons who were excluded from membership immediately before the commencement of the amendments by regulations under the repealed paragraph (j) will continue to be excluded. The new paragraph (j) provides that the Minister may exclude classes of persons from membership by declaration. Item 15 of this Schedule includes provision about the date of effect of Ministerial declarations under the definition and provides that those declarations are disallowable instruments.
17. Item 10 amends the definition as a consequence of item 18 of this Schedule.
Item 11 – Definition of ‘preservation fund’
18. Item 11 repeals the definition of preservation fund. The term will not be used following other amendments.
Items 12 and 13 – Definitions of PSS Board and PSS Fund
19. Item 12 repeals the definition of the PSS Board and item 13 inserts a definition of PSS Fund.
Item 14 – Definition of ‘voting share’
20. Item 14 inserts a definition of 'voting share'.
Item 15 – Dates of effect of declarations made for the purposes of the definition of eligible employee
21. Subsections 3(1A) and (1B) relate to the making of regulations under the repealed paragraph (j) of the definition of 'eligible employee'. Because no further regulations will be able to be made because of the amendments made by item 9, the subsections are no longer required.
22. Item 15 repeals the subsections and inserts new subsections which include similar powers in relation to the Minister's powers under paragraphs (g) and (j) inserted into the definition of 'eligible employee' by items 7 and 9. The new subsections allow the Minister to make declarations with retrospective effect but not in such a way as to disadvantage a person who had been making contributions to the CSS and been treated as a member of the scheme.
Item 16 – Consequential amendment
23. Item 16 repeals subsection 3(2A) as a consequence of the changes to the definition of 'approved authority' made by items 1 and 18 of the Schedule.
Item 17 – Preservation fund
24. Item 17 repeals section 3B as a consequence of other amendments intended to simplify the treatment of benefits payable under the Act that are intended to be preserved according to the rules of SIS. Rather than specifying in detail how these benefits should be paid, it is intended that they be treated according to SIS. The term preservation fund will not be used.
Item 18 – Definition of approved authority and provision of choice
25. Item 18 inserts two new provisions, sections 3D and 3E.
26. New section 3D determines whether or not an authority or body is an approved authority for the purposes of the 1976 Act and replaces the definition repealed by item 1 of this Schedule. Staff of approved authorities may be eligible to be CSS members. The intention is to streamline the administration of the provision which currently requires case-by-case consideration of each request for a body to be declared to be an approved authority. The revised definition, however, does not cease approved authority status for any approved authority covered by the repealed definition while it remains in its present form.
27. Paragraph (a) of the existing definition described the type of authority or body that could be declared by the Minister to be an approved authority for the purposes of the Act and provided for the Minister to make the declaration. Paragraph (b) of the existing definition provided that a body that was an approved authority under the 1922 Act on 30 June 1976 continued to be an approved authority under the 1976 Act.
28. Section 3D describes a body that is an approved authority for the purposes of the Act unless the Minister declares otherwise under subsection 3D(9).
29. Subsection 3D(2) includes an authority or body that is an approved authority at the time of commencement of the section.
30. Subsection 3D(3) provides that a body that is an approved authority prior to the commencement of the subsection, will cease to be an approved authority automatically where there has been a change of character. However, this will only apply to future changes of character. If this does occur, the Minister may still, if appropriate, declare the body to continue to be an approved authority or provide for continuing membership for existing employees of the body by declaration under the definition of “eligible employee” included in subsection 3(1).
31. An authority or body changes its character if the level of Commonwealth control reduces or if, in the last financial year, the level of the funding received from the Commonwealth Budget is below 30% and further reduces.
32. Subsections 3D(4), (5), (6) and (7) provide that certain Commonwealth bodies are approved authorities if their Chief Executive Officer agrees to contribute towards the cost of providing membership to employees of the body. This applies provided the body:
(a) is fully Commonwealth controlled;
(b) is not operating in a competitive environment; or
(c) 30% or more of its funding is received from the Commonwealth Budget (otherwise than by way of taxes imposed by the Commonwealth).
33. One of the effects of these provisions is that, if a body that has automatically been an approved authority in the past changes its character so that it would not automatically be an approved authority, it will cease to be an approved authority.
34. Subsection 3D(8) provides that the Minister may declare any authority or body to be an approved authority including one that has lost that status because of a change in character.
35. Subsection 3D(9) provides that the Minister may, despite the other provisions of the section, declare that an authority or body is not an approved authority for the purposes of the Act.
36. The declarations under section 3D are all Statutory Rules and disallowable instruments as provided by section 4A of the 1976 Act. They may be made with retrospective effect in some circumstances as provided by that section as amended by items 20, 21 and 22 of this Schedule.
37. New section 3E is inserted into the Act to allow CSS members to choose to leave the scheme without ceasing to be employed. Members may only exercise this option on or after 1 July 2000 and only if their employer agrees to contribute to another superannuation scheme or retirement savings account on their behalf.
Item 19 – Consequential amendment
38. Item 19 amends section 4AA as a consequence of the abolition of the office of the Commissioner.
Items 20, 21 and 22 – Consequential amendments
39. Items 20, 21 and 22 amend subsections 4A(1) and (3) as a consequence of the substitution of the definition of approved authority with section 3D and add subsection (4) and (5) to section 4A. Those subsections allow the Minister to make declarations concerning the status of an authority or body with retrospective effect in certain specified circumstances. In particular, declarations to include an authority or body as an approved authority with retrospective effect can be from a date earlier than the commencement of the new definition. (Subsection 4A(3) allows declarations to be made with retrospective effect for up to 12 months.) The section also allows an authority or body to be excluded from the definition retrospectively to the commencement of the new definition if employees of the authority or body have not been treated as CSS members.
Item 23 – Consequential amendment
40. Item 23 amends paragraph 4B(c)(iii) as a consequence of the abolition of the office of Commissioner.
Items 24 to 26 – Salary
41. Generally, contributions and benefits under the Act are based, either directly or indirectly, on a CSS member’s annual rate of salary. Section 5 of the 1976 Act defines annual rate of salary as the salary payable to the member or such other amount specified in regulations. Regulations under section 5 recognise, amongst other things, an annual rate of salary agreed between the member and his or her employer through a certified agreement or Australian Workplace Agreement and certain other flexible remuneration arrangements. This recognises that, in the new flexible workplace agreement making arrangements, some CSS members may wish to have recognised a salary for superannuation purposes which is either higher or lower than would otherwise be the case, for example, by trading off some cash salary for increased superannuation salary.
42. To allow all members the opportunity to agree a superannuation salary with their employer and to ensure that references to agreements may be to those agreements as applying from time to time (this is not generally permitted in regulations), the amendments made to section 5 by item 25 provide that a member’s annual rate of salary may be an amount agreed between the member and his or her employer. If there is no agreement, the existing provisions of the Act or the regulations will continue to apply. A member cannot be disadvantaged by this change because even if a reduced annual rate of salary is provided for in a workplace agreement section 47 of the 1976 Act ensures that a person’s annual rate of salary cannot be reduced unless the member elects that it be reduced.
43. Item 26 amends the provisions in section 5 that provide for a previously higher salary than is received by a CSS member is to be recognised for calculating benefits if the member has been receiving a partial invalidity pension. The amendment will provide for that higher salary to be updated by AWOTE instead of either by reference to actual salary rates that might have applied or, if they are not known, by AWOTE (see section 154B). With the workplace agreement making arrangements and the future conversion of awards to minimum rates awards this change should ensure that these salaries can continue to be updated using readily available data .
44. Item 24 amends subsection 5(2) as a consequence of the changes made to section 5 by items 25 and 26.
Items 27 to 33 – Membership of the CSS
45. Sections 11 to 15A of the Act describe, amongst other things, persons who are, or may choose to be, CSS members. Membership of the scheme is only available to persons who were members on 30 June 1990 or who have residual rights to return to the scheme. Where a person with residual rights of return becomes a permanent employee as defined in subsection 3(1) the person immediately becomes a member without option. Persons with residual rights who become temporary employees or statutory office holders as defined, may elect, at any time to again become members.
46. Items 27 to 31 and 33 amend sections 11, 13, 13A and 14 and repeal and replace section 15A to ensure that, from 1 July 1999, membership of the scheme is only open to continuing members and persons who left the scheme prior to 1 July 1999 with residual rights of return (ie, certain persons with preserved rights from previous membership or entitled to certain invalidity pensions). The amendments also extend choice to such persons who again become permanent employees from that date by giving them three months, after the first occasion of becoming a permanent employee, in which to elect to join. In the case of temporary employees or statutory office holders, the option to rejoin the scheme will be reduced to three months after the first occasion of again becoming a temporary employee or statutory office holder.
47. No CSS members who leave the scheme on or after 1 July 1999 will be able to return to the scheme.
48. Item 32 repeals section 14A. Persons who were CSS members because of the effect of that section continue as members because of amendments made by item 6 of this Schedule. The Saving and Transitional Bill saves the modifications made under the repealed section.
Items 34 to 36 – The superseded Act
49. Part II of the 1976 Act provides for the office of the Commissioner and for his or her responsibilities under the Act including certain residual powers under the 1922 Act.
50. Items 34 to 36 have the effect of abolishing the statutory office of the Commissioner and transferring his or her responsibility to keep proper records of benefits paid under the 1922 Act to the CS Board.
Items 37 to 46 – Functions, duties and powers of the Board
51. Items 37 to 46 amend the provisions of Part IIA of the 1976 Act which provide for the CSS Board which has responsibility for the CSS Fund and the administration of the CSS. It is intended that the CS Board have responsibility for the administration of the CSS from 1 July 1999 while maintaining the CSS Fund as a separate entity.
52. Items 37 to 39 have the effect of replacing the CSS Board with the CS Board. The definition of "Board" in subsection 3(1), as amended by item 3 of this Schedule, means that all references to Board in the Act now refer to the CS Board.
53. Item 40 amends section 27C of the 1976 Act which provides for the functions of the CSS Board to ensure that the CS Board has responsibility for the management and investment of the CSS Fund under this Act. The Board Bill will provide the CS Board with responsibility for the administration of this Act. Although the 1976 Act is repealed by Schedule 2 of the Bill, the Saving and Transitional Bill will continue the operation of section 27C and the CS Board’s responsibility for the CSS Fund.
54. Items 41 and 42 make amendments to section 27C as a consequence of the amendments made by item 40.
55. Item 43 repeals paragraph 27C(2)(e) which requires the Board to liaise with relevant industrial organisations about the management and investment of the CSS Fund. Instead, the Board will be required by SIS to report annually to CSS members on these matters.
56. Item 44 is a consequential amendment to section 27C in relation to changes made by item 43.
57. Items 45 and 46 repeal provisions about the constitution, meetings and business of the CSS Board. Similar provisions are included in the Board Bill in relation to the CS Board.
Item 47 – Vesting of assets and liabilities
58. Clauses 5 and 6 of the Board Bill establish a new CS Board. Under clause 7 of that Bill the CS Board is to become the administrator of the 1976 Act. The CSS Fund is established under that Act.
59. This means that the CS Board will need to become the ‘trustee’ of the CSS Fund. Also, the assets and liabilities of the CSS Fund including those acquired out of the investment monies of the Fund (CSS Fund assets and liabilities) will need to be vested in or transferred to this CS Board in its capacity as ‘trustee’ of the CSS Fund or those assets and liabilities. It will also be necessary for any other assets or liabilities of the CSS Board to be vested in, or transferred to, the CS Board.
60. The vesting and transfer of the assets and liabilities in, or to, the CS Board, the transfer of CSS Fund ‘trusteeship’ to this CS Board and the abolition of the CSS Board is to be effected by way of legislation (new section 40A of the 1976 Act). The CS Board is also to become a successor in law to the CSS Board in relation to all the assets and liabilities vested or transferred.
61. For these purposes item 47 inserts a new section 40A into the 1976 Act that:
• provides for the CSS Fund, and CSS Fund assets and liabilities to be vested in, or transferred to the CS Board in its capacity as ‘trustee’ of the CSS Fund without the need for any conveyance, transfer, assignment or assurance (new subsections 40A(1), (2) and (4));
• provides for any other assets and liabilities of the CSS Board (if any) to be vested in, or transferred to, the CS Board without the need for any conveyance, transfer, assignment or assurance (new subsections 40A(3) and (5));
• provides for the abolition of the CSS Board once these assets and liabilities have been vested or transferred to the CS Board (new paragraph 40A(6)(a));
• provides for the CS Board to be trustee of the CSS Fund (new paragraph 40A(6)(b));
• provides for the CS Board to become the successor in law in relation to these above assets and liabilities (new paragraph 40A(6)(c));
• makes it clear that there is no change in beneficial ownership of the CSS Fund, or other assets, as a result of the Fund or the assets being vested in the CS Board under section 40A (new subsection 40A(7)); and
• defines the terms ‘asset’ and ‘liability’ for the purposes of section 40A (new subsection 40A(8)).
62. Other matters related to the transfer of the assets and liabilities provided for under section 40A of the 1976 Act are set out in subsection 27(5) of the Board Bill and sections 4, 5 and 6 of the Saving and Transitional Bill.
63. Section 4 of the Saving and Transitional Bill sets out transitional provisions that are to apply as a consequence of the vesting and transfer of the assets and liabilities under section 40A of the 1976 Act. In general, the section provides that anything done by, omitted to be done by, any action pending against, or any reference to, the CSS Board in relation to these assets and liabilities is to be taken to have been done by, omitted to be done by, pending against, or a reference to, the new CS Board.
64. Sections 5 and 6 of the Saving and Transitional Bill provide for the Minister or an authorised person to provide certificates in relation to the assets and liabilities transferred under subsection 40(2) of the 1976 Act. For example, this provides for an appropriate person or authority to register any right, legal title or interest in any land, or make such entries as are necessary in relation to the other assets, that may vest in the CS Board under subsection 40A(2) of the 1976 Act on presentation of a certificate.
65. In general, subsections 27(5)(c) and (e) of the Board Bill provide for anything done in respect of, or in relation to, the transfer or vesting of the assets and liabilities under section 40A of the 1976 Act or the registration of ownership of these assets, including the giving of certificates under sections 5 and 6 of the Saving and Transitional Bill, or anything done as a result of giving or lodging those certificates is to be exempt from any tax or charge including stamp duty.
Items 48 and 49 – Taxation of the CSS Fund
66. Items 48 and 49 remove references to taxation of the CSS Fund from the 1976 Act as provisions in the Board Bill will have the required effect.
Items 50 to 54 – Maintenance of salary
67. The annual rate of salary to be used for the payment of contributions under the Act is adjusted every year on the member's birthday. Section 47 of the 1976 Act provides that the rate of salary to be used should be the highest annual rate payable during the year. That is, if the person has suffered a reduction in salary during the year, it is the higher annual rate that is used for the purposes of the payment of contributions. (The member may, under the section elect to use the reduced rate of salary.)
68. That higher annual rate of salary should continue to apply in the future, updated at each birthday, by generally applying salary increases. However, because of considerable change to the workplace relations processes in the APS generally applying salary increases are unlikely to occur in the future. Section 154B of the Act already provides that, where it is impossible to establish an annual rate of salary for maintenance purposes, AWOTE should be used. It is now intended to apply AWOTE increases to annual rate of salary in all cases where there is a maintained rate.
69. Items 50 to 53 amend section 47 of the Act to allow the updating of maintained annual rate of salary by AWOTE rather than attempting to establish the annual rate that would have been paid if the member had not suffered a reduction.
70. Item 54 ensures that the existing provisions continue to apply prior to 1 July 1999.
Item 55 – Supplementary contributions
71. Section 48 of the Act allows CSS members to pay supplementary contributions at any time but limit the amount to being no more than a basic contribution (usually 5% of a person’s fortnightly rate of salary). As supplementary contributions remain in the CSS Fund until benefits are payable, earn the Fund rate of interest during that time and do not attract any additional employer contribution, there is no reason to put a limit on the amount that a CSS member wishes to contribute.
72. Item 55 amends section 48 of the Act which provides for the payment of supplementary contributions by a CSS member, to allow that member to pay any amount of supplementary contributions.
Items 56 to 64 – The payment of contributions on leave without pay
73. Section 51 of the 1976 Act currently provides various rules relating to leave without pay. The effect of these rules is generally that a CSS member cannot pay contributions while on leave without pay except in particular circumstances. Where a member is permitted to pay contributions in these circumstances, full employer benefits also accrue during the period. Because employer-funded benefits are based on the salary payable to the person on cessation and paid by the Commonwealth, it was reasonable to restrict the circumstances in which a person on leave without pay may contribute where they are employed during that leave by employers outside the umbrella of the Commonwealth.
74. However, because since 1 July 1995 all participating employers have been required to make payments to the Commonwealth towards the benefits payable to their employees who are CSS members it is now possible to simplify the provision to provide that a member may pay contributions while on leave without pay where the member's employer continues to make payments to the Commonwealth in relation to that member's future benefits.
75. Item 56 amends section 51 to provide that contributions are not payable where a CSS member is on leave without pay if the member's designated employer does not continue to make payments to the Commonwealth in respect of the benefits payable to the person under the Act.
76. Items 57 to 63 amend section 51 to ensure that powers currently exercised by agreement between the CSS Board and the Minister which have the effect of allowing CSS members to contribute during leave without pay in circumstances not already referred to in the section, may in future be exercised by the CS Board acting alone. Because of the amendment made by item 56, it is expected that any actions taken under these provisions will be very rare.
77. Item 64 provides that section 51 continues to apply without amendment to any period of leave without pay that commenced prior to 1 July 1999, although not to any extension of such a period of leave without pay made after that date.
78. Existing section 51 provides that, where a person is on sick leave without pay, that person must continue to contribute to the CSS. The amendments to the section will not affect the rights of CSS members who are now, or will in the future be, in this situation.
Items 65 and 66 – Benefits to be preserved under SIS
79. Some of the benefits payable under the 1976 Act are intended to be treated as preserved benefits for the purposes of SIS. However, because not all of those benefits necessarily come under the SIS definition of preserved benefits, the payment provisions of the Act in relation to those benefits have attempted to duplicate the requirements for the payment of SIS preserved benefits. Because changes have been made to the SIS requirements it has been necessary to make regular amendments to those payment provisions.
80. In order to allow the CSS to continue to comply with SIS without the necessity for future legislative amendments it is intended to amend the Act to specify the benefits which are to be preserved benefits for the purposes of SIS and to provide that they be dealt with accordingly.
81. Items 65 and 66 amend section 62 of the Act to provide that benefits payable under that section after 1 July 1999 are to be preserved benefits for the purposes of SIS and will be dealt with accordingly. The member may, however, choose to receive payment in cash of his or her own contributions with interest, in which case the remaining benefit is to be a preserved benefit and dealt with accordingly.
Item 67 – Consequential amendment
82. Item 67 makes an amendment to section 62B of the 1976 Act as a consequence of the abolition of the office of the Commissioner.
Items 68 and 69 – Use of AWOTE to update salary
83. Section 73A of the 1976 Act provides for the reduction of invalidity pensions because of earnings in certain circumstances and in determining whether a reduction is to occur refers the pensioner’s “relevant maximum rate”. That definition uses, in part, the pensioner’s final annual rate of salary updated in a similar way to that used in section 47. Section 47 is being amended by this Bill to provide that, from 1 July 1999, amounts recognised as annual rate of salary under that provision will be indexed by AWOTE rather than by salary movements, or if that is not known, AWOTE.
84. Item 68 amends section 73A to provide that AWOTE be used to update the final annual rate of salary in all circumstances. This recognises that there are difficulties in establishing salary rates for particular positions as a result of current workplace relations arrangements.
85. Item 69 ensures that the existing method of updating salary continues to apply up to 30 June 1999 with the new method applying after that date.
Item 70 – Variation of Table of productivity contributions
86. Section 110C of the 1976 Act provides a Table for the calculation of productivity contributions payable under the Act. Section 110D provides that the Minister may vary that Table.
87. Item 70 amends section 110D of the 1976 Act to transfer the power to vary the Table under section 110C from the Minister to the Board but provides that the Board should vary the Table as advised by the Minister.
Item 71 – Consequential amendment
88. Item 71 makes an amendment to section 110Q of the 1976 Act as a consequence of the abolition of the office of the Commissioner.
Items 72 and 73 –Productivity benefits to be treated as preserved benefits under SIS
89. Productivity benefits payable under section 110R of the 1976 Act are intended to be preserved benefits for the purposes of SIS.
90. Item 72 provides that benefits payable under section 110R are to be treated as preserved benefits for the purposes of SIS and dealt with accordingly. The item also ensures that benefits payable may be used for the purchase of additional pension in certain circumstances.
91. Item 73 repeals the existing provisions of section 110R which attempt to replicate the SIS preservation requirements.
92. The notes for items 65 and 66 in this Schedule provide further details.
Item 74 – Consequential amendment
93. Item 74 makes a consequential amendment to section 110SB as a result of the amendments made by item 89 of this Schedule.
Item 75 – Consequential amendment
94. Item 75 makes an amendment to section 110SE of the 1976 Act as a consequence of the abolition of the office of the Commissioner.
Item 76 – Top-up benefits to be treated as preserved benefits under SIS
95. Sections 110SG, 110SH and 110SJ provide for the payment of a top-up benefit under Part VIAA of the 1976 Act. The sections replicate the SIS requirements when those sections were inserted into the Act.
96. Item 76 repeals section 110SG, 110SH and 110SJ and replaces them with a new section 110 SG which provides that a top-up benefit is a preserved benefit for the purposes of SIS and is to be dealt with accordingly. The section also provides for the payment of the benefit where the person has died.
97. The notes for items 65 and 66 in this Schedule provide further details.
Item 77 – Consequential amendment
98. Item 77 makes a consequential amendment to section 110TA as a result of the amendments made by item 89 of this Schedule.
99. The notes for items 63 and 64 in this Schedule provide further details.
Item 78 – Use of AWOTE to update salary for the payment of a postponed benefit
100. Part VIB of the 1976 Act allows a CSS member entitled to a retirement benefit to postpone the payment of that benefit. When the benefit becomes payable, the annual rate of salary to be used for the calculation of the benefit is the final annual rate of salary updated to the time of payment.
101. Item 78 amends section 110TC of the Act to provide that AWOTE is to be used to update the annual rate of salary to be used for the purposes of calculating a postponed benefit.
Items 79 to 81 – Consequential amendments
102. Items 79 to 81 make consequential amendments to sections 110TD, 110TF and 110TG as a result of the amendments made by item 89 of this Schedule.
Item 82 – Benefits payable after a CSS member has chosen to leave the scheme
103. Item 82 inserts Part VIC into the 1976 Act to provide for the benefits that will be payable, and the timing of the payment, where a CSS member has chosen, under section 3E, to cease membership of the scheme.
104. Division 1 of Part VIC provides for the definition of various terms used in the Part, for the application of the Part to persons who cease CSS membership through choice and for no benefits to become payable to such a person under other provisions of the Act, other than as a consequence of the death of another member.
105. No benefit becomes payable to the person at the time of exercising choice. In general, benefits will become payable when the person reaches at least minimum retiring age and ceases to be employed. However, certain benefits may become payable when the person resigns, or is involuntarily retired from employment during which their CSS membership could have continued if they had not chosen to leave the scheme.
106. The benefits that will become payable vary depending on whether or not the person had attained minimum retiring age (typically age 55) when exercising choice.
Where choice exercised prior to minimum retiring age
107. Divisions 2 and 3 of the Part provide for the benefits that will become payable where a person exercises choice prior to minimum retiring age.
108. The basic form of those benefits will be similar to the deferred benefits that would have applied to the person if he or she left the CSS on resigning from Commonwealth employment and elected for preservation under section 137. However, there will be some variation to those benefits to ensure there are no windfall gains to individuals or any increase in CSS unfunded liabilities.
109. New section 110TK provides that the choice benefit should be similar to the deferred benefit calculated by section 136 with several variations.
110. Under section 136, the employer component of deferred benefits is based on 2.5 times the basic member contributions with interest earned to the date on which the benefit becomes payable. In calculating the benefit payable after choice, the factor of 2.5 times is varied according to the factor applicable to the person under the Table provided in Schedule 12 as inserted into the 1976 Act by item 124 of this Schedule. That Table provides factors relating to the person's non-contributory period. These factors were developed by the Australian Government Actuary to ensure the required result of no windfall gains to individuals or any increase in CSS unfunded liabilities.
111. Non-contributory period is defined to mean the person's age at exercising choice less the person's years of contributory CSS membership, both in complete years. This will generally result in the non-contributory period being the person’s age at commencement of CSS membership except where a person has had breaks in that membership.
112. New section 110TL provides for the timing of the payment of the choice benefit. The section duplicates section 138 which provides for the timing of the payment of deferred benefits. However, section 111A of the Act provides that a benefit may not become payable under the Act if SIS would not allow the payment and may override section 110TL. SIS does not allow a benefit to become payable to a person if that person has not ceased to be employed by an employer who had, at any time, made payments to the scheme from which the benefit may become payable on behalf of the person. Section 111A will not allow choice benefits to become payable until the person ceases the relevant employment.
Election to receive “immediate” choice benefits in certain circumstances
113. Division 3 of Part VIC provides for certain exceptions to the payment times described in section 110TL and to the benefit payable, if the former member who has exercised choice so chooses.
114. New section 110TM provides that a person to whom choice benefits are applicable, who would have continued as a CSS member apart from exercising choice, ceases to be employed, other than on death or invalidity, and may elect, within the period prescribed, to receive immediate payment of benefits in the form provided by sections 110TN to 110TR.
115. New section 110TN provides for the immediate benefit payable as a result of an election under section 110TM to a person who is not taken to have been involuntarily retired in the terms of the Act. The benefit is, a return of all member contributions with interest, the productivity benefit (if applicable) a Superannuation Guarantee top-up benefit (where applicable), and any amounts transferred into the CRF or the CSS Fund by or in respect of the person, also with interest. The Board may reduce these benefits if the person's surcharge debt account is in debit when the benefit becomes payable.
116. New sections 110TO and 110TQ provide for payment of an immediate benefit as a result of an election under section 110TM to a person who is taken to have been involuntarily retired in the terms of the Act. The benefit is the immediate payment of the deferred choice benefit either as a lump sum or an annuity. The employer component of the deferred choice benefits is calculated by the application of a factor contained in Table 1 of Schedule 11 of the Act to the various lump sums calculated under section 136 as modified by this section. Because the benefits becoming payable under section 110TO may become payable at an age earlier than deferred benefits it is necessary to amend Table 1 in Schedule 11 of the 1976 Act to provide additional factors. The amended Table is inserted by item 123 of this Schedule. The person is also entitled to a member financed benefit of a lump sum (as well as any productivity benefit) or additional pension based on that lump sum.
117. New section 110TP provides that benefits under these sections become payable on the day after the day on which the person would have been taken to have been involuntarily retired. New section 110TQ provides for the person to elect to receive the immediate benefit as a lump sum which is to be treated as a preserved benefit under SIS, that is it may not be paid in cash (other than the member financed component).
118. Where a person, who would have continued to be a CSS member if he or she had not exercised choice, has resigned from employment in circumstances connected with the sale of an asset or the transfer of a function an immediate benefit may become payable. New section 110TR provides that the benefit should be based on the benefit payable under Part VID of the 1976 Act with modifications to ensure that the factors provided in Schedule 12 are used in the calculations.
Where choice is exercised at or after minimum retiring age
119. Division 4 of Part VIC provides for the benefits that will become payable to a person who exercises choice to cease to be a CSS member at, or after, minimum retiring age (typically age 55). New section 110TS applies the Division to such persons.
120. New section 110TT provides that the choice benefit payable to a person under the Division is based on the postponed benefit option provided for under Part VIB of the 1976 Act with a modification. That modification relates to the calculation of the final annual rate of salary which is to be used for the calculation of the postponed pension.
121. Existing section 110TC provides that where a CSS member resigns or retires after minimum retiring age and opts for a postponed pension, that pension when paid will be calculated by reference to final annual rate of salary as updated to reflect the annual rate of salary that would have been payable to the person if the person had continued membership. New section 110TT provides that the final annual rate of salary to be used for the calculation of a postponed choice benefit, should be the person's annual rate of salary payable when choice was exercised increased by reference to movements in the consumer price index. This is intended to limit any increases in unfunded liabilities as a result of CSS members exercising choice.
Election to receive immediate choice benefits
122. New section 110TU provides that, where a person to whom postponed choice benefits are applicable is taken to have been retired involuntarily in the terms of the Act, he or she may elect to receive the immediate payment of a lump sum in place of the postponed benefit. In such cases, however, the major component of the lump sum is to be calculated using the sum of one and the relevant factor applying under Schedule 12 rather than the multiple of 3.5 as applied where a scheme member is retired involuntarily. The benefit is to be treated as a preserved benefit under SIS, that is it may not be paid in cash (other than the member financed component).
Item 83 - Payment of benefits to be preserved benefits under SIS
123. Item 83 amends section 111A which applies the SIS preservation rules to the payment of benefits under the CSS to ensure that a benefit which may not be paid in cash because of SIS continues to be treated as a preserved benefit under SIS and will be dealt with accordingly.
Item 84 – Application of SIS preservation rules to choice benefits
124. Item 84 amends section 111A to ensure that choice benefits under Part VIC continue to be preserved until SIS allows payment.
Items 85 and 86 – Consequential amendments
125. Items 85 and 86 make consequential amendments to sections 111 and 126A of the 1976 Act as a result of the amendments made by item 89 of this Schedule.
Items 87 to 89 – Transfer value provisions
126. Sections 127 and 128 allow for the payment of transfer values to the CSS in certain circumstances. The provisions are complex because of the way the various components of a transfer value are treated within the scheme. Because the CSS is closed to new members very few transfer values are now payable under those provisions.
127. However, CSS members may take other employment either when on leave without pay or on a part-time or casual basis. Their employers during that leave may be required by the SG Act to pay superannuation contributions into other superannuation funds or retirement savings accounts on their behalf. To allow members to consolidate all their superannuation benefits in the one scheme, it is intended that CSS members be able to pay any superannuation amount that becomes payable on cessation of other employment into the CSS.
128. It is intended that these amounts should be paid into the CSS Fund and accumulate interest until benefits become payable to the member. The current arrangements for distribution of the various components of a transfer value between the CSS Fund and CRF should no longer apply to transfer values paid in from 1 July 1999 with one exception. Some CSS members who have left the scheme and paid a CSS transfer value to another superannuation scheme have a right to return to the scheme in the future. In that case, if they wish to pay a transfer value back to the CSS including the previous CSS component, that transfer value should be treated under sections 127 and 128 before these amendments so that the person’s previous period of membership can be recredited to them.
129. Item 88 amends section 127 to provide that an amount paid to the CSS after the 30 June 1999 is not to be a transfer value for the purposes of that section unless it is payable in relation to a person who is bringing back to the scheme a previously paid CSS transfer value.
130. Item 89 inserts Subdivision B into Division 2 of Part IX of the 1976 Act. The new Subdivision provides for the payment of transferred amounts into the scheme.
131. New section 130A defines transferred amounts as broadly as possible but does not include an amount that includes a previously paid CSS transfer value. Also, it is not intended that members be able to pay to the scheme amounts received from other employers until that employment has ended.
132. New section 130B provides that a transferred amount that has been paid to the Board by a CSS member must be paid into the CSS Fund. New section 130C provides that a person will be entitled to the payment of a benefit under this Subdivision when other benefits become payable under this Act.
133. New section 130D provides that the benefit to which a person becomes entitled is the amount paid into the Fund under section 130B less any income tax payable, plus interest on the amount.
134. New sections 130E and 130F provide for the payment of a benefit under this Subdivision where the person has died.
Items 90 to 92 – Eligible superannuation schemes
135. Section 134 provides for the CSS Board and the Minister to agree that a particular public sector superannuation scheme should be an eligible superannuation scheme in order to allow the payment of transfer values from the CSS to that scheme. The requirements to be satisfied before the Board and the Minister agree are complex and restrictive and no new schemes have agreed to enter into these arrangements for some time. It is therefore proposed that no new agreements be made under the section with the exception of a successor scheme to an existing eligible scheme.
136. Items 90 to 92 amend section 134 to provide that no further schemes become eligible schemes after 30 June 1999. However, the Board may determine that a successor scheme to an existing eligible scheme is an eligible superannuation scheme after that date.
Item 93 – Consequential amendments
137. Item 93 amends section 135 of the 1976 Act as a consequence of the amendments made by item 89 of this Schedule.
Items 94 and 95– Consequential amendment
138. Items 94 and 95 amend section 135 of the 1976 Act as a consequence of the abolition of the statutory office of the Commissioner.
Items 96 and 97 – Consequential amendment
139. Items 96 and 97 amend subparagraphs 136(2)(b)(iii) and 136(2)(b)(iv) as a consequence of the amendment made by item 100 of this Schedule.
Items 98 to 101 – Consequential amendments
140. Items 98 to 101 amend section 136 as a consequence of the abolition of the statutory office of the Commissioner.
Item 102 – Productivity component of deferred benefits to be preserved under SIS
141. Item 102 replaces section 139AA with the effect that any part of deferred benefits that arises from productivity benefits is to be treated as a preserved benefit under SIS and dealt with accordingly.
Items 103 to 105 – Consequential amendments
142. Items 103 to 105 amend section 140 of the 1976 Act as a consequence of the amendments made by item 89 of this Schedule.
Item 106 – Indemnification of members of Reconsideration Advisory Committees
143. Item 106 repeals section 153AF as a consequence of the Board Bill which will provide for all necessary indemnifications.
Item 107 – Reconsideration of Commissioner's decisions
144. Section 154 of the 1976 Act provides an affected person may appeal to the Administrative Appeals Tribunal (AAT) against a decision of the Commissioner under the 1976 Act or the 1922 Act. This provision is being repealed by item 107 as a consequence of the abolition of the statutory office of the Commissioner. The Saving and Transitional Bill will provide that any decisions of the Commissioner will be taken to be decisions of the CS Board. Decisions of superannuation trustees such as the CS Board are subject to appeal to the Superannuation Complaints Tribunal.
145. The Savings and Transitional Bill will allow any person in the process of appeal to the AAT on 1 July 1999 to continue through the process as if the amendments to this Act in item 105 of this Schedule had not been made.
Item 108 – Consequential amendment
146. Item 108 amends section 156A as a consequence of the abolition of the statutory office of the Commissioner.
Item 109 – Responsibilities of the CSS Board to be assumed by the CS Board
147. Item 109 repeals various provisions of the 1976 Act as a consequence of the assumption by the CS Board of the powers and responsibilities of the CSS Board as provided for in the Board Bill. Equivalent provisions will be in that Bill.
Item 110 to 119 – Consequential amendments
148. Items 110 to 119 amend various sections as a consequence of the abolition of the statutory office of the Commissioner.
Item 120 and 121 – Consequential amendments
149. Items 120 and 121 amend sections 240 and 246 of the 1976 Act as a consequence of the amendments made by item 89 of this Schedule.
Item 122 – Consequential amendment
150. Item 122 repeals and replaces sections 248 and 249 of the 1976 Act as a consequence of amendments made in relation to the PSS Board by Schedule 3 to this Bill and the provisions of the Board Bill and to allow the Board to be responsible for decisions about transfers of assets from the CSS Fund.
Item 123 – Replacement Table
151. Item 123 replaces Schedule 11 Table 1 as a consequence of the amendments made by item 82 of this Schedule.
Item 124 – New Schedule
152. Item 124 inserts Schedule 12 into the 1976 Act as a consequence of the amendments made by item 82 of this Schedule.
PART 2 – AMENDMENTS RELATING TO THE MARITAL STATUS OF DECEASED RETIREMENT PENSIONER
153. In the CSS, the PSS and the PCSS when a pensioner begins a marital relationship, legal or de facto, after age 60, no reversionary benefit is payable to the spouse on the death of the pensioner unless the relationship had lasted 5 years prior to the death. A relationship of this kind is known as a "post-retirement marriage".
154. It is proposed, in all of these schemes, to remove this restriction on eligibility for benefits and provide for a phase-in of the benefit on a pro-rata basis where the relationship has existed for less than 3 years prior to the death.
155. While the existing arrangements produce inequities because of the absolute nature of the cut-off point, providing full benefits in all cases could significantly increase scheme costs. A three year phase in period is seen as a compromise between the two extremes.
156. This Part amends the 1976 Act to remove the bar on reversionary benefits becoming payable in the case of a post-retirement marriage which did not last for five years prior to the death of a pensioner. It further amends the complex reversionary provisions of the 1976 Act to enable the calculation and payment of a benefit where the pro-rata rate applies.
157. Where the relationship has been of a very short term prior to the pensioner’s death the pro-rata calculation may result in a very low rate of annual pension becoming payable and, in those circumstances, it is proposed to allow the person to whom the benefit has become payable, to request the Board to commute the pension into a lump sum.
Items 125 to 130 - Definitions
158. Items 125 and 127 to 130 amend the various definitions relating to the eligibility of spouses and children to receive reversionary benefits under the 1976 Act or repeal related provisions to remove the restrictions that apply to the payment of benefits where a relationship had commenced after a pensioner reached the age of 60 and lasted less than five years before his or her death.
159. Item 126 defines a late short-term marital relationship as one that commenced after the pensioner reached the age of 60 and within three years of his or her death. Where a person who has been in a late short-term marital relationship with a pensioner, after the death of a pensioner, the benefit payable is to be calculated on a pro-rata basis in relation to the length of the relationship prior to the death.
Items 131 to 139 – Calculation of reduced rate and optional commutation to benefits payable to spouse
160. Items 131 to 134, 136 and 137 amend the reversionary spouse’s benefit provisions to allow for a reduced benefit to be payable where the benefit arises from a late short-term marital relationship.
161. Items 135 and 138 insert sections 95A and 96AA to provide for the commutation of a pension to a lump sum where:
(a) the pension is payable at a reduced rate because of a late short-term marital relationship;
(b) the annual rate of that pension is less than an amount determined by the Board; and
(c) the person entitled to the pension has requested that it be commuted.
162. Item 139 inserts section 96AB to provide the pro rata rate of pension that is payable as a result of the amendments made by items 129 to 132, and 134 and 135.
Items 140 to 163 – Calculation of reduced rate of benefit and optional commutation to orphans and where there is more than one family entitled to a benefit
163. Items 140 to 163 apply the new arrangements for a pro rata rate of pension and the capacity to commute a low annual rate to a lump sum, by amendments to existing provisions and insertion of new sections similar to sections 95A, 96AA and 96AB, to;
(a) extra spouse's pension that becomes payable as a result of a late short-term marital relationship (section 96BA);
(b) benefits payable to orphans (section 108A)
(c) benefits payable where there is at least one child not in the care, custody and control of the spouse (section 109AB);
(d) benefits payable where there is more than one spouse (section 110); and
(e) benefits payable where a person to whom deferred benefits are applicable has died before the benefit becomes payable (section 136).
Item 164 – To ensure no reduction in benefits
164. Item 164 provides that the amendments made by this Part will not reduce any benefits payable under Part IV of the 1976 Act that would have been payable if the amendments had not been made.
PART 3 – REDUCED AGE RETIREMENT AND EARLY RETIREMENT BENEFITS AND INCREASED BENEFITS TO SPOUSE OR ORPHANS
165. When a CSS pensioner dies, the benefit payable under the 1976 Act to an eligible spouse is 67% of the benefit that had been payable to the pensioner with an additional 11% payable for each child up to a maximum of 100% of the pension payable at the time of death. Some CSS members have expressed a wish to take a lower initial pension and make more generous provision for their dependants on their death.
166. This Part proposes to amend the 1976 Act to allow a CSS member, on becoming eligible for an age or early age retirement pension, to elect to receive that pension at a reduced rate of 93% of the benefit that would otherwise have been paid. Where a pensioner who has made such an election dies, the reversionary benefits payable to the eligible spouse would be paid at 85% of the benefit being paid to the member at date of death. That rate would increase to an aggregate of 97% where there is one eligible child or 108% where there are two or more such children. The rate of 108% of the actual benefit payable is equal to 100% of the benefit that would have been payable at death if the pensioner had not elected for a reduced initial rate of pension.
167. The various percentages have been actuarially calculated to ensure that there is no increase in the costs of the scheme. The amendments do not apply to CSS members who are retiring on the grounds of invalidity as it would not be possible to determine appropriate rates of reduction to apply in such cases because of the increased possibility of the premature death of the pensioner.
Items 165 and 166 - Interpretation
168. Items 165 and 166 insert definitions of "category 1 deceased pensioner" and "category 2 deceased pensioner" into subsection (3)(1) of the 1976 Act. A category 1 deceased pensioner is one who takes the full rate of initial pension and a category 2 deceased pensioner is one who has elected for the lower initial rate.
Items 167 to 175 – Election to receive reduced rate of initial pension on age retirement
169. Items 167 to 174 amend sections 55, 56 and 57 of the Act that allow for the calculation of age retirement pensions, as a consequence of the member making an election under section 57AA.
170. Item 175 inserts section 57AA into the Act to allow a retiring member to elect, within a period of three months before or three months after retirement, for a reduced rate of benefit on age retirement. The reduced rate payable is 93% of the benefit that would otherwise be payable.
171. A person who elects for postponement of their retirement benefits under Part VIB may not make an election under section 57AA (such a person may make an election under the relevant provision in that Part). Similarly, a person who is electing under section 76A to renounce the payment of an invalidity benefit in favour of an age retirement benefit may not make an election under section 57AA (such a person has been retired on the grounds of invalidity and benefit has already been paid).
Items 176 to 182 – Election to receive reduced rate of initial pension on early age retirement
172. Items 176 to 180, and 182 amend sections 59, 60, 61 and 65 of the Act that allow for the calculation of early age retirement pensions, as a consequence of the member making an election under section 61AB.
173. Item 181 inserts section 61AB into the Act to allow a retiring member to elect, within a period of three months before or three months after retirement, for a reduced rate of benefit on early age retirement. The reduced rate payable is 93% of the rate that would otherwise have been payable.
174. A person who elects for postponement of their retirement benefits under Part VIB may not make an election under section 61AB (such a person may make an election under the relevant provision in that Part). Similarly, a person who is electing under section 76A to renounce the payment of an invalidity benefit in favour of an age retirement benefit may not make an election under section 61AB (such a person has been retired on the grounds of invalidity and a benefit has already been paid).
Items 183 to 192 – Rates of reversionary benefits payable to a spouse
175. Items 183 to 186 amend sections 94 and 95 of the 1976 that set the annual rates of standard and additional pension payable to a spouse on the death of a pensioner. The amendments provide for different rates of benefits on the death of category 1 and category 2 pensioners to allow for a higher rate to be payable as a result of the election made by the category 2 pensioner.
176. The minimum benefit payable to an eligible spouse on the death of a category 1 pensioner is 67% of the benefit payable to the pensioner at death, rising to a maximum of 100% where there are 3 or more children. The minimum benefit payable to an eligible spouse on the death of a category 2 pensioner is 85% of the benefit payable to the pensioner at death, rising to a maximum of 108% where there are 2 or more children. The maximum rate of 108% is equal to 100% of the benefit that would have been payable to the category 2 pensioner if he or she had not made the election for a reduced rate of initial pension.
177. Items 187 to 192 amend section 96B of the Act which provides for extra spouses pension to be paid where there is a partially dependant child, to allow an increased rate to be payable where the deceased pensioner was a category 2 pensioner.
Items 193 to 195 – Rates of reversionary benefits payable to orphans
178. Items 193 to 195 amend section 109 to provide for the rates at which benefits should be payable to an orphan or orphans on the death of a pensioner. Different percentages of the pension payable at the pensioner's death are payable in respect of a category 1 pensioner (ranging from 45% to 100%) and category 2 pensioner (ranging from 51% to 108%).
Items 196 to 199 – Rates of reversionary benefits payable where there is a child not in the custody, care and control of the spouse
179. Section 109AB of the 1976 Act provides for the rates of benefits payable on the death of a pensioner where there is both a spouse and at least one child not in the custody, care and control of that spouse. Items 196 to 199 amend that provision to allow a higher rate of benefit to be paid on the death of a category 2 pensioner.
Items 200 to 204 – Rates of reversionary benefits payable where there is more than one spouse
180. Sections 110 and 110AB of the 1976 Act provide for the rates of benefits payable where a pensioner is survived by more than one spouse and for an additional amount to be available in certain circumstances. The section allows the Board to allocate the available benefit among the spouses, after taking certain prescribed matters into account. Items 200 to 204 provide for higher rates of benefits to be available for allocation in the case of the death of a category 2 pensioner.
Item 205 – Consequential amendment
181. Item 205 amends section 110R as a consequence of the amendments made by items 175 and 181.
Items 206 and 207 – Election by a person who has postponed the payment of pension
182. Item 206 inserts new section 110TBA and then item 207 amends section 110TC to allow a person who has made an election to postpone the payment of his or her age or early age retirement benefit, to elect, within a period of three months before or three months after the postponed benefit becomes payable, to receive that benefit at a reduced rate. When a person makes that election, the other provisions relating to the reduced initial pension and increased reversionary pension apply.
Items 208 to 216 – Election by a person to whom deferred benefits are applicable
183. Section 137 of the 1976 Act allows certain persons, on ceasing to be a CSS member to elect to forgo immediate benefit but preserve their entitlements. In most cases the election makes deferred benefits applicable to that person which become payable to or in respect of the person, in certain circumstances at a later time. Where deferred benefits become payable, section 136 provides for the rates of benefits that are to be paid.
184. Item 215 inserts section 137A to allow a person to whom deferred benefits are applicable, to elect, within a period of three months before and three months after those benefits become payable to receive the benefits at a reduced rate. Item 216 repeals and replaces Table 1 of Schedule 11 to the Act to provide new factors for the calculation of pension benefits payable where the person has made an election under 137A.
185. Items 208 to 214 amend various provisions of section 136 to allow for different rates of reversionary benefits to be payable where a person has elected under 137A.
PART 4 – PAYMENT INTO FUND OF AMOUNTS HELD IN OTHER SUPERANNUATION FUNDS OR PAYABLE UNDER SUPERANNUATION ARRANGEMENTS
186. Under an industrial agreement that earlier applied to the Australian Public Service performance based pay (PBP) was available to some CSS members. Members could elect to pay 5 % of that PBP to certain superannuation funds that were declared funds under the PB Act. This contribution was matched by an additional amount equal to 15% of the PBP also paid to those funds in respect of the member by his or her employer. This arrangement is no longer available and some CSS members have small amounts in those funds which cannot, under the current arrangements, be transferred to the CSS.
187. In order to allow CSS members to consolidate their superannuation benefits it is intended to allow members to elect to transfer those PBP amounts into the CSS with the agreement of the trustees of the other funds.
188. This Part amends the Act to allow PBP amounts, and any additional amounts in the member's accounts at the time, to be paid to the CSS Fund. These amounts will remain in the Fund until other benefits become payable, accumulating interest as determined by the Board. When a member becomes entitled to the payment of benefits from the fund, the new accumulation is to be treated as a preserved benefit under the SIS Act and paid accordingly.
189. PBP amounts transferred to the CSS do not attract any further employer subsidy from the Commonwealth.
Item 217 – Interpretation
190. Item 217 inserts definitions of "accumulated performance pay employee contributions" and "accumulated performance pay employer contributions" which make up a PBP amount into subsection 3(1) of the 1976 Act. It is necessary to differentiate between the employee and employer components of the PBP amounts because the SIS Act imposes different preservation requirements on the components.
191. The item also inserts definitions of "employer component", "superannuation entity" and "transferable productivity amount" into subsection 3(1).
Item 218 – Consequential amendment
192. Item 218 amends subsection 110SB(1) of the 1976 Act as a consequence of the amendments made in relation to the transfer of PBP amounts.
Item 219 – Insertion of new Part to allow the transfer of PBP amounts
193. Item 219 inserts Part VIAB into the 1976 Act to provide for payment into the CSS Fund of amounts held in other superannuation funds.
194. New sections 110SK and 110SL provide for a CSS member to request payment of PBP amounts (and other amounts to the person's account with the other fund) to the Board and for the Board to pay those amounts into the Fund. PBP amounts that have been transferred from a declared fund to another fund may also be paid to the Board and transferred to the Fund. CSS members who may make an election under these sections including some non-contributing members to whom benefits have not yet become payable, eg members who have elected for a deferred benefit to become payable at some point in the future.
195. Sections 110SM and 110SN provide for the circumstances in which a CSS member is entitled to a benefit under the new Part and for the amount of benefit that becomes payable. The benefits will be basically the transferred amounts with appropriate reductions for income tax and additions of interest.
196. Section 110SO ensures that the employer component of the benefit is to be treated as a preserved benefit under the SIS Act.
197. Sections 110SP to 110SQ provide for the payment of the benefit on the death of a member.
198. Items 220 to 233 make amendments to various provisions of the 1976 Act as a consequence of the new Part VIAB.
PART 5 – AMENDMENTS RELATING TO ELECTIONS UNDER SECTION 137 MADE OUTSIDE THE PRESCRIBED PERIOD
199. Many provisions of the 1976 Act require, or allow, a member to make an election within a certain time-frame. Section 157 of that Act allows the Board to treat an election made under many of those provisions outside the statutory time-frame as if it had been made within the period. The Board may take this action if it is satisfied in all the circumstances of the case that it is desirable that the election should be recognised.
200. This "late election" provision was intended to ensure that CSS members were not disadvantaged where they were unable because of exceptional circumstances to make an election within the required time. Generally, the late election power has been used only for that purpose.
201. However, there is one circumstance where the extent of the power has been interpreted by judicial and Administrative Appeal Tribunal (AAT) decisions to have a much broader meaning.
202. Where a CSS member leaves the scheme before qualifying for a retirement pension or invalidity pension the person has a choice to take the available lump sum, which only includes the equivalent of the Superannuation Guarantee minimum employer contribution or to preserve his or her contributions in the scheme. Preservation results, generally, in payment of a deferred benefit at retirement age which includes the full employer component.
203. In the past, most CSS members on resignation withdrew their contributions from the scheme and only received the minimum employer benefit. Occasionally those members would, at a later date, request that the Board accept a late election to preserve and, if successful, they would be required to pay back the lump sum benefit into the scheme. Generally, late elections were only recognised where it could be established that the person had not been able to make the election at the time for various reasons such as medical incapacity.
204. In recent years, however, people have become more aware of the value of superannuation and there has been a considerable increase in the level of requests for late elections to preserve. Some of these requests, initially rejected by the Commissioner or the Board, have been allowed by the AAT or the Federal Court. Their decisions have extended the original intention behind the late election power. For example, even where the person has used the lump sum available to purchase a business (which would normally rule out the recognition of the late election) and the business did not succeed, late elections have been accepted because of events that occurred long after the time in which the election could have been made. This extension of the original intention of the late elections power has the potential to considerably increase the costs of the scheme.
205. This Part amends the provisions of the Act in relation to the recognition of a late election for preservation of rights, to restore the original intention of the legislation. The amendments, which only apply to late elections for preservation, will allow the Board to recognise such an election only in certain circumstances.
206. In addition, where a person is successful in making a late election for preservation, he or she will be required to pay to the Board, at the same time as returning the original benefit paid, an amount equal to the amount of interest that that amount would have earned if it had remained in the Fund. This will restore the member to the situation that would have applied if the election had been made within the statutory time frame.
207. The amendments included in this Part take effect from 5 December 1997 except as provided for by item 242 in relation to elections made before that date or Board decisions made prior to the day on which this Bill receives Royal Assent.
Items 234 to 235 – Interpretation
208. Items 234 and 235 amend the definitions of accumulated basic contributions and accumulated supplementary contributions to include the amounts, in respect of interest forgone, required to be paid to the CSS Fund under paragraphs 140(4)(a) and (b) as inserted by item 240 of this Schedule.
Item 236 – Additions to productivity contributions
209. Item 236 amends section 110Q of the 1976 Act to include in accumulated employer contributions the amount, in respect of interest forgone, required to be paid to the Fund by a CSS member under paragraph 140(4)(c) as inserted by item 240 of this Schedule.
Item 237 – Board may accept a late election under section 137
210. Section 137 of the 1976 Act allows a CSS member to elect for preservation of rights on cessation of membership in certain circumstances.
211. Item 237 inserts subsection (3) and (4) into section 137 to allow the Board to treat an election made under that section after the relevant period as if it had been made within the relevant period. In order to accept the late election, the Board has to be satisfied, on the evidence provided by the person, that the person was unable to make the election within the relevant period because of exceptional circumstances or physical or mental incapacity. The Board is also required to be satisfied that the person attempted the make the election as soon as practicable after the circumstances which interfered with his or her capacity to make the election had been alleviated or when the person became aware of the possibility of making a late election.
Items 238 to 240 – Repayment of moneys
212. Section 140 of the 1976 Act provides that, if a person makes an election under section 137 after receiving any other benefit under the Act, the person must repay that other benefit before the election under section 137 can be effective.
213. Items 238 to 240 amend section 140 to provide that where a person is successful in making a late election under section 137, the person must pay to the Board, not only the amount of benefit previously received, but an amount equivalent to the interest that that benefit would have earned if it had remained in the Fund.
Item 241 – Amendment to late election provision
214. Section 157 of the 1976 Act provides that the Board may accept a late election under other provisions of the Act in certain circumstances.
215. Item 241 amends section 157 to remove elections under section 137 from consideration under that section.
Item 242 – Application of amendments
216. Item 242 provides that, if a person has requested the CSS Board to consider a late election under section 137 prior to 5 December 1997, the Board should consider that request as if the amendments in this Part had not been made. It further provides that, if a request was made after that date and the Board had decided to accept a late election under the previous provisions, that decision should continue to have effect as if the amendments had not been made.
PART 6 – AMENDMENTS RELATING TO POWERS OF RECONSIDERATION ADVISORY COMMITTEES
217. Item 243 amends section 27Q in respect of the delegation of the Board's powers to allow delegation to a Reconsideration Advisory Committee established under the Act.
218. Items 244 to 246 amends sections 153AD, 153AL and 153AS of the 1976 Act to allow a Reconsideration Advisory Committee to reconsider a decision referred to it where the CSS Board has delegated its power of reconsideration to the Committee.
PART 7 – MISCELLANEOUS
Item 247 – Indemnification of Board members etc
219. Item 247 amends section 27R to ensure that Board members may only be indemnified in circumstances permitted by SIS.
Item 248 – Involuntary retirement on sale or transfer
220. Subsection 58(3A) of the 1976 Act provides that, where a person has ceased to be a CSS member in circumstances connection with the sale of an asset or the transfer of a function, that person will not be taken to have been involuntarily retired if he or she had accepted an offer of employment or rejected an offer of equivalent employment in connection with that sale or transfer.
221. Item 248 repeals the subsection so that a person who ceases to be a CSS member in those circumstances is treated in the same way as other CSS members who cease membership.
Items 249 and 250 – Restriction on lump sum cash benefits on involuntary retirement
222. Section 62 of the 1976 Act provides for lump sum benefits to be payable, on election of the member, where a person is subject to involuntary retirement. From 1 July 2000, those lump sum benefits are not able to be paid in cash to the person where the person has not reached age 55 and retired from the workforce.
223. The SIS rules for preservation of benefits are intended to change from 1 July 1999 to restrict access to cash benefits unless the person has reached the preservation age (currently 55) and retired from the workforce.
224. Items 249 and 250 amend section 62 to change the date from which lump sum benefits under that section will not be available in cash from 1 July 2000 to 1 July 1999.
225. Lump sum benefits under that section will, from that date, be treated as preserved benefits under SIS and dealt with accordingly. The person will, however, have access to his or her own contributions and interest on those contributions or can choose one of the other benefit options available in these circumstances, ie, an immediate pension or a prescribed entitlement.
Item 251 – Benefit on cessation of membership following sale or transfer
226. Where an asset is sold or a function is outsourced (transferred) CSS members may be involuntarily retired or may have to resign to take up an offer of employment with the new provider or owner depending on the process used. Also, in some circumstances a person may cease to be a CSS member because the business in which they are employed is no longer owned by the Commonwealth, eg, where the Commonwealth has sold its shares in a company. Where a person ceases membership in these circumstances, benefits payable from the CSS do not include involuntary retirement benefits. Because the person who resigns may not have any more choice in the matter than the person who is retired involuntarily, it is intended to make a new benefit available. The Part is taken to have had effect from 27 June 1997 the date of announcement of the changes.
227. This benefit is equivalent to the lump sum benefit available on involuntary retirement but it must be preserved according to SIS and not paid in cash to the person.
228. Item 251 inserts a new Part VID to provide this benefit. New section 110TV provides that the Part applies to CSS members who cease membership on or after 27 June 1997 in circumstances connected with the sale of an asset or the transfer of a function. The section also ensures that, where a benefit becomes payable under this provision, this is in lieu of an involuntary retirement benefit that would otherwise be payable under the Act
229. New section 110TX describes the benefit that becomes payable to the person under the Part, ensures that it is a preserved benefit under SIS (other than the member-financed component) and allows for the reduction of that amount where the person's surcharge debt account is in debit when the benefit becomes payable.
Item 252 – Payment of a preserved benefit
230. Item 252 amends section 111A of the 1976 Act to provide that, where SIS has not permitted the payment of deferred benefits to a person, the benefits will become payable as soon as the person notifies that the payment has become permissible under SIS.
Item 253 – Judgment orders
231. Section 119 of the 1976 Act provides that the CSS Board may make payments to the creditor of a CSS member in certain circumstances. The section had been drafted to allow those payments to be made only with the permission of the ISC (now the Australian Prudential Regulatory Authority) but the that body has since advised that that is not necessary.
232. Item 253 amends section 119 to remove the requirement that the ISC must approve payments to creditors under that provision.
Item 254 – Minor drafting amendment
233. Item 254 makes a minor drafting amendment to section 136 of the 1976 Act.
Item 255 – Correction of drafting error
234. Item 255 corrects a drafting error in section 138 of the 1976 Act.
Item 256 – Compliance with SIS
235. Section 138 of the 1976 Act was amended by the Superannuation Legislation Amendment Act (No. 1) 1995 to comply with the SIS requirement for release of preserved benefits as understood at the time. A later understanding of those requirements meant that section 138 was applying more stringent preservation rules of preservation than required. Regulations were made under section 155C of the 1976 Act to allow benefits to be released as required by SIS. These regulations are included in Statutory Rule 1995 No 406 (Superannuation (Deferred Benefit) Regulations). When section 155C was inserted into the Act it was on the understanding that any regulations modifying the Act under that section would result in amendments to the Act at the earliest possible opportunity.
236. Item 256 amends section 138 in the same way as the regulations made under section 155C.
Items 257 to 259 – Consequential amendments
237. Items 257 to 259 amend section 140 as a consequence of the amendments made by item 250 of this Schedule.
Item 260 – Consequential amendment
238. Item 260 amends section 153AA as a consequence of the amendments made by items 122, 268 and 269 of this Schedule.
Item 261 – Actuarial advice
239. Item 261 amends section 154AB to allow the Board to choose any actuary to give advice concerning the reduction of pension benefits where the member's surcharge debt account is in debit at the time of cessation of membership.
Item 262 – Clarification of regulation making power
240. Section 155B provides for the making of regulations to modify the Act in relation to CSS members who cease membership on the sale of an asset or the transfer of a function. The provision was intended to apply to all persons who cease membership in those circumstances but this is unclear.
241. Item 262 amends section 155B to make clear that it applies to all persons who cease CSS membership in circumstances described in the section.
242. The amendment has effect from 18 December 1992, the date of effect of the provision.
Item 263 – Section not to apply after 26 June 1997
243. Item 263 amends section 155B to provide that it does not apply to a person who ceases to be a CSS member after 26 June 1997. As with the amendment made by item 246 of this Schedule, it is intended that CSS members who are taken to be involuntarily retired in the circumstances of a sale or transfer should be treated in the same way as other CSS members who are taken to be involuntarily retired. There is no need, therefore, to have powers to make special benefit arrangements for such persons by regulation.
Item 264 – Unclaimed money
244. Section 158A of the 1976 Act provides for the treatment of unclaimed money. Item 264 amends the provision in order to comply with variations to the rules for the dealing with such amounts under SIS.
Item 265 – Employers to distribute information
245. Item 265 inserts a new section 163AB to allow the Board to send information to designated employers under the Act and request those employers to distribute the information to CSS members. The section requires the employer to distribute that information.
Item 266 – Foreign currency exchange rate
246. Item 266 amends section 166 of the 1976 Act to provide that, where an amount under the Act has to be converted to a foreign currency other than sterling, the conversion rate should be agreed between the CSS member and his or her designated employer.
Item 267 – Consequential regulations
247. Section 168 of the 1976 Act provides for the making of regulations under the Act. Item 267 inserts a new subsection (17) to provide that, where regulations under the Act no longer have their intended effect because of later 1976 Act amendments, the Board may treat those regulations as if consequential amendments had been made to them.
Items 268 to 270 – Transfer of Ministerial power to the Board
248. Section 240 of the 1976 Act requires that the Minister and the Board agree concerning the transfer of assets from the CSS Fund to an approved fund. As the Board has full responsibility for the Fund it is appropriate that the Board have full responsibility for transfers from that Fund.
249. Items 268 to 270 transfer the Minister's powers under section 240 to the Board and make a consequential amendment to section 241.
SCHEDULE 2 – REPEAL OF THE SUPERANNUATION ACT 1976
Item 1 – Repeal of the Act
250. Item 1 of Schedule 2 repeals the 1976 Act with effect from 1 July 1999 immediately after the commencement of Part 1 of Schedule 1 of this Act.
251. The Saving and Transitional Bill will provide that the Act continues to apply to persons currently covered by its provisions as if it had not been repealed.
SCHEDULE 3 – AMENDMENT OF THE SUPERANNUATION ACT 1990
PART 1 – AMENDMENTS RELATING TO THE SCOPE AND ADMINISTRATION OF THE ACT AND THE TRUST DEED AND THE RIGHTS OF MEMBERS TO TRANSFER TO OTHER SUPERANNUATION SCHEMES
Item 1 – Definition of 'approved authority'
252. Item 1 repeals the existing definition of 'approved authority' and provides that the term is defined by the new section 3AAA inserted by item 9.
Item 2 – Definition of 'Board'
253. Item 2 repeals the definition 'Board' and replaces it with one referring to the CS Board.
Items 3 to 8– Definitions
254. Items 3 to 8 repeal and amend various definitions as a consequence of the transfer of responsibilities to the CS Board under the Board Bill.
Item 9 – Definition of 'voting share'
255. Item 9 inserts a definition of 'voting share'.
Item 10 – Approved authority
256. Item 10 inserts a new provision.
257. New section 3AAA determines whether or not an authority or body is an approved authority for the purposes of the 1990 Act and replaces the definition repealed by item 1 of this Schedule. Staff of approved authorities may be eligible to be PSS members. The intention is to streamline the administration of the provision which currently requires case-by-case consideration of each request for a body to be declared to be an approved authority. The revised definition, however, does not cease approved authority status for any approved authority covered by the repealed definition while it remains in its present form.
258. Paragraph (b) of the existing definition described the type of authority or body that could be declared by the Minister to be an approved authority for the purposes of the Act and provided for the Minister to make the declaration. Paragraph (a) of the existing definition provided that a body that was an approved authority for the purposes of the 1976 Act on 30 June 1990 continued to be an approved authority under the 1990 Act.
259. Section 3AAA describes a body that is an approved authority for the purposes of the Act unless the Minister declares otherwise under subsection 3AAA(9).
260. Subsection 3AAA(2) includes an authority or body that is an approved authority at the time of commencement of the section.
261. Subsection 3AAA(3) provides that a body that is an approved authority prior to the commencement of the subsection, will cease to be an approved authority automatically where there has been a change of character. However, this will only apply to future changes of character. If this does occur the Minister may still, if appropriate, declare the body to continue to be an approved authority or provide for continuing membership for existing employees of the body through a Membership Inclusion Declaration under section 6.
262. An authority or body changes its character if the level of Commonwealth control reduces, or if in the last financial year the level of the funding received from the Commonwealth Budget is below 30% and further reduces.
263. Subsection 3AAA(4), (5), (6) and (7) provide that certain Commonwealth bodies are approved authorities if their Chief Executive Officer agrees to contribute towards the cost of providing membership to employees of the body. This applies provided the body:
(a) is fully Commonwealth controlled;
(b) is not operating in a competitive environment; or
(c) 30% or more of its funding is received from the Commonwealth Budget (otherwise than by way of taxes imposed by the Commonwealth.
264. One of the effects of these provisions is that, if a body that has automatically been an approved authority in the past changes its character so that it would not automatically be an approved authority, it will cease to be an approved authority.
265. Subsection 3AAA(8) provides that the Minister may declare any authority or body to be an approved authority including one that lost that status because of a change in character.
266. Subsection 3AAA(9) provides that the Minister may, despite the other provisions of the section declare that an authority or body is not an approved authority for the purposes of the Act.
267. The declarations under section 3D are all Statutory Rules and disallowable instruments as provided by section 45 of the Act as amended by items 26 to 29 of this Schedule. They may be made with retrospective effect in circumstances as provided by that section as amended.
Item 11 – Vesting of assets and liabilities
268. Clauses 5 and 6 of the Board Bill establish a CS Board. Under section 7 of that Act the CS Board is to become the administrator of the 1990 Act. The PSS Fund is established by the Trust Deed under that Act.
269. This means that the CS Board will need to become the ‘trustee’ of the PSS Fund. Also, the assets and liabilities of the PSS Fund including those made out of the investment monies of the Fund (PSS Fund assets and liabilities) will need to be vested in or transferred to this CS Board in its capacity as ‘trustee’ of the PSS Fund or those assets and liabilities. It will also be necessary for any other assets or liabilities of the PSS Board to be vested in, or transferred to, the CS Board.
270. The vesting and transfer of the assets and liabilities in, or to, the CS Board, the transfer of PSS Fund ‘trusteeship’ to this CS Board and the abolition of the PSS Board is to be effected by way of legislation (new section 4A of the 1990 Act). The CS Board is also to become a successor in law to the PSS Board in relation to all the assets and liabilities vested or transferred.
271. For these purposes item 11 amends the 1990 Act to insert section 4A to:
• provide for the PSS Fund, and PSS Fund assets and liabilities to be vested in, or transferred to the CS Board in its capacity as ‘trustee’ of the PSS Fund without the need for any conveyance, transfer, assignment or assurance (new subsections 4A(1), (2) and (4));
• provide for any other assets and liabilities of the PSS Board (if any) to be vested in, or transferred to, the CS Board without the need for any conveyance, transfer, assignment or assurance (new subsections 4A(3) and (5));
• provide for the abolition of the PSS Board once these assets and liabilities have been vested or transferred to the CS Board (new paragraph 4A(6)(a));
• provide for the CS Board to be trustee of the PSS Fund (new paragraph 4A(6)(b));
• provide for the CS Board to become the successor in law in relation to these above assets and liabilities (new paragraph 4A(6)(c));
• make it clear that there is no change in beneficial ownership of the PSS Fund, or of any asset, as a result of the Fund or the assets being vested in CS Board under section 4A (new subsection 4A(7)); and
• define the terms ‘asset’ and ‘liability’ for the purposes of section 4A (new subsection 4A(8)).
272. Other matters related to the transfer of the assets and liabilities provided for under section 4A of the 1990 Act are set out in subsection 27(5) of the Board Bill and sections 12, 13 and 14 of the Saving and Transitional Bill.
273. Section 12 of the Saving and Transitional Bill sets out transitional provisions that are to apply as a consequence of the vesting and transfer of the assets and liabilities under section 4A of the 1990 Act. In general, the clause provides that anything done by, omitted to be done by, any action pending against, or any reference to, the PSS Board in relation to these assets and liabilities is to be taken to have been done by, omitted to be done by, pending against, or a reference to, the CS Board.
274. Sections 13 and 14 of the Saving and Transitional Bill provide for the Minister or an authorised person to provide certificates in relation to the assets and liabilities transferred under subsection 4A(2) of the 1990 Act. For example, this provides for an appropriate person or authority to register any right, legal title or interest in any land, or make such entries as are necessary in relation to the other assets, that may vest in the CS Board under subsection 4A(2) of the 1990 Act on presentation of a certificate.
275. In general subsections 27(5)(d) and (e) of the Board Bill provide for anything done in respect of, or in relation to the transfer or vesting of the assets and liabilities under section 4A of the 1990 Act or the registration of ownership of these assets, including the giving of certificates under sections 13 and 14 of the Saving and Transitional, or anything done as a result of giving or lodging those certificates is to be exempt from any tax or charge including stamp duty.
Items 12 to 15 – Membership of the PSS
276. Items 12 to 15 make various amendments to section 6 of the 1990 Act which provides for persons to be, or not to be, members of the PSS.
277. Item 13 is a consequence of the abolition of the statutory office of the Commissioner, item 14 is a consequence of item 15 which allows a PSS member to choose to leave the scheme.
278. Item 15 provides that the PSS is closed to new members from 1 July 1999. However, the item allows a person who ceases to be a PSS member prior to that date who has a benefit preserved in the scheme to elect to again become a member within a period of three months after he or she is again covered by the section. Certain CSS members who will continue to be able to exercise an option to join the PSS under section 244 of the 1976 Act will also continue to be able to join the scheme. Item 12 is a consequence of item 15.
Item 16 - Provision of choice
279. New section 6AA is inserted into the Act to allow PSS members to choose to leave the scheme without ceasing to be employed. Members may only exercise this option on or after 1 July 2000 and only if their employer agrees to contribute to another superannuation scheme or retirement savings account on their behalf.
Item 17 – Repeal of redundant provision
280. Item 17 repeals section 6A of the 1990 Act which allowed certain PSS members to take certain actions prior to 1 October 1991 as the section refers to the CSS Board and is now redundant.
Items 18 to 20 – Functions, duties and powers of the Board
281. These items repeals the provisions of the 1990 Act that set up the PSS Board and provide that the functions, duties and powers of the Board are set out in the Trust Deed. The Board referred to is the CS Board because of the amendment made by item 2 of this Schedule. The Board Bill will provide the CS Board with responsibility for the administration of this Act. Item 19 also inserts a new section 22 to provide that the CS Board has the functions, powers and duties set out in the trust Deed under the 1990 Act.
Items 21, 22, 24 and 25 – Powers of PSS Board assumed by CS Board
282. Items 21, 22, 24 and 25 repeal various provisions of the 1990 Act as a consequence of the assumption, by the CS Board, of the powers of the PSS Board to the CS Board by the Board Bill. Equivalent provisions will be in that Bill.
Item 23 – Repeal of Part 7
283. Item 23 repeals Part 7 of the 1990 Act as a consequence of the abolition of the office of Commissioner.
Items 26 to 29 – Consequential amendment
284. Items 26 to 29 amend section 45 of the 1990 Act as a consequence of the insertion of section 3AAA by item 10 of this Schedule.
285. Item 30 amends section 47 of the 1990 Act as a consequence of the abolition of the statutory office of the Commissioner.
PART 2 – MISCELLANEOUS
Item 31 – Consequential amendment
286. Item 31 amends the definition of Trust Deed in subsection 3(1) by omitting the reference to section 5 of the Act as a consequence of amendments made to the Tenth Amending Deed.
Item 32 – Continuity of membership
287. Item 32 inserts new subsection 12(2) which clarifies that where the PSS Rules currently or in the future provide for continuity of membership of the PSS for specified categories of persons, those situations are to be covered by the provisions in the 1990 Act that provide for continuation of membership in certain circumstances.
288. Section 12 of the 1990 Act currently provides for continuity of membership in certain circumstances where there is a break in employment. The existence of this section raises the question whether there is power for the PSS Rules to cover other situations involving continuity of membership. Such provisions include where a person resigns to contest an election for Commonwealth, State or Territorial legislature or persons who are re-appointed or re-employed after termination of appointment or employment under provisions in the Public Service Act.
Item 33 – Transfer of power to the Board
289. Item 33 amends section 33D to ensure the Board, which has responsibility for the PSS Funds under SIS, has the responsibility for determining the timing, amounts and nature of assets and liabilities to be transferred to an approved scheme, and that the consent of the Minister is not required.
Item 34 – Reference to the PSS Rules
290. Item 34 amends subsection 33G(2) to remove a reference to Part 6 of the PSS Rules. This subsection was not amended when amendments were made in the Superannuation Legislation Amendment Act (No1) 1995 to replace references to specific Parts and Divisions of the PSS Rules with more general references in terms of the function involved in the PSS Rules. These amendments were made to avoid the need for amendment when the PSS Rules are amended.
Item 35 – Employers to distribute information
291. Item 35 inserts a new section 42A to allow the Board to send information to designated employers under the Act and request those employers to distribute the information to PSS members. The section requires the employer to distribute that information.
Item 36 – Consequential amendment
292. Item 36 amends section 45 as a consequence of the amendment made by item 32 of this Schedule.
Item 37 – Retrospective amendments
293. Item 37 inserts new subsection 45(6) which states that subsection 48(2) of the Acts Interpretation Act 1901 does not apply in relation to an Amending Deed. This will allow retrospective amendments to be made to the Trust Deed in any circumstances permitted by SIS. Members’ rights and benefits will be protected in accordance with the SIS Act which limits the circumstances in which retrospective amendments can be made to the rules of a superannuation scheme, including that any such amendments must have the consent of the scheme members affected the Insurance and Superannuation Commissioner under SIS regulation 13.16.
Item 38 – Commencement of certain provisions of the Tenth Amending Deed
294. The Ninth Amending Deed, effective from 1 July 1995, remade the PSS Rules in a simplified form. The simplified Rules were, in the main, a translation of the Rules in force before 1 July 1995. Some of these translated Rules contained errors that inadvertently advantaged some groups of members, eg the amount of pension benefits to be received on retirement. These errors were never implemented administratively as they were intended to be a direct translation of the “old” Rules. The errors were corrected by the Tenth Amending Deed (effective 1 February 1996) after the PSS Board, and the ISC approved the changes under SIS regulation 13.16(d).
295. The Senate Standing Committee on Regulations and Ordinances questioned the validity of the administration of the affected provision for the period 1 July 1995 to 1 February 1996, between the Ninth and Tenth Amending Deeds. The Committee agreed with the proposal that to address their concerns, the 1990 Act be amended to validate the administration of those Rules.
296. Item 38 provides for the amendments made by the Tenth Amending Deed to have retrospective effect.
SCHEDULE 4 – REPEAL OF THE SUPERANNUATION ACT 1990
Item 1 – Repeal of the Act
297. Item 1 of Schedule 4 repeals the 1990 Act with effect from 1 July 1999 immediately after the commencement of Part 1 of Schedule 3 of this Act.
298. The Saving and Transitional Bill will provide that the Act, and any delegated legislation under the Act, continues to apply to persons currently covered by its provisions as if it had not been repealed.
SCHEDULE 5 – AMENDMENT OF THE RULES FOR THE ADMINISTRATION OF THE PUBLIC SECTOR SUPERANNUATION SCHEME
299. Schedule 5 amends the Rules for the Administration of the Public Sector Superannuation Scheme.
300. The Government has allowed access to superannuation redundancy benefits for Commonwealth employees who are made redundant as a consequence of their jobs being outsourced or the sale of the enterprise for which they work.
301. Superannuation rules previously prevented these employees from accessing redundancy benefits if they continued in employment or rejected an offer of equivalent employment with the new service provider or owner. These employees were effectively treated for superannuation purposes as having resigned.
302. Until 30 June 1999, redundant employees in this situation who were previously treated as having resigned will have a cash lump sum benefit, including the employer-financed component, as one of the benefit options. Previously the employer component of PSS benefits usually had to be preserved.
303. The new arrangements will also allow employees who resign as a result of outsourcing or sale to choose to roll-over their superannuation entitlements to a superannuation fund or RSA of their choice. If this option is chosen, the employer component must be preserved in the receiving fund or RSA.
304. From 1 July 1999, however, the employer-financed component of all redundancy benefits will have to be preserved, in line with the timing of changes in preservation arrangements announced in the 1997 Budget.
Interpretation
305. Division 2 of Part 1 of the Rules defines special terms and phrases and some concepts used in the Rules.
306. The definition of “involuntary retirement” in Rule 1.2.1 currently excludes all members who cease membership in sale or outsourcing situations. This approach was used because the PSS Rules need provisions that only apply in sale or outsourcing situations (Divisions 6 and 7 of Part 6) and separate provisions that apply in all other situations involving involuntary retirement, for example, downsizing (Division 3 of Part 6). However, some people find this approach confusing as they would usually include sale or transfer situations under the term “involuntary retirement”.
307. Item 1 deletes the definition of “equivalent employment” as this concept is no longer needed under the new rules relating to PSS benefits on sale or outsourcing. Under these new rules employees are no longer prevented from accessing redundancy benefits when they reject an offer of equivalent employment.
308. With the introduction of the new rules relating to PSS benefits on sale or transfer, the definition of “involuntary retirement” has been simplified by including sale or transfer situations in the definition. To achieve this item 2 deletes the tenth dot point of the definition of “involuntary retirement”, which excludes sale or transfer situations from the definition. To ensure that separate provisions continue to apply in sale or transfer situations, the Twelfth Amending Deed also excludes sale or transfer situations from Division 3 of Part 6, which deals with all other situations involving involuntary retirement (see below).
Calculation of Benefits
309. Part 5 of the Rules sets out how regular and casual members' benefit are calculated in various circumstances, including resignation, retirement and invalidity retirement.
310. Items 3 and 4 replace paragraphs 5.7.1(B) and 5.7.2(b) respectively so that the references in those paragraphs to 1 July 2000 are updated to 1 July 1999. These changes reflect the Government's decision that from 1 July 1999 the employer-financed component of all redundancy benefits will have to be preserved.
Benefit Options
311. Part 6 of the Rules sets out the forms and conditions under which members' benefits can be taken. The forms and conditions vary according to the reason membership ceased.
312. Division 3 of Part 6 details the benefit options available on involuntary retirement, other than in sale or transfer situations.
313. Item 5 replaces Division 3 of Part 6 so that the references in those rules to 1 July 2000 are updated to 1 July 1999. These changes reflect the Government's decision that from 1 July 1999 the employer-financed component of all redundancy benefits will have to be preserved. The new rule 6.3.2 should also be easier to understand as it spells out all of the benefit options that apply on or after 1 July 1999 instead of referring to rule 6.3.1. This approach also allows rule 6.3.2 to include the requirement that the employer-financed component is to be treated as a preserved benefit for the purposes of the SIS Act.
314. The new rules 6.3.1, 6.3.2 and 6.3.3 also make it clear that they do not apply in sale or transfer situations (see paragraph (A)). This change follows the broadening of the definition of “involuntary retirement” to include sale or transfer situations.
Benefit options - sale or transfer of an asset or function
315. Divisions 6 and 7 of Part 6 currently describe the benefit options on the sale or transfer of an asset or function, with Division 6 applying where a person continues in employment with the new owner or transferee, and Division 7 applying where a person does not continue in employment.
316. As a result of the Government's decisions on PSS redundancy benefits in sale or transfer situations, members will receive the same benefits whether or not they remain in employment with the new owner or transferee. Accordingly, item 6 replaces Division 6 of Part 6 with a new Division that covers all sale or outsourcing situations, and item 7 deletes the now redundant Division 7 of Part 6.
317. Rule 6.6.1 describes the benefit options for members who continue their PSS membership after sale or transfer and rule 6.6.2 describes the benefit options for members who could have continued their PSS membership. These rules are unchanged from the current Division 6 of Part 6.
318. Rule 6.6.3 describes the benefit options for members who continue in employment, but do not change employer. In this situation the SIS Act does not permit any amounts to be paid to the member, so rule 6.6.3 specifies that a member's benefits must be rolled-over or combined with another current period of PSS membership. The roll-over option includes the requirement that the employer-financed component is to be treated as a preserved benefit for the purposes of the SIS Act. Apart from the addition of the roll-over option, rule 6.6.3 is the same as the current rule 6.6.4.
319. Rule 6.6.4 describes the benefit options for members who cease membership on involuntary retirement before 1 July 1999. Rule 6.6.5 describes the benefit options for members who cease membership on involuntary retirement on or after 1 July 1999 as well as for members who cease membership in circumstances other than on involuntary retirement.
320. Rule 6.6.4 and 6.6.5 contain the same benefit options, with the only difference being the amount of lump sum that can be paid to a member. Under rule 6.6.4 members can obtain the maximum lump sum allowable under the SIS Act in all circumstances, whereas rule 6.6.5 limits this lump sum to the member's accumulated member contributions, with the rule including the requirement that the employer-financed component is to be treated as a preserved benefit for the purposes of the SIS Act. Under rule 6.6.5 members can only obtain a lump sum of the employer-financed component when the release requirements of the SIS Act have been met.
Transfers to other superannuation schemes
321. Division 8 of Part 6 details the circumstances where members can transfer their PSS benefits to another superannuation scheme.
322. Items 8 and 9 replace paragraphs 6.8.1(c)(iii) and 6.8.1(c)(v) respectively so that the references in those paragraphs to 1 July 2000 are updated to 1 July 1999. These changes reflect the Government's decision that from 1 July 1999 the employer-financed component of all redundancy benefits will have to be preserved.
Preserved Benefits
323. Part 8 of the Rules sets out the conditions for access to preserved benefits.
Early access to preserved benefit on involuntary retirement after sale or transfer of assets
324. Division 4 of Part 8 details the different benefit options for certain preserved benefit members who ceased membership in a sale or transfer situation and are subsequently retrenched by the new owner or transferee.
325. Item 10 replaces Division 4 of Part 8 so that the references in that Division to 1 July 2000 are updated to 1 July 1999. These changes reflect the Government's decision that from 1 July 1999 the employer-financed component of all redundancy benefits will have to be preserved. The new rule 8.4.3 should also be easier to understand as it spells out all of the benefit options that apply on or after 1 July 1999, which means that rule 8.4.1 can refer directly to 8.4.3 instead of modifying the options under rule 8.4.2. This approach also allows rule 8.4.3 to include the requirement that the employer-financed component is to be treated as a preserved benefit for the purposes of the SIS Act. The current rules 8.4.3 has been renumbered as 8.4.4, to allow for the insertion of the new rule 8.4.3. Current rule 8.4.4 has been deleted as this saving provision is no longer needed.
SCHEDULE 6 – REPEAL OF THE SUPERANNUATION ACT 1922
326. The 1922 Act provided for the first superannuation scheme for employees of the Commonwealth. That scheme was superseded in 1976 by the CSS which was set up under the 1976 Act. At that time the 1922 Act scheme was closed and all contributors were transferred to the CSS. However, pensioners at that time, or their dependants, continue to receive benefits payable under that Act which is administered by the Commissioner for Superannuation.
327. As the statutory office of Commissioner is to be abolished from 1 July 1999 (see item 34 of Schedule 1), other arrangements must be made for the on-going administration of pensions payable under the 1922 Act.
328. No substantive amendments have been made to the 1922 Act for some time, other than those required as a consequence of amendments to the 1976 Act and other Government policy (for example, the 1922 Act was amended by the Commonwealth Superannuation Schemes Amendment Act 1992 to comply with the provisions of the Sex Discrimination Act 1984). People who are entitled to benefits under the Act should be confident that those benefits will continue unchanged in the future.
329. It is proposed that the Act be repealed and the existing provisions continue to apply without change to those people to whom they currently apply. The administration of the Act will come under the control of the CS Board who will have responsibility for the on-going payment of benefits.
Item 1
330. Item 1 to the Schedule repeals the whole of the 1922 Act.
331. Savings provisions are included in the Saving and Transitional Bill to ensure that the Act and any delegated legislation made under the Act continues to apply to the persons currently covered by it without change.
SCHEDULE 7 – AMENDMENT OF THE SUPERANNUATION AMENDMENT ACT 1976
332. The Superannuation Amendment Act 1976 amended the 1922 Act in 1976 when the CSS was introduced to provide that the Commissioner should exercise any powers in relation to pensioners under that Act which had previously been exercised by the Superannuation Board under that Act. This provision ensures that those powers can be exercised by the CS Board.
SCHEDULE 8 – AMENDMENT OF THE SUPERANNUATION (PRODUCTIVITY BENEFITS) ACT 1988
Items 1 to 5 – Amendment of certain provisions
333. These items provide that the CS Board, instead of the Minister, will be responsible for setting the rates of continuing contributions and interest factors, including penalty interest on late payment of contributions to a fund, in accordance with principles to be determined by the Minister.
Item 6 – Delegation of powers
334. Item 6 provides for the Minister to be able to delegate certain powers under the Superannuation (Productivity Benefit) Act 1988.
SCHEDULE 9 – REPEAL OF THE SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
Item 1 – Repeal of Act
335. The Productivity Benefit Act provides minimum employer support and a Superannuation Guarantee (SG) safety-net arrangement for Commonwealth employees with no other superannuation cover. This item repeals the whole Act from 1 July 1999. From that date, minimum SG employer support will be provided under the Superannuation Guarantee (Administration) Act 1992. Saving and transitional arrangements for certain Commonwealth employees are provided in the Saving And Transitional Bill.
SCHEDULE 10 – AMENDMENT OF THE SUPERANNUATION BENEFITS (SUPERVISORY MECHANISMS) ACT 1990
Item 1 – Amendment of Act
336. Section 6 of the Supervisory Mechanisms Act allows the Minister to determine prescribed requirements for the provision of superannuation benefits in the Commonwealth public sector. This item makes any determination setting out the prescribed requirements a disallowable instrument.
SCHEDULE 11– AMENDMENT OF THE PAPUA NEW GUINEA (STAFFING ASSISTANCE) ACT 1973
337. The PNG Act provides that the Commissioner administer the payment of pensions and benefits to persons covered by that Act. As a consequence of the abolition of the statutory office of the Commissioner, the functions under that act are to be transferred to the CS Board. The Board Bill will provide that the CS Board has responsibility for administration of the PNG Act.
338. It is proposed that provisions of the PNG Act providing for the payment of superannuation and retirement income be repealed and the existing provisions continue to apply without change to those people to whom they currently apply. The administration of the repealed provisions of the Act will come under the control of the CS Board who will have responsibility for the on-going payment of benefits.
339. Savings provisions are included in the Saving and Transitional Bill to ensure that the repealed provisions of the Act and any delegated legislation made under those provisions continues to apply to the persons currently covered by it without change.
Item 1 – Repeal of definitions
340. Item 1 repeals some definitions of terms in the PNG Act as a consequence of the amendments made by this Schedule.
Items 2 to 4
341. Items 2 to 4 repeal the provisions of the PNG Act that provide for the payment of superannuation benefits and retirement income to persons covered by that Act.
SCHEDULE 12 – AMENDMENT OF THE PARLIAMENTARY CONTRIBUTORY SUPERANNUATION ACT 1948
342. This Schedule amends the Parliamentary Contributory Superannuation Act 1948 to improve access to spouse benefits where a retiring member entitled to pension commenced a marital relationship after age 60, in line with the arrangements proposed under the 1976 Act. The Schedule also rectifies anomalies and technical deficiencies in relation to orphan benefits, the maximum reversionary benefit payable where there is more than one beneficiary and the arrangements relating to transfer values.
343. In addition, the Schedule will cease the application of the inwards transfer value arrangements to persons who become members of Parliament after the date of Royal Assent of the Bill.
Items 1 to 4 - Amendments relating to the marital status of deceased retirement pensioner in respect of spouse benefits
344. These amendments implement the changes to post-retirement marriage reversionary benefits.
345. Items 1 and 2 amend the definition of “spouse who survives a deceased person”, removing references to post-retirement marriages.
346. Items 3 and 4 amend the benefit provisions, inserting a provision for a pro-rata benefit where the post-retirement marital relationship after age 60 is less than three years duration. A discretion is also inserted for the Parliamentary Retiring Allowances Trust to allow commutation of such pro-rata benefits that are less than a threshold amount set by the Trust.
Item 5 and 6 – Amendments correcting anomalies to benefits for eligible children
347. Section 19AA provides for benefits to be paid to eligible children upon the death of a member or former member. A previous drafting error disentitled some children of former relationships from benefits in circumstances where they should have been entitled. This was possible where the other parent survived, even if not entitled to any benefit under the Act.
348. The amendments change the test for eligible children to include dependency on a person entitled to a spouse benefit, rather than existence of a person with whom the primary beneficiary had had a marital relationship.
Item 7 - Amendments relating to the marital status of deceased retirement pensioner in respect of benefits for eligible children
349. This item repeals subsections 19AA(2A) and (2B) to give effect to the post-retirement marriage changes in relation to eligible children.
Item 8 - Removal of gender specific terminology
350. This item simply corrects a gender specific provision.
Items 9 to 12 – Correction of drafting error relating to apportioning reversionary benefits
351. Section 21AA is intended to enable the Parliamentary Retiring Allowances Trust (the Trust) to apportion reversionary benefits in circumstances where there is more than one beneficiary, and to limit the totality of reversionary benefits to five-sixths of the benefit applicable to the deceased member.
352. The existing section only applied if there was more than one spouse entitled to a benefit and did not apply where there was a spouse beneficiary and one or more eligible children beneficiaries from a previous relationship. The effect was that, in such limited circumstances, reversionary benefits exceeding those applicable to the deceased member may have been payable.
353. These amendments ensure that the section applies in all circumstances where there is more than one reversionary beneficiary, ie one or more spouse beneficiaries and/or one or more eligible children.
Item 13 – Amendment to allow selection of actuary
354. This amendment allows the Trust to select its own actuary.
Items 14 to 16 – Removal of transfer value provisions
355. Section 22Q provided for new members to pay to the Commonwealth a lump sum transfer value relating to previous employment outside the Commonwealth parliament. These provisions were inserted at a time when there was little or no availability of schemes in which to preserve superannuation entitlements. With the development of the superannuation sector, numerous rollover funds and Approved Deposit Funds are now available to preserve such benefits.
356. These amendments end the transfer value arrangements for persons who become Members of Parliament from the date of Royal Assent.
Item 17 – Validation of certain transfer values
357. Subsection 22Q(1) required the full amount of any previous benefit to be paid to the Commonwealth as a transfer value, ie payment of partial amounts were not allowed. A small number of partial payments have previously been paid and accepted by the Commonwealth. This item validates the receipt of those transfer values and the crediting of notional service based on those transfer values.
Items 18 to 21 – Correction of drafting error relating to interest payable of repayment of transfer values
358. Subsection 22Q(5) provides for the refund of a transfer value where a lump sum only benefit is payable under the Act. The provision allowed interest on this amount, but only in relation to the employer component of the transfer value.
359. Items 18 to 20 amend the existing interest provisions to ensure that interest is payable on the whole of the transfer value amount, when contributions are repaid together with a Commonwealth supplement.
360. Item 21 inserts a new subsection that provides for interest to be paid on the employer component of the transfer value where a superannuation guarantee safety-net amount is payable under section 16A, without including a second interest amount on the member component. Interest on the member component is already included in the safety net calculations.
SCHEDULE 13 – AMENDMENT OF OTHER ACTS
Items 1, 2 and 7 - Amendments in relation to the benefits for certain CSS or PSS members who join the Judges’ Pension Scheme
361. The SG Act imposes a responsibility on employers to provide a minimum level of superannuation for the majority of their employees. Where this is provided through a defined benefit superannuation scheme, the scheme’s actuary is required to certify that the scheme satisfies the employers’ superannuation guarantee obligations. The Australian Government Actuary has advised that the PSS may not satisfy that obligation in respect of those PSS members who are appointed to a federal judicial office and who cease scheme membership on joining the scheme governed by the Judges’ Pension Act 1968, the Judges’ Pension Scheme (JPS).
362. The Administrative Appeals Tribunal Act 1975, Law Officers Act 1964 and Workplace Relations Act 1996 limit the superannuation benefits that members of the PSS and CSS can receive on appointment to a judicial office under those Acts, and joining the JPS.
363. The amendments in items 1, 2 and 7 of this schedule remove the provisions in the Administrative Appeals Tribunal Act 1975, Law Officers Act 1964 and Workplace Relations Act 1996 that restrict a person’s entitlement to CSS or PSS benefits on joining the JPS. This will ensure that the PSS complies with the requirements of the SG Act and that the PSS or CSS benefits for persons who join that scheme are the same as those applying to any other person who voluntarily leaves the relevant scheme.
364. Item 1 amends section 16 of the Administrative Appeals Tribunal Act 1975 by repealing subsections 16(4), (4A) and (4B)
365. Item 2 amends section 14 of the Law Officers Act 1964 by repealing subsections 14(3), (4) and (5).
366. Item 7 amends section 22 of the Workplace Relations Act 1996 by repealing subsections 22(3), (4) and (5).
Items 3 to 6 - Amendments to the Superannuation Legislation Amendment Act (No. 1) 1995
367. Items 3 to 6 amend the Superannuation Legislation Amendment Act (No. 1) 1995 to make technical drafting corrections.