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Parliamentary Entitlements Legislation Amendment Bill 2017



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BILLS DIGEST NO. 62, 2016-17 14 FEBRUARY 2017

Parliamentary Entitlements Legislation Amendment Bill 2017 Cathy Madden Politics and Public Administration Section This Bills Digest updates an earlier version dated 25 November 2014.

Contents

History of the Bill ................................................................. 2

Purpose of the Bill ............................................................... 2

Structure of the Bill ............................................................. 2

Background ......................................................................... 2

Committee consideration .................................................... 4

Policy position of non-government parties/independents ..... 4

Position of major interest groups ......................................... 4

Financial implications .......................................................... 4

Statement of Compatibility with Human Rights .................... 4

Parliamentary Joint Committee on Human Rights .................. 4

Key issues and provisions..................................................... 5

Schedule 1 ............................................................................... 5

Schedule 2 ............................................................................... 6

Definitions ............................................................................. 6

Part 2— Benefits ................................................................... 7

Division 1—provisions applying to benefits generally ........ 7

Obligation not to make travel claims in excess of the entitlement ........................................................................... 7

Concluding comments ......................................................... 8

Date introduced: 9 February 2017

House: House of Representatives

Portfolio: Special Minister of State

Commencement: Sections 1 to 4 on the day the Act receives Royal Assent; Schedule 1 is taken to have commenced on 14 May 2014; Schedule 2 on the day after the Act receives Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

February 2017.

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History of the Bill An earlier version of this Bill was introduced into the 44th Parliament on 2 October 2014.1 The Bill passed the lower House on 28 October 2014. The Bill was before the Senate when the Parliament was dissolved. The Bill lapsed at the dissolution of Parliament on 9 May 2016.

Purpose of the Bill The purpose of the Parliamentary Entitlements Legislation Amendment Bill 2017 (the Bill) is to amend the Members of Parliament (Life Gold Pass) Act 2002 to:

• reduce the entitlement to the Life Gold Pass for former and current members

• introduce a public benefits test for use of the retirement travel benefit

• remove the spouse or de facto partner entitlement to travel (except for the spouse or de facto partner of a former Prime Minister)

• end access to the Life Gold Pass scheme on the commencement of the Act, other than for former Prime Ministers or their spouse or de facto partner, and

• change the title of the entitlement and the Act.

The Bill will also amend the Parliamentary Entitlements Act 1990 to:

• impose penalty loadings where a person makes a travel claim in excess of entitlement

• strengthen the declaration on the travel form and

• limit the dependent child travel entitlement.

The Bill also establishes a statutory basis for recovering overpayments made under either of the Acts.

Structure of the Bill The Bill has two Schedules. Schedule 1 provides for the main amendments to the Members of Parliament (Life Gold Pass) Act 2002 with the retrospective commencement date of 14 May 2014; Schedule 2 includes amendments to the Parliamentary Entitlements Act 1990 which commence the day after Royal Assent.

Background The entitlements of members of parliament (MPs) are complex and have attracted a great deal of interest and at times criticism by the community and in the media. Travel entitlements or alleged misuse of travel entitlements of MPs have garnered the most critical attention. As the Committee for the Review of Parliamentary Entitlements observed ‘the Committee was aware that post-retirement travel, particularly the Life Gold Pass entitlement, is the benefit which most fuels the public’s opprobrium about politicians and the perception of “enjoying perks” that are out of keeping with community standards.’2

The entitlement of parliamentarians to what has been called the ‘life gold pass’ has been in operation since 1918.3 The entitlement was codified as the Members of Parliament (Life Gold Pass) Act 2002 which set out the entitlements for retired parliamentarians who satisfy the qualifying periods determined by the Remuneration Tribunal. The Remuneration Tribunal determines only the qualifying period for the Life Gold Pass.4 The Committee for the Review of Parliamentary Entitlements, and the Remuneration Tribunal’s initial report into the remuneration of members of parliament, both recommended reducing the benefit and closing the scheme prospectively to new members.5

1. Parliament of Australia, ‘Parliamentary Entitlements Legislation Amendment Bill 2014 homepage’, Australian Parliament website. 2. Committee for the Review of Parliamentary Entitlements, Review of parliamentary entitlements: committee report, Parl. Paper 153/2011, April 2010, p. 83. 3. Remuneration Tribunal, ‘Appendix 6: Life Gold Pass’, Review of the remuneration of members of Parliament: Initial report, The Tribunal,

December 2011, p. 259. 4. Remuneration Tribunal, Determination 2012/04: Members of Parliament—entitlements, Part 8, consolidated to 10 October 2014. 5. Committee for the Review of Parliamentary Entitlements, op. cit., April 2010; Remuneration Tribunal, Review of the Remuneration of

Members of Parliament: initial report, December 2011.

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In 2012, the then Labor Government legislated to implement the recommendations. The Members of Parliament (Life Gold Pass) and Other Legislation Amendment Act 2012 closed the scheme off to new members effective from 6 March 2012 and reduced the number of domestic return trips, from 25 to 10, that eligible members and their spouse or de facto partner were entitled to undertake.6 A history of the Life Gold Pass benefit, including the current arrangements, is available in the paper, Retirement Travel.7

The Department of Finance publishes information relating to payments to eligible MPs and their spouses or de facto partners under the current post retirement travel entitlement on its website.8 The report from July- December 2013 indicated there were seven former prime ministers, 158 eligible MPs, one surviving spouse of a former PM and 11 surviving spouses or de facto partners of eligible MPs. The most recent report from January- June 2016 indicates there are five former prime ministers, 46 eligible MPs and two surviving spouse or de facto partners of former PMs.9

A series of media reports about MPs making ‘dubious’ travel claims have called into question the integrity of MPs and their entitlements. The criticisms have highlighted the need to tighten rules relating to making travel claims and to clarify the role of the Department of Finance in providing advice on the claims.10

The Abbott Coalition Government announced reforms to strengthen the entitlements regime not long after taking office in 2013.11 The Special Minister of State proposed implementing further measures recommended by the Committee for the Review of Parliamentary Entitlements in order to improve transparency and public respect for the entitlements system, in particular strengthening the declaration required when submitting a travel claim. These proposals included the introduction of loadings in particular circumstances when a member had to make an adjustment to their travel claim; limiting the age requirement for travel for children; tabling in Parliament the names of parliamentarians who fails to comply with the additional measures; limiting overseas travel; and preventing employment of relatives of a member of parliament.

The legislative changes are part of ongoing reforms aimed at improving the transparency and accountability of the entitlements framework including administrative changes such as prohibiting members employing family members in certain circumstances, improved education and mandatory training.12

The Abbott Coalition Government announced as part of the 2014-15 Budget that, for those who have qualified, the gold pass travel entitlements would be wound back for former and current members of parliament.13 As part of these reforms, spouses or de facto partners would no longer be eligible for travel and limits would be placed on eligibility and the class and number of trips per annum.

The Parliamentary Entitlements Legislation Amendment Bill 2014 introduced the changes announced by the Coalition Government in 2013. In addition the Government indicated it would be seeking changes to the entitlement to severance travel which is determined by the Remuneration Tribunal.14 As noted above the 2014 Bill lapsed at the dissolution of the 44th Parliament. In November 2016, Special Minister of State Scott Ryan, after earlier suggesting the Bill would be re-introduced in the last few sitting weeks of 2016, delayed the move until early 2017 due to the government’s busy legislative agenda.15

6. C Madden and D Spooner, Members of Parliament (Life Gold Pass) and Other Legislation Amendment Bill 2012, Bills Digest, 113, 2011-12, Parliamentary Library, Canberra, 24 February 2012. 7. C Madden and D McKeown, Retirement travel, Background note, 28 June 2013, Parliamentary Library, Canberra, 2013. 8. Department of Finance, ‘Former parliamentarians’ expenditure on entitlements paid by the Department of Finance’, 1 July-31 December

2013, Department website. 9. Department of Finance, ‘Former Parliamentarians' Expenditure - Period 1 January to 30 June 2016’, Department website. 10. J Swan, ‘Can I charge trip to taxpayers?’, The Sydney Morning Herald, 17 March 2014, p. 2; J Swan, ‘Finance failed to rule on Abbott’s

taxpayer-funded travel to wedding’, The Sydney Morning Herald, 21 February 2014, p. 2; M Grattan, ‘Slipper found guilty over trips to wineries’, The Conversation, 28 July 2014. 11. M Ronaldson (Special Minister of State), Strengthening the rules governing parliamentarians’ business expenses, media release, MINSMOS006, 9 November 2013. 12. Ibid., Department of Finance, Annual report 2013-2014, The Department, 2014, p. 64. 13. Australian Government, ‘Part 2: Expense measures’, Budget measures: budget paper no. 2: 2014-15. 14. Remuneration Tribunal, ‘Determination 2012/04: Members of Parliament—entitlements’, current consolidation as at 1July 2016. Severance

travel entitles a former senator or member, not qualifying for a Life Gold Pass, to travel at government expense for a maximum of five return trips within the first six months after his or her retirement from the Parliament. 15. A Gartrell, ‘PM 'too busy' to scrap gold class free travel for MPs’, Sun Herald, 27 November 2016.

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In 2016 the High Court considered a case brought by four former members of Parliament who had argued that the changes to the calculation of the retiring allowance and to the Life Gold Pass entitlement introduced in 2011 and 2012 amounted to an unlawful acquisition of their property by the Commonwealth under section 51(xxxi) of the Constitution. In its judgement on the 12 October 2016 the High Court held, by a majority, that the Life Gold Pass Act and its subsequent amendment were not laws with respect to the acquisition of property.16

On 7 February 2017 the Prime Minister announced that, along with major reforms to the parliamentary entitlements framework, the Government would abolish the Life Gold Pass scheme for all MPs other than Prime Ministers and their spouses. The effect would be immediate rather than the phased approach provided in the 2014 Bill.17

Committee consideration In its first report of 2017 the Senate Standing Committee for the Selection of Bills resolved that the Bill should not be referred to a committee for inquiry.18 The 2014 version of the Bill was referred to the Senate Finance and Public Administration Legislation Committee for inquiry.19 That Committee made a number of recommendations.20 The Explanatory Memorandum to the Bill indicates that the current Bill ‘give[s] effect to the recommendations of the Committee’.21

Policy position of non-government parties/independents The shadow Special Minister of State recently noted Labor’s support for the reforms to the entitlements framework and the Life Gold Pass scheme.22 The Greens have long supported the abolition of the Life Gold Pass and favour further reforms to entitlements.23

Position of major interest groups Two long-serving members of the Liberal Party spoke against the immediate change to the Life Gold Pass scheme. It has been reported that Queensland MPs Warren Entsch and Senator Ian Macdonald objected to the decision, on the grounds that ‘it was a retrospective hit to an entitlement that had been earned and expected’.24

Financial implications The Government expects to achieve savings of $5.0 million over five years by reducing access to the Life Gold Pass, as announced in the 2014-15 Budget.25

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.26

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights has not yet considered the current Bill. The Committee considered that the 2014 Bill did not raise human rights concerns.27

16. Cunningham & others v Commonwealth of Australia & Anor, [2016] HCA 39, 12 October 2016. 17. G Hutchins, ‘Malcolm Turnbull to scrap Life Gold Pass for former MPs’, The Guardian (Australia), 7 February 2017; S Ryan (Special Minister of State), Establishment of the Independent Parliamentary Expenses Authority and abolition of the Life Gold Pass, media release, 7 February 2017.

18. Senate Standing Committee for the Selection of Bills, Report, 1, 2017, 9 February 2017. 19. Senate Finance and Public Administration Legislation Committee, Parliamentary Entitlements Legislation Amendment Bill 2014, inquiry homepage. 20. Senate Finance and Public Administration Legislation Committee, Parliamentary Entitlements Legislation Amendment Bill 2014 [Provisions],

The Senate, Canberra, 24 November 2014. 21. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, p. 3. 22. D Farrell (Shadow Special Minister of State), Action on expenses welcome but Malcolm must do more, media release, 7 February 2017. 23. ABC, ‘Richard Di Natale on parliamentary entitlements’, 7.30 report, 10 January 2017. 24. P Hudson, ‘MPs' lifetime travel perks given the flick’, The Australian, 8 February 2017. 25. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, p. 3. 26. The Statement of Compatibility with Human Rights can be found at page 25 of the Explanatory Memorandum to the Bill. 27. Parliamentary Joint Committee on Human Rights, Fourteenth report of the 44th Parliament, The Senate, Canberra, 28 October 2014, p. 93.

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Key issues and provisions Schedule 1 Schedule 1 amends the Members of Parliament (Life Gold Pass) Act 2002 with amendments commencing 14 May 2014.

Items 1, 2, and 4 in Part 1 and item 38 in Part 3 change the title of the legislation from the Members of Parliament (Life Gold Pass) Act 2002 to the Parliamentary Retirement Travel Act 2002 and change references in that Act to the new terminology. New section 3A, at item 4, provides that the Life Gold Pass benefit (LGP) will now be called the Parliamentary Retirement Travel Entitlement (PRTE). This change to the title of the benefit provides a more appropriate description of the benefit as well as eliminating the controversial description of the benefit as the “Life Gold Pass”. Item 8 inserts a new definition of a holder of a PRTE.

Items 5 and 9 are key provisions in strengthening the purpose test for use of the scheme. Currently the LGP Act provides that a ‘domestic return trip’ must not be for commercial purpose. Under the purpose test in the new section 4AA, inserted by item 9, the travel must be for the public benefit and not for commercial or private purposes. As the Shadow Special Minister of State, Gary Gray, stated in his second reading speech on the 2014 Bill, the term ‘public benefit’ is not defined further, which may lead to inconsistency in applying the test:

For instance, the Bill requires that all travel post-service be for public benefit. It sounds good, but I do not think it would include travel to attend Gough Whitlam's funeral—and I think it should. And I am not even prepared to advise any of my friends who are former parliamentarians to seek advice from the department on whether or not they could utilise their travel to attend the funeral of the former Prime Minister; it is just too risky, and this Bill makes it unnecessarily risky.

28

Item 11 clarifies that the LGP scheme is closed to new members except for former prime ministers.

Item 12 is the key amendment.29 The Bill imposes retrospective time periods which limit the quantum of the benefit and sets expiry dates on access to the entitlement for eligible MPs. Item 12 provides that, for most former MPs who are now holders of a LGP, their entitlement to the benefit will expire on 13 May 2014.

New section 4B provides that any member who was not eligible before 14 May 2014 cannot become a holder of a PRTE unless they are a former prime minister. New section 4B also provides that the scheme will be closed off to all eligible members (except for former prime ministers) on the day section 1 of the Act commences (that is, on Royal Assent to the Bill).

New section 4C imposes time limits for eligible MPs depending on their date of retirement and/or position held while serving in the parliament, after which their entitlement expires. The categories are: former MPs; former ‘senior office holders’ and former prime ministers. The Bill imposes additional time limits on access to the entitlement by closing it off to members who had not met the threshold for qualifying by 14 May 2014 and closing off the entitlement to any eligible member who retires on or after the day that the Bill receives Royal Assent.30

For example, a former senator or member who retired before 14 May 2011 is not entitled to the parliamentary retirement travel entitlement after 13 May 2014. The travel entitlement of members of parliament who retired on or after 14 May 2011 and were not senior office holders will expire at the earliest of:

• three years (36 months) after the date of retirement

• the end of the current parliament after their retirement or

• the day the Bill receives Royal Assent (new subsection 4C(7)).

28. G Gray, ‘Second reading speech: Parliamentary Entitlements Legislation Amendment Bill 2014’, House of Representatives, Debates, 28 October 2014, p. 12283. 29. M Ronaldson (Special Minister of State), Parliamentary Entitlements Legislation Amendment Bill 2014, media release, 30 September 2014. A table provided in the media release outlining the limitations and reductions to Parliamentary Retirement Travel is reproduced in Appendix 1.

For the pre 2014 arrangements for LGP see Retirement Travel. 30. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, p.2.

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The Bill introduces the concept of ‘senior office holder’, defined in item 8 as a former minister (other than the Prime Minister or a parliamentary secretary), former presiding officer or the leader of the opposition in the House of Representatives. If a senior office holder retires before 14 May 2008 they will have no benefit after 13 May 2014; but if they retired on or after 14 May 2008 their travel entitlement will expire at the earliest of:

• six years (72 months) after their retirement

• the second end of a Parliament after the date of retirement or if the retirement occurs during the current Parliament, at the end of that Parliament or

• the day the Bill receives Royal Assent (new subsections 4C(4) and (6)).

MPs who became eligible before 14 May 2014 and retired on or after 14 May 2011, will lose their entitlement at the earliest of:

• three years (36 months) after retirement

• or the end of the first parliament after retirement or

• the day the Bill receives Royal Assent (new subsections 4B(2) and 4C(7)).

Items 13, 14, 17, 18, 19, 25, 26, 32 and 33 abolish any entitlement by spouses or de facto partners of eligible former MPs and eligible current serving members to access retirement travel benefits (except for the spouse or de facto partner of former prime ministers).

The entitlement to post-retirement travel will continue for former prime ministers, although the benefit has been reduced. Item 10 clarifies that the scheme is closed to all new members except for former prime ministers who will be able to access the benefit for life. Item 15 reduces the benefit for former prime ministers from 40 domestic return trips per year to 30.

Item 16 provides that the spouse or de facto partner of a former prime minister is entitled to a reduced number of return domestic flights, down from the current 40 return trips to 20 domestic return trips per year, of which ten can be trips that do not involve accompanying or joining the former prime minister.

Part 3, items 38-40 provide transitional mechanisms that clarify any ambiguity relating to the impact of the retrospective commencement of the provisions on travel undertaken by eligible former MPs for from 14 May 2014 to the day after the Bill receives Royal Assent.

Schedule 2 Schedule 2 amends the Parliamentary Entitlements Act 1990 (PE Act) with the amendments commencing the day after Royal Assent.

Definitions Items 1, 2, and 4 insert or amend the following:

• the definition of claim to mean ‘a claim or request for a benefit that is made to the Commonwealth’

• the definition of dependent child in section 3 to be a person who is ‘at least 16 but under 18’. The current definition applies to a person who is ‘at least 16 but under 25’. Although the Opposition stated its support for the 2014 Bill, the then Shadow Special Minister of State, Gary Gray, indicated that the ALP did not agree with the reduction in domestic travel entitlements for dependent children under 25, stating that ‘I can see no good purpose, at a time when our work and lifestyle in this place are hard enough on families, to make that change for the travel of dependent children, albeit for children aged over 18 and under 25. They are still in the category of dependent children’31

• the definition of prescribed travel benefit to mean ‘a benefit covered by a determination under section 10B’ (see below for an explanation of this section)

• the definition of provides goods, services or facilities to cover goods, services or facilities provided by the Commonwealth itself or paid for by the Commonwealth for provision by another person

31. G Gray, ‘Second reading speech: Parliamentary Entitlements Legislation Amendment Bill 2014’, op. cit., p. 12283.

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• the definition of Secretary to mean ‘the Secretary of the Department’. The Department referred to is, at the commencement of the Bill, the Department of Finance.32

Item 3 provides that under the travel entitlement of Senior Officers, no travel may be undertaken by a dependent child who is aged over 18 from the day after the Bill receives Royal Assent.

Part 2— Benefits

Division 1—provisions applying to benefits generally The new provisions discussed below reflect the changes outlined by the then Special Minister of State, Senator Michael Ronaldson, in his press release dated 9 November 2013.33 The Minister announced a new compliance regime to operate from 1 January 2014 including a new declaration to be made by members of parliament submitting a travel claim. As part of this reform the government stated that parliamentarians making an adjustment to any claims made after 1 January 2014 would be required to pay a loading of 25 per cent in addition to the full amount of the adjustment.34

The Minister also stated that improvements to the Department of Finance records management system would be implemented to highlight ‘non-standard travel or usage amongst parliamentarians’.35 As noted above the Government highlighted the need for training senators and members on issues such as parliamentary entitlements and office management practices. In debate on the 2014 Bill, Shadow Special Minister of State, Gary Gray, stressed the need to put better processes in place to deal with incorrect payments. He suggested that:

Transparency should also include the Department of Finance documenting the advice it gives to MPs and senators. It should provide the advice and it should keep that advice on file for consistent advice’s purpose. Consistent advice is important to parliamentarians. 36

Obligation not to make travel claims in excess of the entitlement Item 6 inserts new section 7A which creates a statutory obligation not to make travel claims in excess of the entitlement. The provisions of the current PE Act do not include any obligation to avoid such claims. This section works in conjunction with new section 10A (see below). While new section 7A creates an obligation not to make a claim for a benefit in excess of entitlement, it also ensures that the mechanism described in section 10A does not extend the boundaries of the benefits which may be provided to a parliamentarian under the PE Act and that the amount to which a person is legitimately entitled is not to be recovered.37

Item 7 inserts new sections 10A-10D. These sections enable a benefit paid in excess of the entitlement to be recovered. The provisions of the current Act do not include penalties for making travel claims in excess of entitlements, but as noted above, the declaration accompanying parliamentarians’ travel claims from 1 January 2014 has included an acknowledgement that a financial loading will be applied if an adjustment is required. The Bill establishes a 25 per cent penalty loading on any adjustments (either voluntary or involuntary) of a parliamentarian’s claim for prescribed travel benefits.38 The 25 per cent loading will not be applied when the excess is paid to the Commonwealth within 28 days of the claim or when the overpayment is the result of an administrative error by the Department of Finance.

New section 10A introduces ‘a mechanism to address the risk that payments made in the course of administering the PE Act may constitute a breach of section 83 of the Constitution’.39 This is in line with mechanisms included in other Acts, such as the Parliamentary Contributory Superannuation Act 1948.40

32. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, p. 17. 33. M Ronaldson (Special Minister of State), Strengthening the rules governing parliamentarians’ business expenses, op. cit. 34. Ibid. The new travel declaration is: I declare that this travel was undertaken in my capacity as an elected representative and I acknowledge that a financial loading will be applied if subsequent adjustment to this travel claim is required.

35. Ibid.

36. G Gray, Second reading speech, op. cit. 37. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, op. cit., p. 17. 38. K Andrews, ‘Second reading speech: Parliamentary Entitlements legislation Amendment Bill 2014’, House of Representatives, Debates, 2 October 2014, p. 11079.

39. Explanatory Memorandum, Parliamentary Entitlements Legislation Amendment Bill 2017, op. cit., p. 18. Section 83 of the Constitution states ‘No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law’.

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New section 10A also establishes a statutory right for the Commonwealth to recover from a parliamentarian or former parliamentarian an amount equivalent to a payment made to, or on behalf of, a parliamentarian or former parliamentarian that is beyond entitlement under the PE Act.

New sections 10C and 10D also establish a statutory right for the Commonwealth to recover from a parliamentarian the 25 per cent penalty loading.41 The Minister noted in his second reading speech to the 2014 Bill that ‘[f]or the purposes of the 25 per cent penalty loading on adjustments, the Bill includes a provision for the Special Minister of State to determine, by legislative instrument, the prescribed travel benefits that are subject to a 25 per cent penalty loading’.42 This power is contained in new section 10B.

Concluding comments The Bill appears non-controversial in that both major parties and the Greens support the changes to the Life Gold Pass scheme and the tightening of rules around parliamentary travel entitlements. As the benefit previously known as the Life Gold Pass is viewed as being out of step with community expectations, no sitting member is likely to oppose the reduction and future termination of the Life Gold Pass scheme (except for its continued application for former prime ministers).43

40. K Andrews, op. cit. 41. Ibid.

42. Ibid.

43. A Taylor, ‘Second reading speech: Parliamentary Entitlements Legislation Amendment Bill 2014’, House of Representatives, Debates, 28 October 2014, p. 12287.

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