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Monday, 18 June 2001
Page: 24484


Senator PATTERSON (Parliamentary Secretary to the Minister for Immigration and Multicultural Affairs and Parliamentary Secretary to the Minister for Foreign Affairs) (5:07 PM) —I table the revised explanatory memoranda relating to the bills. I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

FAMILY LAW LEGISLATION AMENDMENT (SUPER-ANNUATION) BILL 2001

The Family Law Legislation Amendment (Superannuation) Bill 2001 is another landmark in the Howard Government's ongoing reform of family law.

Under this legislation, married couples will for the first time be able to divide their superannuation interests on separation in the same way as their other assets.

In recent years, superannuation has become an increasingly valuable component of the asset wealth of most Australian families:

· 91% of employees held a superannuation account in 1999;

· as a nation, we hold over 20 million superannuation accounts in more than 200,000 funds;

· the aggregate value of superannuation assets is estimated at $439 billion, around double the level of 5 years ago; and

· superannuation assets are projected to reach around $700 billion by June 2005 and $1 trillion (that is, $1,000 billion) by June 2010.

Despite the wealth of funds, many couples whose marriages break down do not consider superannuation among their assets when they arrange their property settlement.

In a recent study entitled Superannuation and Divorce in Australia, the Australian Institute of Family Studies noted the increasing significance of superannuation among family assets.

The Institute found that superannuation may approach, or even exceed, the value of the family home for many couples who have limited assets.

The average aggregate superannuation balance per person is now about $50,000, with wide variations depending on years of membership and the level of contributions.

By June 2005, the average balance is projected to increase to $67,000.

By June 2010, this will increase to $80,000 and to around $135,000 in June 2020.

However, the Institute also found that even though superannuation is increasing in value and importance, separating couples did not consider splitting it in more than half of all cases where property is divided.

Even if couples negotiating a family law settlement do recognise that superannuation is an important asset, there is currently no mechanism for superannuation held in one person's name to be divided, or transferred to the other.

Nor can the Family Court order a third party (such as a superannuation fund trustee) to provide benefits to a former spouse at some future time, even though this might provide the fairest outcome for both spouses.

The Family Court can, and does, take superannuation interests into account and divide other property accordingly.

However, this is not an ideal solution because it often means that current property - usually the family home - has to be traded away in exchange for superannuation that may not be able to be accessed for many years.

This may leave one person with a house, but no retirement income, and the other person with no accommodation, but significant retirement income.

This legislation is designed to address the inequity and inflexibility of this situation.

The bill will amend the Family Law Act 1975 to allow superannuation to be divided after the parties to a marriage have separated.

This division will be able to be achieved in one of two ways - either by agreement of the separating couple, or by order of the court.

The bill will permit separating couples to make binding agreements about how to divide their superannuation interest or interests.

This gives people the flexibility to settle their own financial affairs wherever possible, and therefore to avoid costly and protracted litigation.

This is consistent with the approach in Part VIIIA of the Family Law Act 1975, which commenced on 27 December 2000.

Part VIIIA of the Family Law Act allows couples to make binding financial agreements, either before or during marriage, or after the separation of the parties to the marriage, about how any or all of their property is to be divided on separation.

The Superannuation Bill will provide that couples may make a superannuation agreement, in the context of these broader financial agreements, to specify how their superannuation will be divided on their separation.

The Government recognises that, in some circumstances, couples will want to defer an agreement about how their superannuation interests are to be divided.

This might be because the person who holds the superannuation interest is nearing retirement, or another condition of release, at which time the actual value of the interest will become known.

The bill therefore provides for couples to make an agreement to “flag” their superannuation interest.

This agreement would prevent the superannuation trustee from dealing with the flagged superannuation interest until the “flag” has been lifted, either by further agreement or by court order.

When a superannuation agreement is in force, the trustee of the relevant fund will be required by law to give effect to the agreement.

The bill contains special provisions to ensure that people do not enter into contrived arrangements.

Where a couple has separated, but not yet divorced, at least one of them will have to sign a document called a separation declaration.

This declaration will state that the couple is still married, but that they have separated at the time of the making of the declaration. There are significant penalties provided in the bill for the making of false declarations.

If the value of the superannuation interest is greater than the Eligible Termination Payment threshold determined under the Income Tax Assessment Act 1936 then a more detailed declaration will be required.

For people to be able to make agreements about dividing their superannuation, they will generally need information about the fair value of any superannuation interests to be taken into account upon separation.

For this reason, the bill provides that a superannuation trustee must provide information to the spouse of a member so that both parties are aware of the details of superannuation interests that are involved.

It is important, however, that personal privacy is maintained to the extent possible - an issue that was raised in the Senate Select Committee on Superannuation and Financial Services' reports on the bill.

The bill provides that it is an offence for the trustee to provide the address of a member or to inform a member that an application for information has been received.

Valuation is a particularly important issue for defined benefit schemes, and also partially vested accumulation schemes, where there is a vested benefit and an unvested value.

The unvested value is generally not accessible until the fund member satisfies certain requirements specified by the fund.

The value of an interest in such a plan is typically based upon years of service with an employer and salary levels prior to retirement, as well as contributions and investment earnings.

As the final benefit is dependent on future events, the full value of the retirement benefit cannot be predicted with certainty at the time of separation.

The value of an accumulation plan is generally more easily ascertained.

For this reason, the bill will provide for different methods of valuing a superannuation interest, depending on the type of interest.

The details of how the value is to be calculated, including actuarial information, will be set out in the Regulations.

This will ensure that people are generally aware of the value of the interest they are dealing with in the agreement, and will also ensure that there can be no dispute about how the value is to be calculated.

Obviously it is preferable that people are able to make their own arrangements for dealing with superannuation interests.

However, if they are unable to agree, the court will have the jurisdiction and power to make an order to divide superannuation interests.

Such orders will usually be made as part of a broader court order dealing with all of the property of the parties that has not been dealt with in a financial agreement.

These orders will bind the relevant third party superannuation trustee.

As with superannuation agreements, the court will be able to make an order either to split a superannuation interest or to “flag” an interest and deal with it later.

The amendments will apply to all marriages, including those that were dissolved before the amendments commenced.

The amendments will generally not apply, however, where a property settlement has been finally concluded, whether by formal agreement or by court order.

In addition to the amendments of the Family Law Act, the bill makes a number of consequential amendments of other legislation.

The bill provides for preservation of superannuation money by making the superannuation payment subject to regulations that provide for payment out of a superannuation fund or retirement savings account.

The bill creates a payment splitting regime only and does not create a new separate superannuation interest for the non-member spouse.

The non-member spouse, who has a right to payments from the member spouse's interest, will, however, be accorded some of the rights that the member spouse has. These rights might include the right to receive the annual report and other information.

The amendments of the Superannuation Industry (Supervision) Act 1993 contained in the bill are designed to facilitate this.

Complementary amendments to the Superannuation Industry (Supervision) Regulations will allow - in certain specified circumstances - the creation of a new interest for a non-contributing spouse who is to receive payments under an agreement or order to split a superannuation interest.

That interest will be carved out of the withdrawal benefit of the contributing spouse's superannuation interest.

Membership of the fund is intended to provide the new member (the non-contributing spouse) with similar membership rights to those enjoyed by other members in the fund.

The Superannuation (Resolution of Complaints) Act 1993 provides a low cost dispute resolution mechanism to deal with complaints from members and beneficiaries of superannuation funds about decisions of trustees that are not settled through a fund's internal complaints mechanism.

The amendments to the Complaints Act will permit non-contributing spouses, for whom a new interest in the fund is created, to make complaints to the Superannuation Complaints Tribunal about their treatment by the superannuation trustee in appropriate circumstances.

The amendments of the Family Law Act, and the consequential amendments of other legislation, will commence on a date to be fixed by Proclamation.

The reason for the delay in commencement is to allow the superannuation industry and relevant government agencies to make the necessary adjustments to their information and computer systems to implement the division of superannuation on the separation of the parties to the marriage.

The superannuation industry expressed concern, in submissions to the Senate Select Committee, that much of the detail of the new regime will be contained in the Family Law Amendment Regulations and the Superannuation Industry (Superannuation) Amendment Regulations and that, therefore, the commencement of the new regime should be more closely tied to the commencement of the regulations - rather than the commencement of the bill.

In response to these concerns, the Government moved amendments in the House of Representatives so that the bill will now commence on date to be fixed by Proclamation. The Proclamation will be made when the timing of the necessary changes to the Regulations is clarified.

However, there is a fixed limit to the length of the delay as the bill provides effectively that it must commence 18 months after the Act receives Royal Assent.

—————

EXPORT MARKET DEVELOPMENT GRANTS AMEN-DMENT BILL 2001

The Export Market Development Grants Amendment Bill 2001 delivers on the Government's promise to extend the EMDG scheme for another five years and provides a number of improvements to the scheme.

The EMDG scheme provides $150m per annum to support the export promotion activities of eligible businesses under $50m per annum turnover, by partially reimbursing the expenses that these businesses incur in promoting their exports.

The scheme, administered by Austrade, is a proven success in assisting small business to export, and supports this Government's strategy for a robust, internationally competitive economy.

Last year nearly 3,000 businesses received Export Market Development Grants - 700 of which received a grant for the first time. These businesses generated $4.5 billion in exports and employed thousands of Australians to fill the export orders. An estimated 54,000 jobs are attributable to the exports generated by EMDG recipients. With the average grant being $45,000, the EMDG scheme is achieving its objective of providing effective assistance to businesses seeking to develop export markets. Importantly, 21% of these grants go to businesses in rural and regional Australia

Studies by Austrade and the University of NSW have shown that exporting businesses are successful businesses; good for the employers, good for the employees and good for the country. Exporting businesses on average pay their employees more than non-exporting businesses. Exporting businesses better utilise technology and modern management practices, than typical non-exporters.

But despite recent gains and our improving export performance, research from Austrade and the Australian Bureau of Statistics show that Australia needs to continue to encourage business to export. According to this research, less than 5% of Australian non-farm private sector businesses export, which doesn't compare well with many of our trading partners.

Against this background, in late 1999 the Austrade Board began a comprehensive review of the scheme. The Review featured broad industry consultation, a survey of the scheme's clients, and independent analysis provided by Professor Bewley of the University of NSW and from PricewaterhouseCoopers. The Board then provided a detailed report of its recommendation and findings, which I tabled in August 2000.

As an initial response to the Review's findings, the Government announced it would extend the scheme until 2005/06 and bring forward legislation to implement its overall response to the Review by the end of this financial year. This bill fulfils that promise to the Australian small and medium sized business export community, and implements the key elements of the Government's response to the recommendations of that Review report.

Most importantly, this bill extends the EMDG scheme until 2005/06, with a provision to review the performance of the scheme by June 2005.

The Austrade Board recommended the EMDG scheme be extended after econometric analysis by Professor Bewley found that an additional $12 in exports was generated as a result of every grant dollar. The Review found that the scheme's assistance is very effective in generating additional export promotion that otherwise would not have occurred, and importantly, the assistance is well-targeted delivering value for money for Australian taxpayers.

As well as providing certainty for current and future EMDG recipients by extending the scheme, this bill also improves the scheme by making it more flexible and improving access for small business, in line with the business community's input to the Review and with many of the Review findings themselves.

This bill improves small business access to the scheme by:

reducing from $20,000 to $15,000 the minimum expenditure required to access the EMDG scheme

reducing the period that related family members need to be employed in a business before their travel expenses are eligible from five years to one year, and

removing the current requirement that intending first-time claimants must register with Austrade before applying for a grant.

This bill also expands the range of products and activities that are eligible under the scheme, in line with the Review's findings.

The Review noted that bringing overseas buyers or potential overseas buyers to Australia is an important promotional tool, particularly for the tourism industry. This bill provides for the travel, accommodation and meal expenses incurred in relation to such visits to be claimed under the EMDG scheme.

Events promoters - such as professional conference organisers - promote events to foreign residents on behalf of the holders of those events, and thus increase the export impact of a wide range of business, academic, sporting and other events. This bill gives events promoters access to the EMDG scheme. This will help to boost the number of foreign visitors and business tourists to meetings, conventions and other events in both regional and metropolitan Australia.

To provide enhanced flexibility for EMDG applicants in how they direct their export marketing activities, this bill contains provisions to merge the existing categories relating to Overseas Representation and to Short-term marketing consultant expenses. It removes the requirement that marketing consultancies be “short term” only, and caps the new combined category at $250,000 per application.

Similarly, this bill broadens the expense category relating to Trade Fairs to include genuine export marketing activities - seminars, in-store promotions, certain international forums and private exhibitions - which are currently excluded.

The bill also contains an amendment - suggested by the Review - to expand the EMDG Act's prohibition on grants relating to the export marketing expenses of pornographic film products to ALL forms of pornographic material. This Government is not interested in providing taxpayers' funds to the pornography industry.

The bill also provides that, consistent with the Government's overall strategy that the Australian Business Number be used as an identifier for business dealings with Commonwealth agencies, entities wishing to receive an EMDG grant must hold an ABN.

The EMDG Amendment Bill 2001 also contains a number of technical amendments:

to provide more consistent treatment of service exporters

to ensure that education services exporters who are not properly accredited do not receive grants

to tighten the rules targeting the scheme to firms with exports of less than $25 million per annum

to provide Austrade with more flexibility in relation to the time within which EMDG applicants should respond to requests for information by Austrade, and

to streamline the application of the EMDG Act's insolvency provisions.

As well as the measures in this bill, Austrade will action the findings of the Review report covering

better promotion of the scheme's support for Internet and e-marketing costs

ensuring that related domestic costs - including those of business people flying from regional destinations to capital city airports on the first leg of an overseas promotional visit - are included in the EMDG Overseas Visits Allowance

reviewing the Grants Entry process with a view to simplifying it and making it more effective, and

continuing to seek improvements in the EMDG assessment process.

I would like to thank the individuals, business people and organizations that contributed to the Review of the scheme. The suggestions to improve the EMDG scheme were listened to and the government has incorporated many of them into this bill. I believe these changes to the EMDG Act will be warmly welcomed by the export sector.

In considering this bill, it is important to keep in mind that EMDG is all about helping smaller Australian businesses become successful exporters. One such business is Nu-Lec Industries Pty Ltd of Brisbane, a graduate of the EMDG scheme, which is now a major exporter of electrical switchgear with exports exceeding 50 million dollars annually. Nu-Lec no longer receives EMDG but recently wrote to me supporting the scheme.

Nu-Lec's Vice-President, Neil O'Sullivan, said that when Nu-Lec first started exporting it was a small company and that - without Austrade's support through the EMDG scheme - it would have been “virtually impossible” to fund the costs associated with export marketing.

Nu-Lec received EMDG grants for seven years (1992-99) and Mr O'Sullivan said it was the EMDG payments that made it possible for the company to achieve the export success it has.

It's people like these exporting heroes this Government is sworn to help, and what the EMDG scheme is designed to assist.

Debate (on motion by Senator Denman) adjourned.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.

Ordered that further consideration of this bill be adjourned to a later hour of the day.