Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I present a supplementary explanatory memorandum to the bill. I ask leave of the House to move government amendments (1) and (2) as circulated together.

Leave granted.

I move government amendments (1) and (2) as circulated together:

(1) Clause 2, page 3 (at the end of the table), add:

(2) Page 25 (after line 13), at the end of the Bill, add:

Schedule 3—Default superannuation

Fair Work Amendment Act 2012

1 After item 3 of Schedule 1

  Insert:

3A Section 12

  Insert:

  employer MySuper product: see subsection 23A(1B).

2 After item 4 of Schedule 1

  Insert:

4A Section 12

  Insert:

  first stage test: see section 156Q.

3 Item 5 of Schedule 1

  Repeal the item, substitute:

5 Section 12

  Insert:

  interim application period: see paragraph 156N(2)(b).

5A Section 12 (definition of MySuper product )

  Repeal the definition, substitute:

  MySuper product: see subsection 23A(1).

5B Section 12

  Insert:

  Schedule of Approved Employer MySuper Products: see paragraph 156L(1)(a).

4 Item 6 of Schedule 1

  Repeal the item, substitute:

6 Section 12

  Insert:

  second stage test:

  (a) in relation to a standard MySuper product—see subsection 156H(2); and

  (b) in relation to an employer MySuper product—see section 156S.

6A Section 12

  Insert:

  standard application period: see paragraph 156N(2)(a).

6B Section 12

  Insert:

  standard MySuper product: see subsection 23A(1A).

5 Item 9 of Schedule 1 (new subsection 23A(1))

  Repeal the subsection, substitute:

     (1) MySuper product has the meaning given by the Superannuation Industry (Supervision) Act 1993.

     (1A) A standard MySuper product is a MySuper product that is not an employer MySuper product.

     (1B) An employer MySuper product is a tailored MySuper product or a corporate MySuper product.

6 Item 11 of Schedule 1 (at the end of the new paragraph relating to Division 4A)

  Add:

It also sets out the process for making the Schedule of Approved Employer MySuper products in a 4 yearly review, and amending the schedule after it is made to include other employer MySuper products. If an employer MySuper product is on the schedule, an employer covered by a modern award can make contributions, for the benefit of a default fund employee, to a superannuation fund that offers the product (see subsection 149D(1A)).

7 Item 13 of Schedule 1 (heading to new subsection 149D(1))

  Omit "generic", substitute "standard".

8 Item 13 of Schedule 1 (new paragraph 149D(1)(a))

  Omit "generic", substitute "standard".

9 Item 13 of Schedule 1 (new paragraph 149D(1)(d))

  Before "(2)", insert "(1A),".

10 Item 13 of Schedule 1 (at the end of new subsection 149D(1))

  Add:

     Note: If a superannuation fund is specified in the default fund term of a modern award in relation to a standard MySuper product and, in addition to offering the standard MySuper product, the fund offers a tailored MySuper product that a default fund employee is entitled to hold, then any contributions made by the employer to the fund for the benefit of that employee will be paid into the tailored MySuper product instead of the standard MySuper product (see section 29WB of the Superannuation Industry (Supervision) Act 1993).

11 Item 13 of Schedule 1 (after new subsection 149D(1))

  Insert:

      Superannuation funds offering employer MySuper products on the schedule

  (1A) A default fund term of a modern award must permit an employer covered by the award to make contributions, for the benefit of a default fund employee, to a superannuation fund that offers an employer MySuper product that:

     (a) relates to the employer; and

     (b) is on the Schedule of Approved Employer MySuper Products.

Note: The Schedule of Approved Employer MySuper Products is made during a 4 yearly review of default fund terms of modern awards under Division 4A of Part 2-3.

12 Item 18 of Schedule 1 (new subsection 156A(3))

  Repeal the subsection, substitute:

      First stage—the Default Superannuation List

  (3) In the first stage, the FWC must make the Default Superannuation List for the purposes of the review.

  Note: In the first stage, the FWC must be constituted by an Expert Panel for the purposes of making the list and determining applications to include standard MySuper products on the list (see paragraphs 617(4)(a) and (b)).

13 Item 18 of Schedule 1 (before new subsection 156A(4))

  Insert:

Second stage—reviewing and varying default fund terms

14 Item 18 of Schedule 1 (at the end of new section 156A)

  Add:

      The Schedule of Approved Employer MySuper Products

     (5) In the 4 yearly review, the FWC must also make the Schedule of Approved Employer MySuper Products.

     Note: The FWC must be constituted by an Expert Panel for the purposes of making the schedule and determining applications to include employer MySuper products on the schedule (see paragraphs 617(4)(c) and (d)).

15 Item 18 of Schedule 1 (new subsection 156B(2))

  Omit "generic", substitute "standard".

16 Item 18 of Schedule 1 (heading to new section 156C)

  After "list a", insert "standard".

17 Item 18 of Schedule 1 (new subsections 156C(1) and (3))

  Omit "generic", substitute "standard".

18 Item 18 of Schedule 1 (heading to new section 156D)

  After "list a", insert "standard".

19 Item 18 of Schedule 1 (heading to new section 156E)

  After "list a", insert "standard".

20 Item 18 of Schedule 1 (new subsection 156E(1))

  Omit "generic", substitute "standard".

21 Item 18 of Schedule 1 (new subsection 156E(2))

  Omit "interest", substitute "interests".

22 Item 18 of Schedule 1 (new subsection 156G(2))

  Omit "generic", substitute "standard".

23 Item 18 of Schedule 1 (new paragraph 156H(1)(a))

  Omit "in relation to a generic MySuper product".

24 Item 18 of Schedule 1 (new paragraph 156H(1)(b))

  Omit "10", substitute "15".

25 Item 18 of Schedule 1 (new paragraph 156H(1)(b))

  Omit "generic", substitute "standard".

26 Item 18 of Schedule 1 (note to new subsection 156H(1))

  Omit "10", substitute "15".

27 Item 18 of Schedule 1 (new subsections 156H(2) and (3))

  Omit "generic", substitute "standard".

28 Item 18 of Schedule 1 (new subsection 156H(3))

  Omit "10", substitute "15".

29 Item 18 of Schedule 1 (new subsection 156K(1))

  After "149D(1),", insert "(1A),".

30 Item 18 of Schedule 1 (new section 156L)

  Repeal the section, substitute:

Subdivision D—The Schedule of Approved Employer MySuper Products

156L The Schedule of Approved Employer MySuper Products

  (1) In the 4 yearly review, the FWC must:

     (a) make and publish the Schedule of Approved Employer MySuper Products; and

     (b) revoke any previous Schedule of Approved Employer MySuper Products.

     Note: If an employer MySuper product is on the schedule, an employer covered by a modern award can make contributions, for the benefit of a default fund employee, to a superannuation fund that offers the product (see subsection 149D(1A)).

  (2) When the schedule is made, it must specify any employer MySuper product that the FWC has determined under section 156P is to be included on the schedule.

  (3) After the schedule is made, it must be amended to specify any employer MySuper product that the FWC has determined under section 156P is to be included on the schedule.

  Note: The FWC must be constituted by an Expert Panel for the purposes of amending the schedule (see paragraph 617(5)(b)).

  (4) If the schedule is amended as referred to in subsection (3), the FWC must publish the schedule as amended.

  (5) The schedule must not specify any other product.

156M FWC to invite applications to include employer MySuper products on schedule

  (1) Before making the schedule, the FWC must publish a notice that invites:

     (a) superannuation funds that offer an employer MySuper product; and

     (b) employers to which an employer MySuper product relates;

to apply to the FWC to have the product included on the schedule.

  (2) The notice must specify the period in which an application may be made.

156N Making applications to include employer MySuper products on schedule

  (1) The following may apply to the FWC to have an employer MySuper product included on the schedule:

     (a) a superannuation fund that offers the product;

     (b) an employer to which the product relates.

  (2) The application must be made:

     (a) in the period (the standard application period) specified in the notice under section 156M; or

     (b) in the period (the interim application period) that:

        (i) starts immediately after the schedule is made under paragraph 156L(1)(a); and

        (ii) ends immediately before the next 4th anniversary of the commencement of this Part.

Note: Paragraph (2)(a) deals with applications that are made in a 4 yearly review of default fund terms, and paragraph (2)(b) deals with applications that are made outside a 4 yearly review.

  (3) The application must also:

     (a) be accompanied by any fees that are prescribed by the regulations; and

     (b) provide information relating to the first stage criteria.

  (4) The FWC must publish any application made under subsection (1).

  (5) However, if an application includes information that is claimed by the applicant to be confidential or commercially sensitive, and the FWC is satisfied that the information is confidential or commercially sensitive:

     (a) the FWC may decide not to publish the information; and

     (b) if it does so, it must instead publish a summary of the information which contains sufficient detail to allow a reasonable understanding of the substance of the information (without disclosing anything that is confidential or commercially sensitive).

  (6) A reference in this Act (other than in this section) in relation to an application made under subsection (1) includes a reference to a summary referred to in paragraph (5)(b).

  (7) Only one application in relation to an employer MySuper product may be made under subsection (1) in the period that:

     (a) starts at the start of the standard application period; and

     (b) ends at the end of the interim application period.

156P FWC to determine applications

  (1) If an application is made under subsection 156N(1) to have an employer MySuper product included on the schedule, the FWC must make a determination about whether to include the product on the schedule.

  Note: The FWC must be constituted by an Expert Panel for the purposes of making this determination (see paragraphs 617(4)(d) and (5)(a)).

  (2) The FWC must not determine that the product is to be included on the schedule unless the product satisfies the first stage test and the second stage test.

156Q The first stage test

     An employer MySuper product satisfies the first stage test if the FWC is satisfied that including the product on the Schedule of Approved Employer MySuper Products would be in the best interests of default fund employees, or a particular class of those employees, taking into account:

  (a) the information provided in the application; and

  (b) the first stage criteria; and

  (c) any submissions that were made in relation to whether the product satisfies the first stage test.

156R Submissions about the first stage test

  (1) The FWC must ensure that all persons and bodies have a reasonable opportunity to make written submissions to the FWC about whether an employer MySuper product satisfies the first stage test.

  (2) If:

     (a) a person or body makes a written submission in relation to whether an employer MySuper product satisfies the first stage test; and

     (b) the person or body has an interest in relation to:

        (i) the superannuation fund that offers the product; or

        (ii) if the person or body refers to another superannuation fund in the submission—that superannuation fund;

then the person or body must disclose that interest in the submission.

  (3) The FWC must publish any submission that is made.

156S The second stage test

     An employer MySuper product satisfies the second stage test if the FWC is satisfied that including the product on the Schedule of Approved Employer MySuper Products would be in the best interests of default fund employees of an employer to which the product relates, or a particular class of those employees, taking into account:

  (a) any submissions that were made in relation to whether the product satisfies the second stage test; and

  (b) any other matter the FWC considers relevant.

156T Submissions about the second stage test

  (1) The FWC must ensure that the following persons have a reasonable opportunity to make written submissions to the FWC about whether an employer MySuper product satisfies the second stage test:

     (a) an employee of an employer to which the product relates;

     (b) an employer to which the product relates;

     (c) an organisation that is entitled to represent the industrial interests of a person referred to in paragraph (a) or (b).

  (2) If:

     (a) a person or body (whether or not a person referred to in subsection (1)) makes a written submission in relation to whether an employer MySuper product satisfies the second stage test; and

     (b) the person or body has an interest in relation to:

        (i) the superannuation fund that offers the product; or

        (ii) if the person or body refers to another superannuation fund in the submission—that superannuation fund;

then the person or body must disclose that interest in the submission.

  (3) The FWC must publish any submission that is made.

Subdivision E—Publishing documents under this Division

156U Publishing documents under this Division

     If the FWC is required by this Division to publish a document, the FWC must publish the document on its website or by any other means that the FWC considers appropriate.

31 Item 20 of Schedule 1 (new subsection 159A(1))

  Omit "generic", substitute "standard".

32 Item 39 of Schedule 2

  Repeal the item, substitute:

39 At the end of section 617

  Add:

Expert Panel for 4 yearly review of default fund terms

  (4) In a 4 yearly review of default fund terms of modern awards, the following must be made by an Expert Panel constituted for the purposes of the review:

     (a) the Default Superannuation List;

     (b) a determination under section 156E on an application to have a standard MySuper product included on the Default Superannuation List;

     (c) the Schedule of Approved Employer MySuper Products;

     (d) a determination under section 156P on an application made in the standard application period to have an employer MySuper product included on the Schedule of Approved Employer MySuper Products.

     Note: For the constitution of an Expert Panel for those purposes, see subsection 620(1A).

      Expert Panel for amending the Schedule of Approved Employer MySuper Products

  (5) If an application is made in the interim application period to have an employer MySuper product included on the Schedule of Approved Employer MySuper Products, the following must be made by an Expert Panel constituted for the purposes of determining the application:

     (a) a determination under section 156P on the application;

     (b) if the determination is to include the product on the schedule—an amendment of the schedule to specify the product.

     Note: For the constitution of an Expert Panel for those purposes, see subsection 620(1A).

33 Item 43 of Schedule 2 (new subsection 620(1A))

  Repeal the subsection, substitute:

      Constitution of an Expert Panel for 4 yearly reviews of default fund terms etc.

  (1A) An Expert Panel constituted under this section for a purpose referred to in subsection 617(4) or (5) consists of 7 FWC Members (except as provided by section 622), and must include:

     (a) the President, or a Vice President or Deputy President appointed by the President to be the Chair of the Panel; and

     (b) 3 Expert Panel Members who have knowledge of, or experience in, one or more of the following fields:

        (i) finance;

        (ii) investment management;

        (iii) superannuation.

34 Item 1 of Schedule 11 (after new clause 2)

  Insert:

2A Transitional provision—when first variations of default fund term take effect

  (1) This clause applies to the first 4 yearly review of default fund terms of modern awards under Division 4A of Part 2-3 (as inserted by Schedule 1 to the amending Act).

  (2) In the review, determinations under that Division (whether made under section 156H or 156J) varying the default fund term of a modern award:

     (a) must take effect at the same time; and

     (b) must not take effect before 1 January 2015.

2B Transitional provision—modern awards made on or after 1 January 2014

     If a modern award is made in the period that starts on 1 January 2014 and ends on 31 December 2017, then, until the default fund term of the award is varied after that period under Division 4A of Part 2-3 (as inserted by Schedule 1 to the amending Act), this Act has effect in relation to the award as if subsection 149D(1A) (as inserted by that Schedule) were as follows:

Superannuation funds offering employer MySuper products

  (1A) A default fund term of a modern award must permit an employer covered by the award to make contributions, for the benefit of a default fund employee, to a superannuation fund that offers an employer MySuper product that relates to the employer.

These amendments implement changes to default superannuation arrangements for employees to whom a modern award applies. The new schedule 3 of the bill amends the Fair Work Amendment Act 2012 to allow an employer to make contributions for default fund employees to whom a modern award applies to a superannuation fund in respect of an employer MySuper product—that is, a tailored or corporate MySuper product—subject to the product being approved by the Fair Work Commission.

The amendments would establish a two-stage approval process under which an expert panel of the Fair Work Commission will assess employer MySuper products to determine whether they are in the best interests of the relevant default fund employees. This approval process, including the legislated criteria for both stages of assessment, is largely consistent with the process for generic MySuper products that was established in the Fair Work Amendment Act.

The amendments will also increase the maximum number of funds that can generally be specified in a modern award from 10 to 15. This addresses concerns that employers covered by multiple modern awards could be prevented from using employer-specific subplans of generic superannuation products. This could arise because, to use a subplan for all employees, the generic product must be included in every modern award covering the employer. There was a concern from industry—from corporate funds—that the existing limit of 10 funds might see some high-performing funds not being included in particular modern awards where there are more than 10 funds with highly suitable generic superannuation products. The proposed amendments ensure that high-performing funds have reasonable prospects of being specified in modern awards for which the FWC—the Fair Work Commission—assesses them as highly suitable for employees covered by the award. The measures will also provide certainty that stakeholders have sought regarding when arrangements may change by not requiring any changes to existing arrangements before at least 1 January 2015.

These amendments have been developed following an extensive Commonwealth consultation with employers, unions and superannuation industry stakeholders following the passage of the Fair Work Amendment Act last year. I would like to thank those stakeholders who have invested a significant amount of time and effort into working with the Labor government to develop the amendments. This measure fulfils the commitment made by the government to introduce any required amendments to ensure appropriate arrangements are in place for corporate funds. It will ensure that those employees whose default superannuation contributions have been directed to high-performing employer MySuper products are not made worse off by the new default superannuation system and it will prevent unnecessary disruption for employers with employer MySuper products.

Applications and the assessment of applications by the expert panel and the Fair Work Commission could consider a range of factors including but not limited to the features of the superannuation arrangement and whether they best meet the interests of the employees—for example, the variations in features of generic MySuper products, such as insurance arrangements or employer scale fee discounts that benefit particular groups of employees covered under specific modern awards. The Fair Work Commission has expertise in managing issues that affect multiple employers and industries. Superannuation is an industrial issue. It always has been and it remains that way as it goes towards the remuneration of employees by employers. It is appropriate that the Fair Work Commission has a role but also that we make sure that systems that are working continue to be able to do so. This government is confident that the process will ensure reasonable and practical outcomes for all stakeholders. I commend the amendments and also acknowledge that the opposition is supporting these amendments.

Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

Just very briefly, the coalition is not opposing the government's amendments, as the minister said. On behalf of the shadow minister, Senator Cormann, I make one point—that is, to reconfirm the coalition's position that we want to see genuine competition in the default fund market by letting any MySuper product compete freely. I point out that, once products comply with the default consumer protection requirements, there is no need for an additional process through Fair Work Australia. But I will not labour the chamber any longer. As I said, the coalition will not be opposing these amendments.

Question agreed to.

Bill, as amended, be agreed to.

Ordered that this bill be reported to the House with amendments.

Sitting suspended from 10:29 to 11:39