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Financial Framework Legislation Amendment Bill (No. 2) 2013

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2010-2011-2012-2013

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

Financial Framework

Legislation Amendment Bill (No. 2) 2013

 

 

 

 

 

 

Explanatory Memorandum

 

 

 

 

 

 

 

(Circulated with the authority of the

Minister for Finance and Deregulation,

 Senator the Hon Penny Wong)

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

TABLE OF CONTENTS

 

Table of Abbreviations and Common Terms................................................................................ ii

I. GENERAL OUTLINE................................................................................................................ 1

Main features of the FFLA Bill (No. 2) 2013............................................................................. 1

Financial Impact Statement......................................................................................................... 2

Statement of Compatibility with Human Rights......................................................................... 2

II. NOTES ON CLAUSES.............................................................................................................. 3

Part 1 - Preliminary..................................................................................................................... 3

Clause 1: Short Title..................................................................................................................... 3

Clause 2: Commencement............................................................................................................ 3

Clause 3: Schedules...................................................................................................................... 3

III. OVERVIEW OF AMENDMENTS......................................................................................... 4

Schedule 1 - Amendments of Acts.............................................................................................. 4

Schedule 2 - Amendments of regulations..................................................................................................4

Schedule 3 - Loss relief relating to the transfer of assets from the MSB Fund to the ARIA Investments Trust............................................................................................................................................................4

IV. NOTES ON SCHEDULE 1 - AMENDMENTS OF ACTS.................................................. 5

Amending the Administrative Decisions (Judicial Review) Act 1977 ............................................ 5

Amending the Financial Management and Accountability Act 1997 ............................................ 5

Amending the Social Security Act 1991 .....................................................................................................6

Amending the Judges’ Pensions Act 1968 .................................................................................... 7

Amending the Remuneration Tribunal Act 1973 ........................................................................ 10

V. NOTES ON SCHEDULE 2 - AMENDMENTS OF REGULATIONS.............................. 14

VI. NOTES ON SCHEDULE 3 - LOSS RELIEF RELATING TO THE TRANSFER OF ASSETS FROM THE MSB FUND TO THE ARIA INVESTMENTS TRUST.................................................. 15

 

 



 

Table of Abbreviations and Common Terms

 

Abbreviation or common term

Full term or description

ADJR Act

Administrative Decisions (Judicial Review) Act 1977

AGDRP

Australian Government Disaster Recovery Payment

Chief Executive

Chief Executive of an agency for the purposes of section 5 of the FMA Act

CSC

Commonwealth Superannuation Corporation

Constitution

Commonwealth of Australia Constitution Act

CRF

Consolidated Revenue Fund

Emergency Management Secretary

The Secretary of the Department responsible for Emergency

Management under the Administrative Arrangements Order

FFLA Bill

Financial Framework Legislation Amendment Bill

Finance

Department of Finance and Deregulation

Finance Minister

Minister for Finance and Deregulation

FMA Act

Financial Management and Accountability Act 1997

FMA Regulations

Financial Management and Accountability Regulations 1997

Item

An item of a Schedule of the FFLA Bill

JP Act

Judges’ Pensions Act 1968

RT Act

Remuneration Tribunal Act 1973



 

Financial Framework Legislation Amendment Bill (No. 2) 2013

 

I. GENERAL OUTLINE

 

Main features of the FFLA Bill (No. 2) 2013

1.                   The Financial Framework Legislation Amendment Bill (No. 2) 2013 (FFLA Bill) would, if passed, amend five Acts across three portfolios.

2.                   There are four main purposes of the proposed amendments:

·                      to amend the Financial Management and Accountability Act 1997 (FMA Act) to authorise the Commonwealth to form or participate in forming companies and to acquire shares in, or become a member of a company, so long as the proposed company is specified in the Financial Management and Accountability Regulations 1997 (FMA Regulations) and the objects or proposed activities of the company are specified in the Regulations;

 

·                      to amend the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) to include decisions made under the proposed amendment to the FMA Act in the relevant schedule of decisions not subject to review under that Act;

 

·                      to amend the Judges’ Pensions Act 1968 , the Remuneration Tribunal Act 1973 and the Social Security Act 1991 (in relation to payments under the Australian Government Disaster Recovery Payments scheme) to establish a “recoverable payments” framework for dealing with administrative overpayments, and to address instances where the relevant agency makes payments from appropriations to recipients that, although made in the bona fide administration of that legislation, are not, in practice, consistent with the requirements or preconditions imposed by legislation; and

 

·                      to enable deferred tax asset relief to be provided to the Commonwealth Superannuation Corporation in relation to the transfer of assets from the Military Superannuation and Benefits Fund to the ARIA Investments Trust that occurred in May 2012.  This flows from the Government’s decision to consolidate the trustees of the Commonwealth’s main civilian and military superannuation schemes.

 

3.                   This is the thirteenth FFLA Bill since 2004, and forms part of an ongoing approach to maintaining the Australian Government’s financial framework.  Ten of those Bills became law, with the first and the sixth FFLA Bills lapsing upon the prorogation of the Australian Parliament for the 2004 and 2010 federal elections.  The most recent FFLA Bill, the Financial Framework Legislation Amendment Bill (No. 4) 2012 , was passed by the Parliament on 28 February 2013. 

 

4.                   The first FFLA Bill focussed primarily on implementing text changes to reflect the creation of Special Accounts, from 1 July 1999, in deeming provisions that were in the Financial Management Legislation Amendment Act 1999 .  Later FFLA Bills, including this one, cover a range of issues dealing with appropriations, financial management provisions, governance structures and legislative anomalies.

Financial Impact Statement

5.                   The measure proposed in Schedule 3 of the FFLA Bill will impose a small, but unquantifiable cost to revenue over the forward estimates.  This measure will allow tax losses previously incurred by the Military Superannuation and Benefits Fund to be offset against future tax profits.

6.                   The remaining amendments proposed in the FFLA Bill are not expected to have any financial impact. 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

7.                   The proposed amendments do not engage any of the applicable rights or freedoms outlined in the Human Rights (Parliamentary Scrutiny) Act 2011 , such as those encompassed in the International Covenant on Civil and Political Rights.

8.                   The proposed amendments do not limit any human rights, nor propose any offences or penalties. 

9.                   This Bill is therefore compatible with the human rights and freedoms recognised or declared in the international instruments listed in subsection 3(1) of the Human Rights (Parliamentary Scrutiny) Act 2011.



II. NOTES ON CLAUSES

 

10.               The structure of the Financial Framework Legislation Amendment Bill (No. 2) 2013 (FFLA Bill) comprises three clauses that refer to the three Schedules containing the substantive amendments to other Acts and regulations.  These notes describe the three clauses and their effect.

Part 1 - Preliminary

Clause 1: Short Title

11.               This clause provides that, should the FFLA Bill be enacted, the FFLA Bill may then be cited as the Financial Framework Legislation Amendment Act (No. 2) 2013 .

Clause 2: Commencement

12.               This clause provides that items in Schedules 1, 2 and 3 commence on the day after the Financial Framework Legislation Amendment Act (No. 2) 2013 receives the Royal Assent.

Clause 3: Schedules

13.               This clause provides that each Act and set of regulations set out in Schedules 1, 2 or 3 of the FFLA Bill is amended or repealed as set out on the applicable Schedule. 

III. OVERVIEW OF AMENDMENTS

 

14.               The following overview of amendments proposed in Schedules 1, 2 and 3 of the FFLA Bill is provided in general terms, rather than by item number.  Part IV of this Explanatory Memorandum contains a more detailed description of Schedule 1 of the Bill, organised by item number.

Schedule 1 - Amendments of Acts

15.               Schedule 1 amends five Acts, across three portfolios, to address several issues.  Briefly, Schedule 1 of the FFLA Bill:

·          amends the Financial Management and Accountability Act 1997 (FMA Act) to authorise the Commonwealth to form or participate in forming companies and to acquire shares in, or become a member of a company, so long as the proposed company is specified in the Financial Management and Accountability Regulations 1997 (FMA Regulations) and the objects or proposed activities of the company are specified in the Regulations;

 

·          contains transitional provisions in relation to existing Commonwealth companies which are to be read with amendments to the FMA Regulations made by Schedule 2 of the FFLA Bill.  These provisions will remove any doubt over whether the Commonwealth could form, acquire shares in, or be a member of, existing Commonwealth owned companies by conferring explicit legislative authority for those actions;

 

·          amends the Administrative Decisions (Judicial Review) Act 1977 to include decisions made under the proposed amendment to the FMA Act in the relevant schedule of decisions not subject to review under that Act given the policy nature of such decisions; and

 

·          amends the Social Security Act 1991 (in relation to payments under the Australian Government Disaster Recovery Payments scheme), the Judges’ Pensions Act 1968 , and the Remuneration Tribunal Act 1973 to establish a “recoverable payments” framework for dealing with administrative overpayments, and to address instances where the relevant agency makes payments from appropriations to recipients, that are not, in practice, consistent with the requirements or preconditions imposed by legislation.

Schedule 2 - Amendments of regulations

16.               Schedule 2 amends the Financial Management and Accountability Regulations 1997 to specify a list of existing Commonwealth owned companies.  Schedule 2 is designed to remove any doubt over the Commonwealth’s capacity to engage in the formation, share acquisitions or membership (where relevant) of these existing Commonwealth owned companies. 

Schedule 3 - Loss relief relating to the transfer of assets from the MSB Fund to the ARIS Investments Trust

17.               Schedule 3 enables deferred tax asset relief to be provided to the Commonwealth Superannuation Corporation in relation to the transfer of assets from the Military Superannuation and Benefits Fund to the ARIA Investments Trust that occurred in May 2012.  This flows from the Government’s decision to consolidate the trustees of the Commonwealth’s main civilian and military superannuation schemes.

 



IV. NOTES ON SCHEDULE 1 - AMENDMENTS

 

18.               An explanation of the amendments proposed in Schedule 1 is provided in sequential order.

Amending the Administrative Decisions (Judicial Review) Act 1977

19.               Item 1 adds the words “decisions under section 39B of the Financial Management and Accountability Act 1997” to Schedule 1 of the ADJR Act, thus exempting these decisions from judicial review under the ADJR Act.

 

20.               Decisions under the proposed amendment to the FMA Act to form or participate in forming companies would be policy decisions regarding how the Commonwealth organises its bodies and governance arrangements.  These decisions would not be administrative in nature and would not impact upon the interests of an individual.  Accordingly, it is appropriate to exempt decisions under the proposed section 39B of the FMA Act from review under the ADJR Act.

Amending the Financial Management and Accountability Act 1997

21.               Item 2 of Part 1 inserts new section 39B that expressly provides the Commonwealth with the statutory authority to form and participate in the formation of companies.  The Commonwealth has always believed and still believes that it may, without legislative authority, form or participate in the formation of a company and acquire shares in or become a member of a company to carry out activities within a head of legislative power.  However, in the interests of abundant caution following the High Court’s decision in Williams v Commonwealth [2012] HCA 23 (which involved argument about the outer limits of Commonwealth executive power), the proposed amendments are designed to put beyond any argument the capacity of the Executive Government to form or participate in the formation of companies.

 

22.               Amending the FMA Act is consistent with the requirement to inform Parliament about Commonwealth involvement with a company in section 39A of the FMA Act ( Minister must inform Parliament of involvement in a company by the Commonwealth or a prescribed body ).

 

23.               Subitems 2(1) and 2(2) confirm that the Commonwealth has the power to form a company, participate in the formation of a company, acquire shares in a company or become a member of a company.  

 

24.               Subitem 2(3) provides that the powers in subitems (1) and (2) are to be exercised by the Finance Minister, on behalf of the Commonwealth, within the limits of the legislative powers of the Parliament under the Constitution .

 

25.               Subitem 2(4) provides that the powers conferred on the Executive Government by and under proposed section 39B do not limit by implication the powers of the Executive Government.  This recognises that section 39B is being enacted to remove all doubt rather than in response to a clear or established constitutional imperative.

 

26.               Subitem 2(5) defines the term “acquire” to include by subscription and the term “Commonwealth company” to have the same meaning as provided in section 34 of the Commonwealth Authorities and Companies Act 1997 .

 

27.               Item 3 limits the delegation of any of the Finance Minister’s powers under section 39B to Chief Executives.

 

28.               Item 4 addresses transitional issues in relation to existing Commonwealth companies.  When read with the amendments to the FMA Regulations prescribed by Schedule 2 of the Bill, item 4 will remove any doubt over the validity of actions taken by the Commonwealth before the commencement of these amendments in relation to the 20 wholly-owned Commonwealth companies that are currently operating.

Amending the Social Security Act 1991

29.               Item 5 of Part 2 inserts new provisions into the Social Security Act 1991 to provide for recoverable payments and recoverable death payments for payments made under the Australian Government Disaster Recovery Payments scheme.  It will also create a system for reporting such payments. 

Recoverable Payments

 

30.               Subsection 1061PAAA(1) provides that an amount that is purportedly paid as a benefit under the Social Security Act 1991 but is not payable under the Act may be paid by the Commonwealth as a recoverable payment.  The concept of an amount 'purportedly paid' but 'not payable' is designed to capture those instances where a payment has been made in the bona fide administration of the Act but an error has occurred in relation to the payment such that, without the proposed provision, the payment would have been unauthorised.

 

31.               The fact that the 'mistaken' payment will be authorised by subsection 1061PAAA(1) does not mean that the recipient of the payment should be able to retain the benefit of it.  Accordingly, subsection 1061PAAA(2) provides that a recoverable payment that is paid under new subsection 1061PAAA(1) is a debt due to the Commonwealth and may be recovered by the Secretary, on behalf of the Commonwealth, in a court of competent jurisdiction.

 

Recoverable Death Payments

 

32.               A recoverable death payment is intended to cover situations where a payment is made in respect of a person who has died prior to the payment being made.  New subsection 1061PAAB(1) permits such a payment to be made and new subsection 1061PAAB(2) deems the payment to be a recoverable death payment.

 

33.               Subsection 1061PAAB(3) provides that a recoverable death benefit that is paid under new subsection 1061PAAB(1) is a debt due to the Commonwealth and may be recovered by the Secretary, on behalf of the Commonwealth, in a court of competent jurisdiction. 

 

Reporting Requirements

 

34.               Section 1061PAAC deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

 

35.               Section 1061PAAC provides the reporting requirements for payments made under subsections 1061PAAA(1) and 1061PAAB(1).  New subsection 1061PAAC(1) provides that, during the applicable publication period, the Secretary is to publish a report on the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period.  The report is to be published in a manner that the Secretary considers appropriate.  However, a report is not required when there has not been any recoverable payments or recoverable death payments made in respect of a reporting period (new subsection 1061PAAC(2)).

 

36.               Subsections 1061PAAC(3) and 1061PAAC(4) provide that a report is not required in relation to a recoverable payment or recoverable death payments unless, before the report is prepared, a Departmental official is aware of such a payment being made under subsection 1061PAAA(1) or subsection 1061PAAB(1).

 

37.               Subsection 1061PAAC(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in subsections 1061PAAC(3) and (4), that it is to be reported in a later reporting period, as provided under subsections 1061PAAC(6) or (7).

 

38.               Subsections 1061PAAC(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

 

39.               Subsection 1061PAAC(8) defines ‘reporting period’ for the purposes of section 1061PAAC as meaning a financial year, or a shorter period if specified in a legislative instrument by the designated Minister.

 

40.               Subsection 1061PAAC(9) sets out the power of the Minister to make a legislative instrument for the purposes of subsection 1061PAAC(8)(b).

 

41.               Subsection 1061PAAC(10) defines the ‘applicable publication period’ for a reporting period, for the purposes of section 1061PAAC, as meaning four months, or a shorter period of months if specified in a legislative instrument by the designated Minister, beginning immediately after the end of the reporting period.  Four months is to allow for the Secretary to include the report in the Department’s annual report, if that is preferred.  The report may also be published on the Department’s website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable.  This seeks to ensure that overpayments will be addressed, and minimised.

 

42.               Subsection 1061PAAC(11) sets out the power of the Minister to make a legislative instrument for the purposes of subsection 1061PAAC(10)(b).

 

43.               Subsection 1061PAAD relates to the review of decisions and provides that Part 4 of the Social Security (Administration) Act 1999 does not apply to a decision under Division 3.

 

44.               Subsection 1061PAAE provides that the ‘Department official’, for the purposes of Division 3, means an official (within the meaning provided in section 5 of the Financial Management and Accountability Act 1997 ) and whose duties relate to Australian Government Disaster Recovery Payments.

 

Amending the Judges’ Pensions Act 1968

45.               Section 14 of the Judges’ Pensions Act 1968 (JP Act) provides for the payment of an allowance (pension benefits) to a former Judge.  These benefits are paid out of the Consolidated Revenue Fund (CRF), which is appropriated accordingly.

 

46.               Item 6 of Part 3 inserts sections 20A, 20B and 20C into the JP Act to establish recoverable payments and recoverable death payments.  It will also create a reporting system for when such payments are made.  These provisions are to confirm that amounts paid out of the CRF in certain circumstances are validly paid under an appropriation.

 

Recoverable Payments

47.               Subsection 20A(1) provides that an amount that is purportedly paid as a benefit under the JP Act, but is not payable under the Act, may be paid by the Commonwealth (as a recoverable payment).

 

48.               A recoverable payment is intended to cover situations where a payment is made to a person in the course of the bona fide administration of the JP Act but where that legislation does not otherwise by its terms allow for the payment to that person.  An example of when this may occur is in the case of a family law settlement, where the Family Court orders a split of a person’s superannuation benefits under the JP Act.  The Court order may be received by the scheme administrators after the cut-off time for processing the next pay day, resulting in an overpayment to the recipient.  New subsection 20A permits such a payment to be made, and deems the payment to be a recoverable payment, validly appropriated under subsection 12A(5), section 14 (other than paragraph (a) of that section) and subsection 17AB(7) of the JP Act.

 

49.               Subsection 20A(2) provides that a recoverable payment that is paid under subsection 20A(1) is a debt due to the Commonwealth and may be recovered by the Secretary on behalf of the Commonwealth, in a court of competent jurisdiction.  Subsection 20A(2) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.  Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible.  Currently, in certain situations, the Secretary of the Department, on behalf of the Commonwealth, may allow an “overpaid” amount to be recovered by permitting the overpaid recipient to voluntarily arrange for a repayment of that amount.

 

50.               Subsection 20A(3) provides that a recoverable payment made under subsection 20A(1) that relates to a benefit under subsection 12A(2) of the JP Act is taken to be a benefit under subsection 12A(2) of the JP Act.  This allows a recoverable payment to be appropriated as a benefit under subsection 12A(5) of the JP Act.

 

51.               Subsection 20A(4) provides that a recoverable payment made under subsection 20A(1) that relates to a pension under the JP Act is taken to be a pension under section 14 of the JP Act.  This allows a recoverable payment to be appropriated as an allowance under section 14 of the JP Act.

 

52.               Subsection 20A(5) provides that a recoverable payment made under subsection 20A(1) that relates to an amount under subsection 17AB(6) of the JP Act is taken to be a benefit under subsection 17AB(6) of the JP Act.  This allows a recoverable payment to be appropriated as a benefit under subsection 17AB(7) of the JP Act.

 

53.               Subsection 20A(6) defines ‘benefit’ for the purposes of section 20A as including a pension under the JP Act, or a benefit under subsection 12A(2) or an amount under subsection 17AB(6).  This ensures that benefits paid under the JP Act can be the subject of recoverable payments.

Recoverable Death Payments

 

54.               Subsections 20B(1) and 20B(2) deem an amount that is deposited into an account or paid by way of cheque as a benefit payment under the JP Act, but is paid after the death of the recipient, as a payment to the estate of the recipient (a recoverable death payment).  This deeming occurs when, on the last day on which changes could reasonably be made to the payment, the Secretary does not know that the recipient has died, and when the payment would have been payable if the recipient had not died.  Subsection 20B(1) also provides that the Commonwealth may pay the amount.

 

55.               A recoverable death payment is intended to cover situations where a payment is made in respect of a person who has died prior to payment being made.  An example of when this may happen is where a person in receipt of pension payments dies and the scheme administrator is not notified of their death until sometime later.  Another example is where the administrator is notified of the death immediately, but the instructions for the deposit have already been provided to the financial institution and the payment is not reversible.  Subsection 20B(1) permits such a payment to be made, and deems the payment to be a recoverable death payment, validly appropriated under subsection 12A(5), section 14 (other than paragraph (a) of that section) and subsection 17AB(7) of the JP Act.

 

56.               Subsection 20B(2) takes payments made under 20B(1) to be payments made to the deceased person’s estate.

 

57.               As indicated by the note under subsection 20B(3), the subsection does not preclude the Secretary, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under section 47 of the FMA Act.  Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible.  Currently, in certain situations, the Secretary, on behalf of the Commonwealth, may allow an “overpaid” amount to be recovered from the estate by permitting the estate to voluntarily arrange for a repayment of that amount.  Continuing reliance on this practice would not be prevented by subsection 20B(3).

 

58.               Subsection 20B(3) provides that a recoverable death benefit that is paid under new subsection 20B(1) is a debt due to the Commonwealth and may be recovered by the Secretary of the Department on behalf of the Commonwealth, in a court of competent jurisdiction.  Subsection 20B(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

 

59.               Subsection 20B(4) provides that a recoverable death payment made under new subsection 20B(1) that relates to a benefit under subsection 12A(2) of the JP Act is taken to be a benefit under subsection 12A(2).  This allows a recoverable death payment to be appropriated as a benefit under subsection 12A(5) of the JP Act.

 

60.               Subsection 20B(5) provides that a recoverable death payment made under new subsection 20B(1) that relates to a pension under the JP Act, is taken to be an allowance payable under section 14 of the JP Act.  This allows a recoverable death payment to be appropriated as an allowance under section 14 of the JP Act.

 

61.               Subsection 20B(6) provides that a recoverable death payment made under subsection 20B(1) that relates to an amount under subsection 17AB(6) of the JP Act, is taken to be an allowance payable under section 17AB(6) of the JP Act.  This allows a recoverable death payment to be appropriated as an amount under subsection 17AB(7) of the JP Act.

 

62.               Subsection 20B(7) defines ‘benefit’ for the purposes of new section 20B as including a pension under the JP Act or a benefit under subsection 12A(2) or an amount under subsection 17AB(6) of the JP Act.

 



 

Reports about Recoverable Payments and Recoverable Death Payments

 

63.               Section 20C deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

 

64.               Section 20C provides the reporting requirements for payments made under subsections 20A(1) and 20B(1).  Subsection 20A(1) provides that, during the applicable publication period, the Secretary is to publish a report on the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period.  The report is to be published in a manner that the designated Secretary considers appropriate.  However, a report is not required when there has not been any recoverable payments or recoverable death payments made in respect of a reporting period (subsection 20C(2)).

 

65.               Subsections 20C(3) and (4) provide that a report is not required in relation to a recoverable payment or a recoverable death payment unless, before the report is prepared, a designated Department official is aware of such a payment being made under subsection 20A(1) or subsection 20B(1).

 

66.               Subsection 20C(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in subsections 20C(3) and (4), that it is to be reported in a later reporting period, as provided under subsections 20C(6) or (7).

 

67.               Subsections 20C(6) and 20C(7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

 

68.               Subsection 20C(8) defines ‘reporting period’ for the purposes of section 20C as meaning a financial year, or a shorter recurring period if specified in a legislative instrument by the designated Minister in accordance with subsection 20C(9).

 

69.               Subsection 20C(10) defines the ‘applicable publication period’ for a reporting period, for the purposes of section 20C, as meaning four months, or a shorter period of months if specified in a legislative instrument by the designated Minister in accordance with subsection 20C(11), beginning immediately after the end of the reporting period.  The period of four months is to allow for the Secretary to include the report in the Department’s annual report, if that is preferred.  The report may also be published on the Department’s website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable. 

 

70.               Subsection 20C(12) defines ‘designated Department official’ for the purposes of  this section as meaning an official who is in, or part of, the Department.

 

Amending the Remuneration Tribunal Act 1973

71.               Subsections 7(9) and (10) of the Remuneration Tribunal Act 1973 (the RT Act) provide for the payment of remuneration (including salary) and allowances to holders of various offices and to a member of, or a candidate for election to, either House of Parliament.  Subsection 7(13) provides a standing appropriation for the payment of these benefits.

 

72.               The changes proposed by item 7 are intended to deal with issues in relation to relying on the appropriation under subsection 7(13).  The changes do not affect the entitlements of the offices covered by subsection 7(9) or to a member of, or a candidate for election to, either House of Parliament covered by subsection 7(10) or expand those persons eligible for a benefit (or the amount of those benefits) under the RT Act.  A recoverable payment or recoverable death payment is only taken to be a benefit for the purpose of the appropriation in subsection 7(13) of the RT Act.  Those payments are debts due to the Commonwealth and are recoverable.

 

73.               Item 7 of Part 4 inserts sections 16A, 16B and 16C into the RT Act to establish recoverable payments and recoverable death payments.  These provisions are to confirm that amounts paid out of the CRF in certain circumstances are validly paid under an appropriation.

Recoverable Payments

 

74.               Subsection 16A(1) provides that an amount that is purportedly paid as a benefit in the bona fide administration of the RT Act, but is not payable under the Act, may be paid by the Commonwealth (as a recoverable payment).

 

75.               Subsection 16A(2) provides that a recoverable payment that is paid under subsection 16A(1) is a debt due to the Commonwealth and may be recovered by the Chief Executive of the relevant agency on behalf of the Commonwealth, in a court of competent jurisdiction.  Subsection 16A(2) also incorporates a note regarding the duty to pursue the recovery of a debt under section 47 of the FMA Act.

 

76.               As indicated by the note under subsections 16A(2) and 16A(3), these subsections do not preclude the relevant agency, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under section 47 of the FMA Act.  Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible.  Currently, in certain situations, the relevant agency, on behalf of the Commonwealth, may allow an “overpaid” amount to be recovered by permitting the overpaid recipient to voluntarily arrange for a repayment of that amount.  Continuing reliance on this practice would not be prevented by subsections 16A(2) and 16A(3).

 

77.               Subsection 16A(3) provides that a recoverable payment made under subsection 16A(1) may be recovered by deduction from that benefit, unless the recipient is a Justice of the High Court of Australia or of a court created by the Parliament.  This may be done at the direction of the Chief Executive of the relevant agency.  Subsection 16A(3) would not apply where the amount has previously been recovered under section 47 of the FMA Act.  

 

78.               Subsection 16A(4) provides that if a recoverable payment made under subsection 16A(1) relates to remuneration (including salary) or an allowance under subsection 7(9) of the RT Act, it is taken to be a benefit under subsection 7(9) of the RT Act, for the purposes of the standing appropriation in subsection 7(13).  This allows a recoverable payment to be paid under the authority of the appropriation in subsection 7(13) of the RT Act.

 

79.               Subsection 16A(5) provides that if a recoverable payment made under subsection 16A(1) relates to reimbursement under subsection 7(10) of the RT Act it is taken to be reimbursement under subsection 7(10) of the RT Act for the purposes of the standing appropriation in subsection 7(13).  This allows a recoverable payment to be paid under the authority of the appropriation in subsection 7(13) of the RT Act.

 

80.               Subsection 16A(6) defines ‘benefit’ for the purposes of new subsection 16A(1) as including remuneration (including salary) under subsection 7(9) or reimbursement under subsection 7(10).

 

81.               Subsection 16A(7) defines relevant agency for the purpose of section 16A as the agency that is responsible at that time for paying such benefits on behalf of the Commonwealth.

Recoverable Death Payments

 

82.               Subsection 16B(1) provides that the Commonwealth may pay an amount after the death of a recipient, provided that, on the last day on which changes could reasonably be made to the payment, the Chief Executive of the relevant agency does not know that the recipient has died, and provided that the amount would have been payable to the person if the person had not died (a recoverable death payment).

 

83.                Subsection 16B(2) provides that payments made under subsection 16B(1) are taken to have been paid to the estate of the recipient.

 

84.               A recoverable death payment is intended to cover situations where a payment is made to a person who has died prior to payment being made.  An example of when this may happen is where a person in receipt of a benefit dies and the Chief Executive of the relevant agency is not notified of their death until sometime later.  Another example is where the Chief Executive is notified of the death immediately, but the instructions for the deposit have already been provided to the financial institution and the payment is not reversible.

 

85.               Subsection 16B(3) provides that a recoverable death benefit that is paid under subsection 16B(1) is a debt due to the Commonwealth and may be recovered by the Chief Executive of the relevant agency on behalf of the Commonwealth, in a court of competent jurisdiction.  Subsection 16B(3) also incorporates a note regarding the duty to pursue recovery of a debt under section 47 of the FMA Act.

 

86.               As indicated by the note under subsection 16B(3), the subsection does not preclude the Chief Executive of the relevant agency, on behalf of the Commonwealth, from pursuing other methods of debt recovery as required under section 47 of the FMA Act.  Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue recovery of debts due to the Commonwealth for which they are responsible.  Currently, in certain situations, the Chief Executive of the relevant agency, on behalf of the Commonwealth, may allow an “overpaid” amount to be recovered from the estate by permitting the estate to voluntarily arrange for a repayment of that amount.  Continuing reliance on this practice would not be prevented by subsection 16B(3).

 

87.               Subsection 16B(4) provides that if a recoverable death payment made under subsection 16A(1) relates to remuneration (including salary) or an allowance under subsection 7(9) of the RT Act it is taken to be remuneration or an allowance under subsection 7(9) for the purposes of the standing appropriation in subsection 7(13).  This allows a recoverable death payment to be paid under the authority of the appropriation in subsection 7(13) of the RT Act.

 

88.               Subsection 16B(5) provides that if a recoverable death payment made under new subsection 16A(1) relates to reimbursement under subsection 7(10) of the RT Act, it is taken to be reimbursement under section 7(10) for the purposes of the standing appropriation in subsection 7(13).  This allows a recoverable death payment to be paid under the authority of the appropriation in subsection 7(13) of the RT Act.

 

89.               Subsection 16B(6) defines ‘benefit’ for the purposes of section 16B as including remuneration (including salary) under subsection 7(9) or reimbursement under subsection 7(10).

 

90.               Subsection 16B(7) defines relevant agency for the purpose of section 16B as the agency that is responsible at that time for paying such benefits on behalf of the Commonwealth.

Reports about Recoverable Payments and Recoverable Death Payments

 

91.               Section 16C deals with the reporting of recoverable payments and recoverable death payments and ensures that reporting of these payments is done in a way that promotes transparency and accountability.

 

92.               Section 16C provides the reporting requirements for payments made under subsections 16A(1) and 16B(1).  Subsection 16C(1) provides that, during the applicable publication period, the Chief Executive of an agency is to publish a report on the number of recoverable payments and recoverable death payments made, when known that they have been made, and the total amount of those payments, in respect of a reporting period.  The report is to be published in a manner that the Chief Executive considers appropriate.  However, a report is not required when there has not been any recoverable payments or recoverable death payments made in respect of a reporting period (subsection 16C(2)).

 

93.               Subsections 16C(3) and (4) provide that a report is not required in relation to a recoverable payment or a recoverable death payment unless, before the report is prepared, the Chief Executive is aware of such a payment being made under subsection 16A(1) or subsection 16B(1).

 

94.               Subsection 16C(5) provides that if a recoverable payment or recoverable death payment was made during a reporting period, but not reported because of the reasons set out in subsections 16C(3) and (4), that it is to be reported in a later reporting period, as provided under subsections 16C(6) and (7).

 

95.               Subsections 16C(6) and (7) set out the reporting requirements where a recoverable payment or recoverable death payment has to be reported in a later reporting period to the period in which it was made.

 

96.               Subsections 16C(8) and (9) define ‘reporting period’ for the purposes of section 16C as meaning a financial year, or a shorter recurring period if specified in a legislative instrument by the designated Minister.

 

97.               Subsections 16C(10) and (11) defines the ‘applicable publication period’ for a reporting period, for the purposes of new section 16C, as meaning four months, or a shorter period of months if specified in a legislative instrument by the designated Minister in accordance with subsection 16C(11), beginning immediately after the end of the reporting period.  The period of four months is to allow for the Chief Executive to include the report in the agency’s annual report, if that is preferred.  The report may also be published on the agency’s website or in another accessible format, to ensure that the use of the recoverable payment provisions is transparent and accountable.  This seeks to ensure that overpayments will be addressed, and minimised.

 



 

V. NOTES ON SCHEDULE 2 - AMENDMENTS OF REGULATIONS

Amending the Financial Management and Accountability Regulations 1997

 

98.               Schedule 2 of the Bill would amend the Financial Management and Accountability Regulations 1997 (FMA Regulations) to insert a new regulation 22AB after regulation 22AA.  The proposed new regulation 22AB would provide for Schedule 1B of the FMA Regulations to specify, for the purposes of the new section 39B of the FMA Act, Commonwealth companies and their objects or proposed activities.

 

99.               Schedule 2 would also insert after Schedule 1A to the Regulations a new Schedule 1B which specifies, for the purposes of the new proposed section 39B of the FMA Act, Commonwealth companies and their objects or activities.

 

100.           The proposed new Schedule 1B would specify 20 items for inclusion in the FMA Regulations.  Items 1 to 20 specify existing Commonwealth companies, which are limited by guarantee or limited by shares, and also specify the objects or activities of each company.  These companies have been formed over several decades under existing and previous Governments.

 

101.           Schedule 2 would validate the Commonwealth’s role in forming, participating in the formation of, acquiring shares in or becoming a member of, these companies for the purposes of the proposed new section 39B of the FMA Act.



102.            

 

VI. NOTES ON SCHEDULE 3 - LOSS RELIEF RELATING TO THE TRANSFER OF ASSETS FROM THE MSB FUND TO THE ARIA INVESTMENTS TRUST

102.     Schedule 3 transfers realised capital losses from the Military Superannuation and Benefits Fund (MSB Fund) to the ARIA Investments Trust.  The provision of loss relief reflects the essentially involuntary nature of the consolidation of the trustee arrangements for the Commonwealth’s main civilian and military superannuation schemes, which led to the transfer of assets from the MSB Fund to the ARIA Investments Trust (subitems 1(1) and 1(6) of Schedule 3).

 

103.           In the absence of providing loss relief, losses which had arisen from recent unfavourable market conditions would remain with the MSB Fund.  This would be detrimental to the MSB Fund’s members as these losses could not be used to offset future capital gains of the Fund, given the transfer of all of the Fund’s assets to the ARIA Investments Trust.

 

104.           Subitem 1(2) of Schedule 3 provides that the MSB Fund automatically transfers capital losses to the ARIA Investments Trust to the extent the losses were not utilised before the end of 11 May 2012 (the date when assets were transferred from the MSB Fund to the ARIA Investments Trust).

 

105.           As a result of the transfer of realised capital losses from the MSB Fund to the ARIA Investments Trust, paragraphs 1(3)(a) and 1(4)(a) of Schedule 3 provide that the MSB Fund reduces its capital losses by the transferred amount.

 

106.           To ensure that the ARIA Investments Trust can utilise the transferred capital losses in the 2011-12 and future income years, paragraphs 1(3)(b) and 1(4)(b) of Schedule 3 provide that ARIA Investments Trust is taken to have incurred the transferred amount as a capital loss in the 2011-12 income year.

 

107.           As the intent of these provisions is to modify the effective operation of the Income Tax Assessment Act 1997 (ITAA 1997), subitem 1(5) of Schedule 3 provides that an expression used both in Schedule 3 and in the ITAA 1997 takes the ITAA 1997 meaning.  Examples of these expressions include ‘capital loss’, ‘income year’, ‘net capital loss’ and ‘utilised’.