Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Telstra (Transition to Full Private Ownership) Bill 2005

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2004-2005

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

THE SENATE

 

 

 

 

 

 

 

 

 

 

 

 

TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 2005

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Communications, Information

Technology and the Arts, Senator the Hon. Helen Coonan)

 

 



TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 2005

 

 

OUTLINE

 

 

The Telstra (Transition to Full Private Ownership) Bill 2005 (the Bill) amends the Telstra Corporation Act 1991 (the Telstra Corporation Act) to repeal the provisions that require the Commonwealth to retain at least 50.1 per cent of its equity in Telstra Corporation Limited (Telstra).

 

The Bill gives the Commonwealth the flexibility to use a wide range of approaches to conduct the sell down of Telstra either through a single tranche, several tranches or other approaches such as placements.  The Minister for Finance and Administration will be able to make a determination setting out rules governing a Telstra sale scheme.   To ensure that any proposed access by Telstra to securities markets does not compromise the Commonwealth’s objective of divesting its entire equity in Telstra, the Minister for Finance and Administration will also be able to direct Telstra not to engage in any specified securities issuance activities outside a Telstra sale scheme. 

 

Part 1 of Schedule 1 to the Bill makes amendments to the Telstra Corporation Act that will allow the Commonwealth to sell its remaining equity interest in Telstra.  Item 36 in Part 1 of Schedule 1 inserts a new Part 2C of the Telstra Corporation Act that re-affirms the universal service obligation, the digital data service obligation and the customer service guarantee.

 

Part 2 of Schedule 1 to the Bill makes amendments to various Acts and regulations as a consequence of Telstra ceasing to be Commonwealth controlled, which will occur when the Commonwealth ceases to hold the majority of the voting shares in Telstra.  Transitional amendments will preserve the rights of Telstra employees who have long service leave or maternity leave entitlements or certain retirement benefits under Commonwealth legislation, while they remain Telstra employees.

 

Transitional provisions will also:

 

·                      require Telstra to continue to deal with any requests under the Freedom of Information Act 1982 for access to a document in the possession of Telstra that have not been finally disposed of when Telstra ceases to be Commonwealth controlled and preserve the rights of persons making such requests under the Administrative Appeals Tribunal Act 1975 ;



·                      enable the Commonwealth Ombudsman to continue to investigate any complaints in relation to action taken by Telstra that have not been finally disposed of when Telstra ceases to be Commonwealth controlled;



·                      preserve the operation, in respect of events occurring prior to Telstra ceasing to be Commonwealth controlled, of the Crimes (Superannuation Benefits) Act 1989 and Director of Public Prosecutions Act 1983 ;



·                      ensure that from the cessation of Commonwealth control, Telstra’s liability in respect of injuries suffered by employees prior to 1 July 1989 continues under section 128A of the Safety, Rehabilitation and Compensation Act 1988 .

 

The current provisions of the Telstra Corporation Act that enable the Minister for Communications, Information Technology and the Arts to give certain directions to Telstra in the public interest and that impose certain reporting obligations on Telstra will cease to apply when the Minister for Communications, Information Technology and the Arts is satisfied that the Commonwealth’s equity in Telstra has fallen to 15 per cent or less, known as the ‘85% sale day’ (Part 3 of Schedule 1 to the Bill).  This threshold is consistent with the level at which substantial interest considerations are triggered under the Foreign Acquisitions and Takeovers Act 1975 .  It has been chosen to help ensure that if a multiple tranche sale is necessary, the Commonwealth continues to be fully informed on Telstra’s actions and plans until the Commonwealth no longer holds a substantial interest in Telstra.

 

Section 53 of the Constitution provides that a proposed law appropriating revenue or moneys shall not ‘originate in the Senate’.  The Bill therefore temporarily ‘switches off’ various appropriation provisions in the Telstra Corporation Act that provide funding for the payment of the Commonwealth’s costs for the way its sells its shares in Telstra, reimburse Telstra and its Board for costs of assisting the Commonwealth with the sale and provide for payment of compensation for any acquisition of property otherwise than on just terms as a result of a Telstra sale scheme (see items 19, 23 and 28 of Schedule 1 to the Bill).  These appropriation provisions will be ‘switched on’ again following the passage and Royal Assent of this Bill and the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and Schedule 4 of that Bill).

 

FINANCIAL IMPACT STATEMENT

 

The full financial costs and benefits from a future sale or sales of the Commonwealth’s remaining shareholding in Telstra are difficult to quantify at this stage.  However the Government has stated that sale will only proceed when an appropriate return for taxpayers could be achieved.

 

Actual sale proceeds and costs are dependent on a number of future variables, including:

·          overall market conditions;

·          expected demand for Telstra shares;

·          Telstra’s performance;

·          the outcomes of the new CEO’s operational review; and

·          the implementation of regulatory changes.

 

The total market value of the Commonwealth’s remaining shares in Telstra based on the share price on 31 August 2005 is about $30 billion.  The amount raised on a future sale or sales would be dependent on the sale processes, the structure of the offer and market circumstances at the time.

 

The costs of conducting a sale are dependent on the structure and size of a sale. A future sale is expected to be a complex undertaking with a large number of service providers which will be subject to a competitive tendering exercise for these services. Nevertheless, it is expected that sale costs will be consistent with the level in the previous Telstra 2 Share Offer.    The Department of Finance and Administration will manage the sale process.

 

The forward estimates include the effect of the sale of the Australian Government’s shareholding in Telstra, noting that the level of proceeds will depend, inter alia, on the prevailing levels of world equity markets at the time and that the timing of the sale could be adjusted if market levels are considered unlikely to provide an appropriate return to taxpayers.

 

Proceeds from sale of the Commonwealth's remaining shareholding in Telstra may be used to reduce net debt or allocated to the proposed Future Fund.  Regardless of how the proceeds are used, the Commonwealth will continue to receive income flows from investments (either in the form of interest on term deposits at the Reserve Bank of Australia or through the Future Fund receiving interest and dividends on its investments).

 

A $2 billion dedicated Communications Fund will be established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 to fund the Commonwealth Government’s response to any recommendations proposed by the Regional Telecommunications Independent Review Committee to the Government in a report of a review of the adequacy of telecommunications services in regional, rural and remote parts of Australia.

 

 

NOTES ON CLAUSES

 

 

Clause 1 - Short title

 

Clause 1 provides that the Bill, when enacted, may be cited as the Telstra (Transition to Full Private Ownership) Act 2005 .

 

Clause 2 - Commencement

 

Clause 2 provides for various provisions of the Bill, when enacted, to commence on specified days or times.

 

Clauses 1 to 5 of the Bill will commence on Royal Assent (see item 1 in the table under subclause 2(1)).  Part 1 of Schedule 1 to the Bill will also commence on Royal Assent (see item 2 in the table).  Part 1 of Schedule 1 will amend the Telstra Corporation Act to allow the Commonwealth to sell the Commonwealth’s remaining equity interest in Telstra. 

 

The remaining provisions of the Bill will commence on specified days or times, as discussed in the notes to clauses 3 and 4.

 

Clause 3 - Designated day

 

Part 2 of Schedule 1 makes consequential amendments to various Acts and regulations, and includes certain transitional arrangements.  It permits the Auditor-General to resign as auditor of Telstra and inserts a new Part 3A in the Telstra Corporation Act that contains transitional provisions relating to the sale by the Commonwealth, or by a separate company, of the Commonwealth’s remaining equity interest in Telstra.  Some of those transitional provisions relate to Commonwealth Acts that cease to apply to Telstra when the Commonwealth ceases to hold a majority of the voting shares in Telstra. 

 

Accordingly, the day this occurs (the designated day) has been chosen as the day on which various Commonwealth Acts should cease to apply in relation to Telstra and transitional provisions should operate to preserve employee entitlements and benefits.

 

Item 3 in the table under subclause 2(1) provides for Part 2 of Schedule 1 to commence on the designated day.

 

The designated day is declared by the Minister for Communications, Information Technology and the Arts under clause 3 and is the day that, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth. 

 

In determining the voting shares that the Commonwealth holds it will be necessary to count any voting shares held by a ‘category A hybrid-security issuer company’ (see the definition of ‘the Commonwealth’ in subclause 3(7)).  A category A hybrid-security issuer company will be a wholly-owned Commonwealth company that issues sale-scheme hybrid securities (see items 5, 12 and 13 of Schedule 1 to the Bill).  Voting shares held by a ‘category B hybrid-security issuer company’ (a non-wholly Government owned hybrid-security issuer company specified by the Minister for Finance and Administration under proposed subsection 8AJ(6B)) will not be counted for this purpose.

 

As part of the sale scheme arrangements, it is possible that the Commonwealth may transfer some of its shares in Telstra to a separate company (a hybrid-security issuer company) that would issue sale-scheme hybrid securities.  ‘Sale-scheme hybrid security’ is defined in item 16 of Schedule 1 to the Bill to mean an interest-bearing security, a share, or any other security or financial product that is issued on the basis that it will or may be redeemed in exchange for, exchanged for, or converted to, a share or shares in Telstra; an option to acquire a share or shares in Telstra; or a security or a financial product relating to Telstra that is specified in a written declaration made by the Minister for Finance and Administration. 

 

Hybrid securities are a broad classification for a group of securities that combine both debt and equity characteristics.  The additional characteristics, compared to ordinary equity, make these securities attractive to additional groups of investors.  Accessing all relevant investor groups will be an important consideration for the successful conduct of further sales of Telstra.  Typically a hybrid security will be capable of exchange into the underlying Telstra share or shares at a specified future date.

 

In addition, for the purposes of the declaration by the Minister for Communications, Information Technology and the Arts of the ‘designated day’, if a share in Telstra is an investment of the proposed Future Fund or the Communications Fund, it will be taken to be held by a person other than the Commonwealth (see subclause 3(3)). 

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is possible some Telstra shares may be notionally transferred to the Future Fund in the future. 

 

The Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 provides for the establishment of the Communications Fund.  The Communications Fund will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

In the case of a temporary acquisition of Telstra shares by a person other than the Commonwealth under a stock borrowing arrangement with the Commonwealth, the borrowed share will be taken to be held by the Commonwealth for the purposes of clause 3 of the Bill (subclause 3(4)).

 

The Minister’s declaration of the ‘designated day’ under subclause 3(1) will have effect accordingly (subclause 3(2)). 

 

The Minister’s declaration will be a legislative instrument for the purposes of the Legislative Instruments Act 2003 (the Legislative Instruments Act) (subclause 3(5)).  The declaration will therefore be required to be registered on the Federal Register of Legislative Instruments and tabled in Parliament.  However, the Minister’s declaration will not be subject to Parliamentary disallowance.  As the Minister, acting on appropriate advice from Telstra and others, will be in the best position to decide when the designated day occurs, it is not appropriate that the Minister’s declaration be subject to Parliamentary disallowance.

 

The designated day may be earlier than the day on which the Minister’s declaration under subclause 3(1) is registered under the Legislative Instruments Act (subclause 3(6)).

 

The effect of subsections 12(2) and (3) of the Legislative Instruments Act is that subject to any contrary provision for commencement of an instrument in the enabling legislation for the instrument, an instrument will have no effect if it would take effect before the date it is registered and as a result:

 

(a)        the rights of a person (other than the Commonwealth or an authority of the Commonwealth) as at the date of registration would be affected so as to disadvantage that person; or

 

(b)        liabilities would be imposed on a person (other than the Commonwealth or an authority of the Commonwealth) in respect of anything done or omitted to be done before the date of registration.

 

While there is no intention that the Minister’s declaration under subclause 3(1) will have such a result, subclause 3(6) is a contrary provision for the purposes of subsection 12(3) of the Legislative Instruments Act and therefore avoids any argument that the designated day cannot occur on a day that is earlier than the day on which the Minister’s declaration is registered on the Federal Register of Legislative Instruments.

 

Clause 4 - 85% sale day

 

Part 3 of Schedule 1 to the Bill will repeal Division 3 of Part 2 of the Telstra Corporation Act, which imposes reporting obligations on Telstra.  It will also repeal proposed section 8AYA, inserted by item 27 of Schedule 1 to the Bill, which enables the Minister for Finance and Administration to direct Telstra not to dilute the Commonwealth’s equity in Telstra or engage in specified securities issuance activities.  The object of proposed section 8AYA is to ensure that any proposed access by Telstra to securities markets outside a Telstra sale scheme does not compromise the Commonwealth’s objective of divesting its entire equity in Telstra.  Part 3 of Schedule 1 to the Bill will also repeal Part 3 of the Telstra Corporation Act, which enables the Minister for Communications, Information Technology and the Arts to give certain directions to Telstra in the public interest.

 

It is proposed to repeal these provisions when the Minister for Communications, Information Technology and the Arts is satisfied that the Commonwealth’s equity has fallen to 15 per cent or less, known as the ‘85% sale day’ (see item 4 in the table under subclause 2(1) and subclause 4(1)).  This threshold is consistent with the level at which substantial interest considerations are triggered under the Foreign Acquisitions and Takeovers Act 1975 .  It has been chosen to help ensure that if a multiple tranche sale is necessary, the Commonwealth continues to be fully informed on Telstra’s activities and plans until the Commonwealth no longer holds a substantial interest in Telstra.

 

In determining the voting shares that the Commonwealth holds it will be necessary to count any voting shares held by a ‘category A hybrid-security issuer company’ (see the definition of ‘the Commonwealth’ in subclause 4(7)).  A category A hybrid-security issuer company will be a wholly-owned Commonwealth company that issues sale-scheme hybrid securities (see items 5, 12 and 13 of Schedule 1 to the Bill).  Voting shares held by a ‘category B hybrid security issuer company’ (a non-Government hybrid-security issuer company specified by the Minister for Finance and Administration under proposed subsection 8AJ(6B)) will not be counted for this purpose.

 

As part of the sale scheme arrangements, it is possible that the Commonwealth may transfer some of its shares in Telstra to a wholly-owned Commonwealth company (a hybrid-security issuer company) that would issue sale-scheme hybrid securities.  ‘Sale-scheme hybrid security’ is defined in item 16 of Schedule 1 to the Bill to mean an interest-bearing security, a share, or any other security or financial product that is issued on the basis that it will or may be redeemed in exchange for, exchanged for, or converted to a share or shares in Telstra; an option to buy a share or shares in Telstra; or a security or a financial product relating to Telstra that is specified in a written declaration made by the Minister for Finance and Administration.

 

In addition, for the purposes of the declaration by the Minister for Communications, Information Technology and the Arts of the ‘85% sale day’, if a share in Telstra is an investment of the proposed Future Fund or the Communications Fund, it will be taken to be held by a person other than the Commonwealth (see subclause 4(3)). 

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is possible that some Telstra shares may be notionally transferred to the Future Fund in the future. 

 

The Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 provides for the establishment of the Communications Fund.  The Communications Fund will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

In the case of a temporary acquisition of Telstra shares by a person other than the Commonwealth under a stock borrowing arrangement with the Commonwealth, the borrowed share will be taken to be held by the Commonwealth for the purposes of clause 4 of the Bill (subclause 4(4)).

 

The Minister will be required to declare the 85% sale day by written instrument

(subclause 4(1)).  The Minister’s declaration will have effect accordingly (subclause 4(2)). 

 

The Minister’s declaration will be a legislative instrument for the purposes of the Legislative Instruments Act (subclause 4(5)).  The Minister’s declaration will therefore be required to be registered on the Federal Register of Legislative Instruments and tabled in both Houses of Parliament.  However, the Minister’s declaration will not be subject to Parliamentary disallowance.  As the Minister, acting on appropriate advice from Telstra and others, will be in the best position to decide when the 85% sale day occurs, it is not appropriate that the Minister’s declaration be required to be subject to Parliamentary disallowance.

 

The 85% sale day may be earlier than the day on which the Minister’s declaration under subclause 4(1) is registered under the Legislative Instruments Act (subclause 4(6)).

 

The effect of subsections 12(2) and (3) of the Legislative Instruments Act is that subject to any contrary provision for commencement of an instrument in the enabling legislation for the instrument, an instrument will have no effect if it would take effect before the date it is registered and as a result:

 

(a)        the rights of a person (other than the Commonwealth or an authority of the Commonwealth) as at the date of registration would be affected so as to disadvantage that person; or

 

(b)        liabilities would be imposed on a person (other than the Commonwealth or an authority of the Commonwealth) in respect of anything done or omitted to be done before the date of registration.

 

While there is no intention that the Minister’s declaration under subclause 4(1) will have such a result, subclause 4(6) is a contrary provision for the purposes of subsection 12(3) of the Legislative Instruments Act and therefore avoids any argument that the 85% sale day cannot occur on a day that is earlier than the day on which the Minister’s declaration is registered on the Federal Register of Legislative Instruments.

 

Clause 5 - Schedule(s)

 

Subclause 5(1) provides for the making of the amendments and repeals to the Acts and regulations specified in the Schedules in accordance with the items in the Schedules and for the other items in the Schedules to have effect according to their terms.

 

Subclause 5(2) ensures that the amendment of regulations in the Schedules does not prevent later amendments or repeal of those regulations by the Governor-General.

 

Schedule 1--Amendments

 

Part 1 -- Amendments commencing on Royal Assent

 

Telstra Corporation Act 1991

 

Items 1 to 6 - Insertion of definitions of ‘category A hybrid-security issuer company’, ‘category B hybrid-security issuer company’, ‘Communications Fund’, ‘Future Fund, ‘hybrid-security issuer company’, and ‘sale-scheme hybrid security’ in section 3 of the Telstra Corporation Act

 

Item 5 provides for the definition of ‘hybrid-security issuer company’ to be inserted in section 3 of the Telstra Corporation Act.  This term will have the meaning given by section 8AJ of that Act as proposed to be amended by items 12, 13 and 14 of Schedule 1 to the Bill.

 

As part of the sale scheme arrangements, it is possible that the Commonwealth may transfer some of its shares in Telstra to a separate company (a hybrid-security issuer company) that would issue sale-scheme hybrid securities.  ‘Sale-scheme hybrid security’ is defined in item 6 to have the meaning given by proposed section 8AJA of the Telstra Corporation Act (see the discussion at item 16 below). 

 

There will be 2 types of hybrid-security issuer company.  A ‘category A hybrid-security issuer company’ will be a wholly-owned Commonwealth company that issues sale-scheme hybrid securities.  A ‘category B hybrid-security issuer company’ will be a non-wholly Government owned hybrid-security issuer company specified in a written declaration made by the Minister for Finance and Administration under proposed subsection 8AJ(6B) of the Telstra Corporation Act (see items 1, 2, 5, 12 and 13 of Schedule 1 to the Bill).  The Commonwealth’s holding of voting shares in Telstra will be taken to include Telstra voting shares held by a category A hybrid-security company in certain circumstances (see the definition of ‘the Commonwealth’ in subclauses 3(7) and 4(7) of the Bill, proposed subsection 8AYA(12), 8AYB(7) and proposed section 8AYC of the Telstra Corporation Act, and the definition of ‘Telstra body’ inserted by items 62 and 63 of Schedule 1 to the Bill).  The Commonwealth’s holding will not be taken to include a Telstra voting share held by a category B hybrid-security issuer company for these purposes.

 

Item 3 inserts a definition of ‘Communication Fund’ for the purposes of subclauses 3(3), 4(3) and proposed subsections 3B(3), 8AJ(6D), proposed subsections 8AYA(10) and 8AYB(4), proposed section 8AYD and proposed subclause 12(4AA) of the Schedule to the Telstra Corporation Act.  The Communications Fund is established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 and will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.

 

Item 4 inserts a definition of ‘Future Fund’ for the purposes of subclauses 3(3), 4(3) and proposed subsections 3B(3), 8AJ(6D), proposed subsections 8AYA(10) and 8AYB(4), proposed section 8AYD and proposed subclause 12(4AA) of the Schedule to the Telstra Corporation Act.  At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is possible that some Telstra shares may be notionally transferred to the Future Fund in the future. 

 

Item 7 - Amendment of section 8AA of the Telstra Corporation Act

 

Section 8AA of the Telstra Corporation Act contains a simplified outline of Part 2 of that Act which deals with Commonwealth ownership of Telstra.

 

Item 7 amends the simplified outline as a consequence of item 8 below to indicate that the Commonwealth will be able, after the Bill receives Royal Assent, to sell its remaining equity interest in Telstra.

 

Item 8 - Repeal of Division 2 of Part 2 of the Telstra Corporation Act

 

Item 8 repeals Division 2 of Part 2 of the Telstra Corporation Act which deals with Commonwealth ownership of Telstra, with effect from the day on which the Bill receives Royal Assent.  This will enable the Commonwealth to sell its remaining equity interest in Telstra from that day.  The timing of any sale or sales will, of course, depend on prevailing market conditions.

 

Items 9 to 15 - Amendment of section 8AJ of the Telstra Corporation Act

 

Subsection 8AJ(1) of the Telstra Corporation Act provides that the object of section 8AJ is to define certain sale-scheme related expressions.  Item 9 provides that one of the objects of section 8AJ will be to define ‘hybrid-security issuer company’ (see item 12).

 

Subsection 8AJ(2) of the Telstra Corporation Act defines the term ‘Telstra sale scheme’ for the purposes of the Act.  This subsection and subsequent subsections are intended to give a broad and flexible meaning to the term ‘Telstra sale scheme’. 

 

Item 10 amends subsection 8AJ(2) to make a technical amendment consequential on the repeal of Division 2 of Part 2 by item 8.  The amendment recognises that the object of a Telstra sale scheme may be to transfer the whole or a part of the Commonwealth’s equity in Telstra to other persons. 

 

Item 11 repeals subsection 8AJ(3) consequential on the repeal of Division 2 of Part 2 by item 8 and replaces it with new subsections 8AJ(3), (3A) and (3B).  These new provisions will enable the Minister for Finance and Administration (see the definition of ‘Minister for Finance’ in section 3 of the Telstra Corporation Act) to make a written determination setting out rules that are to be complied with by a Telstra sale scheme.   The Minister’s determination is of a legislative character and will therefore be a legislative instrument for the purposes of the Legislative Instruments Act.  However, because the Minister’s determination is, in effect, a direction to Telstra which is exempt from Parliamentary disallowance under item 41 of the table in subsection 44(2) of the Legislative Instruments Act and in the interests of ensuring commercial certainty in connection with a Telstra sale scheme, the Minister’s determination will not be subject to Parliamentary disallowance (proposed subsection 8AJ(3B)).

 

The period over which the sale scheme provisions will operate is not clear at this time.  It may be necessary, depending on market conditions operating at the time of the sale, for additional rules governing a sale scheme to be established which operate with the force of law.  This item provides the legislative framework for such rules.  The formal sale period for a share offer takes place over a limited time, typically 6 to 7 weeks.  If the circumstances require the issue of a Ministerial determination, a high degree of certainty of operation is likely to be required.  This certainty would not be available if the determination were subject to disallowance for a period that could go beyond the completion of the share offer.

 

As a result of subsection 33(3) of the Acts Interpretation Act 1901 , the Minister’s determination will be able to be varied or revoked at any time.

 

Item 12 adds additional matters that a Telstra sale scheme may involve.

 

A Telstra sale scheme may involve the Commonwealth or Telstra issuing sale-scheme hybrid securities (proposed paragraph 8AJ(4)(k)). ‘Sale-scheme hybrid security’ is defined in item 6 to have the meaning given by proposed section 8AJA of the Telstra Corporation Act (see the discussion on item 16 below).

 

A Telstra sale scheme may also involve an arrangement under which one or more  designated companies (each of which is called a ‘hybrid-security issuer company’) issues sale-scheme hybrid securities (proposed paragraph 8AJ(4)(l)).  Item 13 inserts new subsection 8AJ(6A) which provides that for the purposes of section 8AJ, a designated company is either a wholly-owned Commonwealth company or a body corporate other than a wholly-owned Commonwealth company specified in a written declaration made by the Minister for Finance and Administration under paragraph 8AJ(6A)(b).  Item 14 provides a signpost definition of ‘designated company’.

 

As a result of item 15, the term ‘wholly-owned Commonwealth company’, as used in proposed paragraph 8AJ(4)(l) will be defined to have the same meaning as in the Commonwealth Authorities and Companies Act 1997 (CAC Act), ignoring any sale-scheme hybrid securities issued by the company concerned (to take account of the fact that the hybrid-security issuer company will be able to issue shares in itself that are redeemable in exchange for, exchanged for, or convertible to shares in Telstra).  Section 34 of the CAC Act provides that for the purposes of that Act a ‘wholly-owned Commonwealth company’ means any Commonwealth company, other than a company in which any of the shares are beneficially owned by a person other than the Commonwealth.  A ‘Commonwealth company’ is a Corporations Act company in which the Commonwealth has a controlling interest.  However, it does not include a company in which the Commonwealth has a controlling interest through one or more interposed Commonwealth authorities or Commonwealth companies.

 

Proposed subsection 8AJ(6B) provides for the Minister for Finance and

Administration to specify, in a written declaration, the names of hybrid-security issuer companies, other than wholly owned Commonwealth companies, that are to be category B hybrid-security issuer companies.  The Commonwealth will be taken to include a category A hybrid-security company, but not a category B hybrid-security issuer company, in certain circumstances, including for the purposes of determining the voting shares in Telstra that the Commonwealth holds (see the definition of ‘the Commonwealth’ in subclauses 3(7) and 4(7) of the Bill, proposed subsection 8AYA(12), 8AYB(7) of the Telstra Corporation Act and the definition of ‘Telstra body’ inserted by items 62 and 63 of Schedule 1 to the Bill).

 

A declaration by the Minister for Finance and Administration under proposed paragraph 8AJ(6A)(b) or proposed subsection 8AJ(6B) will be administrative in character and therefore not a legislative instrument for the purposes of the Legislative Instruments Act (proposed subsection 8AJ(6C)).

 

A Telstra sale scheme may also involve the guarantee by the Commonwealth of the obligations of a hybrid-security issuer company in relation to sale-scheme hybrid securities (for example, obligations to make payments of interest or dividends or other non-monetary obligations) (proposed paragraph 8AJ(4)(m)).

 

A Telstra sale scheme may also involve a securities lending arrangement (see, for example, subclauses 3(4) and 4(4) of the Bill) (proposed paragraph 8AJ(4)(n)).

 

Proposed section 8AJ(6D) provides that for the purposes of section 8AJ, if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, the share will be taken to be held by a person other than the Commonwealth.  This will ensure that any future realisation of Telstra shares by the Future Fund or the Communications Fund will be treated like any realisation and not as a Telstra sale scheme.

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is possible that some Telstra shares may be notionally transferred to the Future Fund in the future. 

 

The Communications Fund will be established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 and will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Item 16 - Insertion of proposed section 8AJA of the Telstra Corporation Act

 

Item 16 inserts proposed section 8AJA of the Telstra Corporation Act.  Proposed section 8AJA defines ‘sale-scheme hybrid security’ for the purposes of the Act, as proposed to be amended by the Bill (see, for example, proposed paragraphs 8AJ(4)(k), (l) and (m), proposed paragraphs 8AK(1)(ka) to (kg)).

 

The ability to issue hybrid securities as part of a Telstra sale scheme will provide additional flexibility in the structuring of such a scheme.  Hybrid securities are a broad classification for a group of securities that combine both debt and equity characteristics.  The additional characteristics, compared to ordinary equity, make these securities attractive to additional groups of investors.  Accessing all relevant investor groups will be an important consideration for the successful conduct of further sales of Telstra.  Typically a hybrid security will be capable of exchange into the underlying Telstra share or shares at a specified future date.

 

For the purposes of the Telstra Corporation Act, a ‘sale-scheme hybrid security’ will be broadly defined to mean:

 

(a)                 an interest-bearing security that is issued on the basis that it will or may be exchanged, redeemed in exchange for, or converted to, a share or shares in Telstra; or



(b)                a share (in the hybrid-security issuer company) that is issued on the basis that it will or may be redeemed in exchange for or converted to a share or shares in Telstra; or



(c)                 any other security or financial product that is issued on the basis that it will or may be exchanged, redeemed in exchange for, or converted to, a share or shares in Telstra; or



(d)                an option to acquire a share or shares in Telstra; or



(e)                 a security, or a financial product, that is specified in a written declaration made by the Minister for Finance and Administration and relates directly or indirectly to Telstra (proposed subsection 8AJA(1)).

 

The term ‘security’ is defined in proposed subsection 8AJA(8) to have the same meaning as in Chapter 7 of the Corporations Act 2001 .  Section 761A of the Corporations Act provides that ‘security’ means:



(a)        a share in a body; or



(b)        a debenture of a body; or



(c)        a legal or equitable right or interest in a share in, or debenture of, a body; or



(d)       an option to acquire, by way of issue, a security covered by paragraph (a), (b) or  (c);

 

but does not include an excluded security (which relates to rights to participate in a retirement village scheme).

 

The term ‘financial product’ is defined in proposed subsection 8AJA(8) to have the same meaning as Chapter 7 of the Corporations Act 2001 .  Division 3 of Part 7.1 of the Corporations Act defines what a financial product is.  In general, a financial product includes an arrangement through which, or through the acquisition of which, a person makes a financial investment, manages financial risk or makes non-cash payments.

 

The references to a security, share or financial product that ‘will be redeemed’ in exchange for a share or shares in Telstra, ‘will be converted to’ or ‘will be exchanged for’ a share in Telstra are references to an issue of the security, share or financial product on the basis that redemption, conversion or exchange will be mandatory (by either the holder or the issuer) after a specified period.

 

The references to a security, share or financial product that ‘may be redeemed’ in exchange for a share or shares in Telstra, ‘may be converted to’ or ‘may be exchanged for’ a share in Telstra are references to an issue of the security, share or financial product on the basis that redemption or conversion will be optional (by either the holder or issuer) after a specified period.

 

A security or financial product covered by proposed subsection 8AJA(1) may, but need not, include a charge, lien or pledge (proposed subsection 8AJA(2)).  The term ‘charge’ is defined in proposed subsection 8AJA(8) to have the same meaning as in the Corporations Act 2001 .  Section 9 of the Corporations Act provides that ‘charge’ means a charge created in any way and includes a mortgage and an agreement to give or execute a charge or mortgage, whether on demand or otherwise.

 

An interest-bearing security that is issued on the basis that it will or may be redeemed in exchange for or converted to, or will or may be exchanged for, a share or shares in Telstra may be issued in Australia or overseas and may be denominated in Australian or foreign currency (proposed subsection 8AJA(3)).

 

A share that is redeemable in exchange for a share or shares in Telstra may be issued in Australia or overseas and any rights or obligations in relation to the share may be denominated in Australian or foreign currency (proposed subsection 8AJA(4)).

 

Similarly, a non-interest bearing security or financial product that is redeemable in exchange for, or may be exchanged for, or is convertible to, a share or shares in Telstra, or a security or financial product specified in a Ministerial declaration (see above), may be issued in Australia or overseas and may be denominated in Australian or foreign currency (proposed subsection 8AJA(5)).

 

An option to acquire a share or shares in Telstra may be issued in Australia or overseas and the exercise price may be denominated in Australian or foreign currency (proposed subsection 8AJA(6)).

 

A declaration by the Minister for Finance and Administration of a security or financial product under proposed subparagraph 8AJA(1)(i)(i) is legislative in character and will therefore be a legislative instrument for the purposes of the Legislative Instruments Act.  However, in the interests of ensuring commercial certainty in connection with a Telstra sale scheme, the Minister’s declaration will not be subject to Parliamentary disallowance.

 

Items 17 and 18 - Amendments of subsection 8AK(1) of the Telstra Corporation Act

 

Section 8AK of the Telstra Corporation Act provides that stamp duty or other tax is not payable under a law of a State or Territory in respect of designated matters (ie. certain matters relating to entering into or carrying out a Telstra sale scheme).

 

For the purposes of proposed paragraph 8AK(1)(kf), item 17 inserts a definition of ‘charge’.  The term ‘charge’ is defined to have the same meaning as in the Corporations Act 2001 .  Section 9 of the Corporations Act provides that ‘charge’ means a charge created in any way and includes a mortgage and an agreement to give or execute a charge or mortgage, whether on demand or otherwise.

 

Item 18 expands the list of designated matters in subsection 8AK(1), where the matter relates to the entering into or carrying out of a Telstra sale scheme, to include:

 

·          the issue of sale-scheme hybrid securities (see item 16);



·          the receipt of money by the Commonwealth, or its agent, in respect of the issue of sale-scheme hybrid securities;



·          the receipt of money by a hybrid-security issuer company (see item 12), or its agent, in respect of the issue of sale-scheme hybrid securities;



·          the redemption, exchange or conversion of sale-scheme hybrid securities;



·          the transfer by a hybrid-security issuer company of a share in Telstra held by the company;



·          the grant of a charge, lien or pledge (whether in connection with sale-scheme hybrid securities or otherwise);



·          an agreement relating to certain matters covered by specified paragraphs of subsection 8AK(1); and



·          a securities lending arrangement relating to shares in Telstra (see, for example, subclauses 3(4) and 4(4) of the Bill).

 

Item 19 - Insertion of proposed subsection 8AL(3) of the Telstra Corporation Act

 

Subsection 8AL(1) of the Telstra Corporation Act provides an appropriation to the extent necessary for the purpose of the payment or discharge of the costs, expenses and other obligations incurred by the Commonwealth in connection with the formulation, entering into, or carrying out, of a Telstra sale scheme.

 

Section 53 of the Constitution provides that a proposed law appropriating revenue or moneys shall not ‘originate in the Senate’.  Item 19 therefore inserts proposed subsection 8AL(3) which temporarily ‘switches off’ the appropriation in subsection 8AL(1).  The appropriation in subsection 8AL(1) will be ‘switched on’ again following the passage and Royal Assent of this Bill and the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 4 of Schedule 4 of that Bill).

 

Items 20 to 22 - Amendment of section 8AR of the Telstra Corporation Act

 

Items 20 to 22 update references to provisions in the Corporations Act 2001 in paragraphs 8AR(1)(b) and (c) of the Telstra Corporation Act and repeal subsections 8AR(2) and (3) as a consequence of the updated references.

 

Section 8AQ of the Telstra Corporation Act provides for Telstra to assist the Commonwealth in connection with a Telstra sale scheme.  Paragraph 8AR(1)(b) provides that the assistance mentioned in section 8AQ may take the form of giving of financial assistance (within the meaning of section 205 of the Corporations Act).  Section 205 has been repealed.  The repeal of section 205 was contemplated by subsection 8AR(2) which provides that if section 205 were repealed and replaced by a comparable provision, the reference in paragraph 8AR(1)(b) to section 205 was to be read as a reference to the replacement provision.  The relevant provisions dealing with financial assistance are now in Part 2J.3 of the Corporations Act.

 

Paragraph 8AR(1)(c) provides that the assistance mentioned in section 8AQ may take the form of the giving of a financial benefit to a related party (within the meaning of Part 3.2A of the Corporations Act).  Part 3.2A has been repealed.  The repeal of Part 3.2A was contemplated by subsection 8AR(3) which provides that if Part 3.2A were repealed and replaced by a comparable provision, the reference in paragraph 8AR(1)(c) to Part 3.2A was to be read as a reference to the replacement provision.  The relevant provisions dealing with the giving of financial benefits to related parties are now in Chapter 2E of the Corporations Act.

 

Item 23 - Insertion of proposed subsection 8AS(5) of the Telstra Corporation Act

 

Subsection 8AS(3) of the Telstra Corporation Act provides an appropriation for the purposes of a payment to Telstra or a Telstra Board member to reimburse expenses incurred in giving assistance to the Commonwealth in connection with a Telstra sale scheme.

 

Section 53 of the Constitution provides that a proposed law appropriating revenue or moneys shall not ‘originate in the Senate’.  Item 23 therefore inserts proposed subsection 8AS(5) which temporarily ‘switches off’ the appropriation in subsection 8AS(3).  The appropriation in subsection 8AS(3) will be ‘switched on’ again following the passage and Royal Assent of this Bill and the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 5 of Schedule 4 of that Bill).

 

Item 24 - Amendment of section 8AT of the Telstra Corporation Act

 

Section 8AT of the Telstra Corporations Act provides, among other things, that Chapter 7 of the Corporations Act 2001 binds the Crown in right of the Commonwealth to the extent to which that Chapter deals with a formulation, entering into, or carrying out of a Telstra sale scheme.  Division 3 of Part 7.10 of the Corporations Act contains insider trading prohibitions.  Subsection 1043A(1) of the Corporations Act prohibits a person who possesses inside information from buying or selling shares or other financial products if in possession of inside information.  Inside information means information that is not generally available but if it were generally available, a reasonable person would expect it to have a material effect on the price or value of particular shares or other financial products.  Section 1043F of the Corporations Act provides a ‘Chinese Walls’ exemption from the insider trading prohibitions for bodies corporate.

 

Item 24 inserts proposed subsection 8AT(5) of the Telstra Corporation Act to provide a defence to the Commonwealth from the insider trading prohibitions in the Corporations Act.  This defence is based on the exemption for bodies corporate in section 1043F of the Corporations Act.

 

Proposed subsection 8AT(5) provides that the Commonwealth does not contravene the insider trading prohibition in subsection 1043A(1) of the Corporations Act by entering into a transaction or agreement in relation to shares in Telstra, sale-scheme hybrid securities or a Telstra sale scheme merely because of information in the possession of  a Commonwealth employee or a Commonwealth office holder if:

 

(a)        the decision to enter into the transaction or agreement was taken on its behalf by a person or persons other than that officer or employee; and

 

(b)        it had in operation at that time arrangements that could reasonably be expected to ensure that:

 

(i)                  the information was not communicated to the person or persons who made the decision; and



(ii)                no advice with respect to the transaction or agreement was given to that person or any of those persons by a person in possession of the information; and

 

(c)        the information was not so communicated and no such advice was given.

 

Proposed subsection 8AT(6) provides that a reference in proposed subsection 8AT(5) to an officer of the Commonwealth includes a reference to the holder of an office under a law of the Commonwealth.

 

Items 25 and 26 - Amendment of section 8AV of the Telstra Corporation Act

 

Items 25 and 26 update a reference to a provision in the Corporations Act 2001 in subsection 8AV(5) of the Telstra Corporation Act and repeal subsection 8AV(6) as a consequence of the updated reference.

 

Section 8AV of the Act deals with certain reductions in Telstra’s share capital in connection with a Telstra sale scheme.  Subsection 8AV(5) includes a reference to section 195 of the Corporations Act.  Section 195 now deals with an unrelated subject matter (restrictions on voting by directors of public companies).  The relevant provisions of the Corporations Act on share capital reductions are now contained in Part 2J.1 of the Corporations Act.

 

Item 25 therefore replaces the reference to section 195 with a reference to Part 2J.1 of the Corporations Act and item 26 repeals subsection 8AV(6) (which contemplated the possible replacement of section 195 and is no longer required).

 

Item 27 - Insertion of sections 8AYA, 8AYB, 8AYC and 8AYD of the Telstra Corporation Act

 

Proposed section 8AYA - Minister for Finance may direct Telstra not to dilute the Commonwealth’s equity in Telstra etc.

 

Item 27 inserts a new section 8AYA in the Telstra Corporation Act to give the Minister for Finance and Administration (see the definition of ‘Minister for Finance’ in section 3 of the Act) a reserve power to direct Telstra not to engage in any specified activities outside a Telstra sale scheme that may dilute the Commonwealth’s equity.  The reference to ‘the Commonwealth’ in proposed section 8AYA will include a category A hybrid-security issuer company (proposed subsection 8AYA(12)) to which the Commonwealth has transferred some of its shares in Telstra.  The purpose of this provision is to ensure that any proposed access by Telstra to equity markets does not compromise the Commonwealth’s objective of divesting its entire equity in Telstra.

 

Proposed subsection 8AYA(1) defines ‘equity-dilution conduct’ for the purposes of proposed section 8AYA.  This is conduct that will result, or is likely to result, in a dilution of the Commonwealth’s equity in Telstra and is not carried out under a Telstra sale scheme.

 

Proposed subsection 8AYA(2) provides that in determining whether conduct is equity-dilution conduct, regard must be had to the economic and commercial substance of the conduct.  This recognises that there may be certain fund raising activities that Telstra proposes to engage in that are desirable and do not compromise the Commonwealth’s objective of divesting its equity in Telstra.

 

Proposed subsection 8AYA(3) provides that proposed subsection (2) does not, by implication, limit proposed subsection (1).  This will allow regard to be had to other relevant matters in determining whether particular conduct is equity-dilution conduct as defined by proposed subsection (1).

 

Proposed subsections 8AYA(5) and (6) require that Telstra notify the Minister for Finance and Administration of any proposed equity-dilution conduct or security-issue conduct at least 30 days (or such shorter period as the Minister allows) before engaging in that conduct.  The notice will need to set out details of Telstra’s proposal to engage in that conduct and give Telstra’s reasons for the proposal.  ‘Security-issue conduct’ is conduct that consists of the issue of a security or of a financial product (proposed subsection 8AYA(4)).

 

The term ‘security’ is defined in proposed subsection 8AYA(12) to have the same meaning as in Chapter 7 of the Corporations Act 2001 .  Section 761A of the Corporations Act provides that ‘security’ means:



(a)        a share in a body; or



(b)        a debenture of a body; or



(c)        a legal or equitable right or interest in a share in, or debenture of, a body; or



(d)       an option to acquire, by way of issue, a security covered by paragraph (a), (b) or  (c);

 

but does not include an excluded security (which relates to rights to participate in a retirement village scheme).

 

The term ‘financial product’ is defined in proposed subsection 8AYA(12) to have the same meaning as Chapter 7 of the Corporations Act 2001 .  Division 3 of Part 7.1 of the Corporations Act defines what a financial product is.  The general definition of a financial product set out in Subdivision B of Division 3 includes a facility through which, or through the acquisition of which, a person makes a financial investment, manages financial risk or makes non-cash payments.

 

Proposed subsection 8AYA(7), when read with subsection 46(3) of the Acts Interpretation Act 1901 , allows the Minister for Finance and Administration to direct Telstra not to engage in:



(a)        specified equity-dilution conduct or a specified class of equity-dilution conduct; or



(b)        specified security-issue conduct or a specified class of security-issue conduct.

 

Proposed subsection 8AYA(11) provides that any Ministerial direction under proposed subsection 8AYA(7) will not be a legislative instrument for the purposes of the Legislative Instruments Act (because the direction is administrative in nature).  As a consequence, the Minister’s direction will not be required to be tabled in Parliament and will not be subject to Parliamentary disallowance.  The Minister for Finance and Administration, acting on appropriate advice, will be in the best position to frame the terms of a notice to Telstra under proposed subsection 8AYA(7) and it is not appropriate that this notice be subject to Parliamentary disallowance.

Proposed subsection 8AYA(8) provides that Telstra must comply with any direction under proposed subsection (7).

 

Proposed subsection 8AYA(9) provides that a breach of proposed section 8AYA will not be an offence.  However, a breach will be a ground for the Minister for Communications, Information Technology and the Arts to obtain an injunction in the Federal Court under Division 1 of Part 2B of the Telstra Corporation Act.

 

For the purposes of proposed section 8AYA, if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, it will be taken to be held by a person other than the Commonwealth (see proposed subsection 8AYA(10)).

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is proposed that a notional transfer of some Telstra shares to the Future Fund will take place under the Future Fund Bill. 

 

The Communications Fund to be established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Proposed section 8AYA will be repealed when the Minister for Communications, Information Technology and the Arts is satisfied that the Commonwealth’s equity has fallen to 15 per cent or less, known as the ‘85% sale day’ (see item 4 in the table under subclause 2(1) and item 71 of Schedule 1 to the Bill).

 

Proposed section 8AYB - Telstra to give information to the Minister about the level of non-Commonwealth ownership of shares in Telstra

 

The purpose of proposed section 8AYB is to enable the Minister for Communications, Information Technology and the Arts to direct Telstra to give the Minister information about the level of private ownership of shares in Telstra as a result of a Telstra sale scheme (which may include the issue of sale-scheme hybrid securities by a hybrid-security issuer company - see items 6 and 12).   The Minister’s direction will not be a legislative instrument for the purposes of the Legislative Instruments Act (proposed subsection 8AYB(6)).  The Minister’s declaration is of an administrative rather than a legislative character and it is therefore not appropriate that it be required to be tabled in Parliament and subject to Parliamentary disallowance.

 

A direction under proposed section 8AYB will assist the Minister to determine:

 

·          the ‘designated day’ referred to in subclause 3(1) of the Bill (being the day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth or a category A hybrid-security issuer company) - this is the day on which Part 2 of Schedule 1 to the Bill commences;



·          the ‘85% sale day’ referred to in subclause 4(1) of the Bill (being the day on which 85% of the voting shares in Telstra are held by persons other than the Commonwealth or a category A hybrid-security issuer company) - this is the day on which Part 3 of Schedule 1 to the Bill commences.



Proposed subsection 8AYB(2) provides that Telstra must comply with any direction under proposed subsection (1).

 

Proposed subsection 8AYB(3) provides that a breach of proposed section 8AYB will not be an offence.  However, a breach will be a ground for the Minister for Communications, Information Technology and the Arts obtaining an injunction in the Federal Court under Division 1 of Part 2B of the Telstra Corporation Act.

 

Proposed subsection 8AYB(4) provides that if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, it will be taken to be held by a person other than the Commonwealth.

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is proposed that a notional transfer of some Telstra shares to the Future Fund will take place under the Future Fund Bill. 

 

The Communications Fund to be established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Furthermore, in the case of a temporary acquisition of Telstra shares by a person other than the Commonwealth under a stock borrowing arrangement with the Commonwealth, the borrowed share will be taken to be held by the Commonwealth for the purposes of proposed section 8AYB (proposed subsection 8AYB(5)).

 

Proposed subsection 8AYB(7) provides that a reference in proposed section 8AYB to ‘the Commonwealth’ includes a category A hybrid-security issuer company.  This will ensure that Telstra voting shares held by a category A hybrid-security issuer company will be counted together with the voting shares held by the Commonwealth in determining the situations mentioned in proposed subsection 8AYB(1).

 

Proposed section 8AYC - Application of the Ombudsman Act 1976 to Telstra

 

The purpose of proposed section 8AYC is to ensure that Telstra would continue to be subject to the Ombudsman Act 1976 if the Commonwealth were to transfer some of its shares in Telstra to a category A hybrid-security issuer company (see item 12).  That is, the purpose is to ensure that any such transfer would not result in an unintended triggering of the ‘designated day’ referred to in subclause 3(1) of the Bill.

 

The Ombudsman Act allows the Ombudsman to investigate action taken by a Department or a ‘prescribed authority’.  Section 3 of the Ombudsman Act provides that a prescribed authority includes a Commonwealth-controlled company that is a prescribed authority by virtue of section 3A of that Act.  Section 3A provides that a Commonwealth-controlled company is a prescribed authority unless certain exclusions apply (none of which is relevant for present purposes). 

 

‘Commonwealth-controlled company’ is defined in section 3 of the Ombudsman Act to mean an incorporated company in which the Commonwealth ‘has an interest’ that enables the Commonwealth to control the composition of the board of directors, or the majority of votes that might be cast at a general meeting or a majority of the issued share capital of the company.  If the Commonwealth were to transfer some of its shares in Telstra to the hybrid-issuer security company, proposed section 8AYC will ensure that Telstra will continue to be a ‘Commonwealth controlled company’ for the purposes of the Ombudsman Act notwithstanding the transfer.

 

Proposed section 8AYD - Controlling interest in Telstra

 

Proposed section 8AYD provides that in determining, for the purposes of the law of the Commonwealth (other than the Telstra Corporation Act) whether the Commonwealth has a controlling interest in Telstra, if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, assume that any voting rights associated with the share were held by a person other than the Commonwealth.

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is proposed that a notional transfer of some Telstra shares to the Future Fund will take place under the Future Fund Bill. 

 

The Communications Fund to be established the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Item 28 - Insertion of proposed subsection 8BA(4) of the Telstra Corporation Act

 

Subsection 8BA(3) of the Telstra Corporation Act provides an appropriation for the payment of compensation for any acquisition of property otherwise than on just terms as the result of a Telstra sale scheme.

 

Section 53 of the Constitution provides that a proposed law appropriating revenue or moneys shall not ‘originate in the Senate’.  Item 28 therefore inserts proposed subsection 8BA(4) which temporarily ‘switches off’ the appropriation in subsection 8BA(3).  The appropriation in subsection 8BA(3) will be ‘switched on’ again following the passage and Royal Assent of this Bill and the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 6 of Schedule 4 of that Bill).

 

Items 29 to 34- Amendments of sections 8CI, 8CJ, 8CK and 8CL of the Telstra Corporation Act

 

Items 29 to 34 make minor technical amendments consequential on the proposed repeal of Division 2 of Part 2 by item 8 of Schedule 1 to the Bill.

 

Item 35 - Amendment of paragraph 26(b) of the Telstra Corporation Act

 

Paragraph 26(b) of the Telstra Corporation Act provides that Telstra is taken for the purposes of laws of the Commonwealth, of a State or of a Territory not to be a public authority or an instrumentality or agency of the Crown.  Item 35 amends paragraph 26(b) to add the words ‘(however described)’ after ‘Crown’.  The purpose of this amendment is to ensure that the provision has the widest possible operation to avoid Telstra being found by a judge to be an emanation of the Crown having regard to the variable language used by Commonwealth, State and Territory legislation when describing public entities.  The amendment is made out of abundant caution.

 

Item 36 - Insertion of new Part 2C of the Telstra Corporation Act -

Re-affirmation of the universal service obligation, the digital data service obligation and the customer service guarantee

 

Item 36 inserts a new Part 2C of the Telstra Corporation Act to re-affirm the universal service obligation, the digital data service obligation and the customer service guarantee provisions of Parts 2 and 5 of the Telecommunications (Consumer Protection and  Service Standards) Act 1999 (the Telecommunications (Consumer Protection and Service Standards) Act).

 

Proposed section 8CM - Re-affirmation of universal service obligation and digital data service obligation

 

Part 2 of the Telecommunications (Consumer Protection and Service Standards) Act currently imposes a universal service obligation (USO) on telecommunications carriers to ensure that standard telephone services (ie. voice telephony) and payphones are reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business.  The complementary digital data service obligation (DDSO) underpins access on request to a 64 kbps (or comparable) data service.  As an adjunct to imposing this obligation on the telecommunications industry, Part 2 also provides for the funding by telecommunications carriers of losses incurred in fulfilling the universal service obligation.  Currently Telstra is the national universal service provider and a digital data service provider together with Hotkey Internet Services Pty Ltd.

 

Standard telephone services are price-controlled and in high-cost areas the universal service provider cannot always recover the full cost of providing services from the customer.  The losses incurred by universal service providers resulting from the supply of loss-making services in the course of fulfilling the USO are shared among all carriers in proportion to their eligible revenue.  Each carrier’s contribution is currently calculated at the end of each financial year, and carriers pay their contributions in one lump sum.

 

Proposed section 8CM of the Telstra Corporation Act provides for a re-affirmation of Parliament’s intention:

 

(a)        that all people in Australia, wherever they reside or carry on business, will continue to have reasonable access, on an equitable basis, to standard telephone services, payphones and digital data services; and

 

(b)        that the universal service obligation described in section 9 of the Telecommunications (Consumer Protection and Service Standards) Act and the digital data service obligation described in section 10 of that Act should be fulfilled as efficiently and economically as possible.



Proposed section 8CN - Re-affirmation of the customer service guarantee

 

Under Part 5 of the Telecommunications (Consumer Protection and Service Standards) Act the Minister may give the Australian Communications and Media Authority (ACMA) a direction to make performance standards to be complied with by carriage service providers in relation to customer service.  Following directions from the Minister to the Australian Communications Authority (ACA), the ACMA’s predecessor, the ACA has made the Telecommunications (Customer Service Guarantee) Standard 2000 (No. 2) , as amended.  This CSG Standard cannot be varied or revoked except in accordance with the Minister’s direction (see section 125 of the Telecommunications (Consumer Protection and Service Standards) Act).

 

The object of the CSG Standard is to encourage improvements in service and to guard against poor service by requiring telephone companies to meet minimum standards.  The CSG Standard allows residential and small business customers to receive financial compensation where performance requirements set out in the CSG Standard are not met.

 

Under the CSG Standard, telephone companies are legally required to meet standards on the time taken:

 

(a)        to connect standard telephone services;



(b)        to repair a fault or service difficulty; and



(c)        to attend appointments with customers.

 

The CSG Standard covers the supply of standard telephone services, including voice grade services used to access the Internet or for facsimile.  The CSG Standard does not apply to mobile services (except to the extent that a mobile service is supplied to fulfil the universal service obligation), customer equipment or to customers who have more than five telephone services.

 

Proposed section 8CN of the Telstra Corporation Act re-affirms Parliament’s intention that the Minister will take all reasonable steps to ensure that:



(a)        the ACMA continues to make performance standards to be complied with by carriage service providers in relation to customer service; and



(b)        if a carriage service provider contravenes a performance standard, the carriage service provider will continue to be liable to pay damages to the customer for the contravention.

 

Item 37 - Amendment of paragraph 9(3)(b) of the Schedule to the Telstra

Corporation Act

 

Subclause 9(3) of the Schedule to the Telstra Corporation Act provides for interests in Telstra shares acquired by underwriters and sub-underwriters in relation to the issue of shares in Telstra under a Telstra sale scheme to be disregarded in certain circumstances.  This exemption has not been useful because Telstra sale schemes have involved sales rather than the issue of shares.

 

Item 37 therefore extends subclause 9(3) of the Schedule to underwriting and sub-underwriting of sales and not just issues of Telstra shares, and of Telstra sale schemes generally.

 

Item 38 - Insertion of proposed subclauses 12(4AA) and 12(4AB) of the Schedule to the Telstra Corporation Act

 

Subclause 12(4A) of the Schedule to the Telstra Corporation Act provides that in determining the direct control interest of a particular type that a person holds in Telstra, it is to be assumed that the only shares in Telstra are the shares held by persons other than the Commonwealth.

 

Item 38 inserts a new subclause 12(4AA) in the Schedule to provide that for the purposes of subclause 12(4A) of the Schedule, if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, it will be taken to be held by a person other than the Commonwealth.  Item 38 also inserts a new subclause 12(4AB) to give the Minister for Finance and Administration the flexibility to specify that certain Telstra shares held by the Commonwealth are taken to be held by a person other than the Commonwealth for the purposes of subclause 12(4A) should it be necessary to do so as part of a Telstra sale scheme.

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is proposed that a notional transfer of some Telstra shares to the Future Fund will take place under the Future Fund Bill. 

 

The Communications Fund to be established by the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Item 39 - Amendment of subclause 12(4B) of the Schedule

 

Subclause 12(4B) of the Schedule to the Telstra Corporation Act provides that for the purpose of subclause 12(4A), discussed in item 38 above, ‘share’ does not include an interest in a share.

 

Item 39 omits the reference to ‘subclause 12(4A)’ and substitutes a reference to ‘subclauses (4A), (4AA) and (4AB)’.  This amendment is consequential on the amendment made by item 38.

 

Item 40 - Insertion of new subclause 12(8) of the Schedule

 

Item 40 provides that a declaration by the Minister for Finance and Administration under proposed paragraph 12(4AB)(b) (discussed in the notes on item 38) is a legislative instrument for the purposes of the Legislative Instruments Act.  It will therefore be required to be registered on the Federal Register of Legislative Instruments and tabled in Parliament.  However, in the interests of ensuring certainty in connection with a Telstra sale scheme during the short Telstra sale scheme offer period, the Minister’s declaration will not be subject to Parliamentary disallowance.

 

Part 2--Amendments commencing on the designated day

 

Administrative Decisions (Judicial Review) Act 1977 (ADJR Act)

 

Item 41 - Insertion of paragraph (va) of Schedule 1 to the ADJR Act

 

The ADJR Act currently allows a person aggrieved by a decision of an administrative character taken by Telstra under an enactment to apply to the Federal Court for a review of that decision or to request a statement of reasons for the decision from Telstra.  Decisions that Telstra makes under telecommunications legislation (in particular, the Telecommunications (Consumer Protection and Service Standards) Act and instruments made under that Act) could possibly be characterised as decisions of an administrative character under an enactment. 

 

Item 41 inserts a new paragraph (va) of Schedule 1 to the ADJR Act to ensure that with effect from the designated day (the day on which the Minister for Communications, Information Technology and the Arts declares that a majority of the voting shares in Telstra are held by persons other than the Commonwealth - see subclause 3(1)), decisions of Telstra or a subsidiary of Telstra will not be subject to the ADJR Act.  Comparable exemptions for Qantas Airways Limited, Snowy Mountains Engineering Corporation Limited and CSL Limited are contained in paragraphs (t), (u) and (v) of Schedule 1 to the ADJR, being exemptions put in place as a result of the change in the status of these companies from Commonwealth-owned companies to fully privatised companies.

 
Archives Regulations

 

Item 42 - Repeal of regulation 2A of the Archives Regulations

 

Item 42 repeals regulation 2A of the Archives Regulations.  Regulation 2A refers to ‘AOTC’ (which refers to the Australian and Overseas Telecommunications Corporation, a predecessor to what is now Telstra Corporation Limited) and prescribes AOTC and its subsidiary companies to be Commonwealth authorities for the purposes of paragraph (c) of the definition of ‘authority of the Commonwealth’ in subsection 3(1) of the Archives Act 1983 .  Paragraph (c) provided that the definition of ‘authority of the Commonwealth’ in subsection 3(1) of the Archives Act included a ‘prescribed company or association over which the Commonwealth is in a position to exercise control’ and was amended by the Archives Amendment Act 1995 to define a Commonwealth-controlled company or a Commonwealth-controlled association to be an authority of the Commonwealth.

 

The effect of regulation 2A, by prescribing the AOTC to be a Commonwealth authority, is that Telstra is an authority of the Commonwealth for the purposes of the Archives Act.  It is proposed to repeal regulation 2A because Telstra will no longer be a Commonwealth authority for the purposes of the Archives Act once it ceases to be controlled by the Commonwealth.  Regulation 2A will therefore be repealed with effect from the ‘designated day’. The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Section 28A of the Archives Act provides that if a company that is an authority of the Commonwealth ceases, on a particular day, to be such an authority of the Commonwealth, then, despite the company so ceasing:

 

(a)        the records of the company that were in existence prior to that day continue to be Commonwealth records for the purposes of the Archives Act; and



(b)        the National Archives of Australia may make arrangements with the company to enable those records to be dealt with in accordance with the provisions of Part V of the Archives Act (dealing with Commonwealth records) as if Telstra had not ceased to be an authority of the Commonwealth.

 

Telstra will therefore have to make arrangements with the National Archives of Australia to enable its records to be dealt with in accordance with the Archives Act.  Any Telstra records will continue to be Commonwealth records after the designated day and cannot be transferred unless this is authorised in accordance with paragraph 24(2)(b) of the Archives Act.  The usual practice is for the National Archives to make arrangements with the company concerned (in this case Telstra) for the disposition of existing records based on the continuing needs of the Commonwealth and the public and the business needs of the company.  This may involve transferring the ownership of some records of Telstra with no conditions attached, transferring the ownership of some records with conditions attached (such as non-destruction for a specified time and a continuing right of access by the Commonwealth) and identifying records which constitute the archival resources of the Commonwealth.  The ownership of this last group is not transferred from the Commonwealth although arrangements may be made for the company to have access to such records or to have copies.

 

Australian Security Intelligence Organisation Act 1979 (ASIO Act)

 

Items 43 to 46 - Amendments of section 4 and subsections 26(8) and 27A(5) of the ASIO Act

 

Subsections 26(8) and 27A(5) of the ASIO Act refer to ‘a telecommunications system controlled by Telstra Corporation Limited’.  Given the current structure of the telecommunications industry and the ability of any constitutional corporation to be licensed as a telecommunications carrier, items 45 and 46 amend subsections 26(8) and 27A(5) to replace references to a telecommunications system operated by Telstra Corporation Limited with references to a telecommunications system operated by a carrier or carriage service provider within the meaning of the Telecommunications Act 1997 .

 

Items 43 and 44 insert definitions of ‘carrier’ and ‘carriage service provider’ in section 4 of the ASIO Act as a consequence of the amendments made by items 45 and 46.

 

Freedom of Information Act 1982

 

Item 47 - Amendment of Division 1 of Part II of Schedule 2 to the FOI Act

 

Item 47 amends Division 1 of Part II of Schedule 2 to the Freedom of Information Act 1982 (FOI Act) to remove the entry in that Division relating to Telstra Corporation Limited.

 

Section 7 of the FOI Act exempts certain persons, bodies and Departments specified in Part II of Schedule 2 to the FOI Act from the operation of the FOI Act in relation to the documents referred in Schedule 2.  Division 1 of Part II of Schedule 2 specifies Telstra Corporation Limited to be exempt from the operation of the FOI Act ‘in relation to documents in respect of its commercial activities’.  Telstra is otherwise subject to the operation of the FOI Act because it is a ‘prescribed authority’ under Schedule 1 to the Freedom of Information (Miscellaneous Provisions) Regulations 1982 (the FOI Regulations) (see definition of ‘agency’ in section 4 of the FOI Act).

 

The reason for the proposed amendment is that Telstra will no longer be a Commonwealth authority once it ceases to be controlled by the Commonwealth.  The proposed amendment to the FOI Act will therefore commence from the ‘designated day’.  The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Freedom of Information (Miscellaneous Provisions) Regulations 1982

 

Item 48 - Amendment of Schedule 1 to the FOI Regulations

 

Item 48 omits the reference to Telstra Corporation Limited in Schedule 1 to the FOI Regulations.  Regulation 3 and Schedule 1 to the FOI Regulations specify the bodies that are prescribed authorities for the purposes of the definition of ‘agency’ in the FOI Act.  Subsection 4(1) of the FOI Act defines ‘agency’ to mean a Department, a prescribed authority or an eligible case manager.  Section 11 of the FOI Act provides that every person has a legally enforceable right to obtain access, in accordance with the FOI Act, to a document of an agency other than an exempt document.

 

It is proposed to omit the reference to Telstra Corporation Limited from Schedule 1 to the FOI Regulations because it would be inappropriate that Telstra continue to be a prescribed authority for the purposes of the FOI Act after it ceases to be a Commonwealth authority.  The proposed amendment will therefore commence from the ‘designated day’.  The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Item 49 - Repeal of Schedule 2 (table item 125A) to the FOI Regulations

 

Schedule 2 to the FOI Regulations specifies offices as principal offices for the purpose of the definition of ‘principal officer’ in paragraph (b)(i) of that definition in subsection 4(1) of the FOI Act (see regulation 4 of the FOI Regulations).  This provision provides that a ‘principal officer’ means, in relation to a prescribed authority, the person holding, or performing the duties of an office that is declared to be a principal office in respect of the authority by the regulations.  Table item 125A in Schedule 2 to the FOI Regulations specifies the office of Chief Executive Officer to be the principal office for Telstra Corporation Limited.

 

The proposed amendment will repeal table item 125A.  The proposed amendment is consequential to the proposed amendment in item 47 because that item will result in the FOI Act no longer applying to Telstra once it ceases to be a Commonwealth authority.  Once this occurs, there will also be no need for a principal office to be specified for Telstra for the purposes of the FOI Act.  As will be the case with the proposed amendment in item 47, the proposed amendment will commence from the ‘designated day’. The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Item 50 - Repeal of Schedule 3 (table item 12) to the FOI Regulations

 

Schedule 3 to the FOI Regulations specifies the Minister responsible for prescribed authorities under the FOI Act.  Subsection 4(1) of the FOI Act defines ‘responsible Minister’ in relation to a prescribed authority (other than in relation to a prescribed authority referred to in paragraph (a) or (c) of the definition of prescribed authority) to be the Minister declared by the regulations to be the responsible Minister in respect of that authority.

 

Table item 12 in Schedule 3 to the FOI Regulations specifies the Minister for Communications, Information Technology and the Arts (the effect of the Acts Interpretation (Substituted References - Section 19B) Amendment Order 1997 made by the Governor-General on 29 October 1997 is that the reference to the ‘Minister for Communications and the Arts’ is read as the ‘Minister for Communications, Information Technology and the Arts’) to be the responsible Minister in respect of Telstra Corporation Limited.

 

The proposed amendment will repeal table item 12.  The proposed amendment is consequential to the proposed amendment in item 47 because that item will result in the FOI Act no longer applying to Telstra once it ceases to be a Commonwealth authority.  Once this occurs, there will also be no need for a responsible Minister to be specified for Telstra for the purposes of the FOI Act.  As will be the case with the proposed amendment in item 47, the proposed amendment will commence from the ‘designated day’. The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Item 51 - Transitional ¾ requests under the Freedom of Information Act 1982

 

Item 51 is a transitional provision that deals with FOI requests made to Telstra which have not been disposed of before the commencement of the item.  Item 51 also deals with requests for review by the Administrative Appeals Tribunal (AAT) of a decision Telstra had made under the FOI Act in relation to a particular document but which had not been disposed of before the commencement of item 51.

 

As a result of the proposed amendments in items 47 to 50, on the ‘designated day’ (ie the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth) the FOI Act and the FOI Regulations will no longer apply to Telstra because Telstra will not be an ‘agency’ for the purposes of the FOI Act.  The provision in item 51 will deal with the situation where an FOI request made to Telstra before the commencement of item 51 (i.e. the designated day) has not been finally disposed of immediately before that day.  In such a situation, the FOI Act and the FOI Regulations will continue to apply to that request as if the proposed amendments in items 47 to 50 had not been made.  For example, if on the designated day Telstra had not yet made a decision under the FOI Act in respect of a request for access to a document that was made before the designated day, the FOI Act will continue to apply to that request so that Telstra will be required to make a decision within the time limit specified under the FOI Act.  The ability of a FOI requestor to seek internal review of that decision will remain unaffected.  Equally, if an internal review decision had been made prior to the designated day and the designated day occurs during the period in which the FOI requestor may seek AAT review of the internal review decision, the transitional provision in subitem 51(1) will allow the FOI requestor to apply to the AAT under the Administrative Appeals Tribunal Act 1975 (AAT Act) for review of the internal review decision.

 

If a FOI requestor has made an application for AAT review of a decision of Telstra made under the FOI Act before the designated day or had requested a statement of reasons under the AAT Act, item 51 also ensures that the AAT Act will continue to apply to such an application or a request as if the amendments in items 47 to 50 (to the FOI Act and the FOI Regulations) had not occurred.

 

Long Service Leave (Commonwealth Employees) Regulations 1957

 

Item 52 - Repeal of item 4 of Schedule 1A to the Regulations

 

Item 52 repeals item 4 in Schedule 1A to the Long Service Leave (Commonwealth Employees) Regulations which declares the Australian and Overseas Telecommunications Corporation Limited (now Telstra Corporation Limited) to be a body corporate for the purposes of paragraph 4(6)(c) of the Long Service Leave (Commonwealth Employees) Act 1976 .  Paragraph 4(6)(c) of that Act provides that a reference in the Act to a person who is employed by, remunerated by, in the service of, on loan to or appointed or engaged by the Commonwealth includes a reference to a person who is employed by, remunerated by, in the service of, on loan to or appointed or engaged by a company that is declared by the regulations to be a body corporate to which this paragraph applies.

 

The purpose of the proposed amendment is to ensure that from the designated day Telstra employees will not continue to accrue benefits under the Long Service Leave (Commonwealth Employees) Act 1976 .

 

Item 64 of Schedule 1 to the Bill inserts a new Division 1 of Part 3A in the Telstra Corporation Act which includes savings provisions for Telstra employee long service leave entitlements accrued up to the designated day.

 

Maternity Leave (Commonwealth Employees) Regulations

 

Item 53 - Repeal of item 2 of Schedule 2A to the Regulations

 

Item 53 repeals item 2 in Schedule 2A to the Maternity Leave (Commonwealth Employees) Regulations which declares the Australian and Overseas Telecommunications Corporation Limited (now Telstra Corporation Limited) to be a prescribed authority for the purposes of the Maternity Leave (Commonwealth Employees) Act 1973 .  Section 5 of that Act provides that the Act applies to persons employed by a prescribed authority.

 

The purpose of the proposed amendment is to ensure that employees of Telstra do not, from the designated day, continue to be eligible for maternity leave under the Maternity Leave (Commonwealth Employees) Act 1973

 

Item 64 of Schedule 1 to the Bill inserts a new Division 4 of Part 3A in the Telstra Corporation Act which includes savings provisions for maternity leave entitlements of Telstra employees accrued up to the designated day, including benefits for those employees entitled to begin their maternity leave within the 12 months following the designated day.

 

Ombudsman Regulations 1977

 

Item 54 - Amendment of Schedule 2 (table item 15) to the Ombudsman Regulations

 

Item 54 omits a reference to Telstra in Schedule 2 to the Ombudsman Regulations.  Schedule 2 of the Ombudsman Regulations specifies the authorities that are prescribed authorities for the purposes of the Ombudsman Act 1976 .  The Ombudsman Act allows the Ombudsman to investigate action taken by a Department or a prescribed authority.  Section 3 of the Ombudsman Act provides that a prescribed authority includes a body corporate prescribed by the regulations to be a prescribed authority.

 

It is proposed to omit the reference to Telstra from Schedule 2 to the Ombudsman Regulations because Telstra will cease to be a Commonwealth authority on the ‘designated day’.  The proposed amendment will therefore commence from the ‘designated day’. The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Item 55 - Amendment of Schedule 4 (table item 17) to the Ombudsman Regulations

 

Item 55 omits a reference to Telstra in Schedule 4 to the Ombudsman Regulations.  Schedule 4 to the Ombudsman Regulations specifies principal officers in respect of prescribed authorities for the purposes of the Ombudsman Act 1976 .  Section 3 of the Act provides that the principal officer of a prescribed authority includes an officer prescribed by the regulations as such.

 

It is proposed to omit the reference to the Chief Executive Officer of Telstra from Schedule 4 to the Ombudsman Regulations because Telstra will cease to be a Commonwealth authority from the ‘designated day’.  The proposed amendment will therefore commence from the ‘designated day’.  The designated day is declared by the Minister for Communications, Information Technology and the Arts under subclause 3(1) and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Item 56 - Transitional ¾ complaints and investigations under the Ombudsman Act 1976

 

Item 56 is a transitional provision that will ensure that complaints made to the Ombudsman, and investigations commenced by the Ombudsman, before the commencement of the designated day, in relation to action by Telstra will continue to be dealt with under the Ombudsman Act and the Ombudsman Regulations as if the amendments in items 54 and 55 had not occurred.

 

It should also be noted that item 27 inserts proposed section 8AYC of the Telstra Corporation Act to ensure that Telstra would continue to be subject to the Ombudsman Act 1976 if the Commonwealth were to transfer some of its shares in Telstra to a category A hybrid-security issuer company (see item 12).  That is, the purpose is to ensure that any such transfer would not result in an unintended triggering of the ‘designated day’ referred to in subclause 3(1) of the Bill.

 
Telstra Corporation Act 1991

 

Items 57 to 63 - Amendments of section 3 of the Telstra Corporation Act

 

Items 57 to 63 insert some new definitions in section 3 of the Telstra Corporation Act that are consequential to the addition of proposed Part 3A in that Act (see item 64 in Schedule 1).

 

Item 57 inserts a definition of the term ‘designated day’ for the purposes of the new Part 3A in section 3.  Clause 3 of the Bill provides a mechanism for the Minister for Communications, Information Technology and the Arts to declare a designated day for Telstra.

 

Item 58 inserts a definition of the term ‘employee’ in section 3 because new Part 3A contains various employee benefit savings provisions.

 

Item 59 inserts a definition of the term ‘Long Service Leave Act’ in section 3 because new Part 3A contains employee benefit savings provisions relating to long service leave.

 

Item 60 inserts a definition of the term ‘Maternity Leave Act’ in section 3 because new Part 3A contains employee benefit savings provisions relating to maternity leave.

 

Item 61 inserts a definition of the term ‘SRC Act’ in section 3 consequential on the inclusion of a transitional provision relating to safety, rehabilitation and compensation by item 64 in Schedule 1 to the Bill (see proposed section 9H of the Telstra Corporation Act) and provisions dealing with the refund of licence fees under existing and former provisions of the Safety, Rehabilitation and Compensation Act 1988 in respect of the administration of the Occupational Health and Safety (Commonwealth Employment) Act 1991 (see proposed section 9R of the Telstra Corporation Act).

 

Item 62 inserts a signpost definition of the term ‘Telstra body’ in section 3 and item 63 provides for the insertion of the detailed definition of ‘Telstra body’ in proposed section 3B of the Telstra Corporation Act.  ‘Telstra body’ is defined to mean Telstra or a Telstra subsidiary.  For the purposes of the employee benefit savings provisions, a reference to a Telstra body means Telstra or a body corporate that was a Telstra subsidiary immediately before the day on which a majority of voting shares in Telstra are held by persons other than the Commonwealth (proposed subsection 3B(1)).  This will ensure the effectiveness of the savings provisions if a Telstra subsidiary subsequently ceases to be controlled by Telstra after the designated day. 

 

A reference to a Telstra body in any of the remaining provisions of the Telstra Corporation Act will be a reference to Telstra or a body corporate that is a subsidiary of Telstra at the relevant time (proposed subsection 3B(2)).

 

For the purposes of the reference to ‘the Commonwealth’ in proposed paragraph 3B(1)(b) and proposed subsections 3B(3) and (4), the Commonwealth will be taken to include a category A hybrid-security issuer company and, if a share in Telstra is an investment of the proposed Future Fund or the proposed Communications Fund, the share will be taken to be held by a person other than the Commonwealth (proposed subsections 3B(3) and (5)). 

 

At the time the Bill was introduced, the Future Fund had not yet been established.  The purpose of the Future Fund will be to strengthen the Commonwealth’s long-term financial position in dealing with unfunded superannuation liabilities.  It is proposed that the Future Fund be established by the Future Fund Bill 2005 which will identify assets that are investments of the Future Fund.  It is proposed that a notional transfer of some Telstra shares to the Future Fund will take place under the Future Fund Bill. 

 

The Communications Fund to be established the Telecommunications Legislation Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance the implementation of the Commonwealth Government’s response to the recommendations of the proposed Regional Telecommunications Independent Review Committee.  This Fund may also receive Telstra shares which may technically remain in Commonwealth ownership.

 

Furthermore, in the case of a temporary acquisition of Telstra shares by a person other than the Commonwealth under a stock borrowing arrangement with the Commonwealth, the borrowed share will be taken to be held by the Commonwealth for the purposes of proposed subsection 3B(1) (proposed subsection 3B(4)).

 

Item 64 - Insertion of new Part 3A - Transitional provisions relating to the sale by the Commonwealth of its remaining equity interest in Telstra

 

Item 64 inserts a new Part 3A in the Telstra Corporation Act dealing with transitional provisions relating to the sale of the remaining Commonwealth equity interest in Telstra.

 

The transitional provisions continue or modify certain obligations of Telstra and its subsidiaries.  They also provide for the continuation of certain employee benefits arising from pre-sale service that otherwise would be foregone due to the sale.  The savings provisions also recognise post-sale service of specific categories of employees as public employment for the purposes of qualifying for certain deferred pension benefits.

 

Many of the transitional and savings provisions operate in relation to the ‘designated day’.  Clause 3 to the Bill provides a mechanism for public notification of the day on which the Commonwealth ceases to have a controlling interest in Telstra.  The ‘designated day’ is the day declared by the Minister for Communications, Information Technology and the Arts by written instrument under subclause 3(1).

 

Part 3A--Transitional provisions relating to the sale by the Commonwealth of its remaining equity interest in Telstra

 

Division 1--Long service leave

 

Employees of Telstra currently accrue long service leave entitlements under the Long Service Leave (Commonwealth Employees) Act 1976 (the ‘LSL(CE) Act’).

 

However, for most employees, pre-sale service of less than 10 years will not normally qualify for any long service leave entitlement under the LSL(CE) Act.  To ensure equity, these provisions provide that when those employees either complete 10 years service with Telstra or cease to be employees in circumstances under which the LSL(CE) Act entitlements would have applied had a majority of voting shares in Telstra not been sold, long service leave benefits at the LSL(CE) Act standard are provided in respect of service before the designated day.

 

As a result of these provisions, a Telstra employee with 9 years’ service as at the designated day could be granted long service leave of 9/10ths of 3 months once the employee has served a further one year with a Telstra body (making a combined service period of 10 years).  The employee’s long service leave entitlements relating to service after the designated day will accrue and be credited in accordance with the long service leave regime in place after the designated day.  The Division also saves entitlements accrued under the LSL(CE) Act before the designated day (generally by those employees with at least 10 years service before the designated day).

 

Proposed section 9A of the Telstra Corporation Act - Interpretation

 

Proposed section 9A provides for the definition of terms used in this Division. 

 

Proposed subsection 9A(1) provides that unless the contrary intention appears, expressions used in Division 1 of proposed Part 3A will have the same meaning as in the LSL(CE) Act.

 

The ‘combined service period’ of an employee is defined in proposed subsection 9A(2) as the total of the employee’s service for the purposes of the LSL(CE) Act before the designated day and the employee’s service with a Telstra body after the designated day.

 

Proposed section 9B of the Telstra Corporation Act - Long service leave for employees with less than 10 years service

 

This provision applies to a person who was an employee of Telstra immediately before the designated day and whose period of service at the designated day was less than 10 years.  If the employee continues to be employed by a Telstra body (as defined in item 62 of Schedule 1 to the Bill) until his or her combined service period is at least 10 years, a Telstra body may grant the employee long service leave.

 

Proposed subsection 9B(5) provides for granting of long service leave at retirement or retrenchment as long as the employee has a combined service period of at least one year.  Leave granted under this subsection is to be taken so as to expire immediately before the employee retires or is retrenched (proposed subsection 9B(7)).

 

Proposed subsection 9B(6) allows for a Telstra body to grant long service leave on half pay.

 

Proposed subsection 9B(8) provides for the application of a modified version of section 20 of the LSL(CE) Act to calculate the rate of salary to be used in working out the full salary of an employee for the purposes of this provision.

 

In each case the period of long service leave is calculated by reference to the period of service as at the designated day (proposed section 9E).

 

Proposed section 9C of the Telstra Corporation Act - Payments in lieu of long service leave for employees with less than 10 years service

 

Proposed section 9C provides that a Telstra body (as defined in item 62 of Schedule 1 to the Bill) must, in certain circumstances, pay an amount to an employee in lieu of the employee taking long service leave (proposed subsection 9C(1)).  For proposed section 9C to apply, an employee must have been an employee of Telstra immediately before the designated day and not have accrued a period of service under the LSL(CE) Act of 10 or more years at that time (proposed subsection 9C(2)).

 

Proposed section 9C applies to persons who cease to be employees of Telstra after the designated day, but not to those who cease to be employees because they die (proposed subsection 9C(3)).  If a person ceases to be an employee and has at that time a combined service period of at least 10 years, the employing Telstra body must pay the person an amount in lieu of long service leave (proposed subsection 9C(4)) unless he or she has requested the Telstra body otherwise (proposed subsections 9C(7) and (8)).  This includes a person who voluntarily leaves employment prior to reaching the minimum retirement age.

 

If a person does not have a combined service period of 10 years or more, but does have a combined service period of at least one year then unless the person has requested the relevant Telstra body otherwise (proposed subsections 9C(7) and (8)) he or she is entitled to be paid an amount in lieu of long service leave if the reason that he or she ceases to be an employee is:

 

·       that he or she has reached minimum retirement age or because of retrenchment (proposed subsection 9C(5)); or

 

·       because of ill health (proposed subsection 9C(6)).

 

The amount that an employee is paid in lieu is equivalent to his or her full salary in respect of his or her long service leave credit under proposed subsection 9E(2). 

 

Proposed subsection 9C(9) provides for the application of a modified version of section 21 of the LSL(CE) Act to calculate the rate of salary to be used in working out the full salary of an employee for the purposes of this provision.

 

Proposed section 9D of the Telstra Corporation Act - Payments on the death of an employee

 

Proposed section 9D requires payment to a deceased employee’s dependant (or dependants) of the amount that would have been payable to the employee under proposed section 9C on the day of the employee’s death, as if the employee had at that time stopped being an employee having reached the minimum retirement age.  This provision applies if immediately before the designated day the employee had less than 10 years’ service and at the time of death had a combined service period of at least one year and one or more dependants.

 

Proposed section 9E of the Telstra Corporation Act - Employee’s long service leave credit for the purposes of sections 9B and 9C

 

Proposed section 9E defines the long service leave credit of a Telstra employee as being equal to the employee’s long service leave credit under the LSL(CE) Act as at the designated day.  In cases falling under proposed section 9C, the long service leave credit is reduced by any amount of leave already taken under proposed section 9B.

 

Proposed section 9F of the Telstra Corporation Act - Division not to affect an employee’s post-sale long service leave rights

 

Proposed section 9F is included to avoid doubt and declares that the provisions of the Division do not affect an employee’s post-sale long service leave rights (as defined in proposed subsection 9A(2)). 

 

Long service leave associated with service after the designated day with Telstra will be a matter for Telstra and its employees to agree in the context of relevant State and Territory legislation.

 

Proposed section 9G of the Telstra Corporation Act - Saving - Long Service Leave Act

 

Proposed section 9G ensures that accrued long service leave credits (ie for those employees with 10 or more years of service on the designated day) arising from previous service with Telstra under the LSL(CE) Act are retained post-sale and are able to be dealt with by Telstra as if it were an approving authority under that Act.

 

Division 2--Operation of the Safety, Rehabilitation and

Compensation Act 1988 (‘SRC Act’)

 

Proposed section 9H of the Telstra Corporation Act - Operation of section 128A of the SRC Act

 

Proposed section 9H provides that Telstra will continue to be liable, on or after the designated day, as a prescribed Commonwealth authority for the purposes of section 128A of the SRC Act.  Telstra will therefore continue to be liable to pay an amount in respect of an injury, loss or damage suffered by one of its employees prior to 1 July 1989.

 

Division 3--Retirement benefits

 

Proposed section 9J of the Telstra Corporation Act - Deferred benefits under the Defence Force Retirement and Death Benefits Act 1973

 

Proposed section 9J relates to the Defence Force Retirement and Death Benefits Act 1973 (the ‘DFRDB Act’).  Current employees of a Telstra body (defined in item 62 of Schedule 1 to the Bill) who were formerly members of the Defence Force and who have elected to take deferred benefits under the DFRDB Act are required to complete an aggregate of 20 years (in most circumstances) in the Defence Force or in subsequent public employment to enable benefits to be paid.

 

In the absence of a specific provision, an employee who has not served the required period prior to the Commonwealth ceasing to have a controlling interest in a Telstra body would lose his or her entitlement to the benefits available under the DFRDB Act.

 

Proposed section 9J is intended to enable former members of the Defence Force who:

 

·       are employed by a Telstra body immediately before the designated day;

 

·       had deferred their benefits under the DFRDB Act; and

 

·       were accruing service in public employment with that body;

 

to count employment with the Telstra body as public employment even after the designated day.

 

Subject to relevant eligibility criteria, these employees would be entitled to their deferred benefits if they remain with the Telstra body (or in other public employment) until the qualifying period (usually 20 years) is completed.

 

Proposed section 9K of the Telstra Corporation Act - Period of eligible employment for the purposes of Division 3 of Part IX of the Defence Force Retirement and Death Benefits Act 1973

 

Proposed section 9K provides that any period of employment with a Telstra body which would have been eligible employment for the purposes of Division 3 of Part IX of the DFRDB Act (which allows for the preservation of rights of contributing members who cease to be members of the Defence Force), prior to the designated day will continue to be regarded as eligible employment for the purposes of the person qualifying for deferred benefits.

 

Proposed section 9L of the Telstra Corporation Act - Application of the Superannuation Act 1976

 

Proposed section 9L provides that if an employee of a Telstra body (as defined in item 62 of Schedule 1) was an eligible employee for the purposes of the Superannuation Act 1976 immediately before the designated day, the employee is taken to have ceased to be an eligible employee for the purposes of that Act on the designated day.  Employees of a Telstra body will no longer be entitled to contribute to the Commonwealth Superannuation Scheme (CSS) established under that Act.

 

From the designated day, employees of Telstra who are members of the CSS will have various options in relation to their superannuation benefits which are provided for in the Superannuation Act 1976 and regulations made under that Act.

 

Division 4--Other transitional and saving provisions

 

Proposed section 9M of the Telstra Corporation Act - Telstra employees not on maternity leave immediately before the designated day

 

Certain Telstra employees are currently entitled to benefits provided under the Maternity Leave (Commonwealth Employees) Act 1973 (the ‘ML(CE) Act’) including maternity leave of up to 12 months, of which 12 weeks may be on full pay and the remainder without pay.

 

Proposed section 9M will preserve the entitlements of women employed by Telstra on the designated day to apply for, and be granted leave under, the ML(CE) Act provided that the woman would have been entitled to begin such leave within 12 months of the designated day.

 

Proposed section 9N of the Telstra Corporation Act - Telstra employees on maternity leave on the designated day

 

Proposed section 9N preserves the existing rights of those employees who are on maternity leave on the designated day.

 

Proposed section 9P of the Telstra Corporation Act - Saving - Crimes (Superannuation Benefits) Act 1989

 

The Crimes (Superannuation Benefits) Act 1989 will cease to apply to acts or omissions of employees of a Telstra body (as defined in item 62 of Schedule 1 to the Bill) that would or might constitute corruption offences, where those acts or omissions occur on or after the designated day.

 

The term ‘corruption offence’ is defined in section 3 of the Crimes (Superannuation Benefits) Act and this definition will apply for the purposes of proposed section 9P of the Telstra Corporation Act (see proposed subsection 9P(6)).  A corruption offence is an offence by a person who was an employee at the time when it was committed, being an offence:

 

(a)                 whose commission involved an abuse by the person of his or her office as such an employee; or



(b)                that, having regard to the powers and duties of such an employee, was committed for a purpose that involved corruption; or



(c)                 that was committed for the purpose of perverting, or attempting to pervert, the course of justice.

 

Proposed subsection 9P(1) allows the Act to continue to apply in relation to a corruption offence committed by an employee of a Telstra body before the designated day.

 

Proposed subsection 9P(2) prevents a superannuation order made by a Court under the Act from affecting employer superannuation contributions made by a Telstra body on or after the designated day.

 

Proposed subsection 9P(3) provides that a superannuation scheme to which a Telstra body contributes as an employer on or after the designated day is not a superannuation scheme for the purposes of the Act in relation to a corruption offence committed after the designated day, and employer contributions to that scheme may not therefore be the subject of a superannuation order.

 

Proposed subsection 9P(4) provides that where a superannuation order may be made affecting an employee’s entitlements under the Commonwealth Superannuation Scheme and employer contributions in relation to that person’s membership of the Scheme have been paid but no corresponding benefits have been paid to the person, then the superannuation order can only order that an amount be paid to the Commonwealth.

 

Proposed subsection 9P(5) provides that where an employee has received a superannuation payment from the Consolidated Revenue Fund then the relevant superannuation order is that the employer contributions and interest component are to be repaid to the Commonwealth. 

 

Proposed section 9Q of the Telstra Corporation Act - Saving - Director of Public Prosecutions Act 1983

 

Proposed section 9Q ensures that the Director of Public Prosecutions Act 1983 continues to apply to acts or omissions that occurred prior to the designated day and that civil remedies in relation to those matters can continue to be pursued.  This provision is required because the Director of Public Prosecutions Act will no longer apply to a Telstra body as a ‘Commonwealth authority’ from the designated day.

 

Proposed section 9R of the Telstra Corporation Act - Refund of part of fee paid under section 104A of the Safety, Rehabilitation and Compensation Act 1988

 

Proposed section 9R provides for a refund by Comcare to Telstra if the designated day falls part way through a financial year and Telstra has paid a licence fee under section 104A of the Safety, Rehabilitation and Compensation Act 1988 (referred to as the SRC Act - see item 61 of Schedule 1) in respect of the administration of the Occupational Health and Safety (Commonwealth Employment) Act 1991 (OH&S Act).

 

For the financial years commencing on and after 1 July 2003, the fee associated with the administration of the OH&S Act in relation to Telstra is charged under section 104A of the Safety, Rehabilitation and Compensation Act 1988 .  On 6 June 2003 Telstra was granted a new licence by the Safety, Rehabilitation and Compensation Commission under Part VIII of that Act effective from 1 July 2003.  The licence fee payable under section 104A represents an amount estimated by the Commission and Comcare in carrying out their respective functions under the OH&S Act during a financial year.

 

Item 65 - Amendment of section 36 of the Telstra Corporation Act

 

Section 36 of the Telstra Corporation Act requires the Auditor-General to be the auditor of Telstra.

 

Proposed subsection 36(1) will enable the Auditor-General to resign as Telstra’s auditor by written notice given to Telstra at any time on or after the designated day.  The designated day is declared by the Minister for Communications, Information Technology and the Arts under clause 3 of the Bill and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are held by persons other than the Commonwealth.

 

Proposed subsection 36(2) provides for the repeal of existing subsections 36(3), 36(3A) and (4) at the earlier of:

 

·       the time when the Auditor-General resigns;



·       the end of the first annual general meeting of Telstra held after the designated day.

 

Subsection 36(3) provides that the Auditor-General is taken to have been appointed under section 327 of the Corporations Act 2001 (see now section 327A of that Act) to be auditor of Telstra from its formation.  Subsection 36(3A) allows for an additional auditor to be appointed provided that the appointment complies with subsection 327(7) of the Corporations Act (see now subsection 328A(1) of that Act which requires the person appointed to have consented to the appointment) and the Telstra Board has consulted with the Auditor-General.  Subsection 36(4) provides that section 328 (Nomination of auditors - see now section 328B) and section 329 (Removal and Resignation of Auditors) of the Corporations Act do not apply in relation to the Auditor-General’s appointment as auditor of Telstra. 

 

Proposed subsection 36(2A) provides that even if subsections 36(3), (3A) and (4) remain in effect until the end of the first annual general meeting of Telstra held after the designated day, a replacement auditor may be appointed at the meeting, in accordance with the Corporations Act as if a vacancy in the office of auditor had arisen at the start of the meeting.

 

Part 3--Amendments commencing on the 85% sale day

 

Telstra Corporation Act 1991

 

Part 3 of Schedule 1 to the Bill will repeal Division 3 of Part 2 of the Telstra Corporation Act, which imposes reporting obligations on Telstra and Part 3 of the Telstra Corporation Act, which gives the Minister for Communications, Information Technology and the Arts the power to give Telstra such directions as appear to the Minister to be necessary in the public interest.  It will also repeal proposed section 8AYA, inserted by item 27 of Schedule 1 to the Bill, which enables the Minister for Finance and Administration to direct Telstra not to dilute the Commonwealth’s equity in Telstra.  The object of proposed section 8AYA is to ensure that any proposed access by Telstra to equity markets outside a Telstra sale scheme does not compromise the Commonwealth’s objective of divesting its entire equity in Telstra.

 

It is proposed to repeal these provisions when the Minister for Communications, Information Technology and the Arts is satisfied that the Commonwealth’s equity has fallen to 15 per cent or less, known as the ‘85% sale day’ (see item 4 in the table under subclause 2(1) and subclause 4(1)).  This threshold is consistent with the level at which substantial interest considerations are triggered under the Foreign Acquisitions and Takeovers Act 1975 .  It has been chosen to help ensure that if a multiple tranche sale is necessary, the Commonwealth continues to be fully informed on Telstra’s activities and plans until the Commonwealth ceases to hold a substantial interest in Telstra.

 

The Minister for Communications, Information Technology and the Arts will be required to declare the 85% sale day by written instrument (subclause 4(1)).  The Minister’s declaration will have effect accordingly (subclause 4(2)). 

 

Item 66 - Amendment of section 8AA of the Telstra Corporation Act

 

Item 66 makes a minor amendment to the simplified outline of Part 2 of the Telstra Corporation Act consequential on the amendment made by item 67.

 

Item 67 - Repeal of Division 3 of Part 2 of the Telstra Corporation Act

 

Division 3 of Part 2 of the Telstra Corporation Act sets out special reporting requirements for Telstra, including the giving of financial statements, notification of significant events, keeping Ministers informed and requirements for corporate plans.

 

It is inappropriate to continue to have special reporting requirements that favour the Commonwealth in a situation where the Commonwealth’s equity interest in Telstra has fallen to 15% or less.

 

Accordingly, item 67 provides for the repeal of Division 3 of Part 2 with effect from the 85% sale day.

 

Items 68 to 70 - Amendment of subsection 8AW(1), paragraph 8AX(1)(a) and subsection 8AY(1) of the Telstra Corporation Act

 

Items 68 to 70 make minor technical amendments to subsection 8AW(1), paragraph 8AX(1)(a) and subsection 8AY(1) of the Telstra Corporation Act consequential on the repeal of Division 3 of Part 2 by item 67.

 

Item 71 - Repeal of section 8AYA of the Telstra Corporation Act

 

Item 71 repeals proposed section 8AYA with effect from the 85% sale day.  Proposed section 8AYA, inserted by item 27 of Schedule 1 to the Bill, enables the Minister for Finance and Administration to direct Telstra not to dilute the Commonwealth’s equity in Telstra.  The object of proposed section 8AYA is to ensure that any proposed access by Telstra to equity markets outside a Telstra sale scheme does not compromise the Commonwealth’s objective of divesting its entire equity in Telstra.

 

It is unnecessary for section 8AYA to continue to operate in a situation where the Commonwealth’s equity interest in Telstra has fallen to 15% or less.  Accordingly, item 71 provides for the repeal of proposed section 8AYA with effect from the 85% sale day.

 

Item 72 - Repeal of Part 3 of the Telstra Corporation Act

 

Part 3 of the Telstra Corporation Act gives the Minister for Communications, Information Technology and the Arts the power to give Telstra such directions as appear to the Minister to be necessary in the public interest after consultation with the Telstra Board.

 

Item 72 provides for the repeal of that Part with effect from the 85% sale day, which is the day when the Minister for Communications, Information Technology and the Arts is satisfied that the Commonwealth’s equity in Telstra has fallen to 15 per cent or less.  It would be inappropriate to retain such a power in a situation where the Commonwealth’s equity interest in Telstra has fallen to this level. 

 

The public interest in telecommunications is protected through the comprehensive community and regulatory safeguards set out in the Telecommunications Act 1997 , the Telecommunications (Consumer Protection and Service Standards) Act 1999 , the Telstra Corporation Act 1991 and Parts XIB and XIC of the Trade Practices Act 1974 .  Section 581 of the Telecommunications Act gives the Australian Communications and Media Authority a broad power of direction over carriers and carriage service providers in relation to the performance of its telecommunications functions and powers.  Section 159 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 also empowers the Minister to direct Telstra to comply with that Act.  An additional power of Ministerial direction over Telstra in the Telstra Corporation Act is unnecessary and furthermore conflicts with the rights of other shareholders in the company.