SUPERANNUATION LEGISLATION AMENDMENT BILL 2004 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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SUPERANNUATION LEGISLATION AMENDMENT BILL 2004

2004 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES SUPERANNUATION LEGISLATION AMENDMENT BILL 2004 EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Finance and Administration, Senator the Hon Nick Minchin)

2 SUPERANNUATION LEGISLATION AMENDMENT BILL 2004 GENERAL OUTLINE This Bill includes amendments to the Superannuation Act 1976 (the 1976 Act) and the Rules for the administration of the Public Sector Superannuation Scheme (PSS) made by trust deed under the Superannuation Act 1990 (the 1990 Act). The 1976 Act and the 1990 Act provide the rules for the Commonwealth Superannuation Scheme (CSS) and the PSS, respectively. These schemes provide superannuation arrangements for Australian Government employees and office holders. The Bill amends the provisions of the CSS and the PSS in relation to the superannuation salary for Secretaries of Departments and certain persons who are appointed to Australian Government offices and who are members of either scheme. The amendments are being made to provide or to confirm that superannuation salary for these scheme members can be set in determinations that prescribe remuneration and other terms and conditions of appointment and which are made under certain Acts of Parliament. Proposed amendments The Bill amends the 1976 Act and the PSS Rules to recognise that superannuation salary for the purposes of the CSS and the PSS can be provided for in determinations that set remuneration for Secretaries of Departments and certain Australian Government office holders who are members of the CSS or the PSS. The Bill also confirms the validity of any such determinations of superannuation salary for the purposes of the CSS and the PSS that have been made in the past under various Acts of Parliament. However, this validation of past determinations will not reduce benefits already paid or continuing to be paid from the CSS or the PSS to or in respect of any person who was covered by those determinations. Financial Implications The Bill has no financial impact.

3 NOTES ON CLAUSES Clause 1 -Short title Clause 1 provides for the short title of the Act to be the Superannuation Legislation Amendment Act 2004. Clause 2- Commencement 2. Clause 2 provides for the commencement of the Act on the day of Royal Assent. Clause 3 - Schedule(s) 3. Clause 3 provides that the Superannuation Act 1976 and the PSS Rules are amended as provided for in Schedules to the Act. SCHEDULE 1 - AMENDMENT OF THE SUPERANNUATION ACT 1976 The Superannuation Act 1976 (1976 Act) provides for the Commonwealth Superannuation Scheme (CSS). Item 1 - Annual rate of salary 4. This item inserts subsections 5(3AB) and 5(3AC) into the 1976 Act. Section 5 of the 1976 Act defines the term "annual rate of salary" for the purposes of the CSS. Contributions to and benefits from the CSS are generally based on a CSS member's annual rate of salary. 5. Subsection 5(3AB) describes the circumstances in which new subsection 5(3AC) applies. Those circumstances are where a determination of a person's remuneration is made by a Minister or a Presiding Officer of the Senate or the House of Representatives as appropriate in respect of a person who is appointed under one of various Acts of Parliament or where a determination is made under the Remuneration Tribunal Act 1973 (Remuneration Tribunal Act) and where the CSS member's annual rate of salary can be ascertained under the determination. 6. Subsection 5(3AC) provides that the annual rate of salary for the CSS in respect of a person whose remuneration is determined as described in subsection 5(3AB) can be an amount ascertained from that determination. This subsection overrides subsections 5(1), 5(2) and 5(3), which include provisions relating to the annual rate of salary for the CSS for certain members. Item 2 - Application 7. Item 2 provides for the application of new subsections 5(3AB) and 5(3AC) in respect of the annual rate of salary included in certain remuneration determinations. 8. Subitem 2(1) provides that new subsections 5(3AB) and 5(3AC) apply in respect of a determination made under the Remuneration Tribunal Act (other than a

4 determination made under section 12C of that Act) after the subitem commences (on the day of Royal Assent for the Bill). Determinations made by the Remuneration Tribunal before the commencement of the subitem were able to validly set superannuation salary for CSS members pursuant to regulations under the 1976 Act. 9. Subitem 2(1) also provides that new subsections 5(3AB) and 5(3AC) apply in respect of any other determinations (including a determination made under section 12C of the Remuneration Tribunal Act in respect of principal executive offices (within the meaning of that Act)), whether the determination is made before or after the subitem commences (on the day of Royal Assent for the Bill). This will validate the setting of superannuation salary in any such determinations made before the commencement of the Bill. 10. Subitems 2(2) and 2(3) provide that new subsections 5(3AB) and 5(3AC) do not apply in respect of a past determination if any benefit that has been paid or continues to be paid to or in respect of a CSS member under the 1976 Act is more than it would be if the annual rate of salary had been ascertained from the determination. SCHEDULE 2 - AMENDMENT OF THE RULES FOR THE ADMINISTRATION OF THE PUBLIC SECTOR SUPERANNUATION SCHEME 11. The Superannuation Act 1990 (1990 Act) and the Trust Deed and Rules made under that Act provide for the Public Sector Superannuation Scheme (PSS). Item 1 - Definition of basic salary 12. Item 1 amends Rule 1.2.1 by repealing the definition of "basic salary" and substituting a new definition of that term. Generally, contributions to and benefits from the PSS are based on, or derived from, a member's basic salary and any recognised allowances (see item 2). 13. The new definition of basic salary provides that basic salary is an amount, or an element or elements of remuneration, determined in accordance with paragraph (a), (b), (c) or (d) of the definition, as appropriate. 14. Paragraph (a) of this definition continues to recognise an amount, or an element or elements of remuneration, as basic salary where it is ascertained under the determination of basic salary made by the PSS Board under the Rules applicable at 30 June 1995 provided no other paragraph in that definition applies. Except where paragraph (c) or (d) applies, paragraph (b) continues to allow basic salary to be ascertained by reference to a determination made by the Minister for Finance and Administration under Rule 1.2.3. There is no current determination by the Minister under this definition. 15. Where Rule 1.2.4 applies in respect of a member, and unless paragraph (d) of this definition applies, paragraph (c) provides that basic salary means an amount ascertained under the determination referred to in that Rule which is applicable to the member. However, paragraph (d) provides that, notwithstanding all other paragraphs in this definition, basic salary will continue to mean an amount agreed between the member and his or her designated employer if such an agreement is made.

5 Item 2 - Definition of recognised allowances 16. Item 2 amends Rule 1.2.1 by repealing the definition of "recognised allowances" and substituting a new definition of that term. As noted for item 1, contributions to and benefits from the PSS are based on, or derived from basic salary and any recognised allowances a member may have. 17. The new definition of recognised allowances provides that these allowances are an amount, or an element or elements of remuneration, determined in accordance with paragraph (a), (b), (c) or (d) of the definition, as appropriate. 18. Paragraph (a) of this definition continues to recognise an amount, or an element or elements of remuneration, as recognised allowances for a member where it is ascertained under the determination of recognised allowances made by the PSS Board under the Rules applicable at 30 June 1995, provided no other paragraph of the definition applies. Except where paragraph (c) or (d) applies, paragraph (b) continues to allow recognised allowances to be ascertained by reference to a determination made by the Minister for Finance and Administration under Rule 1.2.3. There is no current determination by the Minister under this definition. 19. Where Rule 1.2.4 applies in respect of a member, and unless paragraph (d) of this definition applies, paragraph (c) provides that recognised allowances means an amount ascertained under the determination referred to in that Rule. However, notwithstanding all other paragraphs in this definition, paragraph (d) provides that recognised allowances will continue to mean an amount agreed between the member and his or her designated employer if such an agreement is made. Item 3 2. Item 3 inserts new Rules 1.2.3 and 1.2.4 at the end of Division 2 of Part 1 of the PSS Rules. These Rules are required for the purposes of the new definitions of "basic salary" and "recognised allowances" inserted by items 1 and 2. 3. New Rule 1.2.3 applies in relation to a PSS member if the Minister for Finance and Administration determines basic salary or recognised allowances in relation to the member. 4. New Rule 1.2.4 applies in relation to certain PSS members if their basic salary or recognised allowances can be ascertained from a determination made under an Act in respect of their remuneration and, in respect of recognised allowances, the determination expressly mentions recognised allowances. The Rule applies to PSS members whose remuneration is set in a determination made by a Minister or a Presiding Officer of the Senate or the House of Representatives as appropriate in respect of a person who is appointed under one of various Acts of Parliament or where the determination is made under the Remuneration Tribunal Act. Item 4 - Application 5. Item 4 provides for the application of the amendments to Rule 1.2.1 made by item 1 and the insertion of new Rules 1.2.3 and 1.2.4 in respect of new definitions of "basic salary" and "recognised allowances".

6 6. Subitem 4(1) provides that the amendments to Rule 1.2.1 and new Rules 1.2.3 and 1.2.4 apply in respect of a determination made under the Remuneration Tribunal Act (other than a determination made under section 12C of that Act) after the subitem commences (on the day of Royal Assent for the Bill). Determinations made by the Remuneration Tribunal before the commencement of the subitem were able to validly set superannuation salary for PSS members pursuant to regulations under the 1976 Act. 7. Subitem 4(1) provides that the amendments to Rule 1.2.1 and new Rules 1.2.3 and 1.2.4 apply in respect of any other determination (including one made under section 12C of the Remuneration Tribunal Act in respect of principal executive offices (within the meaning of that Act)), whether the determination is made before or after the subitem commences (on the day of Royal Assent for the Bill). This will validate the setting of superannuation salary in any such determinations made before the commencement of the Bill. 8. Subitems 4(2) and 4(3) provide that the amendment to Rule 1.2.1 and new Rules 1.2.3 and 1.2.4 do not apply in respect of a past determination if any benefit that has been paid to or in respect of a PSS member under the 1990 Act is more than it would be if the basic salary or recognised allowances had been ascertained under the determination.

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