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Bills Digest No. 105 1998-99 Workplace Relations and Other Legislation Amendment (Superannuation) Bill 1998

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

Workplace Relations and Other Legislation Amendment (Superannuation) Bill 1998

Date Introduced: 3 December 1998

House: House of Representatives

Portfolio: Employment, Workplace Relations and Small Business

Commencement: On Royal Assent apart from Item 2 of Schedule 2 and its associated transitional provisions. Item 2 repeals section 32X of the Superannuation Guarantee(Administration) Act 1992 SG(A)A. Item 2 and Part 2 of Schedule2 commence at whichever is the later of the following times:

immediately after the commencement of section 2 of the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 1998, or
the end of the period of 6 months beginning on the day which this Act receives the Royal Assent.

The repeal of section 32X cannot occur before the commencement of the Choice of Funds Act, as that Bill is currently before parliament and contains section 32X of the SG(A) A.

Purpose

This Bill will remove superannuation from the list of 'allowable award matters' set out in subsection 89A(2) of the Workplace Relations Act 1996. As a consequence, the Australian Industrial Relations Commission (AIRC) 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 AIRC from making an 'exceptional matters order' about superannuation.(1) The changes do not, however, prevent the making of certified agreements or workplace agreements which deal with superannuation entitlements.

Transition arrangements have been included into this Bill to allow time for parties to an award to vary the provisions concerning superannuation according to the new legislation.

Athough the Bill will remove superannuation as an allowable matter in federal awards, it will also amend the Superannuation Guarantee (Administration) Act 1992 to allow employers to be able to continue to use the 'notional earnings bases' of employees (as determined by reference to federal industrial awards), as the base for calculating their liability under the Superannuation Guarantee (Administration) Act.

Background

Employers must currently comply with award superannuation obligations as well as the requirements set out in the Superannuation Guarantee legislation. Under the original Workplace Relations and Other Legislation Amendment Bill 1996, superannuation was not included in the list of 'allowable award matters'. Amendments to the original Bill agreed upon with the Australian Democrats, added superannuation to the list of 'allowable award matters'. This agreement was reached between the Government and the then leader of the Democrats, Senator Cheryl Kernot, on the basis that the Democrats would be prepared to support the removal of superannuation as an allowable matter if various conditions were met under proposed legislation concerning the choice of superannuation funds.(2)

On 23 December 1997 the Full Bench of the AIRC determined a test case on the simplification of federal awards.(3) In essence this decision provides a guide to the list of 'allowable award matters' that can be dealt with by the AIRC under the Workplace Relations Act 1996. It confirms that disputes concerning superannuation can be dealt with by the AIRC. In particular, the AIRC may arbitrate with reference to the following aspects:

the relevant superannuation legislation
definition of ordinary time earnings
contribution to be made into specific fund(s)
eligibility
employer contributions
voluntary employee contributions, and
exemptions.(4)

This Bill is based on legislation originally introduced into the previous Parliament as the (Workplace Relations Amendment Superannuation) Bill 1997 on 4 December 1997 along with the Taxation Laws Amendment Bill (No.7) 1997 which contained provisions for the choice of superannuation funds.(5) The 1997 Bill, although passed by the House of Representatives, was not passed by the Senate before the general election was called for 3 October 1998.

The Bill currently before the Parliament contains not only the original amendments but also transitional provisions. These allow a six month transitional period after which existing superannuation provisions in federal awards will cease to exist and the AIRC will be required to remove superannuation provisions from awards. Existing superannuation clauses, where they are 'special consent provisions', (ie, have not been arbitrated) will be preserved beyond the six month transitional period.

The Bill also contains amendments to the Superannuation Guarantee (Administration) Act 1992 (SG(A)A). Currently there are employers who use reference to their employee's 'notional earnings base' in an award as a basis for determining an employee's superannuation entitlements and for determining the employer's charge (where applicable). If this arrangement has been in place before 21 August 1991, these new amendments, will allow employers to continue using the employee's 'notional earnings base' for the calculation of superannuation after superannuation provisions have been removed from awards, as intended by this Bill. The Government's object as stated by Mr Reith, 3 December 1998, in his second reading speech, is to 'ensure that employers do not incur additional superannuation costs as a result of the removal of superannuation from awards'.(6) If reference to these 'notional earnings base' in awards is removed employers will be obliged to use an employee's 'ordinary time earnings'.(7) This is more likely to impose higher costs on the employer.

However, there is debate over the introduction of the choice of funds legislation and its cost impact on employers and the superannuation industry.(8)

Main Provisions

Schedule 1 - Amendments of the Workplace Relations Act 1996

Part 1-Amendments

Paragraph 89A(2)(s) is repealed. This will remove 'superannuation' from the list of allowable award matters in subsection 89A(2) of the Workplace Relations Act 1996.
Subsection 89A(7) is amended such that superannuation will also not be considered an 'exceptional matter' that may be dealt with by the AIRC in an industrial dispute.

Part 2-Transitional provisions

4. Special consent provisions

In 1986 superannuation was accepted as a wage principle. Provision for superannuation could then be inserted into awards as either a consent term or as part of a certified agreement under section 28 of the Conciliation and Arbitration Act 1904. Later, the principle was altered to become a matter that the AIRC could arbitrate on. Under this proposed Bill, only those existing superannuation clauses that fall within 'special consent provisions' will continue to exist after the six month provisional period. These are essentially award provisions which have been made in accordance with Wage Fixing Principles of AIRC through National Wage Decisions from the period commencing October 1991 to 1995 as described in paragraphs (a), (b) and (c) of this item.

5. Variation of awards during the interim period

Subitem 1 allows parties to an award to apply to the Commission to have awards varied so that they no longer deal with superannuation.

Subitem 2 states that the special consent provisions as defined in Item 4 cannot be varied until the termination time for these provisions has expired.

Subitem 3 states the AIRC will only be able to arbitrate on applications for variations to an award concerning superannuation after it is satisfied that reasonable attempts have been made by applicants to reach an agreement.

6. Parts of awards cease to have effect at the end of the interim period

Subitem 1 states that at the end of the interim period awards will no longer have effect on matters concerning superannuation.

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. If these conditions apply then the following subitem 7 will apply.

7. Variation of awards after the end of the interim period

Subitem 1 and 2 directs the AIRC to review awards as soon as possible at the end of the interim period if the AIRC considers that subitem 6 applies; and for the AIRC to remove superannuation provisions if they have ceased to have effect.

8. Corporations not bound by State awards

Subitems 1 and 2 ensures that a corporation will not be bound to a State award with regard to superannuation provisions if its award is varied according to subitem 5. If the corporation chooses to it may apply for to become bound by the relevant State award.

Schedule 2- Amendments of the Superannuation Guarantee (Administration) Act 1992 (SG(AA))

Part 1-Amendments

After section 12 of the SG(AA)1992, a new section 12A is to be inserted:

12A Interpretation: contributions to superannuation fund or RSA notionally made in accordance with industrial award

The following explains the amendment including subitems (1) to (5).

Section 12A will allow the amendments of Schedule 1 of this Bill to be disregarded under the following circumstances:

if an employer is currently, contributing or would be required to contribute to an employee's superannuation as required by an industrial award that has not been varied after the commencement of this amendment. That is the employer has recourse to the employee's original 'notional earnings base' as referred to in the applying award. Similarly if an employer is subjected to the superannuation charge instead, the employer has recourse to the employee's 'notional earnings base' as referred to in the applying industrial award.

Section 32X

This proposed section is repealed. Under proposed changes included in Schedule 1 to Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 1998 a new section 32X is to be inserted. This change is designed to reflect the objectives of that legislation, that is to provide greater choice of superannuation funds as it affects the superannuation guarantee legislation. The proposed amendments will allow an employer to make contributions to a fund other than the fund specified in a federal award. In effect this enables employers to choose a superannuation fund that is not an industry based superannuation fund. However, in this Bill at the end of the interim period, superannuation provisions in awards cease to have effect, therefore employers no longer require the protection provided by the proposed section 32X of the SG(A)A and the section is therefore repealed.

Part 2-Transitional provision

Item 3 - Transitional -section 32X of the Superannuation guarantee (Administration) Act 1992

This transitional provision is designed to ensure that section 32X of the Superannuation Guarantee (Administration) Act 1992, will continue to apply to those situations which come under the special consent provisions as outlined in Part 2 of Schedule 1 of the act. Therefore, if special consent provisions continue to operate after the end of the interim period, section 32 X will still apply.

Concluding Comments

The Government's intent to remove superannuation as an award provision invites some update of the award simplification process. In its 1997-98 Annual Report the AIRC noted that there were 3253 awards in force. By the end of June 1998, 120 awards had been varied according to award simplification principles, 60 have been set aside and there were 676 awards where simplification has commenced. Also, of 778 awards which were identified as not having been varied for five years, 176 had been set aside as at 14 September 1998 on the grounds that they no longer had any substantial operation.(9) It is fair to say that the award simplification process is moving apace and a cursory review of the AIRC's list of awards reveals that 31 December 1998 about 190 awards had been simplified.

It might be also noted that award simplification has generated debate within the AIRC as to the scope of its application. Recently, Deputy President Acton dissented from the majority in a Full Bench decision known as the 'Leave' Test Case on 23 December 1998 (Print Q9399). There, DP Acton expressed the view that:

while the Commission commonly refers to an instrument containing clauses granted as an "Award", in fact generally each of the clauses it has granted is an "award". For example, the Australian Public Service Award 1998 (the APS Award 1998) [Print Q7548 [A1660]] includes clauses on Payment of Salaries, Annual Leave and Hours of Work. Each of these clauses is an "award"...

Together items 51(2) and 50(1) of the WROLA Act require the Commission to vary an award provision "to the extent that it provides for matters other than allowable award matters." To put it another way, the terms of items 51(2) and 50(1) require the Commission to excise from an award provision matters that are no longer allowable award matters. Item 51(3) then provides, as a corollary of such excision, that the Commission may vary the award provision so that the remaining allowable matters in it are appropriately expressed.

In conducting the review under item 51, the Commission must be careful to ensure that it does not excise from an award provision more than is contemplated by the item. Action by the Commission, in performing its function under item 51(2), to delete the whole of an award provision, which contains both allowable and non-allowable matter, would be beyond the scope of item 51(2) and, in the absence of a hearing on the removal of allowable award matter, beyond jurisdiction because it amounts to a denial of natural justice. In this case, there was no consideration of the merits of the particular award provisions.

It is likely that views similar to those raised by DP Acton will receive further consideration in the legal challenge to the award simplification process initiated by the Construction, Mining, Forestry and Energy Union in the High Court, in relation to the Coal Mining Industry (Production&Engineering) Consolidated Award 1997. This action challenges the constitutional validity of the aforementioned Items 50, 51(1), (2) and (3) of the WROLA Act. It is likely that hearings will commence in the Federal Court in February 1999.(10)

Endnotes

Explanatory Memorandum, Workplace Relations and Other Legislation Amendment (Superannuation) Bill 1998.
Reith, Peter, Government to remove superannuation from awards, Press release, 25 Nov. 1997.
AIRC, 'Award Simplification Decision' (Print P7500) 23 December 1997.
O'Neill, Steve. ' Award Simplification: what's out and what's in'. Current Issues Brief No. 9 1997-98, Information and Research Services, Department of the Parliamentary Library Canberra, 23 January 1998.
For further information on this related Bill see the Superannuation Legislation Amendment (Choice of Superannaution) Bill 1998 Bills Digest no. 104 1998-99.
Reith, Peter, Second Reading Speech, Workplace Relations and Other Legislation Amendment (Superannuation) Bill 1998, 3 December 1998, p. 1265.
'The minimum level of superannuation support which an employer must give under the SG(A)A is worked out as a percentage of the employee's notional earnings base for a contribution period. An employee's notional earnings base is generally the higher of:
- Ordinary time earnings [essentially an employee's earnings for their ordinary work]
- The measure of earnings on the employee used in an award, law, occupational superannuation arrangement or superannuation scheme under which the employer's superannuation obligation is determined.' In Australian Superannuation Practice Commentary [looseleaf service],Australian Tax Practice. Sydney, Law Book Company.
Kavanagh, John, 'Member choice is big turn-off.' The Australian, 8 October 1998, p. 24.
AIRC, 'Annual report, 1997-98', Melbourne, Commonwealth of Australia, 1998, p.8.
'CFMEU's High Court Challenge', Industrial Relations and Management Newsletter, November 1998.

Contact Officer and Copyright Details

Marilyn Stretton and Steve O'Neill
8 February 1999
Bills Digest Service
Information and Research Services

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Published by the Department of the Parliamentary Library, 1999.