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Tuesday, 25 March 1997
Page: 2419

Senator KEMP (Assistant Treasurer)(8.20 p.m.) —Senator, I am not too sure the debate is advanced by some of the epithets you used. This product has been widely welcomed. It was an election promise. You are a strong supporter and wish to protect the industry funds; we understand that. We understand where you are coming from.

Senator Murphy —I want to protect workers' money.

Senator KEMP —You do not want to protect the workers; you want to protect the unions. There is a bit of a difference. I will deal with Senator Murphy's points first. The payment of contributions deducted from salary and wages must be remitted in relation to the RSA provider within 28 days, and payment of SG contributions by an employer is an enforcement issue of the tax office and is a matter for the tax office. Payment of super contributions under industrial awards is an industrial relations issue. The ISC responsibility is for the moneys once they are in fact in the system.

Senator Murphy —You ought to check with the tax office and see how well it worked there.

Senator KEMP —I am responding to your questions. The ISC responsibility, as I said, is for the moneys once they are in the super system. That is to ensure that funds and RSA providers comply with standards and RSA providers are subject to the prudential supervision for financial safety and soundness by the RBA.

Senator Harradine has moved an amendment to the Life Insurance Act 1995 and attempts to reinsert a provision which was deleted from the Life Insurance Act 1945. Two senators have spoken in this debate. Senator Sherry had particular concerns with aspects of the amendment. Although he was happy to support it in principle, he was unhappy with the wording. Senator Allison also raised some issues in relation to it and in relation to due diligence and whether those particular words were needed.

Senator Sherry drew on the bipartisanship which used to exist, and we used to give him support. The Labor Party brought in the Life Insurance Act 1995. Senator, it was introduced by your government and it inserted new provisions which required directors of life insurance companies to give priority to the interests of policy owners over shareholders. These are akin, as Senator Sherry would know, to fiduciary duties of trustees, but they recognise the non-trust based nature of life policies. We thought that you actually got it right in 1995. You brought that provision in, and we supported it. These new provisions, Senator, as you will recall, have made the onerous duties of life insurance directors explicit.

This is consistent with the ruling of the Supreme Court of Victoria in the Occidental-Regal case, which stated categorically that the statutory funds of life offices were not trusts. This was confirmed by the Court of Appeal. You got it right in 1995, Senator. I am surprised that, for someone who often calls on bipartisanship in this area, which I do not dispute—

Senator Sherry —That's gone. I declared that dead last week.

Senator KEMP —I know you declared it dead, because you are not adopting an entirely constructive attitude to some of these things. The courts have categorically ruled that statutory funds of life offices are not trusts. We will not be supporting Senator Harradine's amendment, because it is out of step with contemporary case law, which is reflected in the current life act.

I refer to the matter that has been raised by Senator Allison. Senator, this may or may not be your intention, but I will put it on the record so that you may reflect on it. The advice I have notes that the suggested removal of the due diligence defence would place even more onerous burdens, as I understand it, on directors of RSA providers. I do not know whether it was your intention to remove that—perhaps it was. It is your intention? We do not agree with it. We accept the argument if not the rationale.