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Thursday, 14 May 1987
Page: 3245

Mr BARRY JONES (Minister for Science)(4.58) —I move:

That the Bill be now read a second time.

In his Press releases of 11 June, 30 July and 22 December 1986, the Treasurer (Mr Keating) announced various operating standards which superannuation funds and approved deposit funds will be required to meet in order to be eligible for relevant taxation concessions. These standards were established following consultations with various interested groups and against the background of the Government's concern to ensure that superannuation arrangements are directed at meeting genuine retirement needs and that members' entitlements are protected.

The Treasurer also referred in his June 1986 statement to the Government's decision to establish a new body called the Insurance and Superannuation Commission to be headed by a new statutory officer. The Commission would bring together the existing offices of Insurance Commissioner, Life Insurance Commissioner and Australian Government Actuary as well as the proposed office relating to occupational superannuation.

Mr Jacobi —Long overdue.

Mr BARRY JONES —I draw attention to the fact that this is one of a long series of reforms that have been advocated for many years by the honourable member for Hawker (Mr Jacobi).

Mr Jacobi —Things have moved slowly.

Mr BARRY JONES —I would have thought that, relatively speaking, eight years would represent lightening speed. I take this opportunity to commend the work of the honourable member for Hawker in this area.

The three Bills now before the House namely-The Occupational Superannuation Standards Bill 1987, the Insurance and Superannuation Commissioner Bill 1987, and the Insurance and Superannuation Commissioner (Consequential Provisions) Bill 1987-give effect to these announcements.

The Occupational Superannuation Standards Bill 1987 is the principal of the current Bills. Its purpose is to establish the conditions and the supervisory requirements which superannuation funds and ADFs must meet in order to be eligible for concessional taxation treatment under the Income Tax Assessment Act. The Bill provides that these supervisory functions are to be performed by a newly created office-the Insurance and Superannuation Commissioner.

The purpose of the Insurance and Superannuation Commissioner Bill 1987 is to create the position of Insurance and Superannuation Commissioner-ISC-and thereby establish an Insurance and Superannuation Commission. The basic objective of the Government's decision to establish such a commission was to achieve improved efficiency and co-ordination through the integration of the Commonwealth's various insurance, superannuation and actuarial functions. It was also seen as better reflecting the growing importance of the insurance and superannuation industries in the national economy.

Further detailed examination of the proposal has confirmed that the benefits to be gained from such integration are substantial but has also made it clear that the maximum benefits will flow more quickly and efficiently if the formal responsibilities of statutory office were concentrated in the one position of Insurance and Superannuation Commissioner. This approach is reflected in the Bills before us, which rather than adding, as originally envisaged, two additional statutory positions to those already existing, establish the new senior statutory position of Insurance and Superannuation Commissioner and removes the statutory positions of Life Insurance Commissioner and Insurance Commissioner. The proposed statutory office of Occupational Superannuation Commissioner is also not being established.

The purpose of the Insurance and Superannuation Commissioner (Consequential Provisions) Bill 1987 is therefore to amend the Life Insurance Act 1945, the Insurance Act 1973 and other insurance legislation to remove the statutory positions of Life Insurance Commissioner and Insurance Commissioner and place their statutory responsibilities in the hands of the new Insurance and Superannuation Commission-which I seem to have said several times before.

Mr Shack —Sounds like musical chairs.

Mr BARRY JONES —But only one can sit at any time. The new arrangements will not remove the legislative and institutional distinctions embodied in the Insurance Act 1973 and the Life Insurance Act 1945. These Acts will remain in force and the specialist nature of the two industries will also be reflected in the management structure of the new Commission. Thus, occupants of the former positions of Insurance Commissioner and Life Insurance Commissioner-I do not know why it is not life `assurance', but there you are-will hold positions in the new Insurance and Superannuation Commission, with equivalent status under the Public Service Act, of Deputy Commissioner (General) and Deputy Commissioner (Life). The proposed legislation allows the Insurance and Superannuation Commissioner to delegate to these officers all the powers necessary for them to efficiently administer the specialist legislation. Similar arrangements will apply in the occupational superannuation area with the creation of the position of Deputy Commissioner (Occupational Superannuation).

The existing statutory office-holders fully support and have encouraged the Government to adopt the change in approach. They have done so in recognition of the benefits to be derived from the greater integration of the various functions and the difficulties in achieving that objective which could arise from maintaining a number of specific statutory offices. The Government will, of course, ensure that the conditions on which the commissioners were appointed will be fully protected.

The status and efficiency of the insurance and superannuation regulatory bodies will be significantly enhanced by the greater administrative and management autonomy, as well as the policy responsibilities, which it is intended will reside with the Insurance and Superannuation Commission. The integration of policy responsibilities with the regulatory and industry liaison functions of the Commission will also provide the insurance and superannuation industries with a focal point for discussing matters of concern and should ensure that industry issues are given specialist and co-ordinated attention. The Office of the Australian Government Actuary will form part of the Insurance and Superannuation Commission but there will be no change in the position of Australian Government Actuary and the professional independence of the actuarial advice provided by that office will, of course, be fully maintained.

I would now like to outline the particular provisions of the Occupational Superannuation Standards Bill 1987. This Bill incorporates provisions to give effect to the handover to the Insurance and Superannuation Commissioner of the supervision of those non-revenue superannuation requirements currently supervised by the Commissioner of Taxation.

In essence the Bill provides that, where the trustee of a superannuation fund or approved deposit fund provide to the ISC certain information on the operations of the fund together with certificates as prescribed, the ISC will notify the trustees of the fund as to whether or not the ISC is satisfied that the fund has met the relevant standards and requirements for the purpose of establishing eligibility for concessional taxation treatment. Particulars of the ISC's notification are to be forwarded to the Commissioner of Taxation.

In brief, these standards, which are to be prescribed in regulations under the Bill, provide for improved vesting of benefits arising from both employee and employer contributions, improved preservation requirements and measures to ensure greater member involvement in the control of superannuation funds and improved security of members' benefits. Funds will also need to comply with the existing requirements of the Income Tax Assessment Act pending the passage of legislation expected to be introduced in the Budget sittings to amend that Act and to relocate those provisions as requirements imposed under the Occupational Superannuation Standards Bill.

Implementation of the new standards, most of which commenced to operate from 1 July 1986, represents an important step in ensuring that taxation concessions made available to superannuation funds are directed towards the provision of genuine retirement benefits. To this end, the Occupational Superannuation Standards Bill is an important element in the Government's overall retirement incomes policy.

In developing the legislation, the Government has been anxious to establish a regulatory system incorporating the principle of self-assessment. The arrangements which I have outlined place the onus on trustees to ensure that funds satisfy the operating standards and minimise the degree of interference in the operations of those funds. This minimal supervisory approach is supported by the measures already outlined to provide greater member representation on the boards of trustees and for a greater degree of audit and disclosure of information to members on the operation of the funds.

At the same time it is necessary, in the public interest, to provide the Commissioner with powers to enable more detailed checking of the operations of a fund to test its compliance with the standards. Accordingly, the Bill provides that the Commissioner may from time to time require a fund to produce documents for purposes of undertaking routine checks and for initiating appropriate inquiries where there is reason to suspect that there may be non-compliance with the operating standards.

The Commissioner is also to be given the power to revise any notification as to compliance or non-compliance that may have been provided if, on the examination of further material, the Commissioner is satisfied that the notification should be revised. As well, discretionary powers are provided to the Commissioner to treat funds as complying with the requirements in special circumstances where the standards have not been satisfied.

The Bill also requires that a statement of reasons be included in any notice of non-compliance the ISC might provide and that decisions to notify non-compliance be reviewable. The Bill takes account of recent consultations with industry representatives. These consultations will be continuing in relation to regulations under the Bill which are currently being drafted. As previously foreshadowed, the Bill provides for the levying on superannuation funds and approved deposit funds of a prescribed annual fee which will be aimed at recovering the normal costs of supervisory operations. It is intended to set such fee at $30 for the 1986-87 financial year.

Although the Bill is generally to come into operation on a date to be fixed by proclamation, earlier dates have been provided for in relation to two matters. First, regulations made for the purpose of relocating some of the existing provisions in the Tax Act applicable to ADFs in this Act are to come into operation on 1 July 1986. Second, the Bill provides that regulations to give effect to the standards announced in the Treasurer's Press statements of 11 June, 30 July and 22 December 1986 may be made with dates of effect foreshadowed in those announcements.

Finally it should be noted that this legislation is not intended to set aside the recourse that members of a fund have by way of normal trustee law avenues. The legislation will also not apply to public sector schemes. However, it remains the Government's intention that public sector schemes comply with similar standards to those applying to funds in the private sector. To that end the Government will be undertaking an examination of funds covering its own employees and, where necessary, appropriate adjustments will be made. Discussion will also be sought with the governments of the States and the Northern Territory to seek their co-operation in adopting similar standards in respect of funds covering their own employees. I commend the Bill to the House and table the explanatory memorandum.

Debate (on motion by Mr Downer) adjourned.