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
Amendments to the Bankruptcy Act
Amendments to SIS
Amendments of the Superannuation (Resolution of Complaints) Act
Date Introduced: 27 November 1997
House: House of Representatives
Commencement: Except as otherwise indicated
in the Main Provisions section, on Royal Assent.
The Bill makes a
number of largely non-contentious amendments to legislation dealing
with the regulation of superannuation. The main changes introduce
specific restrictions on 'in-house' investments for defined benefit
funds; marginally increased investigative powers; and
administrative changes to the operation of the Superannuation
As there is no central theme to the Bill, the
Background to the various measures will be discussed below.
Amendments to the Bankruptcy Act
Section 116 of the Act defines the property that
is divisible amongst the creditors of a bankrupt. The section
provides that all of the property of the bankrupt will be available
for distribution unless it is excluded under the section.
Currently, excluded property includes an interest in a regulated
superannuation fund and an approved deposit fund up to the person's
reasonable benefit limit. Both terms are defined in the
Superannuation Industry (Supervision) Act 1993 (SIS).
There is some doubt as to whether an exempt public superannuation
scheme (which is defined in SIS to be a fund so declared by
regulation) will fall within the exemption as it is not regulated
under SIS or its regulations. Item 1 of Schedule 1
will amend section 116 to provide that an interest in an exempt
public sector fund is excluded from the divisible property of the
bankrupt up to the person's reasonable benefit limit. Other
provisions of Schedule 1 also relate to this exclusion.
Amendments to SIS
SIS and its regulations form the prudential
rules for superannuation funds and are designed to provide a regime
of member protection. SIS must be complied with for a
superannuation fund, other than an excluded fund, to receive
concessonal tax treatment on its income (excluded funds are
generally those with less than 5 members). SIS is administered by
the Insurance and Superannuation Commission (ISC).
Items 1 and 2 of Schedule 2
will amend the definitions of protected document and protected
information to enable a larger range of documents and information
to be protected and so used by the ISC. The new definitions include
documents or information obtained by the ISC as well as the current
categories of documents/information given to the ISC or produced
Item 12 of Schedule 2 will
insert a new Division 3A into SIS that deals with the limits on
in-house assets of defined benefit funds. Part 8 of SIS currently
contains restrictions on the amount of assets that may be held
in-house (an in-house asset is generally a loan to an employer
sponsor of the fund). The difficulty in applying the rules to
defined benefit funds is that it is often difficult to calculate
the value of the 'assets' of the fund as they are often unfunded or
partially funded and benefits are paid out of the revenue of the
organisation as they become due. The most common examples of
unfunded defined benefit schemes are public sector schemes where
benefits are paid from government revenue as they become due,
although there are also private sector defined benefit funds.
Failure to properly implement the in-house investment rules can
lead to the danger of people's benefits being at risk should the
entity responsible for their payment cease to be able to do so.
Proposed section 83A contains a
number of definitions, including those for:
- base amount: 120% of the greater of the funds liabilities in
respect of vested benefits or it's accrued actuarial
- defined benefit fund: a public sector fund that is a regulated
fund and has at least one defined benefit member or a private
sector regulated fund that has at least one defined benefits member
and in which some or all of the benefits payable are not paid into,
or accumulated by, the fund;
- defined benefit member: where the benefit payable is defined
wholly or partly be either, or both, of the member's salary or
averaged salary, or by reference to a specified amount;
- maximum permitted amount: the prescribed percentage applied to
the base amount for the fund and any amount by which the market
value of the fund's assets exceeds the base amount;
- prescribed percentage: for 1998-1999 and 1999-2000, 10% and 5%
for other years (these are the same as the rates currently set in
SIS for other funds).
Proposed section 83C formally
limits the maximum in-house assets to the maximum permitted amount.
Proposed section 83D restricts a funds ownership
of shares in a listed public company that is the employer sponsor
or an associate of that company to 5% of the shares in the company.
If the value of the in-house assets exceeds the allowable amount at
the end of a year, the trustee is not to acquire, or enter into a
contract to acquire, further in-house assets until after an actuary
has certified that the limit is not exceeded (proposed
Part 25 of SIS deals with the monitoring and
investigation of superannuation entities. Proposed section
253A provides that where a notice is to be given to a
relevant person in relation to an entity, it will be sufficient if
the notice is given to a person who at any time has been a relevant
person in relation to the entity.
Item 27 of Schedule 2 will
amend section 264 of SIS to clarify the power of the ISC to require
the production of information and freeze assets. The amendments
strengthen the ISC's power.
The definition of an 'insolvent under
administration' will be amended by item 40 of Schedule
2. The relevant part of the definition deals with people
who have made arrangements with creditors and the amendment will
provide that they will cease to be an insolvent under
administration where the appropriate certificate has been issued
under the Bankruptcy Act 1966.
Application: 28 days after Royal Assent.
As noted above, Part 8 of SIS deals with the
in-house assets restrictions. Proposed section 69A
provides that a sub-fund within a fund is to be treated as a fund
for the purpose of the rules where the sub-fund has separately
identifiable assets and beneficiaries and the interests of the
beneficiaries is determined only by reference to the conditions
governing the sub-fund (item 51).
Application: 1 January 1999.
The definition of 'governing rules' contained in
section 10 of SIS will be amended to include any unwritten rules
concerning the fund (item 52).
Application 6 months after Royal Assent.
Amendments of the Superannuation
(Resolution of Complaints) Act 1993
The Superannuation Complaints Tribunal (SCT) was
established to provide a low cost alternative to court proceedings.
Six hundred and ninety four complaints were made to SCT in 1996-97,
with 38% relating to employer sponsored funds, 30% relating to
industry funds, 26% relating to retail funds, 4% relating to public
sector funds and 2% relating to other bodies. By the type of
complaint, 27% related to disability benefits, 24% to death
benefits, 16% to payments, 10% to disclosure and fees, and 22% to
other matters. In relation to the 160 determinations made by SCT in
1996-97, 65% were affirmed, 24% set aside or new decisions
substituted, 7% remitted, 3% varied and in 1% of cases there was no
A recent Full Federal Court decision has cast
doubt on the ability of the SCT to continue to exercise it's
functions. In Neil Wilkinson, Tony Tuohey & Marita Wall v
Clerical Administrative & Related Employees Superannuation Pty
Ltd & Ors, delivered on 12 February 1998, a majority of
the 3 judges ruled that the SCT was exercising judicial power when
making a decision. As it is against the Constitution for an
administrative body to exercise judicial power, the case
effectively means that the SCT is acting unconstitutionally and its
decisions are unenforceable. If this view is upheld, it would also
mean that all previous decisions of the Tribunal were equally
unenforceable. The options for the government are to appeal to the
High Court, establish a court with low costs and the same
jurisdiction as SCT, abandon the idea of a low cost body and allow
matters to proceed through the current courts or give the matter
back to industry to establish a complaints body. The Assistant
Treasurer is reported as saying that the government was fully
committed to ensuring access to a low cost alternative to the
courts and that while the government was determining what course of
action to take the SCT would perform an inquiry and conciliatory
Membership of the SCT is dealt with in section 7
of the Act, which also creates the position of Chairperson of the
SCT. Proposed section 7A, which will be inserted
into the Act by item 1 of Schedule 3, provides
that the Chairperson is to be the executive officer of SCT and
responsible for allocating work amongst members of SCT and ensuring
that the operation of SCT is as fair, just, economical, informal
and quick as practicable.
Section 9 of the Act provides that SCT is to
consist of the Chairperson and 2 other members. Item 2 of
Schedule 3 provides that the number of members may be
between 1 and 3.
Proposed subsection 9(1A)
provides that in the time between a tribunal being constituted to
hear a particular complaint and its making a determination, the
Chairperson may reconstitute the tribunal if satisfied that it is
desirable to remove any perception of bias or to ensure the timely
performance of SCTs functions (item 3 of Schedule
Section 63 of the Act deals with secrecy.
Proposed subsection 63(3B) provides that a member
of SCT or its staff must not intentionally disclose to a
complaint-handling body information relating to a complaint that
discloses personal information relating to an individual unless
that individual has consented in writing to the disclosure. The
maximum penalty for a breach of this provision is imprisonment for
2 years (item 20 of Schedule 3).
- Superannuation Complaints Tribunal, 1996-97 Annual
- The Age, 14 February 1998.
11 March 1998
Bills Digest Service
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