Referral of the inquiry
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 ('the bill') was introduced in the House of Representatives and read a first time on 27 November 2019.
On 28 November 2019, the Senate referred the provisions of the bill to the Economics Legislation Committee for inquiry and report by 21 February 2020.
Purpose of the bill
This bill reintroduces amendments to the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992) that were previously introduced into the 45th Parliament on 14 September 2017 through Schedule 1 to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017.
The amendments enable employees under workplace determinations or enterprise agreements to have an opportunity to choose the superannuation fund for their compulsory employer contributions.
The Minister for Education, the Hon. Mr Dan Tehan MP, summarised the bill's aims in his second reading speech:
Providing choice of fund to individuals should be simple. It was a recommendation of the Financial System Inquiry and the trade union royal commission. The Productivity Commission also found in their recent landmark report into superannuation that denying choice of fund can discourage member engagement and that this reform was 'much needed'…
Under this bill, it will no longer be possible to deny choice to individuals on the grounds that they are employed under an enterprise agreement or workplace determination that specifies their fund for them…
Moreover, lack of choice can force people to be stuck in poorly performing funds… At least 14,000 employees are forced to contribute to one of seven funds identified by Super Consumers Australia as the worst performing funds as a result of the restrictions.
Even when members are not forced into poorly performing funds, restricting choice often leads to the opening of another unnecessary account. The Productivity Commission report highlighted the negative effects that holding unintended multiple superannuation accounts were having on millions of Australians through duplicate fees and insurance premiums…
This bill is the next step in fixing the problem of multiple accounts by preventing Australians from being forced into having multiple accounts because of their enterprise agreement or similar workplace determination…
To be clear, this bill does not prevent enterprise agreements from specifying a particular fund. It just allows individuals to choose a different fund if it suits them better. And in doing so, it puts those individuals on an even footing with the majority of the workers who already have this choice. Also, this bill will have no impact on default funds specified in modern awards.
Overview of the bill
The Explanatory Memorandum (EM) argued that workers cannot choose the superannuation fund into which their compulsory employer superannuation is paid. This puts them out-of-step with the majority of workers and prevents them making key decisions around their retirement savings, can result in the payment of unnecessary fees and insurance premiums, and can reduce competition between superannuation funds.
Choice of fund for compulsory contributions can be restricted by some employers under existing Commonwealth legislation. The EM argued that without reform, individuals under certain collective agreements will continue to face restricted choice of fund. Moreover, by expanding choice of funds for individuals will also reduce the need for multiple accounts involving multiple fees and insurance premiums, which can erode retirement savings.
Giving more employees choice of fund also aims to promote member engagement and reduce fees through increased competition.
Comparison of key features of new law and current law
The table below summarises the changes to the current law.
Compulsory employer superannuation contributions to a fund under, or in accordance with, a workplace determination or enterprise agreement made before 1 July 2020 will comply with the choice of fund requirements.
Compulsory employer superannuation contributions to a fund under, or in accordance with, a workplace determination or enterprise agreement comply with the choice of fund requirements.
An employee will be able to choose their own superannuation fund where they are employed under a workplace determination or enterprise agreement that is made on or after 1 July 2020. New employees to whom such a determination or agreement applies must be provided with a standard choice form and if there is no chosen fund for a new employee the default fund arrangements apply. An employer does not have to provide existing employees with a form unless requested once a new determination or agreement is made. Where there is no chosen fund for an existing employee, an employer that continues to make compulsory contributions for that employee with the same fund, in accordance with the previous determination or agreement, will comply with the choice of fund requirements
Employees of employers that make compulsory employer superannuation contributions to a fund under, or in accordance with, a workplace determination or an enterprise agreement, may not be able to choose their own superannuation fund.
Notional contributions for an employee in relation to a defined benefit scheme will not cause an employer to have an increase in their superannuation guarantee shortfall if the employee’s benefit in the scheme would not be affected by the employer making contributions to another fund.
Notional contributions for an employee in relation to a defined benefit scheme may cause an employer to have an increase in their superannuation guarantee shortfall even if the employee’s benefit in the scheme would not be affected by the employer making contributions to another fund.
Date of effect
This measure applies to new workplace determinations and enterprise agreements made on or after 1 July 2020.
Regulation impact on business
The EM stated that although the financial impact of this bill is expected to be zero, the total annual average regulatory cost is $5.646 million; $2.245 million for business and superannuation funds and $3.401 million for individuals.
The bill was considered by the Senate Standing Committee for the Scrutiny of Bills, which had no comment.
Compatibility with Human Rights
The EM argued that the bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 and does not raise any human rights issues.
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to relevant stakeholders inviting written submissions by 17 January 2020.
The committee received 18 submissions, one supplementary submission, as well as answers to questions on notice and additional information, which are listed at Appendix 1.
The committee held one public hearing for the inquiry in Sydney on Monday, 9 March 2020. The names of witnesses who appeared at the hearing can be found at Appendix 2.
References to the Committee Hansard are to the Proof Hansard and page numbers may vary between Proof and Official Hansard transcripts.
The committee thanks all individuals and organisations who participated in the inquiry, especially those who made written submissions and participated in the public hearing.