Bills Digest No. 51,
2017–18
PDF version [304KB]
Paula Pyburne
Law and Bills Digest Section
13
November 2017
Contents
Purpose of the Bill
Structure of this Bills Digest
Committee consideration
Senate Standing Committee on
Economics
Senate Standing Committee for the
Scrutiny of Bills
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Schedule 1—choice of fund
Background
Types of superannuation fund
Accumulation funds
Defined benefit fund
Financial system review
Options considered
Financial implications
Policy position of non-government
parties/independents
NXT
Australian Labor Party
Position of major interest groups
Problem of duplicate accounts
Industry funds deliver high returns
Table 1: Ratios by fund type
Unions
Key issues and provisions
Choice of fund and industrial
agreements
Members of defined benefit schemes
Schedule 2—salary sacrifice integrity
Background
Superannuation
Guarantee Cross‑Agency Working Group
Senate
Economics References Committee
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Key issues and provisions
Defining a salary sacrifice
arrangement
Formula for calculating SG shortfall
Reduction of SG charge percentage
Date introduced: 14
September 2017
House: House of
Representatives
Portfolio: Treasury
Commencement: Sections
1–3 on Royal Assent; Schedules 1 and 2 on the day after Royal Assent
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at November 2017.
Purpose of
the Bill
The purpose of the Treasury Laws Amendment (Improving
Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017
(the Bill) is to amend the Superannuation
Guarantee (Administration) Act 1992 (SGAA) to:
- Give
employees under workplace determinations or enterprise agreements the
opportunity to choose the superannuation fund for their compulsory employer
contributions and
- ensure
that an individual's salary sacrifice contributions cannot be used to reduce an
employer’s minimum superannuation guarantee contributions.
Structure of this Bills
Digest
As the matters covered by the Schedules are independent of
each other, the relevant background, stakeholder comments (where available) and
analysis of the provisions are set out under each Schedule number.
Committee
consideration
Senate Standing Committee on Economics
The Bill was referred to the Senate Standing Committee on
Economics (the Economics Committee) for inquiry and report by 23 October 2017.[1]
The majority of Senators on the Economics Committee recommended that the Senate
pass the Bill.[2]
However, the Labor Senators on the Economics Committee
recommended that the Bill be amended so as to:
- ensure
that there are no impediments to collective bargaining that would lift
superannuation arrangements beyond the community standard and
- ensure
that sufficient safeguards exist when workers exercise choice of fund.[3]
The matters raised by submitters are canvassed under the
relevant Schedule heading below.
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
(Scrutiny of Bills Committee) considered the Bill in its Scrutiny Digest of 18
October 2017 but made no comment.[4]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[5]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considered
the Bill and reported that it did not raise human rights concerns.[6]
Schedule
1—choice of fund
Background
Under the SGAA, employers are required to make
contributions to their employee’s superannuation fund (with limited
exemptions). Most employees have the opportunity to choose which fund these
contributions are paid into. However, individuals might encounter difficulty
making retirement savings decisions that are in their own best interests for a
number of reasons, including:
- lack
of financial literacy, which limits people’s ability to make informed financial
choices
- complexity
of investment decisions and difficulty matching risk preferences with the right
products
- high
search costs in terms of time taken to research and understand what is often a
large number of products
- the
‘endowment effect’ where people value money that is lost more highly than money
gained, causing them to be unduly conservative in their investment decisions
- lack
of price awareness, as compulsory contributions, fees and other costs do not
come directly out of members’ pockets
- information
asymmetries between superannuation providers and individuals
- a
long lag between the initial investment of contributions and the time when the
benefits can be accessed
- an
associated tendency toward procrastination and inertia in making retirement
savings decisions
- mental
rules or short cuts (heuristics) that people use when they have no clear
preference, or where the cost of acquiring information is too high, which can
lead to persistent biases in decision making
- framing
effects, where people choose based on how the available options relate to one
another, how they are explained and what other information is provided at the
same time, rather than which option is in their best interests.[7]
For those employees that do not make an active choice,
employers are required to nominate a fund—which is called the default fund.
Existing default arrangements evolved in the context of the workplace relations
system. Specific superannuation funds were named in awards when superannuation
became an industrial matter in national wage bargaining in the 1980s. Several
industry-based funds were established as not-for-profit entities to cater for
employees in specific industries.[8]
From 1 July 2005, most employees have been able to choose
their superannuation fund and the product to which they want their
contributions directed. Where employees have not made a choice, funds named in
awards have become the default option in many cases. Default arrangements
provide a safety net for employees that failed to make a decision, in view of
the compulsory nature of superannuation.
Once a default fund has been selected, fund trustees are
required to place default contributions into that fund’s default product, which
in most cases must be a MySuper product.[9]
Types of
superannuation fund
Accumulation
funds
Most Australians have their super in an accumulation fund.
The value of a person’s super depends on:
- how
much money their employer contributes
- how
much extra they contribute
- how
much they receive in bonus contributions
- how
much the fund earns from investing superannuation contributions
- the
amount of fees charged and
- the
investment option that the person chooses.
Importantly, investment profits are added to a person’s
account, just as investment losses are taken out.
Defined
benefit fund
Defined benefit funds are less common than accumulation
funds. Most defined benefit funds are corporate or public sector funds, and many
are now closed to new members.
The value of a person’s retirement benefit is defined by
the fund rules and depends on:
- how
much money their employer contributes
- how
much extra the person contributes
- how
long the person has worked for their employer
- the
person’s salary when they retire.
Type of fund |
Description |
MySuper
|
Many super funds offer MySuper which has replaced
most existing default accounts offered by super funds. MySuper accounts
generally offer:
- lower
fees (and restrictions on the type of fees you can be charged)
- simple
features so you don't pay for services you don't need
- single
or life stage investment options
- life
insurance on an opt-out basis
MySuper is only offered for accumulation funds, not
for defined benefit funds and does not apply to accounts in pension phase.
|
Retail funds
|
Retail funds are usually run by banks or
investment companies.
- anyone
can join
- they
often have a large number of investment options. Retail funds are
usually recommended by financial advisers who may be paid for their
advice by fees and/or a commission (although commissions are being
phased out)
- they
are usually accumulation funds. Most retail funds range from mid to high
cost, but some are now offering a low cost or MySuper alternative
- the company
that owns the fund aims to retain some profit.
|
Industry funds
|
The larger industry super funds are open for anyone to
join. Some others are restricted to employees in a particular industry. The
main features of an industry fund are:
- they
usually have a smaller number of investment options, which will
meet most people's needs
- most
funds are accumulation funds. A few older funds still have defined
benefit members
- they
are generally low to mid cost funds
- they
are ‘not for profit’ funds which means profits are put back into the fund for
the benefit of all members.
|
Public sector funds
|
Public sector funds were created for employees of federal
and state government departments. Most are only open to government employees.
The main features are:
- some
employers contribute more than the 9.5% minimum
- a
modest range of investment choices that will meet most people's needs
- many
long-term members have defined benefits; newer members are usually in
an accumulation fund
- they
generally have very low fees and some offer MySuper accounts
- profits
are put back into the fund for the benefit of all members.
|
Corporate funds
|
A corporate fund is arranged by an employer, for its
employees.
Some larger corporate funds have an employer who
also operates the fund under a board of trustees appointed by the
employer and employees.
Other corporate funds may be included as a separate
part of a large retail or industry super fund (especially for small- and
medium-sized employers).
Features of these funds include:
- funds
run by the employer or an industry fund will usually return all profits to
members while those run by retail funds will retain some profits
- those managed
by a larger fund may offer a wider range of investment options
- they
are generally low to mid cost funds for large employers but may be high cost
for small employers
- some
older corporate funds have defined benefit members, most others
are accumulation funds.
|
Australian Securities and Investments Commission (ASIC), ‘Types
of super funds’, ASIC website, last updated 18 October 2017.
Financial system review
The final report of the ‘Financial system review’ (known as
the Murray Review after the
chair of the review, former CEO of the Commonwealth Bank David Murray AO) was
published in November 2014. The final report noted that there was scope to
improve the efficiency of the superannuation system in a number of areas. Of
concern was:
A significant minority of employees cannot choose the
superannuation fund that receives their SG contributions. In particular, this
affects employees with a superannuation fund nominated in an enterprise
agreement, a workplace determination or a state-based award. A 2010 ASFA paper
found that around 20 per cent of employees cannot choose their fund. These exemptions contribute to employees having
multiple superannuation accounts and paying multiple sets of fees and insurance
premiums, which reduces retirement income. For some individuals, lack of choice
contributes to disengagement with superannuation. [10]
[emphasis added]
Essentially the Murray Review took the view that the
absence of choice is a barrier to members engaging with their superannuation,
and that this barrier should be removed—thereby providing flexibility for
members and lowering fees through greater competition.[11]
Accordingly, the Murray Review recommended the Government
should remove provisions in the SGAA that deny some employees the
ability to choose the fund that receives their SG contributions due to the
exclusions given to enterprise agreements, workplace determinations and some
awards.[12]
The amendments in Schedule 1 to the Bill respond to this
recommendation.
Options
considered
In determining the manner in which the recommendation would
be put into effect, the government considered three options:
- Option
1: maintain the status quo
- Option
2: extend choice to employees under enterprise agreements and workplace
determinations made after 1 July 2018
- Option
3: extend choice to all employees under existing and new enterprise agreements
and workplace determinations after one July 2018, and employers must
offer a choice of fund form to all existing employees.[13]
The Government’s preferred option is option 2 because it
spreads the costs across employees, employers and superannuation funds. The Government
rejected option 1 as it does not address the ongoing problem of employees
having multiple funds and so having to pay duplicate fees and charges.[14]
(This, in turn, is likely to lead to lower retirement incomes.) The reason for
rejecting option 3 was that it would result in higher compliance costs than
option 2.[15]
Financial
implications
According to the Explanatory Memorandum to the Bill, the
measure in Schedule 1 will have ‘nil financial impact’.[16]
Policy
position of non-government parties/independents
NXT
Rebekha Sharkie, of NXT, supports the choice measure
contained in Schedule 1 to the Bill stating:
This does not mean that default funds cannot still be
recommended for those people whose knowledge of superannuation is limited, but
it places the power to opt out back in the hands of the employee...[17]
Australian
Labor Party
Dr Andrew Leigh of the Australian Labor Party (ALP) indicated
Labor would not oppose the Bill in the House of Representatives.[18]
As stated above, the Labor Senators of the Economics Committee recommended
certain amendments to the Bill and have reserved ‘their final voting position
on the Bill depending on the outcome of such amendments’.[19]
In relation to the measure in Schedule 1 to the Bill the
Senators stated:
... the collective bargaining of
workers has been able to lift superannuation services beyond community
standards [and] ... when workers are offered “choice” in a mandatory financial
service such as superannuation, there must be adequate safeguards so that
workers are not left worse off.[20]
Position of
major interest groups
Problem of
duplicate accounts
The primary reason for supporting the measure to increase
choice of fund is that employees who lack choice may have more than one
superannuation account—and so are subject to duplicate fees, charges and
insurance premiums.[21]
This problem may be particularly significant for individuals employed in
multiple jobs such as casuals.
ASIC’s submission to the Murray Review states that the
choice of fund reforms which commenced in 2005 ‘made it possible for members
with multiple accounts to more easily consolidate these accounts and reduce the
amount of fees they pay for maintaining multiple accounts. However, in
practice, this consolidation did not lead to a decrease in the number of
accounts in the industry’.[22]
That is, even though there have been enhancements to
superannuation to enable consolidation of superannuation accounts, many account
holders have not done so. The ongoing review of superannuation default models
by the Productivity Commission indicates that the number of members holding
more than one account is approximately 40 per cent.[23]
Industry
funds deliver high returns
The Australian Institute of Superannuation Trustees (AIST)
supports the principle of choice in superannuation but argues that choice has
to be provided in a way that does not leave consumers worse off, and operates
in an environment of meaningful disclosure and consumer protections.[24]
Of note is the ‘evidence [from the Productivity Commission[25]]
that superannuation funds listed in awards deliver higher investment returns
than those not listed in awards’.[26]
The performance of superannuation fund types (for the year
to June 2016) is provided by the Australian Prudential Regulation Authority
(APRA) in its annual statistical bulletin as shown in table 1 below.
Table 1: Ratios by fund type
|
Corporate |
Industry |
Public sector |
Retail |
Total |
Net assets ($m) |
53,109 |
444,894 |
337,426 |
543,196 |
1,378,625 |
Total administration and operating expenses ($m) |
129 |
1486 |
705 |
4120 |
6439 |
Total investment expenses ($m) |
190 |
1551 |
977 |
401 |
3119 |
Total expenses ($m) |
319 |
3037 |
1681 |
4521 |
9558 |
Net earnings after tax ($m) |
1317 |
17,156 |
11,590 |
8310 |
38,373 |
Cash flow adjusted net assets ($m) |
51,860 |
419,556 |
323,706 |
534,520 |
1,329,642 |
Operating expense ratio (%) |
0.2% |
0.4% |
0.2% |
0.8% |
0.5% |
Investment expense ratio (%) |
0.4% |
0.4% |
0.3% |
0.1% |
0.2% |
Rate of return (%) |
2.5% |
4.1% |
3.6% |
1.6% |
2.9% |
Five year average annualised rate of return (%) |
7.4% |
8.3% |
8.2% |
6.4% |
7.4% |
Ten year average annualised rate of return (%) |
5.1% |
5.4% |
5.4% |
3.6% |
4.6% |
Number of entities |
30 |
41 |
38 |
135 |
244 |
Australian Prudential Regulation Authority (APRA), Statistics:
Annual Superannuation Bulletin, June 2016, issued 1 February 2017, p.
17.
Unions
According to the ACTU ‘removing the ability for workers to
nominate a single fund in their Enterprise Agreements will increase the
incidence and magnitude of unpaid super’. Of particular concern is any
regulatory measure which might have a detrimental effect on the superannuation
gender gap:
A number of enterprise agreements exist in female dominated
industries (the service sector, nursing, health, hospitality and the like)
which include superannuation provisions which are better for women workers than
alternative arrangements which would exist in an uncontrolled choice
environment. Moving away from these provisions may damage investment earnings
potential for women workers, default insurance arrangements and support
mechanisms such as those which pursue unpaid superannuation.[27]
The Transport Workers Union of Australia expressed its
concern that the measure in Schedule 1 to the Bill ‘will have an adverse impact
in the operation of industry super in Australia’.[28]
Key issues
and provisions
Choice of fund and industrial
agreements
Currently subsection 32C of the SGAA
sets out the circumstances in which a contribution to a fund by an
employer for the benefit of an employee is made in compliance with the choice
of fund requirements. In particular, subsection 32C(2) provides that if an
employee has not chosen a specific fund, a contribution to a fund complies with
the choice of fund requirements if it is made to a default fund.
Subsection 32C(6) of the SGAA provides that a
contribution to a fund will comply with the choice of fund requirements if the
contribution, or a part of the contribution, is made under, or in accordance
with certain listed agreements and workplace determinations.
Item 5 of Schedule 1 to the
Bill amends paragraph 32C(6)(g) so that the choice of fund requirements will
only be met in relation to a contribution that is made under, or in accordance
with, a workplace determination that was made before 1 July 2018. Similarly item
6 of Schedule 1 to the Bill amends paragraph 32C(6)(h) so that the choice
of fund requirements will only be met in relation to a contribution that is
made under, or in accordance with, an enterprise agreement that was made before
1 July 2018.
This means that employees who are
subject to a workplace determination or an enterprise agreement that is made on
or after that date must be given a standard
choice form.[29]
Item 7 of Schedule 1 to the
Bill inserts proposed subsection 32C(6AA) into the SGAA so
that contributions to a fund will comply with the choice of fund requirements
if, there is no chosen fund for the employee and the fund is a fund to which
the employer has previously made contributions, in compliance with the choice
of fund requirements under paragraph 32C(6)(g) or (h).
A failure by an employer to make contributions that comply
with the choice of fund requirements will create a superannuation guarantee
shortfall.[30]
In that case, a superannuation guarantee charge is payable. The amount of the
charge is an amount equal to the amount of the shortfall.[31]
Members of defined benefit schemes
Section 32F of the SGAA
provides that a member of a defined benefit fund cannot choose another fund. In
addition, an employer is not required to give an employee who is an existing
member of a defined benefit fund a standard choice form in certain specified circumstances.[32]
Items 1–4 of
Schedule 1 to the Bill amend the SGAA in relation
to members of a defined benefit fund. Item 1 amends paragraph 19(2B)(c) so
that there is no increase in the superannuation guarantee shortfall for an
employer who makes contributions in respect of an employee who is a member of a
defined benefit scheme and therefore, cannot choose a fund. Item 4 makes
a consequential amendment by inserting proposed subsection 20(3A) into
the SGAA. Together these amendments operate so that employers who do not
technically comply with the choice of fund requirements because their employees
are members of a defined benefit fund are not penalised.
Schedule
2—salary sacrifice integrity
Background
The superannuation framework obliges employers to
contribute 9.5 per cent of the ordinary time earnings (OTE) of their eligible
employees as a superannuation contribution. In general, OTE is salary and wages
paid less bonuses, overtime and termination payments related to unused annual
leave.
Where employers fail to pay compulsory superannuation
contributions on time they are liable to pay the SG Charge which is the
mechanism to require employers to pay superannuation guarantee contributions
direct to an employee’s superannuation fund.
In December 2016 Industry Super Australia (ISA) released a
report entitled Overdue: Time
for Action on Unpaid Super which estimated that 2.4 million Australians
are being underpaid SG of at least $3.6 billion.[33]
That report highlighted, amongst other things, that if an employee makes
voluntary contributions, a loophole allows their employer to count this towards
SG obligations.[34]
Superannuation Guarantee Cross‑Agency Working
Group
In December 2016 the Minister for Revenue and Financial
Services requested that a Cross Agency Working Group be formed to report on the
incidence and nature of non-compliance for superannuation guarantee.[35]
The interim report of the Cross Agency Working Group dated
January 2017 considered the methodology and data used in the ISA report and did
not support all of ISA’s conclusions. However, it was satisfied:
... a small number of employers are using their employees’
salary sacrifice arrangements to satisfy their superannuation guarantee obligation.
ATO compliance data does not indicate the practice is widespread [and the
problem] ... can be resolved with straightforward legislation that would address
anomalies.[36]
The final report to the Minister for Revenue and Financial
Services by the Cross Agency Working Group dated March 2017 states, amongst
other things:
The Working Group considers that the Government should
clarify the law on how salary sacrifice agreements affect an employer's
superannuation guarantee obligations. In particular to, firstly, ensure that
employers cannot use an amount an employee's salary sacrifices to
superannuation to satisfy the employer's superannuation guarantee obligation;
and secondly, to ensure that the ordinary time earnings base used to calculate
an employer's superannuation guarantee obligation includes those salary or
wages sacrificed to superannuation. This will ensure that employees receive the
full benefit of voluntary contributions.[37]
Senate Economics References Committee
Also in response to the ISA report, on 1 December 2016, the Senate referred an inquiry into the Superannuation Guarantee
to the Senate Economics References Committee (Economics References Committee)
for report by 22 March 2017.[38]
The Economics References Committee noted that a 2006 ATO ruling (SGD
2006/2) on the SGAA states that it is allowable for an employee's
voluntary salary sacrifice contributions to firstly, reduce the employee's OTE
base on which SG is calculated; and secondly, be counted towards their
employer's compulsory SG obligation.
Numerous submitters raised concerns with this arrangement and
emphasised it could be exploited by unscrupulous employers to the detriment of
employees.[39]
The Economics References Committee stated its belief:
... that the SG must be a guaranteed minimum contribution to
employees' retirement savings. When employees voluntarily contribute extra
funds to their own superannuation savings they should be assured that these
amounts are genuinely additional to the SG and not simply reducing their
employers SG obligation. Without this assurance, employees may be disinclined
to make adequate provision to their retirement through voluntary contributions.[40]
Accordingly, it recommended that the SGAA be
amended to ensure that an employee's voluntary salary sacrificed superannuation
contributions cannot count towards the employer's compulsory SG obligation, nor
reduce the OTE base upon which SG is calculated.[41]
The amendments in Schedule 2 to the Bill give effect to
that recommendation.
Policy
position of non-government parties/independents
The position of Labor Senators is clear from the
additional comments in the Economics Committee report into the Bill—whilst the
closure of the salary sacrifice loophole is welcome, ‘it is only one important
small step in taking significant action on unpaid super’.[42]
Position of
major interest groups
Very few submitters commented on this measure—except to
state that it was welcome[43]
and would be likely to enhance the integrity of the superannuation system.[44]
However, some submitters were concerned that the Bill does
not go far enough to address other identified problems in relation to unpaid
superannuation contributions.[45]
Financial
implications
According to the Explanatory Memorandum to the Bill, the
measure in Schedule 2 will have ‘a small but unquantifiable impact on the
fiscal and underlying cash balances’.[46]
Key issues
and provisions
Defining a
salary sacrifice arrangement
Item 2 of Schedule 2 to the Bill inserts proposed
section 15A into the SGAA to provide a description of a salary
sacrifice arrangement being an arrangement under which a
contribution is, or is to be, made to a complying superannuation fund or a
retirement savings account (RSA) by an employer for the benefit of an employee—provided
that the employee agreed for the contribution to be made and in return, for
either or both of the following amounts to be reduced (including to nil):
- the
ordinary time earnings of the employee
- the
salary or wages of the employee.[47]
Two new definitions are inserted to support this
description:
- a sacrificed ordinary time earnings amount of the employee for the
quarter arises if ordinary time earnings are reduced and
- a sacrificed salary or wages amount of the employee for the quarter
arises if salary or wages are reduced.[48]
Amounts that would otherwise be excluded from salary or
wages (under sections 27 and 28 of the SGAA) are not taken into account
when working out the amount of a reduction under a salary sacrifice
arrangement.[49]
Formula for
calculating SG shortfall
Employers are liable for the SG charge for a quarter if they
have a shortfall for the quarter.[50]
An employer will not have a shortfall for a quarter if they contribute at least
9.5 per cent of an employee's ordinary time earnings (OTE) base for the
quarter. An employer’s shortfall is calculated by reference to the SG charge
percentage—currently 9.5 per cent.[51]
Existing subsection 19(1) of the SGAA sets out the
formula for calculating an employer’s individual superannuation guarantee
shortfall. That formula is based on the total salary or wages paid by
the employer to the employee. Item 3 of Schedule 2 to the Bill repeals
and replaces the formula so that under proposed subsection 19(1) the
formula will take into account the quarterly salary or wages base,
for an employer in respect of an employee being the sum of:
- the
total salary or wages paid by the employer to the employee for the quarter and
- any
sacrificed salary or wages amounts of the employee for the quarter in respect
of the employer.[52]
The effect of this amendment is that the inclusion of
sacrificed salary or wages amounts ‘ensures that the shortfall and charge is
calculated on the pre-salary sacrifice base and that employers cannot calculate
their superannuation guarantee obligations on reduced salary and wages’.[53]
Item 5 of Schedule 2 to the Bill repeals existing subsection 19(3)
and inserts proposed subsections 19(3) and (4) into the SGAA. For
the purposes of calculating the quarterly salary or wages base, where
sacrificed salary or wages amounts are taken into account for one quarter but
not actually contributed to the fund in that quarter the amount will be counted
in the quarter to which the salary sacrifice arrangement relates.
Reduction
of SG charge percentage
Under existing section 23 of the SGAA, the SG
charge percentage of an employer in relation to an employee is reduced if the
employer makes a contribution (other than a sacrificed contribution) to an RSA
or to a superannuation fund that is not a defined benefit fund. The amount of
the reduction is worked out using the formula in subsection 23(2) of the SGAA
which is based on ordinary time earnings.
Item 7 of Schedule 2 to the Bill amends that
formula so that it refers to the ordinary time earnings base. Item
9 inserts the new definition of ordinary time earnings base being
the number of dollars in the sum of:
- the
ordinary time earnings of the employee for the quarter in respect of the
employer and
- any
sacrificed ordinary time earnings amounts, of the employee for the quarter in
respect of the employer.
These amendments operate to ensure that employer
contributions that reduce the SG charge are calculated on a pre-salary
sacrifice base.
Item 10 of Schedule 2 to the Bill inserts proposed
subsection 23(7) into the SGAA to provide that sacrificed
ordinary time earnings amounts that are taken into account in a quarter are not
to be taken into account for any other quarter.
The amendments made by Schedule 2 to the Bill apply in
relation to working out an employer’s superannuation guarantee shortfall for
quarters beginning on or after 1 July 2018.
[1]. Details
of the terms of reference, submissions to the Economics Committee and the
Committee’s final report are available on the inquiry
homepage.
[2]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (improving Accountability and Member Outcomes in Superannuation
Measures No. 2) Bill 2017 [Provisions], The Senate, Canberra, 23
October 2017, p. 14.
[3]. Australian
Labor Party Senators, ‘Additional
comments by Labor Senators’, Senate Economics Committee, Inquiry into
the provisions of the Treasury Laws Amendment (Improving Accountability and
Member Outcomes in Superannuation Measures No. 2) Bill 2017 [provisions],
The Senate, Canberra, October 2017, p. 22.
[4]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2017, The Senate, Canberra, 18 October 2017, p. 62.
[5]. The
Statement of Compatibility with Human Rights can be found at pages 14 and 47 of
the Explanatory
Memorandum to the Bill.
[6]. Parliamentary
Joint Committee on Human Rights, Report,
11, 2017, 17 October 2017, p. 60.
[7]. Productivity
Commission (PC), Default
superannuation funds in modern awards, Report, 60, PC, Canberra,
5 October 2012, p. 4.
[8]. PC, Superannuation:
alternative default models, draft report, PC, Canberra, March 2017, p.
35.
[9]. Australian
Securities and Investments Commission (ASIC), ‘MySuper:
super made simple’, ASIC website, last updated 27 June 2017.
[10]. Financial
System Inquiry, Financial System
Inquiry: final report, (Murray Review), Treasury, November 2014, p.
131.
[11]. Ibid.
[12]. Ibid.,
recommendation 12.
[13]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017, p. 4.
[14]. Ibid.,
p. 22.
[15]. Ibid.,
p. 32.
[16]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017, pp. 3, 5.
[17]. R
Sharkie, ‘Second
reading speech: Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017’, House of
Representatives, Debates, (proof), 23 October 2017, p. 49.
[18]. A
Leigh, ‘Second
reading speech: Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017’, House of
Representatives, Debates, (proof), 23 October 2017, p. 46.
[19]. Australian
Labor Party Senators, ‘Additional
comments by Labor Senators’, op. cit., pp. 15–22.
[20]. Senate
Economics Committee, Treasury
Laws Amendment (Improving Accountability and Member Outcomes in Superannuation
Measures No. 2) Bill 2017 [Provisions], The Senate, Canberra, 23
October 2017, p. 15.
[21]. Choice,
Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], September 2017, p. 9.
[22]. Australian
Securities and Investments Commission (ASIC), Submission to the Financial
System Inquiry, April 2014, p. 227.
[23]. PC, Superannuation:
alternative default models, op. cit., p. 8.
[24]. AIST,
Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], 29 September 2017, p. 9.
[25]. PC,
Default
superannuation funds in modern awards, op. cit., p. 2.
[26]. AIST,
Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], op. cit., p. 10.
[27]. Australian
Council of Trade Unions, Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], 29 September 2017, p. 2.
[28]. Transport
Workers’ Union of Australia, Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], 28 September 2017, p. 1.
[29]. SGAA,
section 29.
[30]. SGAA,
subsections 19(2A) and 19(2B).
[31]. Superannuation
Guarantee Charge Act 1992, section 6.
[32]. SGAA,
subsection 32NA(7)–(9).
[33]. Industry
Super Australia (ISA) and Cbus, Overdue:
time for action on unpaid super, ISA, Melbourne, December 2016, p. 2.
[34]. Ibid.,
p. 6.
[35]. Superannuation
Guarantee Cross Agency Working Group, Cross
Agency Superannuation Guarantee Working Group: interim report, [Treasury,
Canberra], January 2017, p. 3.
[36]. Ibid.,
pp. 25–26.
[37]. Superannuation
Guarantee Cross Agency Working Group, Superannuation
guarantee non-compliance: a report to the Minister for Revenue and Financial Services,
[Treasury, Canberra], 31 March 2017, p. 7.
[38]. The
terms of reference, submissions to the Senate Economics References Committee
and the final report of the Committee are available on the inquiry
homepage.
[39]. Senate
Economics References Committee, Superbad—wage
theft and non-compliance of the superannuation guarantee, The Senate,
Canberra, May 2017, p. 33.
[40]. Ibid.,
pp. 37–38.
[41]. Senate
Economics References Committee, Superbad—wage
theft and non-compliance of the superannuation guarantee, op. cit.,
recommendation 4, p. xi.
[42]. Australian
Labor Party Senators, ‘Additional
comments by Labor Senators’, Senate Economics Committee, Inquiry into
the provisions of the Treasury Laws Amendment (Improving Accountability and
Member Outcomes in Superannuation Measures No. 2) Bill 2017 [Provisions],
op. cit., p. 21.
[43]. AIST,
Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], op. cit., p. 5; Choice, Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], op. cit., p. 10; AFSA, Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], op. cit., p. 7.
[44]. BT
Financial Group, Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], 29 September 2017, p. 2.
[45]. ISA,
Submission
to the Senate Economics Committee, Inquiry into Treasury Laws Amendment
(Improving Accountability and Member Outcomes in Superannuation Measures No. 2)
Bill 2017 [Provisions], op. cit., pp. 8–11.
[46]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017, p. 5.
[47]. SGAA,
proposed subsection 15A(1).
[48]. SGAA,
proposed subsection 15A(2).
[49]. SGAA,
proposed subsections 15A(3) and (4).
[50]. SGAA,
section 16.
[51]. SGAA,
subsection 19(2) provides that an employer’s shortfall is calculated by
reference to the SG charge percentage—currently 9.5 per cent.
[52]. Inserted
into subsection 19(1) of the SGAA by item 4 of Schedule 2 to the
Bill.
[53]. Explanatory
Memorandum, Treasury Laws Amendment (Improving Accountability and Member
Outcomes in Superannuation Measures No. 2) Bill 2017, p. 42.
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