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Wednesday, 11 February 2004
Page: 19971


Senator VANSTONE (Minister for Immigration and Multicultural and Indigenous Affairs and Minister Assisting the Prime Minister for Reconciliation) (4:59 PM) —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—

TAXATION LAWS (CLEARING AND SETTLEMENT FACILITY SUPPORT) BILL 2003

This bill ensures that no taxation consequences will arise as a result of a payment out of the National Guarantee Fund under section 891A of the Corporations Act 2001.

The National Guarantee Fund came about as a result of the merging of the various state stock exchanges in 1987 and the amalgamation of the states' fidelity funds. Like the fidelity funds, the National Guarantee Fund provides fundamental investor protection, encouraging investor confidence in the stock exchange. When investors hand money over to a stockbroker or ask a stockbroker to sell shares they do so in the confidence that the transaction will be completed. In the very rare instance where their broker might fail the National Guarantee Fund can be called upon to complete the transaction.

Besides investor protection, the National Guarantee Fund currently also provides clearing support for the Australian Stock Exchange.

In transactions entered into on the Australian Stock Exchange the matched buyer and seller do not bear the risk that the other party will not be able to complete the transaction. Instead this risk is borne by the central counterparty which is interposed in each transaction. The central counterparty needs strong financial backing and this has been provided by the National Guarantee Fund. This is referred to as `clearing support'.

Clearing support and investor protection are quite separate functions. Separating them would allow the National Guarantee Fund to retain its investor protection role and would place the onus for arranging clearing support directly on the dedicated clearing house. Separating the functions would also be consistent with international practice and expectations. Further, it would be consistent with the Reserve Bank's financial stability standards that apply to licensed clearing and settlement facilities. Finally, a dedicated clearing house function provides greater flexibility for the ASX to provide clearing services in relation to emerging products and services, without the need to amend the law or regulations.

As part of the Financial Services Reform Act 2001, the Corporations Act now provides for the splitting of these functions by allowing the transfer of funds for clearing and settlement system support to another entity.

The Corporations Act 2001 provides that if the Minister (in the case, the Parliamentary Secretary to the Treasurer) is satisfied that another body has made adequate arrangements covering clearing support, the Minister can direct a payment be made out of the National Guarantee Fund to that other body to take over those clearing support functions.

The purpose of this bill is to ensure that such a payment does not have tax consequences.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill.

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SUPERANNUATION SAFETY AMENDMENT BILL 2003

Today, I introduce a bill to modernise and strengthen the prudential regulation of superannuation in Australia.

For many Australians, superannuation savings are their second biggest asset after the family home. Investing in superannuation will help to reduce Australians' reliance on the age pension and significantly improve their quality of life in retirement. It is important, therefore, that the prudential framework protecting that superannuation is robust.

The reforms to be introduced by this bill are designed to build on the strong performance of the superannuation system by further enhancing the safety of superannuation for fund members. They will help to increase already high levels of public confidence in the superannuation system, and make private savings for retirement more attractive to all Australians.

These reforms give effect to the Government's response to the recommendations of the Superannuation Working Group, announced on 28 October 2002. They build on proposals that were initially canvassed in the Government's Issues Paper of 2 October 2001, titled Options for Improving the Safety of Superannuation.

The Superannuation Working Group found that the current prudential regime remains sound.

However, the Superannuation Working Group also found there was scope for changes in certain areas to modernise and strengthen the regime—and to better equip the Australian Prudential Regulation Authority (APRA) to undertake preventive action, rather than responding with enforcement action after a breach has occurred.

This bill contains several elements. It provides for the licensing of trustees of superannuation entities regulated by APRA and the registration of those entities. It puts in place improved disclosure requirements, including the introduction of new provisions requiring actuaries and auditors to report information to APRA in certain circumstances. It also contains appropriate enforcement powers to underpin the new framework.

The bill will be supported by Regulations, including new Operating Standards. The Operating Standards will include standards on the fitness and propriety of superannuation trustees and risk management plans and strategies. The Government will consult on the Operating Standards in the next few weeks.

There will be a two year licensing transition period from the date of commencement for existing trustees of regulated superannuation funds, approved deposit funds and pooled superannuation trusts. The reforms concerning licensing and registration do not apply to self-managed superannuation funds and exempt public sector superannuation schemes.

These reforms have been subject to extensive consultation and public scrutiny, both through the Superannuation Working Group and public exposure of a draft bill earlier this year. There is support within the industry for the reforms. The Government believes they will make a significant contribution to raising industry standards and sustaining high levels of public confidence in the superannuation system.

Trustee Licensing

While trustees of public offer funds currently must be approved by APRA, there is no universal licensing requirement for superannuation trustees.

This bill addresses this situation by providing for the licensing of all trustees of `registrable superannuation entities', which include superannuation funds, approved deposit funds and pooled superannuation trusts that are regulated by APRA.

From the commencement of the new licensing regime, all new trustees seeking to operate registrable superannuation entities will require licences. Existing trustees must obtain licences by the end of the two year licensing transition period in order to be allowed to continue operating their entities.

The new trustee licences, to be known as RSE Licences, will be subject to conditions, including requirements for trustees to meet minimum standards of fitness and propriety. Licensees will be required to maintain risk management strategies covering the licensee's operations and risk management plans for each fund under the licensee's control.

Importantly, APRA will be able to impose additional conditions on licences or issue directions to licensees. These powers will enable APRA to respond to specific prudential issues, before they can become actual risks to members' benefits.

Under the bill, groups of individual trustees will be allowed to collectively hold a single RSE licence, in the same way as directors of a body corporate.

A single licence will help to reduce the compliance burden on groups of individual trustees. In most cases, any member of a licensed group will be able to discharge the duties or obligations of the group on behalf of the other members.

At the same time, the bill ensures that each member of a trustee group takes responsibility for the performance of their obligations as a trustee of a superannuation fund, or as a member of a group of licensed trustees.

The RSE licensing regime is supported by the introduction of new offence provisions. The most significant provision will make it an offence for a person to be the trustee of a registrable superannuation entity unless the person is a body corporate or a member of a group that holds an RSE licence. This will apply to new trustees from the date of commencement, and to existing trustees from the end of the licensing transition period.

At the end of the two year licensing transition period, the arrangements for approving trustees of public offer superannuation funds and approved deposit funds contained in Part 2 of the Superannuation Industry (Supervision) Act 1993 will be repealed. These arrangements will be superseded by the RSE licensing regime at that time.

The new licensing regime will mean that trustees must demonstrate they meet minimum standards of competence, possess adequate resourcing and have in place appropriate risk management procedures. With the introduction of this new framework, fund members can have the confidence that the people managing their retirement savings will have met these benchmarks.

Registering Entities

Under the bill, RSE Licensees must also register their registrable superannuation entities with APRA. Registration, along with the associated requirements for risk management plans, will ensure APRA can gain important information about the entities it regulates, the risks they face, and the processes in place to deal with those risks.

Failure to register registrable superannuation entities may lead to the cancellation of a licensee's RSE Licence. The Government also intends to make Regulations prohibiting registrable superannuation entities that are not registered from accepting contributions.

Risk management

As part of the licensing and registration requirements, RSE Licensees will be required develop and maintain risk management strategies governing the licensee's operations and risk management plans for each fund under the licensee's control. Risk management strategies and plans will help to ensure that trustees, and the entities that they manage, are well positioned to respond to risks to their operations.

These are significant new requirements. However, trustees operating under industry best practice are likely to already be undertaking many, if not all, of the risk management practices being formalised by the bill.

Disclosure obligations to members are also being enhanced. Under the bill, members will be able to request a copy of their fund's risk management plan. This will ensure members have access to detailed information about how the entity in which their retirement savings are held is being managed. Access to such information about their assets is important if fund members are to confidently and effectively manage their retirement savings.

Amalgamation of Funds

It may be that, for a number of reasons, some existing trustees of registrable superannuation entities will decide not to make an application for an RSE licence. Also, some trustees who do apply may not meet the requirements for an RSE licence. These trustees will not be allowed to continue to operate as trustees of registrable superannuation entities after the end of the two year transition period.

The bill provides certainty for members of funds in these situations by providing for the amalgamation of funds if certain requirements are met.

Consequently, APRA will be given powers to approve the amalgamation of funds if all reasonable attempts to bring about the transfer under other provisions contained in the SIS Act—such as the successor fund arrangements—have failed. The Minister must also agree to any amalgamation under the new provisions before it can occur.

Actuaries and Auditors

As part of the enhanced disclosure arrangements to be introduced by the bill, there will also be expanded reporting requirements for actuaries and auditors.

In particular, actuaries and auditors will be required to report to APRA as well as to the trustee of a superannuation entity where they form the opinion that it is likely that a contravention of the SIS Act or Regulations has occurred in relation to that entity.

In addition, the scope of reporting by actuaries and auditors will be expanded so that it includes the activities of RSE Licensees, as well as the operation of superannuation entities.

These important changes build on existing legislative requirements to strengthen the role actuaries and auditors play in ensuring best practice management of superannuation entities by trustees.

Commencement

It is the Government's intention that the arrangements contained in this bill will commence from 1 July 2004.

On commencement, new trustees will be required to meet the new RSE licensing requirements before they will be able to operate registrable superannuation entities. Existing trustees will have up to two years from the date of commencement to transition to the new arrangements.

These timeframes will ensure that there is no overlap with the transition period for the Australian Financial Services Licence regime established under the Financial Services Reform Act 2001. They will also ensure that industry has sufficient time to prepare for these important improvements to the prudential regulation of superannuation.

Conclusion

The existing prudential regime for superannuation has served Australians well for a decade. The new framework to be introduced by this bill will build on that success. It will do that by helping to ensure that trustees of superannuation funds maintain best practice in the management of the superannuation assets of their fund members.

The reforms will help to give the public greater confidence in the superannuation system. They will do this by requiring trustees to have appropriate skills for managing superannuation entities, risk management procedures in place, and by requiring the disclosure of information to members about the operation of their fund. Overall, the bill establishes a framework that will help to ensure superannuation funds are managed in members' best interests.

I commend this bill.

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WORKPLACE RELATIONS AMENDMENT (TERMINATION OF EMPLOYMENT) BILL 2002 [No. 2]

The workplace relations system plays an important role in Australian society and contributes directly to our social and economic well being. An effective, fair and carefully targeted system will help grow our economy, raise living standards, lift productivity, reduce disputes and help the unemployed find jobs.

Despite its importance, much of the system this Government inherited is complicated and inefficient. It is certainly not a rational system for the Australian labour market of the 21st century.

Since late 2000, it has been Government policy to work towards a simpler, fairer workplace relations system based on a more unified and harmonised set of laws.

A national economy needs a national regulatory system. Maintaining six separate industrial jurisdictions just does not make sense.

This bill has three objectives: first, to improve Federal unfair dismissal law for small business; second, to improve Federal unfair dismissal law generally; and third, and most important, to widen very significantly the Federal law's coverage with respect to unfair dismissal.

The Government is reintroducing this bill because it firmly believes that a more unified national workplace relations system means less complexity, lower costs and more jobs. This bill is a significant step towards a national workplace relations system.

The Government would prefer to proceed by agreement and by referral of powers by the States. But, in the absence of referrals by the States, the Government will do what it reasonably can, to move towards a more unified system. In this case, the Government proposes to ensure that workers and business people operate, as far as is constitutionally possible, under one system of laws governing unfair dismissal.

At present, only workers employed under Federal awards or agreements have access to remedies under the Federal unfair dismissal laws (unless they are employed in Victoria or the Territories). This legislation will ensure that any worker employed by a corporation is within the scope of the Federal unfair dismissal jurisdiction and that all workers within the Federal system will be governed by it rather than any State unfair dismissal law. This “cover the field” provision means that the number of workers covered by Federal unfair dismissal provisions should rise from about 4 million to about 7 million, that is from about 50 per cent to about 85 per cent of all employees.

If this bill is passed, the authority and coverage of the Australian Industrial Relations Commission will be strengthened. Just 15 per cent of employees, mostly working in unincorporated small businesses, will remain covered by State unfair dismissal systems. The Government believes that an expansion of Federal jurisdiction on this scale would be an important step towards national consistency.

The Federal unfair dismissal law is generally less burdensome to employers and less destructive of employment growth than the State laws. Even if this were not the case, it is self evident there would be advantages in having to deal with only one set of laws rather than several. The Government hopes to achieve not only one set of unfair dismissal provisions covering Australian workplaces, but also the best possible set of provisions.

A study by the Melbourne Institute of Applied Economic and Social Research study provides evidence of the confusion caused by overlapping Federal and State unfair dismissal laws and also of the damage these laws can do. Based on a Yellow Pages survey of nearly 2000 small to medium businesses, the study found that almost a third of businesses did not know whether they were covered by Federal or State unfair dismissal laws.

If business managers are confused by this complexity, workers can be expected to be just as confused and, as a result, might fail to seek redress or to lodge an application in time.

The study also showed that the cost to small and medium sized businesses of complying with unfair dismissal laws is at least $1.3 billion a year, and that these laws have played a part in the loss of over 77,000 jobs from small and medium business. This study amply justifies the Government's continued determination to exempt small business from the reach of unfair dismissal laws, and justifies the provisions in this bill to make these laws less onerous for business and less damaging to job creation.

It is precisely because we are committed to creating jobs that we are reintroducing this bill.

For small business, this bill:

extends the standard qualifying period for employees' access to unfair dismissal provisions from three to six months;

allows the Australian Industrial Relations Commission to deal with some claims `on the papers', that is, without a hearing;

halves the amount of compensation that can be awarded to an employee;

streamlines the criteria for determining whether a dismissal was unfair; and

refines the penalty provisions for lawyers and agents who encourage unmeritorious claims.

For business generally, the bill:

requires the Commission to take into account any contributory conduct by an employee when determining compensation;

limits dismissal claims where an employer no longer has work for an employee. In other words, redundant employees will not usually have access to unfair dismissal claims to supplement any redundancy pay they may otherwise have received;

requires the Commission, when making an order for back pay, to take account of any income an employee who is to be reinstated has earned since his or her dismissal;

requires the Commission to consider whether the safety and welfare of other employees was a factor in the dismissal; and

emphasises reinstatement as the primary remedy.

This bill contributes substantially towards achieving a better balance between the interests of employers and employees without impeding job creation.

The bill is also an important legislative step towards a single workplace relations system for the whole country. For these reasons the Government believes it is essential to reintroduce it.

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

Debate (on motion by Senator Crossin) adjourned.