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Tuesday, 10 September 2019
Page: 2265

Mr PORTER (PearceAttorney-General, Minister for Industrial Relations and Leader of the House) (12:24): I thank all the members for their contributions to the second reading stage of this bill, the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2019. Of course, as the procedure in these matters goes, this bill is already the subject of a Senate committee, and the hearings into the bill have already commenced. In fact, they were reported in news media yesterday—perhaps not widely enough, given some of the quite extraordinary pieces of evidence and submissions that were made. Perhaps I can commence by reading out some passages from one report that appeared in The Australian Financial Review yesterday about the proceedings of the Senate committee's hearing into this bill. That report notes:

Protect, founded by the ETU Victoria and the National Electrical Contractors Association, revealed it distributed $60 million in "surplus funds" to its two founders for the first time in its submission to a Senate inquiry into the Morrison government's bill to regulate worker benefit funds.

So, for the first time, this organisation, Protect, which is one of the worker benefit funds which is meant to be properly and transparently regulated by this piece of legislation, acknowledged that it had transferred $60 million over two years to the National Electrical Contractors Association, known as NECA, and the Electrical Trades Union's Victoria branch. The report goes on to note:

The amounts were far in excess of surplus distributions in previous years, which have averaged $630,000 for the ETU and $210,000 to NECA over the past two decades.

That amount of just over $800,000 over two years jumped up to $60 million over two years, and this was, as the report notes, the first time that's been acknowledged by Protect. The article then goes on to note:

Protect 2017-18 annual report made no mention of the amounts and the fund has previously refused requests to identify the total amount distributed to its sponsors.

So before a Senate committee, it's required and compelled to give that information. As is noted, prior to that point, this worker benefit fund, Protect, had refused requests to identify the total amount distributed to its so-called sponsors. I must say that after 11 years in politics—five state and six federal—there are few more outrageous things that I have seen than the money that is being transferred by worker benefit funds like Protect in a complete absence of regulation and legislative oversight.

It's outrageous not because it's unlawful but precisely because there are no laws governing these types of unbelievably large transactions of workers' money. The central question that arises for anyone concerned about workers' rights and their rights to the money that is supposedly held in these funds to their benefit is this: are these funds, at present in an unregulated environment, in many instances simply giving away workers' money to third parties, as exampled here by the ETU and the National Electrical Contractors Association, NECA? And when I say 'giving the money away' to those third parties, are these worker benefit funds allocating money in a way to these third parties where there is no ability whatsoever to determine what these third parties are actually spending the money on? Is there any evidence that this money is being spent fulsomely and in its whole part to the benefit of workers?

What was fascinating with respect to this Senate committee hearing was that when Protect were asked what NECA spent its share of the surplus funds on—keeping in mind that this was $14.8 million that the National Electrical Contractors Association had been provided with over two years—Protect said that 'to the best of our knowledge' NECA directs its share of the surplus funds to its Victorian education fund, which invests in training. There is nothing wrong with that money being invested in training; that's quite appropriate. That's what we'd expect the money to be invested in.

But forget the union for a moment; let's look at the employer association, NECA. Where is the evidence that there has been $14.8 million worth of training provided by that organisation? The fact is that it simply does not exist and will never exist unless we have legislation of this type properly regulating the incomings, the outgoings and the proper transparent accounting for these organisations. Where is the evidence that $44 million allocated to the Electrical Trades Union over two years has actually been expended on the things that we would expect it be expended on—bereavement funds, counselling, training and things of this nature, which both sides of the House accept are the legitimate purpose of these accounts? Where is the evidence that it is being spent on these types of appropriate expenditures?

In the complete absence of that evidence, looking at the evidence of incredibly large directors fees and administration fees, we are seeing precisely the same type of thing that was uncovered in the banking royal commission—what looked like fees for no service and massively bloated administration fees to people that it was impossible to identify. The root cause of those problems is, as this report notes and as was heard in the Senate committee only several days ago, that there is no requirement to record the expenditure or the incomings or the outgoings. Indeed, in its annual report Protect made no mention of the amounts and had previously refused requests to identify the total amount distributed to its sponsors. Imagine distributing $44 million and $14.8 million but refusing to even acknowledge the fact of the transfer? You would have thought, if the recipients of those transferred funds were doing the right thing and spending that money in the way that people opposite and people on this side of the House expect it to be spent, that there wouldn't be a problem in at least acknowledging that the moneys had been transferred to those organisations. This is absolutely scandalous. Forgetting for a moment the role of the ETU in this transaction, NECA should delineate precisely what that $14.8 million has been spent on or will imminently be spent on to the benefit of workers, or they should give the money back. The same applies to the ETU. If they are unable to show where that $44 million is being expended or imminently will be expended to the benefit of workers, that money should be returned.

The central difficulty with all of this is that there is no proper regulatory system. These funds are exempt from the applications of corporations law that would otherwise ordinarily apply to other managed investment schemes. That is essentially what these funds are—managed investment schemes. In fact, they are large and sophisticated managed investment schemes. They would ordinarily be required to register under the Corporations Act, but there has been a class order that exempts the funds, which seems to be going on in perpetuity. It exempts the trustees of these workers' funds from holding an Australian Financial Services licence, something you'd think might be a basic requirement for funds that are now managing in excess of $2 billion worth of workers' money. Because the requirements that usually apply do not apply, it means that these workers' benefits funds are not required to have a compliance plan. They're not required to have a compliance committee. They do not have capital requirements, so the capital that is meant to be kept safe in perpetuity to pay for things like severance benefits is not actually stipulated and there is no capital requirement. They do not have audit requirements. They do not have an obligation to maintain certain competence requirements. They do not have requirements to ensure responsible officers are fit and proper persons to hold office in these organisations.

Two royal commissions—not just one but two royal commissions—have acknowledged all of the ongoing difficulties that arise through that lack of regulation. Two royal commissions have noted that funds not regulated when they should be have the capacity and tendency to treat union members more favourably than non-union members and to use income earned on contributions for 'any purpose that they see fit'. This is the point. It seems to be the argument from members opposite that we should simply trust that this $44 million and this $14.8 million are not being spent in a way that is fit for the ETU or NECA. We should just trust that they're being spent to the benefit of workers. NECA, in their own reports, simply list the receipt of those funds as improving their bottom line. That is the exact opposite of evidence that it's actually being spent to the benefit of workers.

This ASIC class order was never intended to be an interim measure, but it continues in perpetuity in effect. The consequence is that the entitlements funds are not otherwise subject to the requirements in the Corporations Act for comparable managed investment schemes to treat employee members equally. One of the great and shameful failings of these schemes is that, even where moneys are transferred back to a union or an employers' association and even where that association does and can show through proper transparency and accounting that they're spending the money on workers, there has been documented evidence of the money that was sent back to the third-party union being expended on welfare programs only for workers who are members of the union. The money, which sits in the workers' benefit fund, which has been transferred back to the union or to the employer association, represents money hard earned by both union member and non-union member workers. For example, it was heard before the royal commission that several of the welfare services offered by the fund BERT, the Building Employees Redundancy Trust, were only offered to union members. The money represents the money of both union and non-union members but is filtered back to BERT, who offers the welfare training and funds and the application of that welfare only to members of the union. It's totally inequitable, outrageously unfair and completely unregulated, and there's nothing that anyone in our parliament can do about it—and something should be done about it. It raises the question: why is Labor slumbering on this issue, an issue that represents a colossal and outrageous misapplication of workers' money? And that's something that they will have to answer.

Currently, there are no legislative requirements for these funds to disclose any fees they charge. Of course, there was quite properly enormous outrage during the banking royal commission when it was shown that fees were being charged for no service. We don't have the capacity to even know what fees are being charged here let alone whether or not their directors' fees or administrative allocations of money are providing any value whatsoever to the workers. We have no means of working out what they are unless, by the goodwill of the third-party organisations, whether they are a union or employers' organisation, they determine to put it somewhere—hide it in some annual report. And, of course, Protect refused to even acknowledge that money had been transferred until they were brought before a committee, as was reported in TheAustralian Financial Review yesterday. These funds don't have to be operated by people of fit and proper character. They do not have to have independent voting directors on their boards.

I'll address a few of the matters raised by the members opposite. Members opposite said, 'They're trusts essentially'—and some of them are but not all of them, by the way—'so they can just be regulated like any trust fund.' Well, that is a hopeless way to regulate billions of dollars under management, because it requires the workers themselves, not an independent regulator who's properly tasked with the role by the government, in effect to become the litigants if they see things going wrong. That's hopelessly inadequate even for the workers' benefit funds that actually are trusts and where that could arise.

Then we had an argument by those opposite which is so astoundingly weak that I can't really believe it was even raised here—that is, under existing laws, employers who choose not to set up workers' benefit fund bills can apply interest in ways such as reinvest in their own business, so, where a workers' investment fund is set up, it should effectively be allowed to spend the interest in any way it sees fit. The first problem with that is that 'any way it sees fit' might not be a way that benefits workers, and the standards set up by the employer in these circumstances, by the workers' benefit fund or by the third-party unions or employers' associations who take distributions is that the money will be expended to the benefit of workers. That is the standard that they set for themselves in these circumstances. There is a world of difference between an employer who holds an entitlement for their own employees being able to allocate interest earned on those moneys where they are abiding by all of the requirements of the corporations law to keep the contingent liability to pay for things like severance payments into the future and a union or employer association simply being able to spend the money with no regulation in any way it sees fit from lump sum payments that they, the union or the employer peak organisation made no contribution to.

The DEPUTY SPEAKER ( Mr Rob Mitchell ): I thank the minister. The question is that the amendment be agreed to. There being more than one voice calling for a division, in accordance with standing order 133 the division is deferred until after the discussion on the matter of public importance.

Debate adjourned.