Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012-2013
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SUPERANNUATION LEGISLATION AMENDMENT (SERVICE PROVIDERS
AND OTHER GOVERNANCE MEASURES) BILL 2012
SUPPLEMENTARY EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Explanation of amendments .......................................... 5
Chapter 2 Statement of Compatibility with Human Rights .............. 9
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Bill Superannuation Legislation Amendment
(Service Providers and Other Governance
Measures) Bill 2012
SIS Act Superannuation Industry (Supervision)
Act 1993
1
General outline and financial impact
On 29 November 2012, the Minister for Superannuation and Financial
Services, the Hon Bill Shorten MP, introduced the Superannuation
Legislation Amendment (Service Providers and Other Governance
Measures) Bill 2012 (Bill).
The Bill is the fourth tranche of legislation implementing the
Government's MySuper and governance reforms.
In addition to the first schedule of amendments made in response to the
Parliamentary Joint Committee on Corporations and Financial Services'
(PJC) recommendations and to clarify the legislation, there are a number
of additional amendments.
The amendments address industry concerns and include a number of
measures to: clarify that the legislation is not intended to prohibit the use
of related parties, provided the trustee complies with the trustee covenants
and other relevant legislation; carve out certain existing products (for
example, risk and capital guaranteed products) from the direction of
contributions requirements; include a regulation making power to
prescribe circumstances in which a direction given to the trustee of
another fund can be relied upon by the trustee of a successor fund; and
amend the existing direction arrangements so that after 31 March 2013 a
direction has to be given in writing.
Date of effect: The amendments to sections 29WA and 29WB commence
the day after Royal Assent. The new section 58B will commence on
Royal Assent.
Proposal announced: On 16 December 2010, the then Assistant
Treasurer and Minister for Financial Services and Superannuation, the
Hon Bill Shorten MP, announced the Stronger Super reforms. On
21 September 2011, he announced the Government's decisions on the key
design aspects of the Stronger Super reforms.
Financial impact: Nil
Human rights implications: This Bill does not raise any human rights
issues.
Compliance cost impact: Nil
3
Chapter 1
Explanation of amendments
Outline of chapter
1.1 The amendments to the Bill:
· clarify that the legislation (and in particular the tied service
provider override in section 58A) is not intended to prohibit
the use of related parties, provided the trustee complies with
the trustee covenants and other relevant legislation as
specified in a new section 58B;
· carve out certain products (held as at 31 March 2013) from
the direction of contributions requirements in sections 29WA
and 29WB;
· include a regulation making power in the direction of
contributions provisions so that a direction given to the
trustee of another fund can be relied upon by the trustee of a
successor fund; and
· amend the existing direction of contributions provisions so
that only directions given after 31 March 2013 are required to
be in writing.
Service Providers
1.2 Concerns have been raised that, as currently drafted, section 58A
which is to be inserted into the Superannuation Industry (Supervision)
Act 1993 (SIS Act) could inadvertently prohibit trustees from using
related service providers, even where this is in the best interests of
members. The basis for this concern is that, on one view, the general law
on conflicts of interest may require a trustee to avoid dealing with a
related party at all (even where the outcome is favourable to beneficiaries
of the fund) if the trustee or its directors have a conflict of interest under
general law. Some funds address this by including a provision in the trust
deed authorising the trustee to deal with the related party, but there is
concern that section 58A will render such a provision void.
1.3 The amendments insert a new section 58B into the SIS Act
which will make it clear that, provided a trustee complies with all
5
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
relevant Acts, legislative instruments, prudential and operational
standards, governing rules and statutory covenants, the trustee may enter
into service provider and investment arrangements (and undertake the
preliminary dealings necessary to do so) even though this might otherwise
breach general law conflict of interest prohibitions. It will not be
necessary, therefore, for the trust deed to expressly authorise the trustee to
engage in dealings with the related party. The words `general law relating
to conflict of interest' are intended to be construed broadly so as to cover
general law relating to both trustees and directors and to cover conflicts
between duties to beneficiaries and the interests of beneficiaries, on the
one hand, and duties to other persons and the interests of other persons, on
the other. [Amendment 8]
1.4 New section 58B will commence on Royal Assent and apply in
relation to things done on and after 1 July 2013. [Amendments 1 and 9]
Direction of contributions provisions
1.5 The amendments insert new subsections (4), (5) and (6) into
section 29WA of the SIS Act, and add new subsections (4), (5) and (6)
into the new section 29WB which is to be inserted into the SIS Act.
These subsections will have the following effects.
Investment direction `in writing'
1.6 Current section 29WA of the SIS Act, and the new
section 29WB to be inserted by the Bill, provide that a direction given by
a member to a trustee that contributions be invested in a specified
investment option, must be in writing. Amendments (2), (3), (5) and (6),
remove from paragraph 29WA(1)(c) and new paragraph 29WB(1)(d), the
general requirement for the direction to be `in writing'. [Amendments 2, 3, 5
and 6]
1.7 New subsections 29WA(4) and 29WB(4), will ensure that the
requirement to have directions given to the trustee in writing will only
apply to directions given after 31 March 2013. A copy of a direction
given after 31 March must also be held by or on behalf of the trustee of
the fund. [Amendment 4, subsection 29WA(4) and Amendment 7,
subsection 29WB(4)].
Recognising Previous Directions
1.8 New subsections 29WA(5) and 29WB(5) will provide regulation
making powers to prescribe the circumstances in which a direction,
relating to the investment of contributions, given to the trustee of one
regulated superannuation fund is to be taken to be a direction given to the
6
Chapter 1 - Explanation of amendments
trustee of another regulated superannuation fund for the purposes of the
relevant sections. [Amendment 4, subsection 29WA(5), and Amendment 7,
subsection 29WB(5)]
1.9 It is intended that the regulations to be made under these
subsections will address the circumstances where a member has been
moved from one fund to another under a successor fund transfer.
Existing products
1.10 New subsections 29WA(6) and 29WB(6) will provide
exceptions from the direction of contributions requirements for certain
products. The exceptions will apply to the extent the contribution relates
to a life product, investment account contract or cash investment option
that is held by a person as at 31 March 2013. The exception applies to the
same categories of products that are excluded from the application of
paragraph 20B(3)(c) of the SIS Act (in respect of the definition of accrued
default amounts). [Amendment 4, subsection 29WA(6), and Amendment 7,
subsection 29WB(6)].
1.11 The amendments will ensure that future contributions can
continue to be directed to these products; that is, the contributions will not
have to be paid into a MySuper product and the trustee will not have to
secure a formal direction from the member to continue the payment of the
contributions into the relevant product.
7
Chapter 2
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Superannuation Legislation Amendment (Service Providers and Other
Governance Measures) Bill 2012
2.1 These amendments are 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.
Overview
2.2 The amendments to the Bill:
· clarify that the legislation (and in particular the tied service
provider override in section 58A) is not intended to prohibit
the use of related parties, provided the trustee complies with
the trustee covenants and other relevant legislation as
specified in a new section 58B;
· carve out certain products (held as at 31 March 2013) from
the direction of contributions requirements in sections 29WA
and 29WB;
· include a regulation making power in the direction of
contributions provisions so that a direction given to the
trustee of another fund can be relied upon by the trustee of a
successor fund; and
· amend the existing direction of contributions provisions so
that only directions given after 31 March 2013 are required to
be in writing.
Human rights implications
2.3 The amendments do not engage any of the applicable rights or
freedoms.
9
Superannuation Legislation Amendment (Service Providers and Other Governance Measures)
Bill 2012
Conclusion
2.4 These amendments are compatible with human rights as they do
not raise any human rights issues.
Minister for Financial Services and Superannuation and
Minister for Employment and Workplace Relations, the Hon
Bill Shorten.
10
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