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1998
THE PARLIAMENT OF THE COMMONWEALTH
OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
WORKPLACE RELATIONS AND OTHER
LEGISLATION AMENDMENT (SUPERANNUATION) BILL
1998
EXPLANATORY
MEMORANDUM
(Circulated
by authority of the Minister for Employment, Workplace Relations
and Small
Business, the Honourable Peter Reith MP)
ISBN: 0642 379009
WORKPLACE RELATIONS AND OTHER LEGISLATION AMENDMENT
(SUPERANNUATION) BILL 1998
OUTLINE
This Bill will remove superannuation from the
list of ‘allowable award matters’ set out in subsection 89A(2) of
the Workplace Relations Act 1996. The effect of the amendments will be
that the Australian Industrial Relations Commission (the Commission) will not be
permitted to deal with disputes about superannuation by arbitration. The
Commission will not be permitted to prevent or settle disputes about
superannuation by making awards or orders or maintain the settlement of such
disputes by varying awards or orders. An amendment to subsection 89A(7) of the
Workplace Relations Act 1996 will preclude the Commission from making an
‘exceptional matters order’ about superannuation.
Notwithstanding the Bill’s removal of superannuation as an
allowable matter in federal awards, employers will be able to continue to use
the ‘notional earnings bases’ of employees determined by reference
to federal industrial awards. This will enable employers to continue to use
these ‘notional earnings bases’ for the purposes of calculating
their liability (if any) to pay the superannuation guarantee charge.
The
amendments also make a further minor amendment to the superannuation guarantee
law consequent upon the removal of superannuation as an allowable matter in
federal awards.
FINANCIAL IMPACT STATEMENT
The Bill has
no significant impact on Commonwealth expenditure.
NOTES ON CLAUSES
Clause 1 - Short title
1. This
clause provides the Act’s short title.
Clause 2 -
Commencement
2. This clause provides for the commencement of the Act.
The Act will principally commence on the day on which it receives Royal
Assent.
3. Subclause 2(2) provides the commencement provision for the
consequential amendment in item 2 of Schedule 2, and the associated transitional
provision. Item 2 of Schedule 2 repeals section 32X of the Superannuation
Guarantee (Administration) Act 1992 (SG(A)A). The commencement provision
ensures that section 32X will be repealed on the later date of either six months
after the Bill receives Royal Assent, or immediately after commencement of
section 2 of the Superannuation Legislation Amendment (Choice of
Superannuation Funds) Act 1998. The repeal cannot occur before the
commencement of that section of the Choice of Funds Act, proposed by another
Bill presently before the Parliament, as it will be that Act which introduces
section 32X of the SG(A)A.
Clause 3 - Schedule(s)
4. This
clause provides for the two Schedules of this Act to come into
effect.
5. Schedule 1 amends the Workplace Relations Act
1996.
6. Schedule 2 amends the Superannuation Guarantee
(Administration) Act 1992.
SCHEDULE 1
PART 1
– AMENDMENT OF THE WORKPLACE RELATIONS ACT 1996
Item
1 – Paragraph 89A(2)(s)
1.1 This item will delete
‘superannuation’ from the list of allowable award matters in
subsection 89A(2) of the Workplace Relations Act 1996 (the WR Act). The
amendment reflects the intention that superannuation no longer be considered an
allowable award matter for the purposes of the WR Act.
Item 2 –
Subsection 89A(7)
1.2 This item will provide that the Commission
cannot make an ‘exceptional matters’ order dealing with
superannuation. The effect of this item is to exclude from the
Commission’s exceptional matters jurisdiction disputes about
superannuation. Consequently, the Commission will be unable to make an
‘exceptional matters order’ dealing with superannuation matters,
including, but not limited to, choice of fund, types of employees to be covered,
rate of contribution, and employees’ ability to access
entitlements.
PART 2 – TRANSITIONAL PROVISIONS
1.3 This item proposes definitions that are used in the transitional
provisions.
1.4 ‘Interim period’ is defined as the period
starting on the day after the Bill commences and finishing six months later.
The interim period will allow time for the parties to awards containing
superannuation provisions to apply to have them varied by removing those
provisions. At the end of the interim period remaining superannuation
provisions would cease to have effect.
1.5 The definition of
‘special consent provisions’ refers to the meaning set out in item 4
(explained below). ‘Termination time’ is defined in relation to
‘special consent provisions’ as the end of the period that is
required to be specified in the award under the Workplace Relations Act
1996.
1.6 Special consent provisions are provisions of awards which can briefly
be described as enterprise agreements which are given effect as consent awards
by reference to specified wage fixing principles established by the Commission.
The specific wages fixing principles that are relevant are set out in paragraphs
(a), (b) and (c) of this item. The provisions may deal with
superannuation.
1.7 Subitem 1 allows the parties to an award to apply to the Commission to have awards varied so that they no longer deal with superannuation.
1.8 Subitem 2 provides that special consent provisions cannot be varied
in the interim period unless the termination time for the provisions has
expired. The termination time for the provisions is defined in item 3 by
reference to section 147 of the WR Act.
1.9 Subitem 3 reinforces that the
Commission can only arbitrate in relation to applications for variation if
reasonable attempts have been made to reach an agreement on how the award should
be varied and the treatment of superannuation.
1.10 Subitem 1 provides that award provisions dealing with superannuation
will cease to have effect at the end of the interim period.
1.11 Subitem
2 ensures that if the termination time for special consent provisions is after
the end of the interim period, then superannuation provisions in these awards
will cease to have effect after the termination time. The subitem also ensures
that special consent provisions will be dealt with under item 7 (see notes
below) after the termination time.
1.12 Subitem 1 provides that, after the interim period, the Commission
must review each award that is in force and has been effected by item 7.
1.13 The Commission is required under subitem 2 to vary the award and
remove provisions that have ceased to have effect. This is to ensure that
awards do not continue to contain provisions that have no legal effect.
1.14 The purpose of this provision is to ensure that where a corporation
is bound by an award, and the award is either varied under subitem 5(1), or
ceases to have effect because of item 6 (and as a consequence the award no
longer operates to render a State award invalid), the corporation will not
become bound by the State award unless it opts to become so bound. A corporation
wishing to be bound by a State award would need to apply to the relevant State
authority to be bound by the State award.
1.15 The terms ‘State
award’ and ‘State industrial authority’ are defined in section
4 of the WR Act.
SCHEDULE 2 – AMENDMENT OF THE SUPERANNUATION
GUARANTEE (ADMINISTRATION) ACT 1992
PART 1 –
AMENDMENTS
2.1. The amendments made in this Schedule will ensure that, notwithstanding the removal of superannuation as an allowable matter in federal awards, employers will, for superannuation guarantee purposes, be able to continue to use the ‘notional earnings bases’ of employees determined by reference to federal industrial awards. This will enable employers to continue to use these ‘notional earnings bases’ for the purposes of calculating their liability (if any) to pay the superannuation guarantee charge.
2.2. The amendments also repeal section 32X of the Superannuation Guarantee (Administration) Act 1992 (SG(A)A). This amendment is consequential to the removal of superannuation as an allowable matter in federal awards.
2.3. To avoid being subject to the superannuation guarantee charge,
employers must provide superannuation support for their employees at specified
levels.
2.4 Generally, the level of employer superannuation support for
an employee is calculated as the amount of superannuation contributions
expressed as a percentage of the employee’s ‘notional earnings
base’. For the 1998-99 year that level will be 7%.
2.5 Where an
employer is making superannuation contributions under an award which has been in
place since before 21 August 1991 the employee’s ‘notional earnings
base’ is calculated by reference to the earnings specified in the award.
Generally, an employee’s ‘notional earnings base’ calculated
by reference to the award will be lower than it would otherwise have been (which
would generally be the employee’s ‘ordinary time
earnings’).
2.6 The Bill’s removal of superannuation as an
allowable matter under federal awards would mean, without corresponding
amendments to the SG(A)A, that employers with employees employed under federal
awards would generally be required to calculate their superannuation obligations
using an employee’s ‘ordinary time earnings’ as the
employee’s ‘notional earnings base’, rather than the generally
lower ‘notional earnings base’ calculated by reference to the
award.
2.7. The Government announced on 4 December 1997 that it would
enable employers to continue to use existing notional earnings bases following
the removal of superannuation as an allowable matter under federal
awards.
Item 1 – New section 12A
2.8. Item 1 of Schedule 2 will insert a new
section into the SG(A)A to treat certain contributions to a superannuation fund
as having been made in accordance with an industrial award, notwithstanding the
removal of superannuation as an allowable matter under federal awards (new
section 12A).
2.9. New subsection 12A(1) provides
that the operation of Schedule 1 to the Workplace Relations and Other
Legislation Amendment (Superannuation) Act 1998 (to remove superannuation
as an allowable matter) in relation to the SG(A)A is to be disregarded. The
remainder of the section explains how new subsection 12A(1) is to apply
(new subsection 12A(2)).
2.10. The SG(A)A refers to matters
being done, or being required to be done, in accordance with an industrial award
in two broad areas:
• in calculating employees’
‘notional earnings bases’ (refer to sections 13 and 14 of the
SG(A)A); and
• in determining the methodology for reducing an
employer’s charge percentage in respect of an employee (refer to section
23 of the SG(A)A).
2.11. New subsections 12A(3) to (5)
operate to ensure that those two broad areas of the SG(A)A will continue to
operate in respect of an employer and an employee as they would have operated
had superannuation not been removed as an allowable matter and the terms of the
award relating to the superannuation fund had not been varied.
|
Example
Immediately before superannuation is removed as an allowable matter under federal awards, ABC Ltd was contributing to the ABC Superannuation Fund on behalf of an employee, Ryan, in accordance with a federal award. The award was in place before 21 August 1991 and requires employer contributions equal to 5% of an employee’s gross salary at last birthday. Ryan’s notional earnings base is therefore determined in accordance with section 13 of the SGAA. Under this section the notional earnings base is the earnings of the employee by reference to which contributions are calculated under the award, that is the employee’s gross salary at last birthday. In addition, ABC Ltd’s charge percentage for superannuation guarantee purposes is reduced under subsection 23(2) of the SG(A)A, since ABC Ltd is required by an industrial award to contribute superannuation for the benefit of an employee at a specified percentage of the employee’s notional earnings base. Once superannuation clauses cease to have effect, ABC Ltd continues to contribute to the ABC fund for the benefit of Ryan in the same manner as it contributed before. No new arrangements or agreements relating to superannuation are entered into. In this circumstance: • Ryan’s notional earnings base will still be determined under section 13 of the SG(A)A, as if ABC Ltd were contributing in accordance with the industrial award and the terms of the award relating to superannuation contributions had not been varied (new subsection 12A(3)); and • ABC Ltd’s charge percentage reduction will still be calculated under subsection 23(2) of the SG(A)A, as if ABC Ltd were required by the industrial award to contribute for the benefit of Ryan, and the requirements of the award relating to contributions had not been varied (new subsections 12A(4)). |
Item 2 – Repeal of section 32X
2.12. Schedule 1 to
Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill
1998 proposes to insert new section 32X into the SG(A)A, as part of
broader amendments to introduce choice of fund requirements into the
superannuation guarantee law. The section would make a requirement in a federal
award to make contributions for the benefit of an employee to a superannuation
fund unenforceable to the extent that the employer instead makes the
contributions to another fund in compliance with the choice of fund
requirements.
2.13. At the end of the interim period, superannuation
clauses in federal awards will no longer require superannuation contributions to
specified funds. Consequently, the protection provided for employers by
proposed section 32X of the SG(A)A is no longer necessary and the section is
repealed.
PART 2 – TRANSITIONAL PROVISION
Item 3
– Transitional – section 32X of the Superannuation Guarantee
(Administration) Act 1992
2.14 This transitional provision
ensures the continued operation of section 32X of the SG(A)A to the extent that
special consent provisions continue to operate after the end of the interim
period. Special consent provisions are defined in Part 2 of Schedule 1.