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Passage History Purpose Background
Main Provisions Concluding Comments Endnotes Contact Officer and
Benefits) Amendment Bill 1997
Introduced: 26 November 1997
House: House of Representatives
Commencement: Upon Royal Assent with the
exception of a minor amendment, which may commence at a later
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
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.
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
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
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
The effect of a superannuation order is
- 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
The employee remains entitled to his or her
contributions plus interest accrued. The Bill will not disturb that
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
Tracing and Recovery of Superannuation
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
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 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
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
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
Suspension or 'Freezing' of Employer-Funded
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
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
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
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
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
- the end of the period for appealing the conviction for the
- 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
- the conclusion of the proceedings arising out of the making of
a recovery order.
Obtaining Information from Superannuation
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
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
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
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.
Rationale for Superannuation
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
Drafting Error in New Sub-paragraph
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.
- 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.
- Australian Federal Police Act 1979, Part VA; Crimes
(Superannuation Benefits) Act 1989; Public Officers Superannuation
Benefit Recovery Act 1988 (Qld).
- 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.
3 March 1998
Bills Digest Service
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