Gavin Marshall (Victoria, Australian Labor Party) Share this | Hansard source

by leave, I move:

That the House of Representatives be requested to make the following amendments:

(1)    Schedule 1, item 47, page 17 (line 24), after “rate”, insert “and the formula for determining the rate”.

(2)    Schedule 1, page 17 (after line 26), after item 47, insert:

47A  Rate to be applied since 1994

(1)    The Minister must specify a rate according to a formula in an instrument made under subsection 21(5) of the Safety, Rehabilitation and Compensation Act 1988 to apply to all eligible claimants since 1994.

(2)    The Minister must apply the formula mentioned in subitem (1) to each year since 1994 to determine a rate to be applied (the catch-up rate) for each of those years.

(3)    The difference between the rate already paid and the catch-up rate is now due and payable as compensation to all eligible claimants since 1994.

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Statement pursuant to the order of the Senate of 26 June 2000

The effect of the amendments would be to allow retrospective increased compensation payments under the Safety, Rehabilitation and Compensation Act 1988 to all eligible claimants since 1994. These payments would be met from the appropriation under the Act from the Consolidated Revenue Fund.

This increase in the amount of the payments to claimants would have the effect of increasing expenditure from the standing appropriation, and the amendments are therefore presented as requests.

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

The Senate has long accepted that an amendment should take the form of a request if it would have the effect of increasing expenditure under a standing appropriation in an Act amended by the bill. These requests are therefore in accordance with the precedents of the Senate.

Senator Barnett was right when he spoke about some of the complexity of this particular matter to which these amendments go to and how the committee had been engaged in some rather detailed discussions and given some real-life examples. It required a follow-up hearing in Canberra with Comcare and the department to try and work through some of these issues. My amendments do not go to all the issues of concern, because, while Senator Trood also took keen interest in this matter, I have been advised that, on the bulk of the issues that I have some concerns about, the government is not interested in supporting any changes. That was certainly clearly reflected to me by Comcare and the department. That explains why the amendments go to this issue. They go to this issue because this is the specific issue that is dealt with in this amendment bill.

In my speech in the second reading debate I tabled an example provided by the Law Council of Australia. I have tabled the response from Comcare, which I thought would be useful for senators interested in this debate to have in front of them as I go through the issues, because they are quite complex. This will help the Senate understand the significant disadvantage that has occurred to people who have been effectively superannuated out of the Commonwealth public sector due to ill health or injury through the Comcare scheme.

The object of the act is that people in this situation should be compensated to 75 per cent of normal weekly earnings. The example that has been given and responded to by Comcare is titled ‘Daryl’. Rather than use a real-life example, this is the example that we have been using. Daryl’s normal weekly earnings were $1,038 a week. The amount of compensation, given the objectives of the act, should be 75 per cent of that, which would work out at $778.50. In this scenario, Daryl was paid out a lump sum from his Commonwealth superannuation of $242,399.37. The problem starts at this point.

Up until this legislation, the earnings that that lump sum enabled people to make were taken into consideration in the final calculation of their weekly payments. The deeming rate that has been applied up until now was 10 per cent. That deeming rate is an unreal expectation of what you could earn on that lump sum payment and in any case it is applied to the pre-tax amount. So there are two disadvantages that occur at this point. One is that it is a pre-tax amount so even if it were able to get the rate that is deemed, 10 per cent, it is not a real rate and it would not be a real return because the amount that can be invested is an after-tax amount. So we have two disadvantages there. A deeming rate for many years of 10 per cent is totally unrealistic. People would have no opportunity to invest their lump sum earnings and achieve that sort of interest rate.

We then have another disadvantage where Comcare—or maybe it is the superannuation fund, but it is a mixture of the compensation payments—still requires a five per cent superannuation contribution even though the person has been permanently incapacitated and is no longer on the payroll. So it has been a notional five per cent contribution, which adds up to $52.07 in Daryl’s case. That is another disadvantage.

There has been some significant debate about where that money goes. I am still somewhat unclear. There have been statements made that that amount goes to the benefit of the person—Daryl in this case. But there have also been statements that it simply goes into the superannuation scheme. There is another view that it is simply a notional deduction and does not end up going anywhere. But certainly, it does not go into Daryl’s pocket. Clearly, we would say, and many would argue, that if there is going to be a superannuation deduction from someone’s normal weekly payment, even under this compensatory arrangement, it ought to be made to the benefit of that individual. But again, that issue is not dealt with in these amendments. Given the strong advice I have had from the department and from government senators, the government would not entertain changing those things.

I will just run through the list. Daryl earns $1,038; his 75 per cent would equal $778.50. The amount that is deducted from his payment is the deemed 10 per cent value of the earnings from his lump sum and $52.07, which is the five per cent notional superannuation deduction. That adds up to $518.22, which is then deducted from his $778.50—under the objective of the act, 75 per cent of his normal weekly earnings—leaving him with $260.28 per week as his payment. This is opposed to the stated objective of the act where he should have $778.50.

That is an appalling reduction and of course it realistically could not be met in terms of the deeming arrangements. The government and the department have certainly known about the inadequacy of this deeming arrangement for a long time. But Daryl in this case—and it is the same in every other case—has no way to change that. It is purely in the realm of the government to be able to change the deeming rate, and they have refused to do so. They have left it at an artificially high rate. The disadvantage—and I will go through the size of the disadvantage in a minute—has been going on for years.

Under the proposed legislation, let us again use the case study of Daryl and his normal weekly earnings of $1,038 a week. The 75 per cent objective of the act would give him $778.50 per week. There is no change there and no change to his lump sum of $242,399.37. If the interest rate used is what the department tells us the minister will determine, and that is the 10-year bond rate, that would now be 5.56 per cent. There would also be the deduction of $52.07, which is the five per cent notional superannuation contribution. That means that the total deductions from the $778.50 would only be $311.25, which would leave him better off by $206.97. So he would go from $260.28 a week to $467.25 a week, which is a 79.5 per cent increase in his weekly payments.

There is still the argument about whether the 10-year bond rate is the appropriate rate. Other Commonwealth departments use different rates. That is not necessarily an issue here today; it is whether the government will support the principle of these amendments, which I will now get to.

The extent of this disadvantage has been apparent for a decade. Daryl’s case is not unusual, I am advised by the department. People have been disadvantaged because they were removed from the workplace because they were unfit to work due to injury or illness. They were superannuated out because they were unfit to work. These are the most vulnerable people in our community and they are not being looked after appropriately. They have been expected to live on $260.28 a week, in Daryl’s case, plus whatever investment he may have been able to get from his lump sum. By simply making this administrative adjustment today, or allowing the minister to make it annually, the government would rectify the situation in the first instance and increase his payments by $206.97—and many would argue it is not enough, as I have said.

The concern many of us on the committee had was that this is not a new problem that has just dawned on the government; this has been an ongoing battle for the recipients of these payments for a decade or so. There have been enormous amounts of correspondence sent and enormous amounts of advocacy made to the government to try to redress this imbalance.

What do these amendments seek to do? Rather than just giving the minister the ability to determine a rate on an annual basis in the future, by regulation he should in fact publish that rate in the Senate. He should also publish the rationale for determining the new deeming rate for people in this situation so we can understand it. Once that is done, that same formula ought to be used—and I have said it should go back to 1994; I am happy for some negotiation on this—to determine a new rate to be applied for each year going back to 1994 to compensate those people who ought to have been receiving rates based on the appropriate interest rate at the time, rather than an artificial 10 per cent deeming rate.

I think that is just simple fairness and justice. These people have been disadvantaged over a very long period of time. The government has known about it. The department has known about it. Yet, now, in 2007, the government is actually acting to fix this legislation. Again, we will have all the other arguments about other issues, but we need some indication from the government about whether it is prepared to consider, as a matter of principle, compensating people retrospectively for the disadvantage that has taken place. I am happy to have some discussion about the detail of the amendment if that would assist the government in accepting the principle. That is the position we put. We believe that is a fair and moral position. There are other issues, as I have said, but, if we can get over this hurdle, I think we may get over some of the other hurdles more easily.