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Wednesday, 8 April 1998
Page: 2867

Mr KELVIN THOMSON (9:27 PM) —by leave—I move additional amendments Nos 1-3:

(1) Schedule 5, item 12, page 47, definition of industry-based superannuation fund, (lines 9-20) omit the definition, substitute:

industry-based superannuation fund means a complying fund or complying superannuation scheme that:

(a) has 2 or more employer-sponsors; and

(b) is a fund which operates on a not-for-profit basis;


(c) complies with section 89(1) of the Superannuation Industry (Supervision) Act 1993 (basic equal representation rules); or

(2) Schedule 5, item 28, page 52 (lines 16-21), omit proposed subsection 32C(2), substitute:

Contributions under AWAs, Certified Agreements or Federal or Territory Awards

(2) A contribution to a fund by an employer for the benefit of an employee is also made in compliance with the choice of fund requirements if the contribution is made under or in accordance with, an AWA, a certified agreement under the Workplace Relations Act 1996 , a certified agreement under the Industrial Relations Act 1988 , a Commonwealth industrial award, or a Territory industrial award.

(3) Schedule 5, item 28, page 53 (lines 10-15), omit paragraphs (4)(a)-(c), substitute "before 1 July 2000".

These amendments relate to what are known as third line forcing provisions, and they insert improper conduct provisions into the bill. This was an issue which was considered by the Senate Superannuation Committee, and I will turn to it in a moment. The issue here is really one of protection from improper employer influence. Of particular concern is the possibility that employers will influence the employee's choice of superannuation fund because they themselves are receiving some direct or indirect benefit from the financial institution where the employee's superannuation goes to.

It is common knowledge that many small business operators, particularly in regional Australia, have close relationships with their bank manager or their insurance agent. In some cases, that sort of business contact and social contact would be enough to influence the employer to push employees into the company's products. Even more seriously, you could have the situation where someone wants to maintain favourable loan conditions or other incentives. We would be concerned about the situation where someone went to a bank seeking a loan for business purposes and the bank said, `Yes, sure, you can have the loan. Now, what about your workers' super?'

It is noteworthy that the legislation does not contain any provision equivalent to section 76A of the Retirement Savings Accounts Act—the RSA Act—which inhibits improper conduct—that is, RSA providers supplying or offering to supply any benefits to employers on condition that employees open RSA accounts or, indeed, refusing to supply or offer such benefits. That is a situation which we are concerned about. It was an issue which was dealt with by the Senate select committee inquiring into superannuation and inquiring into choice of fund. In particular, the committee heard evidence that there was potential for employees to be locked into their employer's fund choices where that fund choice was something in the interests of the employer, rather than in the interests of the employees. In particular, the practice of bundled selling was raised as a potential issue, as was the issue of undisclosed inducements and rewards. Indeed, West Scheme provided an example to the committee in its submission and it submitted that there was evidence within weeks of the Western Australian government's choice of fund legislation of employers being offered financial incentives to meet their choice obligations through a particular service provider.

The Consumers Association and several other witnesses put forward the idea that there ought to be strong provisions against deals between employers and product providers. They told the committee that those deals work against the interests of employees and unnecessarily restrict choice. Accordingly, they were of the view that we need to get a clear opinion on whether the existing Trade Practices Act provisions relating to third line forcing are adequate for the protection of employees in such situations.

We would be interested in any response we could get from the government on its view about the use of the existing third line forcing provisions in the Trade Practices Act to deal with the situation before us. I would ask the parliamentary secretary whether he is able to advise us on whether the Trade Practices Act provisions relating to third line forcing would be adequate to protect employees from bundled selling. In any even, we think the amendments that we have moved, amendments 1 to 3, make the issue clear and put it beyond doubt. On that basis we think that the House ought to support them.