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Parliamentary Superannuation Bill 2004

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2002 - 2003 - 2004

 

 

the parliament of the commonwealth of australia

 

 

house of representatives

 

 

 

Parliamentary superannuation bill 2004

 

 

explanatory memorandum

 

 

 

 

(Circulated by the authority of the Minister for Finance and Administration, Senator the Hon Nick Minchin)

 



parliamentary superannuation bill 2004

general outline

This Bill and the Parliamentary Superannuation and Other Entitlements Legislation Amendment Bill 2004 constitute a package of Bills to make new superannuation arrangements for persons who first become members of the Federal Parliament, or return to the Parliament after a previous period in Parliament, at or after the next general election. 

This Bill provides the framework for the new superannuation arrangements. The new arrangements will involve a 9% contribution payable into a superannuation fund nominated by the Member or Senator. 

The main features of the arrangements provided for in this Bill are:

a)       contributions of 9% of total Parliamentary salaries will be paid for persons newly elected to the Federal Parliament from the next general election or return to the Parliament after a previous period in Parliament at or after the next general election;

b)       the 9% contributions will be paid to a superannuation fund or Retirement Savings Account (RSA) nominated by the Member or Senator; 

c)       where a fund or RSA is not nominated to receive the 9% contributions, these contributions will be paid to a default fund nominated by the Minister for Finance and Administration.

Members and Senators who are entitled to superannuation under the new arrangements will also be able to salary sacrifice from their parliamentary allowance, up to 50 per cent of their total salary, as additional employer superannuation contributions to a superannuation fund. This will be provided for through amendments to the Remuneration and Allowances Act 1990 proposed in the Parliamentary Superannuation and Other Entitlements Legislation Amendment Bill 2004. 

Members and Senators who were sitting members of Parliament immediately before the next general election are not affected by the new arrangements while they continue to remain in Parliament.



 

Financial Implications

The estimated financial impact of closing the PCSS and introducing a 9% accumulation arrangement as provided for in this Bill and the Parliamentary Superannuation and Other Entitlements Legislation Amendment Bill 2004 is as follows.

 

 

2003-04

$ m

2004-05

$ m

2005-06

$ m

2006-07

$ m

2007-08

$ m

Fiscal Balance

0

0.9

3.2

3.7

5.3

Underlying Cash

0

-0.4

-1.1

-1.1

-0.5

 

The fiscal balance improvement is due to the reduction in accruing unfunded liabilities less the expense of funding the new arrangements and less the reduction in member contributions no longer received by the Australian Government.

The negative underlying cash impact reflects the Government contributions to the new accumulation arrangements and the member contributions that will no longer be received by the Government.  In 2007-08, the underlying cash balance is improved because unfunded benefit payments will no longer be made in respect of new Members and Senators exiting.

 



Notes on clauses

Clause 1 - Short title

Clause 1 provides for the short title of the Act to be the Parliamentary Superannuation Act 2004 (the Act).

Clause 2 - Commencement

2.       Clause 2 provides that, apart from sections 3 to 19, the Act commences on the day after Royal Assent.  This clause also provides that sections 3 to 19 of the Act commence at the same time as Schedule 1 to the Parliamentary Superannuation and Other Entitlements Legislation Amendment Act 2004 to ensure that all the legislative provisions for the new superannuation arrangements for Members of Parliament commence at the same time.

Clause 3 - Definitions

3.       Clause 3 defines a range of terms used in the Act.

4.       The terms “complying superannuation fund”, “new scheme entry time” and “new scheme contribution period” are defined by reference to descriptions in clauses 4, 5, and 6 respectively.

5.       The term “administering authority” means the Clerk of the Senate or of the House of Representatives, as appropriate.

6.       The term “allowance by way of salary” is defined to make it clear that it does not include certain allowances such as electorate allowance.

7.       The term “basic contributions fund”, as it applies in relation to a person at a particular time, means a fund mentioned in a notice by a member under Division 2 of Part 2 of the Act that is in force at that time, or if there is no such fund, the default fund under Division 3 of Part 2 of the Act.

8.       A “month” is defined as meaning one of the 12 months of the year.

9.       An “office holder” is defined to mean a person who is entitled to a parliamentary allowance who holds a parliamentary office for which he or she receives an allowance by way of salary.  An office-holder does not include a Minister of State.

10.     The term “parliamentary allowance” is defined to mean an allowance by way of salary under clause 1 of Schedule 3 to the Remuneration and Allowances Act 1990 .

11.     The term “RSA” refers to a Retirement Savings Account as provided for in the Retirement Savings Accounts Act 1997 .

12.     The term “salary”, as it applies in relation to a Minister of State, is defined to ensure that it does not include any allowance.

13.     The term “self managed superannuation fund” has the same meaning as in the Superannuation Industry (Supervision) Act 1993 .

 

Clause 4 - Meaning of complying superannuation fund

14.     Sub-clause 4(1) provides that where the Act refers to a “complying superannuation fund” at a particular time it is referring to a fund or scheme that is a complying superannuation fund for the purposes of Part IX of the Income Tax Assessment Act 1936 in relation to the year of income in which the time occurs and a superannuation fund as defined by subsection 6(1) of the Income Tax Assessment Act 1936

15.     Subclause 4(2) ensures that a fund or scheme cannot be a complying superannuation fund for the purposes of the Act unless there is in existence at that time a notice under the Superannuation Industry (Supervision) Act 1993 that it is a complying superannuation fund in the terms of that Act.  It also ensures that a notice under the Superannuation Industry (Supervision) Act 1993 that a scheme or fund is not a complying superannuation fund in the terms of that Act will not have retrospective effect for the purposes of the Act.

Clause 5 - Meaning of new scheme entry time

16.     Clause 5 defines the term “new scheme entry time” as used in the Act to mean the first time after the commencement of the Act that the following conditions are satisfied:

(a)     the time is on or after the polling day for the first general election of the members of the House of Representatives following the commencement of the Act;

(b)     the person becomes entitled to a parliamentary allowance at that time;

(c)     the person was not entitled to a parliamentary allowance immediately before that time.

2.       A person who has resigned from one House of Parliament to stand for election to the other House and who is elected to that other House within 3 months does not have a new scheme entry time in respect of that election.

3.       This clause will not apply to currently sitting MPs, as those MPs who stand for re-election to Parliament at the next general election continue receiving their parliamentary allowance up to and including the day before the election and when re-elected receive an entitlement to their parliamentary allowance from the day of the election.  The “new scheme entry time” for a member is used to determine the beginning of a member’s first “new scheme contribution period”. 

Clause 6 - Meaning of new scheme contribution period

4.       Clause 6 defines the term “new scheme contribution period” as used in the Act to be:

(a)     the period from when the person (including a person who returns to the Parliament after a previous period in Parliament) is first elected or appointed on or after the first polling day for a general election of the House of Representatives after the commencement of the Act and that ends when the person next ceases to be entitled to a parliamentary allowance; and

(b)     if the person has more than one period of parliamentary service (because they have resigned, lost pre-selection or have been defeated but return to the Parliament after the general election following the commencement of the Act), the period that starts at any later time in relation to which the person becomes entitled to a parliamentary allowance and that ends when the person next ceases to be entitled to a parliamentary allowance.

Part 2 - The new parliamentary superannuation scheme

Division 1 - Commonwealth’s obligations to make contributions

Clause 7 - Persons to whom the Division applies

2.       Clause 7 provides that Division 1 of Part 2 applies to a person (who is called “a member” in the Division) in respect of a month if all or a part of the month is in a new scheme contribution period of the person.  The term “new scheme contribution period” is defined in clause 6.

Clause 8 - The Commonwealth’s obligations to make contributions

3.       Clause 8 provides for the payment of the 9% Government superannuation contribution, which is the basis of the new arrangements.  The clause provides that:

·          the Commonwealth must make a contribution in respect of any month or part of a month that is part of the new scheme contribution period for the member, provided those contributions are permitted to be paid by the Superannuation Industry (Supervision) Act 1993 (the SIS legislation);

·          the contribution must be made either to a complying superannuation fund or scheme or Retirement Savings Account chosen by the member or, if none has been chosen, the default fund under Division 3 of Part 2 of the Act; and

·          the amount of the contribution is to be 9% of the sum of the amount of parliamentary allowance (that is, basic salary), any salary payable because the person was a Minister of State and any allowance by way of salary payable because the person was an office holder for the month in question, provided these salaries count as salary under the Superannuation Guarantee legislation.  By virtue of the definitions in section 3 of the Act, an allowance by way of salary does not include certain allowances including electorate allowance.

4.       Currently, the effect of the SIS legislation above and the restriction on what salary is counted under the Superannuation Guarantee legislation is to prevent a contribution being made to a fund for any person who is age 70 or over, which is a community standard.

5.       Salary sacrifice by a member of any part of their parliamentary allowance will not affect the amount of contribution to be paid under this clause.  Also, provided the Commonwealth makes the above contributions for any month in a quarter in which Division 1 of Part 2 applies to a member it will have no Superannuation Guarantee shortfall for the member.

 

 

 

Division 2 - Choice of funds

Clause 9 - Meaning of fund - includes schemes and accounts

6.       Clause 9 provides that in Division 2 a reference to a “fund” includes a reference to a scheme or an account.

Clause 10 - When may a person choose a fund?

7.       Clause 10 provides that a person covered by the new arrangements (referred to as a member) may only choose a fund in accordance with clause 11 when the person is entitled to a parliamentary allowance.  However, in the case of a Senator- elect or person appointed to fill a casual vacancy in the Senate who is not yet receiving parliamentary allowance the choice can be made before that time.

Clause 11 - The nature of the choice

8.       Clause 11 describes the choice that is available to a person in respect of a fund or account to receive contributions to be paid for them in accordance with clause 8. The chosen fund must be a complying superannuation fund, but may not be a self managed fund, or a Retirement Savings Account.  There may be only one chosen fund at any particular time.

Clause 12 - How to make a choice

9.       Clause 12 describes the process that a person must follow to notify the appropriate authority of the fund chosen to receive contributions paid for them in accordance with clause 8.  The notice must be in writing, must include specified details of the fund and the date of effect of the notice.  Regulations can be made to specify other matters to be included in the notice. Evidence must also be given that the fund will accept the contributions.

Clause 13 - Duration of a choice notice

10.     Clause 13 provides that a valid choice notice under section 12 commences on the date of effect specified in the notice and remains in force until the earliest of the date on which :

(a)     the last contribution is paid under the Act when the member next ceases to be entitled to parliamentary allowance;

(b)     a revocation of the notice takes effect; or

(c)     the chosen fund ceases to exist, ceases to accept contributions under the Act, ceases to be a complying superannuation fund or an RSA, or becomes a self managed superannuation fund.

Clause 14 - Variation of a choice notice

2.       Clause 14 provides that a member may vary a choice notice to change the chosen fund to another eligible fund or to change the start date to a later date provided the original start date has not passed. 

Clause 15 - Revocation of a choice notice

3.       Clause 15 provides that a member may revoke the notice of a chosen fund from a specified date which must be no earlier than the date of the notice.

Clause 16 - Obligation to notify person of their right to choose a fund

4.       Clause 16 provides that a member must be notified of their right to chose a fund to receive contributions to be paid for them in accordance with clause 8 and that if they do not do so those contributions will be paid to the default fund referred to in Division 3 of Part 2 of the Act.

5.       The notification must be made by the relevant administering authority within 28 days after a person becomes eligible to choose a fund.

Division 3 - The Default Fund

Clause 17 - Declaration of the default fund

6.       Clause 17 provides that the Minister for Finance and Administration may declare a complying superannuation fund that is not a self managed fund to be the fund to receive contributions payable under clause 8 where a member has not notified a chosen fund.  A declaration must be made as soon as practical after the commencement of this clause.  A declaration may have retrospective effect.  There may be only one default fund at a time and the declaration of a new default fund must take effect immediately after any revocation of an earlier declaration takes effect.

part 3 - miscellaneous

Clause 18 - Appropriation

7.       Clause 18 provides for the appropriation of the Consolidated Revenue Fund for the purposes of paying the contributions provided for in clause 8.

Clause 19 - Regulations

8.       Clause 19 provides that regulations may be made prescribing any matters required or permitted to be made by the Act or necessary or convenient to be prescribed for carrying out or giving effect to the Act.