PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2018 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2018

2016 - 2017 - 2018 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2018 EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Finance, Senator the Hon Mathias Cormann)

PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2018 General outline The Bill makes the following changes:  amendments to the Parliamentary Contributory Superannuation Act 1948 (PCS Act) to ensure that in all circumstances the calculation of any lump sum superannuation guarantee safety-net benefit meets the minimum Superannuation Guarantee (SG) requirements; �- the amendments do not increase any parliamentary pension entitlements for any individual members; rather they ensure that the minimum SG requirement will be met in all circumstances;  amendments to the Judges' Pensions Act 1968 (Judges' Act) to allow members of the Judges' Pensions Scheme the option to request that they be paid a lump sum amount from the scheme to meet their Division 293 tax liability;  amendments to a number of Commonwealth superannuation Acts to standardise and modernise provisions relating to eligibility for reversionary superannuation benefits payable to or in respect of children;  two minor amendments to the PCS Act and the correction of a misdescribed amendment relating to the Judges' Act; and  amendments to reduce the size of the Commonwealth Superannuation Corporation (CSC) Board from 11 to 9 directors. Financial impact The financial impact of the Bill is expected to be immaterial. Statement of Compatibility with Human Rights This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 because it promotes the protection of human rights. The Bill engages the following human rights:  the right to social security as recognised in article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) and article 26 of the Convention on the Rights of the Child (CRC); and  the best interests of the child under article 3(3) of the CRC. The right to social security is contained in article 9 of the ICESCR and article 26 of the CRC. The right to social security will be engaged when changes are made to retirement pensions and superannuation contributions. The Bill promotes the right to social security by ensuring all parliamentarians benefit from the superannuation guarantee minimum, and by modernising the provisions relating to superannuation benefits payable to or in respect of children. Under article 3(3) of the CRC, the best interests of the child must be taken into account in all actions of States Parties concerning children. The Bill promotes this obligation by having taken the rights of the child into account in modernising the provisions relating to superannuation benefits payable to or in respect of children. 2

PUBLIC SECTOR SUPERANNUATION LEGISATION AMENDMENT BILL 2018 Notes on clauses Clause 1 - Short Title Clause 1 provides for the Act to be cited as the Public Sector Superannuation Legislation Amendment Act 2018. Note: The clauses in the Bill will become sections of the Act on Royal Assent. Clause 2 - Commencement 2. Clause 2 sets out the commencement provisions for the Bill. Commencement details for specific provisions are included in the table in subclause 2(1). 3. Item 1 of the table provides that sections 1 to 3 and anything in the Act not covered elsewhere in the table commence on Royal Assent. 4. Item 2 of the table provides that Schedule 1, Part 1 commences on the day after Royal Assent. 5. Item 3 of the table provides that Schedule 1, Part 2 commences on the first 1 January to occur at least 6 months after the day the Act receives Royal Assent. 6. Item 4 of the table provides that Schedule 1, Part 3 commences immediately after the time specified in the Judges and Governors General Legislation Amendment (Family Law) Act 2012 (Family Law Act) for the commencement of item 38 of Schedule 1 to that Act. This date is 15 March 2013.  Schedule 1, Part 3 concerns the correction of a misdescribed amendment to subsection 16(1) of the Judges' Pensions Act 1968. The retrospective application of Schedule 1, Part 3 will not affect the entitlements of any individuals, as no individual has fallen within the scope of subsection 16(1) since the Family Law Act commenced. 7. Item 5 of the table provides that Schedule 2 commences on 1 July 2020. 8. The note at the end of the table in subclause 2(1) clarifies that the table only relates to provisions of the Act as originally enacted, and that it will not be amended to deal with any later amendments of the Act. 9. Subclause 2(2) clarifies that the information in column 3 of the table is not part of the Act. Clause 3 - Schedules 10. Clause 3 provides that legislation specified in a Schedule to the Act is amended or repealed as set out in the applicable items in the relevant Schedule. It also provides that any other item in a Schedule to the Act has effect according to its terms. 3

Schedule 1 - Superannuation arrangements Part 1 - Amendments commencing on the day after Royal Assent Judges' Pensions Act 1968 Amendments concerning the Division 293 tax - overview 11. One measure announced in the 2012-13 Budget was a reduction in the tax concessions on superannuation contributions of very high income earners (Division 293 tax). 12. Schedule 4 of the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 (the Tax Act) amended several Commonwealth superannuation schemes to allow a person to request that they be paid a lump sum amount from their scheme to meet their Division 293 tax liability. This is done using a Division 293 tax release authority. 13. The Judges' Pensions Act 1968 (Judges' Act) was not amended because under Subdivision 293-F of the Income Tax Assessment Act 1997 judges who are members of Judges' Pensions Scheme are not subject to Division 293 tax. However, there are a small number of non-judges that have been granted the same status as judges for the purpose of membership of the Judges' Pensions Scheme. These non-judge members, and any future non-judge members, are subject to Division 293 tax. 14. The Bill therefore includes amendments to the Judges' Act that are similar to those made by the Tax Act. Amendments concerning the Division 293 tax - detail 15. Item 1 of Schedule 1 inserts a new Part heading. 16. Item 2 of Schedule 1 inserts new definitions into subsection 4(1) of the Judges' Act. These definitions are "defined benefit interest", "Division 293 tax law", "release authority lump sum" and "superannuation provider". 17. Item 3 of Schedule 1 inserts a new Part heading. 18. Item 4 of Schedule 1 inserts a note at the end of subsection 6(2) which explains that a pension to which a Judge for the purposes of the Judges' Act is entitled in accordance with subsection 6A(2) or 6B(2) may be reduced under new section 17AN. New section 17AN specifies how to calculate benefits after the payment of a release authority lump sum. 19. Item 5 of Schedule 1 replaces the heading to section 6A, as it contains an incorrect reference to "amount" instead of "account". 20. Section 6C of the Judges' Act gives a Judge an alternative method, to the method set out in subsection 6B, for reducing their rate of pension because of a surcharge debt. Item 6 of Schedule 1 inserts new subsection 6C(2A) to preclude a Judge from making an election under subsection 6C(2) to have their pension calculated under section 6C if they have given a written notice to the Secretary of the Department under new paragraph 17AL(2)(c) forgoing that option. 21. Item 7 of Schedule 1 inserts a new Part heading. 22. Item 8 of Schedule 1 inserts a new Part 4 in the Judges' Act, comprising new sections 17AK to 17AN. This Part sets out arrangements for the payment of a release authority lump sum from the Judges' Pensions Scheme and for the calculation of benefits where a release authority lump sum is paid. 4

23. New section 17AK provides that, for the purposes of the Judges' Act, the Division 293 tax law applies as if the Secretary of the Department was the superannuation provider in relation to the defined benefit interest established under the Act. The note at the end of new section 17AK refers the reader to subsection 4(1) for definitions of the terms "Division 293 tax law", "superannuation provider" and "defined benefit interest". 24. New section 17AL deals with the release of benefits from the Judges' Pensions Scheme under a release authority. The effect of new subsections 17AL(1) and (2) is to allow a lump sum to be paid in compliance with a release authority issued to a Judge under item 3 of the table in subsection 135-10(1) in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) and given to the Secretary of the Department in accordance with Subdivision 135-B in that Schedule provided certain conditions are met. In particular, at the time that the release authority is given to the Secretary of the Department, one of the following must apply:  the Judge's surcharge debt account is not in debit; or  one of the following conditions is satisfied: - the Judge has made an election under subsection 6C(2) of the Judges' Act to reduce their benefit to take account of the surcharge deduction amount; or - the Judge has not made an election under subsection 6C(2) of the Judges' Act and the two month period allowed for such an election has expired; or - the Judge has given the Secretary of the Department a written notice forgoing the option to make an election under subsection 6C(2) of the Judges' Act. 25. Note 1 under subsection 17AL(1) explains that the purpose of a release authority is to allow a lump sum to be paid to meet a Division 293 tax. Note 2 under subsection 17AL(1) explains that Division 293 tax is not payable by a Justice of the High Court or a judge of a court created by the Parliament and refers the reader to Subdivision 293-F of the Income Tax Assessment Act 1997. 26. New subsection 17AL(3) requires a release authority lump sum to be paid out of the Consolidated Revenue Fund and appropriates the Consolidated Revenue Fund for this purpose. 27. New section 17AM limits the amount of a release authority lump sum that may be paid from the Judges' Pensions Scheme in compliance with a release authority issued to a Judge. New subsection 17AM(1) provides that, in addition to any requirements in Division 135 in Schedule 1 to the TAA 1953, the amount of a release authority lump sum must not have the effect of reducing the Judge's retirement pension to below zero. New subsection 17AM(2) provides that, for the purposes of new subsection 17AM(1), the impact of the release authority lump sum on the Judge's pension is to be worked out after first taking into account any surcharge adjustment under section 6B or 6C and any reduction for a family law split under sections 17AA to 17AJ. 28. New section 17AN deals with the calculation of a Judge's benefits after a release authority lump sum has been paid. New subsection 17AN(1) provides that if a release authority lump sum has been paid in respect of the Judge and the Judge is entitled to a rate of pension under subsection 6A(2) (surcharge debt account not in debit) or 6B(2) (surcharge debt account in debit), the Judge's rate of retirement pension is the applicable 5

percentage of what is essentially a basic rate of retirement pension that, if not for new section 17AN, would be worked out under subsection 6A(2), 6B(2) or 6C(3). New subsection 17AN(1) makes it clear that this basic rate of retirement pension is worked out having regard to any other provisions of the Judges' Act that affect the rate. 29. Under new subsection 17AN(2) the applicable percentage is worked out using the following formula:    1 �-  Release authority lump sum  Basic rate    100   Age factor       Under this formula:  age factor is the age factor for the Judge on the day on which the retirement pension becomes payable; and  basic rate is the rate of the retirement pension that would, but for new subsection 17AN(2), be worked out under subsections 6A(2), 6B(2) or 6C(3) for the Judge at the time the retirement pension becomes payable (taking into account any other provision in the Judges' Act that affects the rate of the retiring allowance). 30. New subsection 17AN(3) specifies that the applicable percentage referred to in new subsection 17AN(1) is to be calculated to three decimal places, with the third decimal place to be rounded up if the fourth decimal place is five or more. 31. New subsection 17AN(4) provides that, for the purposes of calculating the applicable percentage under new subsection 17AN(2), the regulations may prescribe the age factor, or the method for working out the age factor. Parliamentary Contributory Superannuation Act 1948 (PCS Act) Resolutions without meetings 32. Item 9 of Schedule 1 inserts a new section 8A to provide flexibility for the Parliamentary Retiring Allowances Trust (the Trust) to make resolutions "out of session". However, this flexibility is subject to the Trust first determining that it may make resolutions without a meeting and the way in which trustees are to indicate agreement with proposed resolutions. 33. New subsection 8A(1) prescribes that the trustees are taken to have passed a resolution at a meeting and may bind the Trust where:  a majority of the trustees entitled to vote on the proposed resolution indicate (in a way determined by the trustees) that they agree with the resolution; and  all trustees were informed of, or a reasonable attempt was made to inform them of, the proposed resolution. 34. New subsection 8A(2) provides that new subsection 8A(1) only applies if the trustees have determined that they may pass resolutions of the kind "out of session", and the way in which trustees are to indicate agreement with proposed resolutions. Superannuation guarantee safety-net amount - overview 35. The actuary for the Parliamentary Contributory Superannuation Scheme (PCSS) established by the PCS Act has advised that it is theoretically possible that, in certain limited circumstances, the calculation of the lump sum superannuation guarantee 6

safety-net benefit under the PCSS, that is payable to an estate, would not meet the statutory minimum Superannuation Guarantee (SG) requirements. Under the current PCSS provisions this could potentially occur where the member converts a significant proportion of their pension into a lump sum and:  the member has very long service, noting that the main benefits cease accruing after 18 years; and/or  the member is over age 65 at retirement, in which case a lower lump sum conversion factor applies; and/or  the member's superannuation salary is significantly lower than the member's salary for SG purposes. 36. A lump sum superannuation guarantee safety-net benefit is payable under the PCSS where the benefits paid or payable to a person have been less than what is required to meet the SG requirements. This can only occur in the PCSS in very limited situations, for example, where a PCSS contributory member dies without any dependants or a PCSS pensioner dies (without dependants) shortly after having started to be paid their PCSS pension. 37. The amendments to the PCS Act ensure that in all circumstances the calculation of any lump sum superannuation guarantee safety-net benefit meets the statutory minimum SG requirements. 38. The amendments do not increase any parliamentary pension entitlements for any individual members; rather they ensure that the lump sum superannuation guarantee safety-net benefit under the PCSS will in all circumstances meet the SG requirements. Superannuation guarantee safety-net amount - detail 39. Items 10 to 13 of Schedule 1 amend section 16A of the PCS Act, which deals with the superannuation guarantee safety-net amount. 40. Item 10 of Schedule 1 inserts new subsection 16A(1A) in the PCS Act to expand the definition of "superannuation guarantee safety-net amount" in relation to a person to be the greater of the amount worked out under subsection 16A(1) (first amount) and a new amount worked out under new subsection 16A(1AA) (second amount). 41. Item 11 of Schedule 1 amends subsection 16A(1) to make it clear that this subsection deals with the calculation of the first amount referred to in new subsection 16A(1A). 42. Item 12 of Schedule 1 inserts new subsections 16A(1AA) to 16A(1AC) dealing with the calculation of the second amount. Under new subsection 16A(1AA), the second amount is the sum of the person's minimum requisite benefit and an amount representing interest on the minimum requisite benefit. The Secretary of the Finance Department is to determine, in writing, the interest amount in accordance with advice received from an actuary. New subsection 16A(1AB) sets out additional matters that the Secretary of the Finance Department must have regard to in determining an interest amount. They are:  the timing and amounts of the benefits paid to or in respect of the person under the PCS Act;  determinations as to rates of interest and the method of calculating interest made by CSC under Public Sector Superannuation Scheme; and 7

 any other matter that the Secretary considers relevant. 43. New subsection 16A(1AC) modifies the calculation of the superannuation guarantee safety-net benefit under new subsection 16A(1AA) for the purposes of paragraph 19AB(1C)(b), which provides for the calculation of the benefits payable to the personal representative of a deceased person in specific circumstances. The modification increases the amount worked out under new subsection 16A(1AA) by the person's surcharge deduction amount. Without this provision, the superannuation guarantee safety-net benefit would be an amount that has been twice reduced by the surcharge deduction amount, as the subsection 16A(1AA) amount and the paragraph 19AB(1C)(b) amount are both reduced by the surcharge deduction amount. 44. Item 13 of Schedule 1 inserts new definitions of "benefit certificate" and "minimum requisite benefit" into subsection 16A(3). The definition of "benefit certificate" is inserted as the term is referred to in the definition of "minimum requisite benefit".  Benefit certificate means the benefit certificate (within the meaning of section 10 of the Superannuation Guarantee (Administration) Act 1992) that was in effect on the last day the person was entitled to a parliamentary allowance.  Minimum requisite benefit means the benefit certified by an actuary in the benefit certificate as the minimum requisite benefit for a PCSS member, calculated at the last day they were entitled to a parliamentary allowance. It is essentially the benefit that must be paid by a defined benefit scheme to meet the minimum SG requirement. 45. Item 14 of Schedule 1 amends subsections 19AAA(6), 19ABA(6), 22A(1) and 22B(1) of the PCS Act to allow an actuary other than the Australian Government Actuary to provide advice in relation to the PCSS. Part 2 - Amendments relating to children Amendments concerning eligible children - overview 46. The schemes under the Federal Circuit Court of Australia Act 1999 (FCCA Act), the Judges' Act, the PCS Act, the Superannuation Act 1922 (1922 Act) and the Superannuation Act 1976 (1976 Act) pay benefits to, or in respect, of, an "eligible child" of a deceased scheme member. 47. The pre-existing provisions reflected a time when a significant percentage of students left formal education at age 16 and commenced full time employment. This is no longer the case, with it now being more usual for students to remain in formal education until at least age 18. 48. It is now common for students that go on to further education generally to work in part-time or casual employment to sustain themselves and meet other education costs while studying, even though they may have some form of parental support. The current legislative requirement that child to be an eligible child to not ordinarily be in employment does not reflect current trends. 49. The amendments contained in Part 2 of Schedule 1 of the Bill will increase the age from which an eligible child must be in full-time education from age 16 to age 18 and also, where relevant remove the restriction relating, to not ordinarily being in employment. 8

50. Amendments similar to those made by this Bill will be made to the Trust Deed made under the Superannuation Act 1990 to provide consistent amendments to the Public Sector Superannuation Scheme in relation to eligibility of benefits for children. Amendments concerning eligible children - detail 51. Item 15 of Schedule 1 amends the definition of "eligible child" in section 9F of Schedule 1 of the FCCA Act to increase the age from which an eligible child has to be in full-time education from age 16 to age 18. 52. Items 16 and 17 of Schedule 1 amend the definition of "child" in section 4 of the Judges' Act to increase the age from which a child has to be in full-time education from age 16 to age 18. 53. Items 18 and 19 of Schedule 1 amend the definition of "eligible child" in subsection 19AA(5) of the PCS Act to increase the age from which an eligible child has to be in full-time education from age 16 to age 18. 54. Items 20, 21, 22 and 23 of Schedule 1 amend the definition of "eligible child" in subsection 4(1) of the 1922 Act to:  increase the age from which an eligible child has to be in full-time education from age 16 to age 18;  update the language of the provisions to reflect modern drafting; and  remove the requirement relating to not ordinarily being in employment. 55. Item 24 of Schedule 1 repeals subsection 4(10) of the 1922 Act as a consequence of changes to the definition of "eligible child", to reflect modern drafting. 56. Items 25 and 26 of Schedule 1 amend the definition of "eligible child" and "partially dependent child" respectively in subsection 3(1) of the 1976 Act to:  increase the age from which an eligible child has to be in full-time education from age 16 to age 18; and  remove the requirement relating to not ordinarily being in employment. 57. Item 27 sets out the application provisions for the amendments made by Part 2 of Schedule 1. 58. Subitem 27(1) of Schedule 1 defines "commencement day". 59. Subitem 27(2) of Schedule 1 provides that the amendment made to the FCCA Act applies in relation to a Judge or retired disabled Judge who dies on or after the commencement day. This reflects that the benefit paid to an eligible child under that Act is a lump sum benefit. 60. Subitems 27(3) and 27(4) of Schedule 1 set out how the amendments to the Judges' Act, the PCS Act, the 1922 Act and the 1976 Act apply to a person (the young person), in relation to paying a benefit under the relevant Act (benefit Act). 61. Under subparagraph 27(3)(a)(i) the amendments apply to a young person in relation to paying a benefit under the relevant benefit Act if the benefit is payable for a day occurring on or after the commencement day because of the death of a person that occurred on or after the commencement day. Example 1: Bob is a pension member of the Commonwealth Superannuation Scheme established under the 1976 Act. Bob dies after the commencement day for the amendments. Bob is survived by his 9

spouse Belinda and daughter Sally. Sally is 17 years old and not in full-time education. Therefore, the reversionary pension payable is 78% (67% in relation to Belinda and 11% in relation to Sally) of the pension that was being paid to Bob at the time of his death. Without the changes made by Part 2 of Schedule 1, the additional 11% reversionary pension in relation to Sally would not be payable as Sally is over 16 years of age and not in full-time education. 62. Under subparagraph 27(3)(a)(ii) the amendments apply to a young person in relation to paying a benefit under the relevant benefit Act, to the extent that the benefit is payable for a day occurring on or after the commencement day, if on the day before the commencement day, a benefit was payable under the relevant benefit Act to or for the young person, or to or for another person in respect of the young person. Example 2: Jane was a pension member of the Commonwealth Superannuation Scheme established under the 1976 Act who died before the commencement day. Jane was survived by her son Tom who is 15 years old. As such Tom is receiving a reversionary pension of 45% of the pension that was payable to Jane at the time of her death. The application provisions under subparagraph 27(3)(a)(ii) mean that Tom will be able to continue to receive his reversionary pension until at least age 18 regardless of whether or not he is in full-time education. Without the changes made by Part 2 of Schedule 1 and the application provision, Tom's reversionary pension would have ceased when he turned 16 years old if he was not in full-time education at the time. 63. In the case of a death that occurred before commencement day and on the day before the commencement day no benefit was payable to or in respect of the young person then the amendments made by Part 2 of Schedule 1 apply to a young person as set out under paragraph 27(3)(b). Under paragraph 27(3)(b) a benefit only becomes payable from the later of the commencement day and the day notice is first given as mentioned in subitem 27(4). 64. Subitem 27(4) sets out the day on which a notice is given for the purposes of paragraph 27(3)(b). The notice can be given on or after the day the Act receives the Royal Assent but under paragraph 27(3)(b) no benefit would be payable until after the commencement day. Under subitem 27(4) a notice is taken to be given when an application is made under the relevant scheme Act (paragraph 27(4)(a)) or a request is made under paragraph 27(4)(b) to the relevant person as specified in the table below paragraph 27(4)(b) by the young person or by a person in respect of the young person. 65. The table below paragraph 27(4)(b) sets out who a request is to be made in relation to each relevant superannuation Act. For example, in the case of the Superannuation Act 1976 the request is to be made to CSC, that is the Commonwealth Superannuation Corporation, which is trustee and administrator of the Commonwealth Superannuation Scheme. 66. Paragraph 27(3)(b) ensures that the changes made by Part 2 of Schedule 1 can be practically administered. Without receipt of an application for a benefit or request to apply the amendments, the trustee or administrator of the relevant scheme has limited, if any, way of identifying or contacting those young persons who may be eligible for benefits because of the changes. This is because at the time of changes no benefit is being paid or payable in respect of the young person. The alternative approach would have been to apply the changes only in respect of deaths that occurred after commencement day. However, this would have meant a young person as covered by paragraph 27(3)(b) would have never been able to benefit from the changes. 10

Example 3: Robert was a pension member of the Commonwealth Superannuation Scheme established under the 1976 Act. Robert died before the commencement day for the amendments. Robert was survived by his daughter Lilly. Lilly was 16 years and six months old and not in full-time education. Therefore, Lilly was not entitled to a reversionary pension at the time of Robert's death. After the Act receives Royal Assent Lilly makes a request to CSC to apply the amendments to her. On the commencement day, Lilly is aged 17 years and three months old and not in full-time education. Therefore, Lilly will be eligible for a reversionary pension from commencement day. The reversionary pension will be payable to Lilly until she turns 18. Without the changes made by Part 2 of Schedule 1 and the application provision Lilly would never have become eligible for a reversionary pension. 67. The application provisions in item 27 do not, of themselves, provide that anyone is, or is not, entitled to a benefit. As such even if the changes apply to a child in relation to a particular type of benefit, the child would still have to actually fall within the provisions of the new definition to be eligible for a benefit. For example, if Lilly in example 3 above was 20 years old and not in full-time education then she would not be entitled to any benefit because she would not come within the amended definition of "eligible child" in the 1976 Act. 68. Item 28 sets out transitional provisions for the amendments made by Part 2 of Schedule 1. The purpose of the provisions set out in item 28 is to ensure that the amendments set out in Part 2 of Schedule 1 do not decrease benefits being paid immediately before the commencement day under any relevant superannuation Act on a day after commencement. 69. Subitem 28(1) provides that the provisions in item 28 are to be applied where the amendments in Part 2 of Schedule 1 would:  reduce the amount of a benefit (the existing beneficiary's post- commencement benefit) payable under a relevant superannuation Act to or for a person (the existing beneficiary) that was payable on the day occurring immediately before the commencement day; and  increase the amount of a benefit (the new beneficiary's post-commencement benefit) payable under a relevant superannuation Act for a day after the commencement day. 70. Subitem 28(2) provides that an existing beneficiary's benefit for a post-commencement day is to be increased to what it would have been if Part 2 of Schedule 1 had not been enacted. 71. Subitem 28(3) provides that where there is only one new beneficiary the amount of their benefit is to be reduced by the increase that would apply under subitem 28(2) to an existing beneficiary or beneficiaries. 72. Subitem 28(4) provides that where there is more than one beneficiary the amount of the increase that would apply under subitem 28(2) is to be applied to reduce the benefit of each new beneficiary in proportion to his or her share of the total increase. Part 3 - Other amendments 73. Item 29 of Schedule 1 corrects a misdescribed amendment made to the Judges' Act by item 38 of Schedule 1 of the Judges and Governors-General Legislation Amendment (Family Law) Act 2012 (the Family Law Act). The misdescribed 11

amendment sought to insert "(disregarding sections 17AD and 17AH)" after the words "this Act" in subsection 16(1) of the Judges' Act. However, subsection 16(1) of the Judges' Act includes three references to "this Act". Item 29 of Schedule 1 amends item 38 of Schedule 1 of the Family Law Act to make it clear that the additional words are inserted after the third such reference. 74. The amendment commences on 15 March 2013, which is the date of commencement of item 38 of Schedule 1 to the Family Law Act. The retrospective correction of this misdescribed amendment will not affect the entitlements of any individuals, as no individual has fallen within the scope of subsection 16(1) since the Family Law Act commenced. Schedule 2 - Governance arrangements for the Board of CSC Governance of Australian Government Superannuation Schemes Act 2011 75. The CSC Board is established under the Governance of Australian Government Superannuation Schemes Act 2011 (GAGSS Act). 76. The size of the CSC Board will be reduced from 11 to 9 directors (which includes the Chair) from 1 July 2020, through the reduction of one position of a Finance Minister-nominated director and one position of a director that is nominated by the President of the Australian Council of Trade Unions (ACTU). 77. The nine member Board will then comprise of:  2 (currently 2) directors nominated by the Chief of the Defence Force;  2 (currently 3) directors nominated by the President of the ACTU;  4 (currently 5) directors chosen by the Finance Minister in consultation with the Minister for Defence; and  a Chair selected by the Finance Minister in consultation with the Minister for Defence and subject to the agreement of the CSC Board. 78. Item 1 of Schedule 2 amends paragraph 11(1)(b) of the GAGSS Act to replace the reference to 10 to 8. This means the CSC Board will comprise 9 directors, that is a Chair and 8 other directors. 79. Item 2 of Schedule 2 amends subsection 11(2) of the GAGSS Act to replace the reference to 10 other directors to 8 other directors. 80. Item 3 of Schedule 2 amends paragraph 11(2)(a) of the GAGSS Act that relates to the number of directors to be nominated by the President of the ACTU. The reference to 3 directors will be replaced with a reference to 2 directors. 81. Item 4 of Schedule 2 amends the note under subsection 11(2) of GAGSS Act. The note makes a reference to the number of directors that the Finance Minister chooses. The reference to 5 directors will be changed to 4 directors. 12

82. Items 5, 6, 7, 8 and 9 of Schedule 2 make consequential amendments to subsection 21(1), subsection 21(2), subsection 21(3), section 23 and paragraph 24(1)(a) of the GAGSS Act that relate to quorum and voting requirements for the CSC Board. 83. Under the changes, 6 directors will constitute a Board quorum and also decisions made by the CSC Board will need the agreement of 6 of the 9 directors. The quorum and voting requirements will continue to apply where a director cannot vote for reasons provided for in section 22 of the GAGSS Act. Where a decision is made without a meeting, the CSC Board is taken to have made a decision where 6 directors indicate their agreement to the proposed decision in accordance with the method determined by the CSC Board under subsection 24(2). 84. Item 10 of Schedule 2 provides that existing appointments (including the appointment of a person to act as a director) that occur before 1 July 2020 are not affected by the amendments made by Schedule 2 to section 11 of the GAGSS Act. 85. Although item 1 of Schedule 2 will reduce the size of the CSC Board to 9 directors on 1 July 2020, it is possible for the number of directors to be 10 or 11 after this date because the amendments made by Schedule 2 do not affect CSC Board appointments that take effect before 1 July 2020. As a result, item 11 of Schedule 2 and the note under item 11 sets out the quorum and voting provisions for the CSC Board where the size of the CSC Board consists of 10 or 11 directors. 13

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