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Governance of Australian Government Superannuation Schemes Bill 2010

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2008-2009-2010

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

GOVERNANCE OF AUSTRALIAN GOVERNMENT

SUPERANNUATION SCHEMES BILL 2010

 

 

SUPPLEMENTARY

EXPLANATORY MEMORANDUM

 

 

 

Amendments and new clauses to be moved on behalf of the Government

 

(Circulated by authority of the Minister for Finance and Deregulation,

The Honourable Lindsay Tanner MP)

Outline of Amendments

The Governance of Australian Government Superannuation Schemes Bill 2010 (the Bill) gives effect to the Government’s announcement in October 2008 to merge the Australian Reward Investment Alliance (ARIA), the Military Superannuation and Benefits Board (MSB Board) and the Defence Force Retirement and Death Benefits Authority (DFRDB Authority) to form a single trustee body from 1 July 2010. 

The Bill was introduced into the House of Representatives on 4 February 2010.

While an essential consideration during development of the legislation to implement the single trustee was to protect the interests of military members, the amendments seek to give further recognition to the unique nature of military service following the establishment of CSC.

The amendments complement the existing features of military superannuation that reflect the special nature of military service and are consistent with the views put forward by military stakeholders, including key ex-service organisations and their members.

The amendments make changes to the process for nomination of directors to the governing board of CSC and to the operation of CSC when it is considering matters that relate solely to the military schemes.

These enhancements, together with existing provisions in the Bills, evidence the strong commitment to recognise the unique nature of military service under the single trustee and protect the interest of members of the military schemes.

Importantly, these amendments to the Bill do not change the schemes or impact on the superannuation entitlements of members of the schemes.

Financial Impact Statement

The amendments have no financial impact.

Glossary of terms

In this Supplementary Explanatory Memorandum:

ACTU ’ is short for the Australian Council of Trade Unions;

CDF ’ is short for the Chief of the Defence Force;

CSC ’ is short for the Commonwealth Superannuation Corporation;

DFRB ’ is short for the Defence Forces Retirement Benefits Scheme;

DFRDB ’ is short for the Defence Force Retirement and Death Benefits Scheme;

MSB ’ is short for the Military Superannuation and Benefits Scheme;

RSL ’ is short for the Returned and Services League of Australia.

 



 

GOVERNANCE OF AUSTRALIAN GOVERNMENT SUPERANNUATION SCHEMES BILL 2010

NOTES ON THE AMENDMENTS

 

Definitions

Amendment (1) inserts a definition of Defence Minister as this term is used in the Bill as a result of the amendments.

Amendment (2) inserts a definition of military schemes, which includes each one of the DFRB, DFRDB or MSB or all of the DFRB, DFRDB and MSB together.

Amendment (3) expands the definition of ‘relevant organisation’ so that it encompasses the other schemes for which the trustee has responsibility, including the DFRB, DFRDB and MSB.

The definition includes an organisation in which a large number of its members are members of a superannuation scheme administered by CSC and whose principal purpose is in relation to the interests of members in matters concerning their employment.

It also includes an organisation which has the principal purpose of protecting beneficiaries of the schemes in matters concerning their entitlements as beneficiaries.  For beneficiaries of the military schemes, an example of such an organisation could be the RSL or another ex-service military organisation.

Board of CSC

Amendments (4), (5) and (6) are concerned with the membership of the governing Board of CSC, particularly in relation to the process for the nomination of directors by the President of the ACTU and the CDF.

Amendments (4) and (5) bring the nomination process for the CDF into line with the process applying to the President of the ACTU.  That is, before nominating a person for appointment to the Board, the CDF and the President of the ACTU must consult with one or more relevant organisations, as defined.

Once the President of the ACTU and the CDF have made their nominations, it is not intended that the Minister, in making the appointment, would have any obligation to satisfy him or herself that there has been consultation with at least one relevant organisation.

Amendment (6) is technical in nature and removes unnecessary provisions relating to nomination process for acting appointments under clause 10 of the Bill.  These provisions are unnecessary because clause 10 relates to the requirements on the President of the ACTU and the CDF for the nomination of a person, rather than whether the person is to be appointed as a director or appointed to act as a director.  A director, or a person to act as a director, is appointed by the Minister under clauses 11 and 17 of the Bill, respectively.

Role of Defence Minister

Amendments (7) and (8) set out the role of the Defence Minister in relation to the appointment of the directors who are not nominated by the President of the ACTU or the CDF.

For these five directors, the Finance Minister is required to consult with the Defence Minister before making the appointment.  Similarly, amendment (8) provides that the Finance Minister is required to consult with the Defence Minister on the termination of these five directors.  Amendment (9) provides for such consultation in relation to acting appointments.

These amendments reflect the Defence Minister’s current a role in appointing directors to the existing military boards.  It is appropriate, therefore, that the Defence Minister also has a role in relation to the appointment of directors on the Board of CSC.

Quorum

Amendment (10) deals with a change to the quorum requirements for the governing Board.  The purpose of the amendment is to better protect the interests of members of the military schemes where the Board is considering an issue that relates only to the military schemes.  The amendment provides for at least one director nominated by the CDF to be present when the Board is considering a matter that relates only to the military schemes.

The reference to a matter that relates ‘only to the military schemes’ is intended to limit the requirement as appropriate, so as not to create practical difficulties for the operation of the Board.

The type of matter that would relate only to the military schemes could include where CSC makes a decision or exercises a power or discretion under the military scheme legislation on issues such as the payment of military death and disability benefits.   It would also include instances where CSC is considering whether there is an issue with the governing rules of the military schemes that may need to be raised with Defence for further consideration.

However, matters concerned with the management and investment of scheme funds by CSC, including money constituting the MSB Fund, would not typically relate only to the military schemes and would therefore not be subject to the additional quorum requirements.  Similarly, where the matter concerns administrative practices that are applicable to both the civilian and military schemes, the matter would typically not be taken to relate only to the military schemes.

Where there is a doubt about whether a matter being considered, or about to be considered, by the Board relates only to the military schemes, the Chair is required determine whether or not the matter relates only to the military schemes.  

Paragraph (5) of amendment (10) clarifies that a determination by the Chair is not a legislative instrument within the meaning of the Legislative Instruments Act 2003 because it is administrative in character.  It does not determine or alter the content of the law.  This provision is included to assist readers and is merely declaratory in nature.

Decisions without meetings

Amendment (11) is also concerned with better protecting the interests of military members where the Board is considering an issue that relates only to the military schemes.  In this case, the provision concerns those occasions where the Board is making a decision without a meeting.

The amendment places a strict obligation to inform all directors, including directors nominated by the CDF, of the proposed decision where it relates only to the military schemes.  This will allow for directors who have been nominated by the CDF to participate in the decision-making process.

Delegation by CSC

Amendment (12) corrects a reference to the Defence Force Retirement and Death Benefits Act 1973 in the table setting out the delegation of power to reconsider decisions.