The Public Sector Superannuation Legislation Amendment Bill 2022 (the Bill) was introduced in the House of Representatives on 17 February 2022.
Its main purpose is to amend the Parliamentary Superannuation Act 2004 (PS Act) and the Superannuation Act 2005 (referred to as the PSSAP Act) to allow the Parliamentary Superannuation Scheme and Public Sector Superannuation Accumulation Plan (PSSAP) to be treated in a consistent manner with industry superannuation funds, following the Your Future, Your Super reforms relating to the annual performance test for MySuper products and the single default account.
The Bill also amends the Federal Circuit Court and Family Court of Australia Act 2021 (FCFC Act) to allow for a single default account for judges.
Your Future, Your Super
The Your Future, Your Super policy was designed to make it easier for workers to understand and engage with their superannuation.
The Treasury Laws Amendment (Your Future, Your Super) Act 2021 (Your Super Act) furthered this policy by amending the Superannuation Guarantee (Administration) Act 1992 SGA Act to create Single Default Accounts and amending the Superannuation Industry (Supervision) Act 1993 (SIS Act) to include Annual Performance Tests for MySuper products.
Single default accounts
Most employees have had the ability to choose their preferred superannuation fund since 2005. If an employee did not exercise this choice when starting a new job, they were placed into a default fund. This resulted in some people having multiple superannuation funds.
Part 3A of the SGA Act covers choice of fund, which essentially operates so that:
- New employees are offered a choice of fund.
- If a new employee does not choose a fund, then the employer applies to the ATO to find out if the employee has an existing, or ‘stapled’ fund.
- If the employee does have a ‘stapled’ fund, then the employer pays superannuation contributions into that fund.
- If the new employee does not choose a superannuation fund and does not have a ‘stapled’ fund, contributions are paid into a default fund.
The Bill amends the PS Act and the PSSAP Act to extend these conditions to new public sector employees so that if they have a ‘stapled’ fund, then contributions will be paid into that fund and not into a new account in the default fund.
Annual performance assessments
The Your Super Act added Part 6A – Annual performance assessments etc to the SIS Act. This was added to protect superannuation fund members from loss of retirement income stemming from underperforming funds.
Under Part 6A, the Australian Prudential Regulation Authority (APRA) assesses the performance of funds each year. If a fund fails a performance assessment once, the trustee is required to inform all members. If a fund fails in two consecutive years, then it is no longer permitted to accept new members. In cases where such a fund is a default fund, a new default fund must be selected.
Several government funds (including the PSSAP) were initially excluded from these rules as governance of these arrangements would require additional legislative amendments. The Bill addresses this exclusion.
The Bill makes additions to the PS Act and the PSSAP Act which describe the way in which new default funds would be chosen if either the Parliamentary Superannuation Scheme or the PSSAP were to fail the annual performance test in two consecutive years.
Neither the PS fund nor the PSSAP have failed, or are likely to fail, the annual performance test. In his second reading speech Mr Sukkar, the Assistant Treasurer, stated, ‘… but it is appropriate that there is a transparent approach provided, as a contingency, in case of an underperformance scenario.’
Part 4 of the Bill provides for transitional provisions for the PS Act. Under these provisions the chosen fund and default fund arrangement apply immediately before the commencement of the schedule. The effect is that if an election were called between the passing of the Bill and its Royal Assent, the provisions would apply to new Parliamentary Superannuation fund members.
Federal Circuit and Family Court of Australia Act 2021 (FCFC Act)
Unlike many other judges in Australia, the judges of Division 2 of the Federal Circuit and Family Court of Australia (formerly known as the Federal Circuit Court of Australia – see Section 6 of the Act) are not covered by the Judges’ Pension Act 1968.
Currently the FCFC Act requires judges of Division 2 of the Federal Circuit and Family Court of Australia to make a choice as to where their superannuation contributions are paid. It does not include provisions for payment of employer contributions into either a pre-existing fund or a default fund.
The proposed amendment under Part 3 of the Bill removes this special condition from the FCFC Act. This change will align superannuation guarantee payment arrangements for these judges with the changes made under the government’s Your Future, Your Super policy.
Reaction to the Bill
At the time of writing there have been no views expressed on the Bill by parliamentarians or key industry stakeholders.
Stapled fund – an existing super account which is linked, or ‘stapled’, to an individual employee and follows them when they change jobs.
Default fund – the employer-nominated super fund an employee’s super guarantee contributions will be paid to, if they have not chosen an alternate super fund, or if they do not have a stapled fund.
Public sector superannuation funds – a type of super fund that are generally only available to people working in the public sector.