Bills Digest No. 141   1997-98 Crimes (Superannuation Benefits) Amendment Bill 1997


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History Purpose Background Main Provisions Concluding Comments Endnotes Contact Officer and Copyright Details

Passage History

Crimes (Superannuation Benefits) Amendment Bill 1997

Date Introduced: 26 November 1997

House: House of Representatives

Portfolio: Attorney-General

Commencement: Upon Royal Assent with the exception of a minor amendment, which may commence at a later date.

Purpose

This Bill proposes to amend the Crimes (Superannuation Benefits) Act 1989 (CSB Act) and the Australian Federal Police Act 1979 (AFP Act) to close loopholes which have allowed corrupt public officials to access their publicly funded superannuation benefits.

Corrupt officials will no longer be able to avoid confiscation of employer-funded benefits by rolling their superannuation into a non-Commonwealth fund. The Government will be able to freeze the superannuation entitlements of any official charged with a serious corruption offence, and trace amounts that have been rolled-over and recover them under a court order.

Background

General Confiscation Legislation

The powers of a court to take property that is immediately connected with an offence, generally known as 'forfeiture', or to deprive an offender of the proceeds, profits or other benefits derived from crime, referred to as 'confiscation', are of ancient origin dating back some hundreds of years.

However, the traditional statutory powers of forfeiture, as well as the traditional sanctions such as imprisonment and fines, came to be regarded as inadequate to combat the growing problems of drugs and organised crime.

Legislation(1) of more recent origin has been introduced in all the States and Territories and at the Commonwealth level permitting the confiscation of the proceeds of crime. The legislation generally empowers a court, following the conviction of an offender, and upon the application of an appropriate officer, to make a 'confiscation order' which is the generic term used to describe two discrete types of order: a forfeiture order and a pecuniary penalty order.

Although confiscation orders generally follow conviction, they are not, strictly speaking, sentences. Confiscation orders are separate civil proceedings intended to incapacitate and deter offenders.

Confiscation of Superannuation Benefits

In both the Commonwealth and Queensland jurisdictions, legislation(2) exists enabling a court to confiscate the employer's contribution to the superannuation fund of a person convicted of corruption offences.

The Commonwealth provisions are modelled on the Proceeds of Crime Act 1987 and include provisions for restraining orders. They create a 'superannuation order', the basis of which is the conviction of a person who is, or was, an employee of the Australian Federal Police, or of the Commonwealth or a Commonwealth authority, including Members of Parliament, of a 'corruption' offence(3).

Where a person has been so convicted and sentenced to imprisonment for life or a term longer than 12 months which has not been wholly suspended, the relevant Minister may authorise the Director of Public Prosecutions to apply to the relevant State or Territory Supreme Court for a superannuation order.

The effect of a superannuation order is that:

  • the employer contributions or benefits which have been made, or are payable to the person and to which the person is, or would be entitled, including interest, are forfeited; and
  • the person's membership in the superannuation scheme is terminated.

The employee remains entitled to his or her contributions plus interest accrued. The Bill will not disturb that position.

Main Provisions

Schedule 1 - Amendment of the Crimes (Superannuation Benefits) Act 1989

Item 3 proposes to insert new subsection 18(3), which amends some evidentiary provisions by facilitating the obtaining and subsequent admission in court of information requested under new section 39N, discussed at item 19 below.

Tracing and Recovery of Superannuation Benefits

Item 9 proposes to amend section 19 by inserting new provisions extending the operation of superannuation orders to benefits that have been rolled-over or transferred from superannuation schemes to which the Commonwealth made contributions, and providing for their tracing and recovery.

Under the existing provisions, there are basically three types of superannuation order. They are:

  • an order under subsection 19(1), which cancels benefits that reside in the scheme to which the Commonwealth or Commonwealth Authority made contributions;
  • an order under subsection 19(3), which orders the repayment of benefits by the Fund in which the benefits are held, where that scheme is one to which the Commonwealth or Commonwealth Authority has made contributions; and
  • a recovery order under subsection 19(4), made against the offender for the recovery of benefits that have been paid to the offender by the scheme to which the Commonwealth or Commonwealth Authority made contributions.

The existing provisions only apply to benefits residing in a relevant Commonwealth superannuation scheme or "paid" to an offender.

Benefits rolled-over or transferred from the scheme to which the Commonwealth or Commonwealth Authority made contributions fall outside the scope of superannuation orders. Those benefits are no longer residing in the relevant scheme and thus subsections 19(1) and (3) have no application.

The benefits have not been "paid" to the offender for the purposes of subsection 19(4) because the offender does not have an immediate, unfettered entitlement to the benefits given they would usually be required to be preserved in accordance with the preservation rules of the Superannuation Industry (Supervision) Act 1993.

New subsection 19(6) operates to treat these benefits as "paid" to the offender by the scheme for the purposes of subsection 19(4).

In order to access such rolled-over or transferred benefits, new subsection 19(7) provides for their tracing and subsequent recovery from the roll-over holder. Provision is also made to cover successive roll-overs or transfers of all or part of an offender's benefits.

Benefits which are paid to a third party who is not a superannuation provider, the offender's spouse for example, are not caught by new subsection 19(6).

New subsections 19(8) and (9) provide that the amount of a recovery order under subsection 19(7) is calculated in such a way as to ensure that the Commonwealth recovers the lesser of:

  • the amount originally rolled-over increased by an amount that reflects the real value of the roll-over at the time of making the order less the roll-over holder's unrecouped reasonable administrative expenses, and
  • the amount that the roll-over holder actually has in respect of the offender less its unrecouped reasonable administrative expenses.

Reflecting any decline in the purchasing power of the amount originally rolled-over mirrors the existing treatment of recovered benefits. It is normally expected that the court would apply the relevant Consumer Price Index to the roll-over amount and arrive at an amount that reflects the real value of the roll-over at the time of making the order.

A drafting error appears to have been made in new Paragraph 19(9)(a) in that the amount of the benefit to be calculated by the court should be that attributable to the employer contributions "and" interest accrued thereon, rather than "or" interest accrued thereon.

The amendments to section 19 apply only to superannuation orders that relate to convictions that occurred on or after the day on which the Bill, once enacted, receives Royal Assent.

Item 12 proposes to insert new section 21B, which provides that once the roll-over institution pays the amount of a recovery order under subsection 19(7), the roll-over holder is released from its obligation to pay to the offender (or other beneficiary) an amount equal to the recovery order. The provision overrides any obligation arising under any rule of law or equity.

Any other benefits held by the roll-over institution on behalf of the offender are unaffected by new section 21B.

Suspension or 'Freezing' of Employer-Funded Superannuation Benefits

Item 15 proposes to insert new Part 2A comprising sections 23A to 23E, which permits the Minister to make a direction that suspends the employer-funded contributions of a person in the Commonwealth superannuation scheme to which they were paid. New Part 2A is modelled on existing section 51 of the AFP Act where the benefits of AFP members or staff members may be suspended.

There are advantages and efficiencies in temporarily freezing employer-funded benefits in the scheme until the corruption offence proceedings are finalised. Should a superannuation order be made against the person, the benefits are simply cancelled in the scheme. That obviates the need to obtain a recovery order and prevents the benefits from being dissipated and thus more difficult to recover.

The Minister may only make a direction that a person's employer-funded contributions be suspended if the person has been charged with or convicted of an offence. Where the person is convicted of a corrupt offence and sentenced in respect of that offence, the sentence must be for a term greater than 12 months.

The freezing or suspension of benefits preserves the benefits in the scheme. That order ends 12 months after it was made but may be extended by the Minister.

The freezing of benefits does not affect the employee's rights to his or her employee contributions. Furthermore, the freezing merely prevents the fund from paying employer benefits. It does not prevent those benefits from being forfeited, or prevent other rights from being affected by the actions of the employee or anyone else.

A direction freezing employer contributions ceases to be in force if:

  • the charge is disposed of without conviction of the superannuation scheme member;
  • the member is convicted but a superannuation order cannot be made against the member; or
  • the direction is not extended within 12 months.

New Part 2A only applies to a member of a scheme who is charged with or convicted of a corruption offence on or after the day on which the Bill, once enacted, receives Royal Assent. It also applies to a member who was charged with a corruption offence that occurs before the Bill commences provided the charge was either withdrawn or disposed of by acquittal or conviction.

Disposal of Property Subject to Restraining Orders

Item 16 proposes to insert new Part 3A comprising sections 39A to 39M, which introduces a mechanism for the sale and disposition of restrained property for the purposes of satisfying a recovery order.

The new provisions authorise the court to direct the Official Trustee in Bankruptcy to take custody and control of restrained property and to sell or otherwise dispose of it to satisfy an order made under subsection 19(4). A similar mechanism currently applies to restrained property under the Proceeds of Crime Act 1987.

Part 3 of the CSB Act currently makes provision for the making of restraining orders against the property of a person who has either been convicted of a 'corruption' offence, or, has or is about to be charged with a corruption offence. However, no mechanism exists to enable that property to be disposed of in order to satisfy a recovery order debt.

Such restraining orders are designed to secure the property of a defendant to serve as a reserve from which payment may be sought when a recovery order is obtained under subsection 19(4). If a person has been paid superannuation benefits under a scheme, and there is property of equal value to that of the benefits paid, it may be restrained. The object of the restraining of the property is that that property can be sold or otherwise disposed of to satisfy the recovery order debt.

The Official Trustee cannot carry out a direction to sell or otherwise dispose of restrained property until:

  • the end of the period for appealing the conviction for the offence;
  • the conclusion of the proceedings arising out of an appeal against the conviction for the offence;
  • the end of the period for appealing the making of a recovery order; and
  • the conclusion of the proceedings arising out of the making of a recovery order.

Obtaining Information from Superannuation Authorities

Item 19 proposes to insert new section 39N, which enables an authorised officer to obtain information from a number of State and Commonwealth authorities, as well as any superannuation provider.

The information may only be requested on the grounds that the person who is the subject of the request has been charged with or convicted of a corruption offence. The information must also be relevant to the making of an application for a superannuation order or for the making of a decision by the Minister as to whether the Director of Public Prosecutions should be authorised to apply for a superannuation order.

New subsection 39N(4) provides that a person who fails to comply with a request for relevant information, or whose response is false or misleading in a material particular and made recklessly, commits an offence.

An anomaly appears to exist on a construction of subsection 39N(4), in that, it would seem a response must be made recklessly as well as being false or misleading in order for an offence under the subsection to be committed. It is therefore uncertain whether an offence would be committed if a person knowingly responds in a manner that is false or misleading.

It is submitted that any potential problem could be overcome by omitting "and" appearing at the end of paragraph 39N(4)(a) and substituting "or".

Schedule 2 - Amendment of the Australian Federal Police Act 1979

This Bill also proposes amendments to the AFP Act, which parallel those made to the CSB Act outlined above, although section numbers differ.

The exception is item 15, Schedule 1 of the Bill, which proposes to insert new Part 2A dealing with the suspension of employer-funded superannuation benefits. The AFP Act already has a suspension or 'freezing' mechanism in section 51 of that Act and amendments thereto equivalent to those proposed by item 15, Schedule 1 were therefore unnecessary.

Schedule 3 - Consequential Amendment

The definition of "eligible termination payment" in section 27A(1) of the Income Tax Assessment Act 1936 is proposed to be amended to ensure payments under new subsection 19(7) of the CSB Act or the equivalent provision in the AFP Act are not eligible termination payments.

Concluding Comments

Rationale for Superannuation Orders

In his second reading speech, The Attorney-General referred to the underlying policy of superannuation orders. That is, a Commonwealth employee who discharges his or her duties in a corrupt way has failed to fulfil a fundamental condition of employment and by doing so forfeits his or her entitlement to publicly funded superannuation.

Whilst the meritorious nature of the stated underlying policy is not in question, it is not applied universally. It should be noted that employers in the private sector are unable to access the employer funded superannuation entitlements of an employee or former employee who deliberately causes loss or defrauds his or her employer.

Prior to the introduction of the Occupational Superannuation Standards Act 1987 and the Regulations thereunder, employers could exercise such rights provided the governing rules of the fund permitted. The succeeding and current superannuation regime also prevents employers being able to access employer funded superannuation entitlements of employees.

Drafting Error in New Sub-paragraph 19(9)(a)

Refer to the discussion item 9 of the Bill

Anomaly in New Subsection 39N(4)

Refer to the discussion on item 19 of the Bill.

Endnotes

  1. Conviction-based legislation: Proceeds of Crime Act 1987; Proceeds of Crime Act 1991 (ACT); Confiscation of Proceeds of Crime Act 1989 (NSW); Crimes (Forfeiture of Proceeds) Act 1988 (NT); Crimes (Confiscation) Act 1989 (Qld); Crimes (Confiscation of Profits) Act 1986 (SA); Crime (Confiscation of Profits) Act 1993 (Tas); Crimes (Confiscation of Profits) Act 1986 (Vic); Crimes (Confiscation of Profits) Act 1988 (WA).
    Non-conviction legislation permitting the confiscation of the proceeds of crime is found in the Customs Act 1901 and the Drug Trafficking (Civil Proceedings) Act 1990 (NSW). This legislation effectively runs parallel to the conviction-based legislation and is directed primarily at drug-related offences.
  2. Australian Federal Police Act 1979, Part VA; Crimes (Superannuation Benefits) Act 1989; Public Officers Superannuation Benefit Recovery Act 1988 (Qld).
  3. A corruption offence is one committed by the employee during the course of employment whose commission involved an abuse of office as an employee, or that involved corruption or was committed for the for the purpose of perverting, or attempting to pervert the course of justice: Australian Federal Police Act 1979, s 41; Crimes (Superannuation Benefits) Act 1989, s 2. Members of the Australian Federal Police may also be liable under the legislation if they have been found guilty of a specified disciplinary offence and have been dismissed from the force as a penalty for that offence: Australian Federal Police Act 1979, s 49.

Contact Officer and Copyright Details

Simon Lang
3 March 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1997

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.



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