On 14 September 2017, the Senate referred the provisions of the Treasury
Laws Amendment (Improving Accountability and Member Outcomes in Superannuation
Measures No. 2) Bill 2017 (Measures No. 2 bill) to the Senate Economics Legislation
Committee for inquiry and report by 23 October 2017.
The Measures No. 2 bill is part of a broad package of reforms focused on
protecting members' money, prioritising members' interests and strengthening
the foundations of the superannuation system.
As part of this package of reforms, the Senate also referred the
Treasury Laws Amendment (Improving Accountability and Member Outcomes in
Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws
Amendment (Strengthening Trustee Arrangements) Bill 2017, separately to the
committee for inquiry and report by 23 October 2017.
The Measures No. 2 bill, the focus of this report, would amend the Superannuation
Guarantee (Administration) Act 1992 (SGAA) to strengthen accountability of
superannuation funds and improve outcomes for members. The measures contained
in the bill are aimed at ensuring that choice of fund is provided to over one
million more Australians and that salary sacrifice contributions are reflected
in members' retirement savings.
The Minster for Revenue and Financial Services, The Hon. Kelly
O'Dwyer MP, noted in her Second Reading Speech that the measures in this
bill would 'deliver on the findings of the 2014 Financial Systems Inquiry (FSI)
and address issues identified in the Government's Superannuation Guarantee
Cross-Agency Working Group report Superannuation Guarantee Non-compliance'.
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to
relevant stakeholders and interested parties inviting submissions by 29
September 2017. The committee received 32 submissions, which are listed at
Public hearings for the inquiry were held in Canberra on 9 October 2017
and in Sydney on 10 October 2017. The witnesses who gave evidence are listed at
The committee appreciates the efforts of all stakeholders who
contributed to the inquiry.
Overview of the bill
The Measures No. 2 bill extends choice of fund provisions for employees
(schedule 1) and removes the capacity of employers to use salary sacrifice
contributions to reduce minimum superannuation guarantee contributions
Schedule 1¾Choice of Fund
Schedule 1 amends the SGAA to ensure employees under workplace
determinations or enterprise agreements have an opportunity to choose the superannuation
fund for their compulsory employer contributions. This measure applies to new
workplace determinations and enterprise agreements made on or after 1 July
Summary of new law
This schedule implements the 2014 FSI's Recommendation 12 to:
Provide all employees with the ability to choose the fund
into which their Superannuation Guarantee contributions are paid.
The FSI recommended removing the barriers to members engaging with their
superannuation by ensuring all employees, to the extent possible, have the
right to choose their superannuation fund. To this end, it was suggested the government
should remove provisions in the SGAA that deny some employees the ability to
choose the fund that receives their superannuation guarantee (SG) contributions
due to the exclusions given to enterprise agreements, workplace determinations and
Given the importance of compulsory superannuation contributions to individuals'
retirement incomes, individuals should be able to decide where their compulsory
superannuation goes. The government states that expanding choice of fund will
also reduce the need for multiple accounts involving multiple fees and
insurance premiums which can erode retirement savings.
In addition, giving more employees choice of fund would also promote
member engagement and reduce fees through increased competition.
Schedule 2¾Salary sacrifice integrity
Schedule 2 amends the SGAA to improve the integrity of the
superannuation system by ensuring that an individual's salary sacrifice
contributions cannot be used to reduce an employer's minimum SG contributions.
Summary of new law
This schedule implements the Superannuation Guarantee Cross-Agency
Working Group's recommendations to prevent contributions made as part of a
salary sacrifice arrangement from satisfying an employer's SG obligations (Recommendation 8); and specifically
include salary or wages sacrificed to superannuation in the base for
calculating an employer's SG obligations.
Under a salary sacrifice arrangement an employee agrees to forego part
of their future salary or wages in return for their employer providing benefits
of a similar value. Employees are also able to salary sacrifice amounts of
their future salary and wages to be paid by their employer to a superannuation
fund as superannuation contributions. These contributions are deductible for
the employer and are not included in the assessable income of the employee
(subject to concessional contributions caps). Instead, these contributions are
included in the assessable income of the superannuation fund and generally
taxed concessionally at a rate of 15 per cent.
Currently, salary sacrificed amounts count towards employer
contributions that reduce an employer's mandated SG contributions. In addition,
employers can calculate SG obligations on a (lower) post salary sacrifice
earnings base. While employees salary sacrificing may obtain other taxation
benefits, employees who salary sacrifice to boost their superannuation savings
may end up with lower superannuation contributions than they expect.
Financial savings, regulatory impact and human rights issues
The explanatory memorandum notes that schedule 1 has no financial impact
nor does it raise any human rights issues. However, the regulatory impact will
result in a total annual average regulatory cost of $5.646 million; $2.245
million for business and superannuation funds; and $3.401 million for
The date of effect for schedule 1 is 1 July 2018 for all new workplace
determinations and enterprise agreements.
Schedule 2 notes that the measure has a small but unquantifiable impact
on the fiscal and underlying cash balances. It is also compatible with human
rights and does not raise any human rights issues. The date of effect for
schedule 2 is also 1 July 2018.
Structure of this report
The report is structured in two chapters¾this
introductory chapter, which provides a brief overview of the Measures No. 2 bill
and the context; and chapter two which discusses the schedules and the related
issues raised by submissions.
The committee would like to thank all individuals and organisations that
participated in the inquiry, particularly given the tight timeframes requested
for submissions and the hearing.
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