Senate debates

Monday, 4 December 2017


Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017, Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017; Second Reading

11:07 am

Photo of James PatersonJames Paterson (Victoria, Liberal Party) Share this | | Hansard source

I advise senators I'll be speaking only briefly in continuation of my remarks when we considered the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and related bill a number of weeks ago. I just want to revisit an issue in light of some new research which has been released into this topic. It is well worth the time of all senators to carefully consider. When I spoke on this issue a few weeks ago, I was marvelling at the strange set of reasoning that the Labor Party had clearly gone through to arrive at their position to oppose these measures. They are, in my view, very reasonable measures, which include things such as requiring that there be a number of independent directors on the boards of industry superannuation funds, increasing the level of reporting standards, requiring that AGMs take place and giving APRA more powers to make sure that, effectively, the money that superannuants trust their superannuation funds to look after is carefully stewarded and spent wisely. That's a pretty reasonable set of amendments, in my view, and it is something that the Labor Party have been fighting tooth and nail for for some time in this place.

Why is it that the Labor Party, who would normally be in favour of these sorts of regulatory oversights and reasonable measures to ensure that people's financial investments are being carefully stewarded, are opposing them? It doesn't make sense. If this were a private bank, a private super fund or a commercial super fund, they'd be all for it, and yet, when it comes to industry super, all of a sudden they're in favour of less regulation, less oversight and less red tape. At the time, I thought it might have something to do with the close relationship that organisations like the Cbus super fund evidently have with the CFMEU, given the findings of the royal commission that the private information of Cbus superannuants is passed on to the CFMEU, in contravention of many laws. But there is more evidence of this close relationship that might possibly explain why the Labor Party is opposed. It comes in the form of a very excellent research paper, produced by my former colleagues and ongoing friends at the Institute of Public Affairs—in particular, Mr Simon Breheny and Mr Morgan Begg. It's entitled 'Rivers of gold: how the trade union movement is funded by industry super' and was released only last week. There are many interesting findings in the paper, but one which particularly stood out for me was: between the financial years 2013-14 and 2016-17 industry super funds paid a grand total of $18,438,516 to unions. That is an extraordinary sum of money. While we often hear in these debates that unions have the exact same status and control over industry super funds that employer organisations have, the equivalent amount to paid employer and industry groups was only $2,076,756—so a massive, massive weight in favour of unions.

Unions have received almost $20 million over a handful of years from Industry Super. That fact might possibly play on the minds of some senators in their decision-making on this bill. The ICAC broke down between the unions how much each received. The CFMEU received $2.8 million; United Voice received $2.3 million; and the ACTU received $2 million. It is important to mention these are payments made from industry super funds to unions in directors' fees only. These are the funds that are paid for the service of, presumably, union employees on the boards of industry super funds. They don't include all the other financial transactions between Industry Super and unions, including—as we know and as has been reported on previously—some interesting marketing arrangements between these organisations that seem, on the face of it, quite generous. It is a possible reason that the Labor Party is opposing these reforms today. I don't think it is a very good reason to oppose the reforms; I think they deserve the careful consideration and support of all senators. I would urge them to do so.

11:12 am

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Before I commence my formal remarks, I have to explain why Labor is opposing this legislation, which Senator Paterson has tried, in what I would describe as Orwellian fashion, to portray as improving the superannuation situation. It is absolutely not the case. What we're seeing here is an attack on the vital role of superannuation in this country. It's been made crystal clear that Labor opposes both of the bills that are before us this morning, 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. And the reason is simple: it's the viability of the compulsory superannuation system that was first instituted under the Hawke-Keating Labor government. This lot over here are now standing up saying that they now want to support the superannuation industry—they will look after it; they are all into transparency—but let's not forget the history of where this started. They said the Australian economy would tank if we dared to create a superannuation system. They said that it was going to fail the country and that small businesses would never cope. And now, as we've got a fantastic body of wealth in our country to provide for superannuation and the benefit of Australians, they think they should own it because it's got something to do with money. They continue to misrepresent to the Australian people that they can actually even manage money. Certainly, they are not managing the economy very well; certainly, they are not managing the budget very well. God help them if they get their hands into the super of people who are working very well for this country, who have a right to a dignified retirement and who have a right to the benefit of the funds that are going into their superannuation plans, particularly those who are in Industry Super. This is nothing but a countervailed attack on the rights of decent workers who are getting good service from the superannuation companies that look after them.

Labor is the party of compulsory universal superannuation and will always ensure Australia's retirement income is strong and sustainable—giving older Australians the financial support and the security that they deserve. The only reason that the Turnbull government is trying to make these changes is to attack union trustees and industry super. And by extension, if they are successful in this shameful bid to attack union trustees—and the employers who are on those boards—the only person who will suffer is the Australian who has worked hard their entire life and who relies on proper management of their funds. They tried this game on in 2015, and here they are trying it again.

The 50-50 representational model has been the foundational structure of occupational super—50 per cent union representatives standing up for the employees in that industry, 50 per cent employers—but we never hear them talk about that. This is the model where the employers and the workers have actually got it together and done a great job, and are outperforming the retail sector that's associated with the big banks that these guys are in cahoots with. The model is working. It's not only working, it's working much better than what they are proposing should be copied in this legislation. And the title of the bill—who do this government continue to think that they're going to fool? We all know that this bill from the Turnbull government is not improving accountability or member outcomes in super, and it is not strengthening trustee arrangements. It's doing the exact opposite. Do you know why, Mr Acting Deputy President Sterle? Because they just can't stand the thought of good outcomes for hardworking Australians. Just this morning in this place, we've had this government attack the penalty rates again: the penalty rates of ordinary working Australians. Anytime they see a hardworking Australian getting ahead, they want to get in the way of that. That's what this legislation is attempting to do.

Superannuation, as we know, is absolutely fundamental to retirement. There are three pillars of retirement: the age pension, compulsory superannuation and voluntary savings. Compulsory superannuation has a fundamental role in ensuring that older Australians who have worked all their lives do not retire in poverty. It has a fundamental role in ensuring that older Australians retire with financial security. Compulsory superannuation—perhaps its most important role—has a fundamental role in ensuring that older Australians can retire with dignity. As our population ages, compulsory superannuation is only going to increase in importance. It's of increasing importance to our federal budget, and it's also increasing in importance to that large group of older Australians. The structure of superannuation tax concessions means that it has a fundamental role to play in the budget bottom line.

Offering incentives through the tax system is an important way to encourage Australians to save for their retirement, and that's what's been going on. That's particularly important in a system where contributions are compulsory. But the fact of the matter is that this government simply doesn't seem to have ever understood the purpose of superannuation, particularly for hardworking, average earners in this country. The flat and generous taxation structure of the superannuation system has meant that those on the highest incomes, by definition, received the greatest tax incentive to put money into their superannuation funds. This suggests that self-funded retirees are not necessarily entirely well-described as self-funded. They have actually benefited from generous tax concessions, which come at the expense of the budget bottom line. But that is part of the structure that we've instituted, and it is part of the way in which older Australians live in a dignified retirement. The reality is that those on the lowest incomes do not have the advantage of this incentive.

The Labor Party has continually argued for tax concessions to be targeted where they are needed most: to low-to-middle income earners and, particularly, to women. Those opposite have struggled with this concept. If they get this bill through, they will add further disadvantage to those who I've just described. Without the pressure of the Labor Party and the unions—yes, the unions; so maligned in this place by those opposite—those opposite would have made sure that individuals earning up to $37,000 would continue to be penalised for contributing to their superannuation fund. So Australians who might be listening to this need to understand that, if you earned under $37,000, this government was trying to have a go at you. Only the unions and Labor standing up together has prevented that attack. We're fighting here today because only Labor and the unions together will stand up for ordinary working people.

The government didn't want to keep the low-income superannuation contribution, the LISC. They wanted to make sure that low-income earners paid more tax on their superannuation contributions than they even pay on their take-home pay, and, having had a go at that, they are here chasing penalty rates as well. Every single chance they get they try to put their hands in the pockets of hardworking Australians, the ordinary families out there. They put their hands in to try and take money away from them, while at the other end of town, the big end of town, anything goes—make all you like, and we'll leave you alone.

We know that those who would be most penalised by not retaining the LISC are women. Without the advocacy of unions and the Labor Party we would have had a situation where individuals earning less than $37,000 would have been taxed for putting money into their superannuation fund. This is an example of the blind ideological attack that is the signature of this government. Given the fundamental role of superannuation in retirement, why would the government want to abolish a model that benefits working Australians?

Analysis of APRA data informs us that, on average, industry funds have outperformed retail—which stands for bank owned—and corporate superannuation funds. That's just the fact of it. Together these union representatives and employers have done a better job of managing people's superannuation than the banks. That's it. It's very, very simple. It doesn't stop those guys opposite, the government, attacking the model that's actually working the best.

A former research head of APRA stated that industry funds have averaged two to three per cent better than retail funds over a period of 20 years. I'd prefer to see that two to three per cent in the hands of retiring Australians who are part of industry super rather than allow a model that has not worked for the retail sector to be imposed on a sector which has a model that is working better. It simply doesn't make sense, except if you think that the banks should have their own way pretty well all the time and if you believe it's okay to fleece ordinary working Australians, which is clearly what this government believes.

Unlike industry super funds, banks and insurance companies use their super funds to generate corporate profits, which are returned as dividends to shareholders—but not to shareholder policy owners. Retail funds are set up to make profits. Industry funds are set up to benefit consumers. There's a vast difference. So, again, I have to ask the question: why does this government want to abolish a model that benefits working Australians?

Photo of Helen PolleyHelen Polley (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Aged Care) Share this | | Hansard source

They don't care!

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

They don't care, as Senator Polley says. They don't care—or, perhaps, they don't understand. It's pretty dangerous when a government doesn't understand. When you put not understanding and not caring together, you've got a big problem, and that's what we're seeing from this government.

It's clear to everyone that there's only one reason this government is running this piece of legislation. It's an ideological agenda. It's all about attacking the unions. We see it time and time again. We've seen it through Senator Cash and her involvement in the attacks on the AWU, a union that has, 100 per cent of the time, provided documents that have been requested of it, both by the royal commission into the unions and by the ROC. But that wasn't good enough. They had to overreach, they had to stretch out and they had to go and have a raid. It was a bit of entertainment for those opposite—another attack on the unions.

It's just plain wrong, and it's a massive abuse of the power of government—and we're still left with the question: what did Minister Cash actually know? She is refusing to answer questions. She was hauled back to the Senate to answer questions last Friday by a vote of this Senate. That was the only way we could get her there. She's running. She can run, but she can't hide. She can't hide the fact that she represents a government whose No. 1 priority is to attack working people and the unions that support them and to attack the Labor Party that stands up for fairness for all Australians.

I want to speak briefly about a particular union, the SDA, which the government has continued to blindly attack throughout this year. The SDA is one of the largest trade unions in the country. Its membership exists right across this country in every community—in retail, in fast food, in warehousing, in hairdressing, in pharmacy and even in modelling. The SDA's continued and consistent advocacy has helped ensure that Australian retail and fast-food workers are among the most highly paid in the world. That's what a union does for you. It stands up for you collectively.

When a boss says, 'Sorry, there's not quite enough cash in the till this week and I'm going to drop your wages'—that's the way it is when you haven't got a union to represent you—unions say: 'No, there are standards. You should expect a reasonable rate of pay. These are conditions that you should expect in a safe workplace. They're the things that unions have been fighting for.' Thanks to the action led by the SDA, 27 expired Domino's enterprise bargaining agreements were finally terminated. Thanks to the leading advocacy of the SDA, more than 20,000 Domino's workers will get a pay rise.

The SDA is launching a very important campaign to stop customer abuse of retail workers, particularly at this time over Christmas. Sometimes Christmas is the season of joy, but sometimes there is a lot of pressure. People who are standing and waiting to be served perhaps forget their manners sometimes. This is the work of the unions, which is far different to the way in which it's characterised by those opposite: the SDA union is running a campaign to encourage better behaviour in the shops to provide a safe working place for their outward-facing retail employees.

It seems, sadly, that every other day there's another story of sexual harassment of women in the workplace. The coverage has been focused most recently on the media industry, both here and overseas. But it's not limited to the media industry. The latest ABS personal safety survey indicated that more than one in two women had experienced sexual harassment, and, following the #MeToo campaign, no-one can be surprised by that statistic. On the weekend the New South Wales branch president of the SDA, Bernie Smith, stated that one in eight SDA members experiences sexual harassment from customers. So what is this union doing? It is responding to the challenge of that reality and taking on a social advocacy role to change the systematic abuse that is, overwhelmingly, faced by retail and food workers. That's what unions do.

The leaders of those unions and the people representing those unions are standing up in the boardrooms discussing future investments to make sure that the people that they have worked with on the floor get a fair return on their investment. In an article in the Sydney Morning Herald over the weekend Jenna Price described some of the experiences that are going on that the union is rallying and fighting against to make sure those experiences are more acknowledged in the Australian community and to drive the change that's needed. This is a description of a few:

Try working in your local bakery where a customer paws the girl behind the counter (for girl she is, in Year 10 in her first job, and she's being told she has luscious lips). Or a customer waits to rape the woman locking up the shop at night. Try stacking shelves while some arsehole rubs his unzipped pants across your buttocks. Or dealing with a customer whose only request of you is to have "quick sexual intercourse", or with a customer who is buying a Bluetooth speaker for the shower and suggests you have a shower with him. Or the young retail worker approached by two twenty-something guys who said they were doing a bet.

"They needed me to give them a kiss. I felt very awkward and confused as my training instructs me to be polite and acquiesce to customers, but I felt violated. After a few minutes of awkwardness a colleague saw I was distressed and when they spoke to her she awkwardly told them I had other work to do, so they left."

These are the real lived experiences of people who are being represented by unions.

After a lifetime of working in an industry, facing the public where that sort of behaviour has happened, the least people can expect is that the people who have been working to get them the advantage of their superannuation savings have been getting them the best amount that they possibly can. But unions do these things at the same time—advocating for the financial health and wellbeing but also the social health and wellbeing of workers of this country.

I would also like to refer to the Health Services Union, who helped ensure thousands of New South Wales health workers, including former employees who've worked as casuals, won the right to include time as casual workers towards their long service leave entitlements for the first time. I would like to acknowledge the very hard work of all the members of that union who worked to achieve that outcome. I would particularly like to acknowledge Gerard Hayes for his fantastic leadership in that union.

Does the Turnbull government believe in decent wages for workers? Do they believe in the social advocacy of unions? Clearly not. Let's have a look at who the Turnbull government are listening to and working for. The Turnbull government are focused in their efforts not on the support of workers but on tax cuts to millionaires and multinationals—those that don't even pay tax in the first place. And, of course, they continue to attack unions and protect the banks.

This bill also indicates that the government wants to turn the super industry into the banking industry, and you have to ask why. After all we've seen about the toxic culture of banks, why on earth would this government, at this point of time, want to force a model that replicates the banks' practices rather than allow industry super, which is doing two to three per cent better on average over 20 years? Why do they want to meddle in this space? It's clearly just an ideological attack. It seems that every single day we read a new article about a scandal in the banks—scandals that hurt families and particularly hurt small businesses, who are the employers in the regions across this country.

Labor have been calling for a royal commission into the banks for years, and, instead, we've had delay after delay from the Turnbull government—until Malcolm Turnbull was attacked by his own backbench and had to face a discussion with the banks, where they've written their own terms for a royal commission. In closing, this piece of legislation is opposed by Labor for all of the reasons that I put forward in my comments here today. I urge those on the crossbench to support us in rejecting this attack on workers' wages and futures.

11:32 am

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

It seems a bit like groundhog day. It seems like only yesterday we were in here debating an almost identical bill. The Greens actually believe that the legislation before us is precisely the wrong model for the superannuation industry. We've argued for some time now that what's not broken doesn't need fixing, and no-one yet has provided a compelling argument that the model we have before us, administered by Industry Super Australia, is broken. Where is the evidence that the current system is not working? It wasn't provided when we debated this bill earlier in the year and it hasn't been provided to us now.

In my contribution today, I also want to talk a little bit about the announcement of a royal commission last week and address some of the concerns around the terms of reference and how they may be targeting industry super funds. Before I get to that, these superannuation bills introduced by this government risk dismantling the not-for-profit superannuation sector and giving the banks a leave pass on some new transparency and disclosure requirements. Australians will be concerned that the government's agenda is not about improving governance and transparency but about advancing the commercial interests of the banks.

The Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 will dismantle the successful industry super and not-for-profit super governance model, and the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 will enhance trustee obligations and regulatory powers in the default super sector, but not the 83 per cent of retail sector assets dominated by the big-bank-owned funds. The government still haven't advanced any evidence that their proposals will improve returns for members. They've talked about risk management and improving governance, but at the end of the day the track record is clear: for the 10 years to 30 June 2017, SuperRatings data shows on average that industry super funds have outperformed bank-owned super funds by more than two per cent a year.

Meanwhile, in the banking sector, ANZ have to pay an extra $10.5 million to 160,000 customers after ASIC found they incorrectly processed member super contributions and failed to deal with the loss in active member balances correctly. CommBank had to repay an estimated $105.6 million for charges fees where no advice was provided. As of 19 May 2017, CBA had repaid or offered to repay only $5.85 million of that. We've had ASIC alleging that Westpac's subsidiaries provided personal advice to customers, recommending that they roll out their other superannuation funds into Westpac-related superannuation accounts, even though they were not legally allowed to provide personal financial advice. We've seen with NAB, the last of the big four, that super trustee NULIS Nominees had to repay $34.7 million to 220,000 super accounts in February 2017. It charged planned service fees between September 2012 and October 2016 to clients for general advice where no plan adviser had been appointed to provide advice. So here are some examples where we've seen bad behaviour in the profit sector of the retail industry, and there's been no discussion whatsoever about that from the other side of the chamber in this debate.

For those who are new to this debate and are listening in, essentially—and at the risk of oversimplifying things—we have two sectors in superannuation. We have a for-profit sector, often called the retail sector, and we have a not-for-profit sector, which is often associated with the unions and employer representatives. The government previously introduced into this place a bill to try to bring in independent directors and change the equal representation law that is in place between employer representatives and workers. They've said that's necessary to provide new expertise and better governance, to reduce the risks to industry super members. But, as I've previously shown, industry super funds have outperformed for-profit retail funds.

The one thing that might not be known by those listening to this debate is that when the Liberal-National Party say that union reps sitting on the board are making complicated investment decisions—and I listened to the contributions from other senators when this debate was on a few weeks ago when they were asking: where do union reps get their expertise in providing financial advice or looking at asset allocation between portfolios? What they neglected to tell you was that these industry super funds use IFAs, independent financial advisers. They outsource their financial advice and most of their asset allocation decisions to highly qualified and experienced experts. That's why their funds have done so well. So, to somehow portray a risk to members because union reps are making decisions and say that these union reps should be on the shop floor doing some welding or boilermaker work and not sitting on the board of an industry super fund, is actually wrong. They're there to represent the workers but they're not necessarily making the financial decisions; those decisions are being outsourced to IFAs.

We've also got some very progressive models that the industry super funds have run. I initiated a Senate inquiry a couple of years ago that looked at infrastructure spending in this country. It found that some of the industry super fund long-term allocations going to infrastructure have been some of the most productive and high-returning in this country, investing in long-term assets—and not just investing but also managing assets. They have been very progressive and very successful. I also like the fact that workers' super funds are being directly invested in our economy, not only helping to produce long-term productive infrastructure for this nation but also providing jobs to workers and stimulus to our economy. That's something that the Greens support, and industry super funds are to be commended for some of the great investment work that they've done and are continuing to do in those sectors.

To somehow portray this as being a matter of expertise—that there are risks to the governance of these structures and that those risks come directly from the fact that union reps, who are there to represent workers, are risking the returns of investors—is false. The real reason that the government has brought on these bills is that the salaries those union reps—and they're on record about it; there's no lack of disclosure—get paid are put back into the unions. And this government has done everything it can since it's been elected in the last two parliaments to attack unions. This is all about an ideological agenda by the Turnbull government to attack unions and workers. There is no evidence that the current structures as they exist are broken and don't provide good returns for investors, super fund members in the industry super sector or their workers. This is part of an ideological attack.

Before I go into a little more detail, I want to address the royal commission that was announced last week. I want to say, more broadly, that it's in absolutely no-one's interest for this royal commission—a royal commission that the Greens have campaigned on for nearly four years, especially the financial services sector, the banks, the insurance companies—to be some kind of half-baked, whitewashed, Clayton's royal commission, or for it to be a royal commission that is overtly political and set up to target, as has been portrayed by some in the media, industry super funds or the government's enemy, the unions. I've got a couple of things to say on this. While the terms of reference are more prescriptive in targeting industry super funds, the parliamentary commission of inquiry bill that the Greens initiated in this place that went through—with the support of Labor, the crossbench and Senator Williams—also allowed a commissioner to look at industry super funds. It wasn't discussed then, and there was no mud throwing going on at that time. I just want to make it clear: this place has already sent a bill down to the other place, the House, for a royal commission that reports to parliament that included this more broadly in its terms of reference.

I also want to say that, if the government's view was that they needed a royal commission and a commissioner to look at industry super funds and to discover some kind of rorting of members, misconduct, or fraud, a royal commission has, just recently, looked at industry super funds. I've got the terms of reference here, and the section from the recent government inquiry into unions and union misconduct, and it found almost nothing. What's there to see here? Once again, I think the inclusion of something a bit more descriptive about industry super in the royal commission terms of reference last week was simply something to soften the belly-flop, or the backflip, that Mr Malcolm Turnbull did last week. He was throwing a bit of red meat to some of his more conservative backbenchers and frontbenchers to soften the blow.

I don't believe it will be the case that a royal commission set up for only 12 months is going to spend all its time focusing on industry super funds. They already disclose all their payments; they've got nothing to hide. A royal commission's already looked at it. But, most importantly, we're already here with the government's agenda debating legislation before us to change—to break open and break apart—the industry super fund model. Why would the government want a royal commission and a commissioner to look at this issue in detail, when they've already made up their minds about their legislative agenda?

We have two bills before us to dismantle the not-for-profit sector in industry super. So why bother? That's another reason why I don't believe that the royal commission announced last Friday will spend a lot of time focusing on this particular issue. Lastly, having sat on numerous Senate inquiries for a number of years, as have other senators in this chamber, I believe that the commissioner—especially with a 12-month time frame, which, by the way, is not long enough; the Greens' parliamentary commission of inquiry bill, supported by the Senate, was for at least two years—is going to have so much work to do dealing with those issues that cause the most harm and are the most urgent or pressing. This issue about industry super funds is not urgent or pressing. There is nothing to see here, as the recent Abbott commission into union corruption found. There will be plenty of work for a commissioner to look at. I think there's going to be a tsunami, an avalanche, of information provided to that commissioner. Let me say, in relation to that 12-month time frame: 12 months is not long enough.

I don't agree with Senator O'Neill that the banks wrote the terms of reference for the royal commission announced last week. The reason I don't believe that is that some of those terms of reference were taken almost directly from the Greens' bill that passed this place. I'm unhappy with some of the omissions from those terms of reference. There are things I would have like to have seen in the terms of reference, but I don't believe they've been written by the banks. Let me warn the Prime Minister and the big banks and the financial services companies: if you think this issue has been political to this point—a 'political football' was the way it was described—you just wait and see what political is going to be if this royal commission is a whitewash or is even seen to be a whitewash.

This will be the most scrutinised royal commission in this country's history—there's that much public interest in it. If this is even seen to be a whitewash, just you wait to see what political is going to be, especially in the 12 months going into a federal election. With Labor wanting to own the royal commission—they were happy throwing mud at the announcement last week; fair enough; that's politics—and Labor campaigning on this going into a federal election, if the banks actually want to have trust restored in the financial system and in themselves, then I warn them and the government to make sure this is not a whitewash or a clayton's royal commission. This royal commission has to have the powers and the resources to get to the bottom of some systemic issues in this country that have caused misconduct—the misconduct that a number of senators in this Senate have witnessed and felt helpless that they couldn't do anything about—so that those issues can be fixed and so that victims of financial crime and misconduct can get properly compensated.

Until the banks get out of the bathtub fully scrubbed up, this issue is not going to go away. I will make that really clear today. For all of the people who think that this is going to be a whitewash, that it's going to be a furphy and that the banks only want a limited royal commission, so it's going to be a waste of time and money—it can't happen. It's going to be a whole lot worse. The door is now open and it's not going to be closed until this issue is dealt with. To finish on this legislation: the government can ask a commissioner in the next 12 months to look at these issues, but we clearly have an agenda before us today to change and dismantle the industry super model.

There are a couple of other things I want to say. There are some things, some of the high-level objectives of this bill, that I will admit, on face value, seem quite reasonable, but, regrettably, this reform package requires significant amendment to deliver on any potential to improve member outcomes, accountability and transparency. It fails to include all superannuation products in the strength and outcomes test and assessment framework. As I mentioned before, the vast majority—nearly 83 per cent—of bank-owned and other retail superannuation assets are held outside MySuper and will be excluded from the requirement. This is the case notwithstanding that such products, on average, underperform MySuper products, where the majority of industry super funds are held. It provides APRA with new powers to administer the superannuation sector, but in a manner that seems ineffective when it comes to bank-owned and other vertically integrated retail super funds. In particular, the enhanced power to issue directions to connected entities would typically exclude the bank-owned funds, parent companies and party-related service providers.

By the way, while we're talking about a royal commission, the terms of reference that have been set out in the last week actually allow very good and in-depth insight into vertically integrated business models, the conflicts of interest, the high fees, and the money that goes towards profits for the big banks and financial services companies. To those who think it's just about targeting superannuation funds, the terms of reference and the advice that I have show it will easily allow a commissioner to look at the for-profit sector and the problems inherent within that for-profit sector, not to mention the allocation of the for-profit super funds' or investment funds' revenues going into things like unethical investments—investments like Adani that will end up ruining the environment. Anyway, I digress.

The look-through reporting requirements for operating expenses have been modelled on the look-through reporting requirements for investment, which have allowed two-thirds of the super funds owned by the big four banks, Macquarie and AMP to disclose absolutely zero investment expenses or member investment fees. They fail to address the key areas of longstanding inefficiency and opacity in the system and, in particular, the underperformance of the retail sector, which I have already alluded to. They've reduced retirement savings across the system to the tune of $135 billion since 1996 and increased the fiscal impost on the federal budget in the form of increased age-pension outlays. I could go on; there are a number of faults. But, luckily, we have another superannuation bill which we'll be debating very soon, so I will be able to continue this discussion.

To wrap up, this is precisely the wrong model. The simple adage is: if it ain't broke, why fix it? This government is only trying to fix it because it wants to attack the unions and workers. This is part of an ideological crusade to not only undermine the unions and workers in this country but provide a leg-up for their big-business mates in the banking sector.

11:52 am

Photo of Slade BrockmanSlade Brockman (WA, Liberal Party) Share this | | Hansard source

If you had listened to the last two contributions, you would have heard that we have the union movement, unicorns and rainbows, and big banks are terrible. To quote Senator Whish-Wilson: 'there's nothing to see here' when we're talking about industry super funds. I think there is something to see. The reason there is something to see is that, for the exact same reason that many people have been arguing for a closer look at the banks, people have been arguing against the idea of strong vertical integration and banking institutions having links through the financial services sector from top to bottom. And yet when we look at the structure of the industry super funds and the entities that have been created to provide services to those industry superannuation funds, we start to see a very strong web of the same people providing services to the industry super fund network in a way that looks highly vertically integrated to me. I think that is something that does need a much closer look.

Industry Super Holdings describes itself as providing 'services to Australian based superannuation funds and fund members and managing a range of equity and debt portfolios'. ISH has been bankrolled by $830 million of retirement savings from 28 superannuation funds. Senator Whish-Wilson's contribution described how industry super funds were looking after members' money. Yes, they are. When they're looking after members' money, you've got to ask: where is that money going? The major shareholders of ISH are organisations like AustralianSuper, Cbus and HESTA. AustralianSuper recently sold down its stake and reduced its shareholdings. Perhaps it just wanted to reduce its shareholdings, but that has allowed others to buy in. We've now got Cbus, CareSuper, Energy Super, Hostplus, Maritime Super, HESTA, Media Super, MTAA and Vision Super. All are contributors to this Industry Super Holdings, which is, as I said, a large holding company. It has never paid a dividend to shareholders. It has $71 billion of assets under management—$71 billion of Australians' retirement savings. This is a significant entity.

Obviously, we've got Industry Super Australia. It used to be the Industry Super Network, which obviously is the lobbying and advertising vehicle for the industry super funds. We've seen recently in the media a very large campaign for them. I've seen it at least tens of times myself. I'm sure everyone's very aware of it, because it's quite striking. The imagery is the fox in the henhouse. It has very ominous music. The fox is, of course, the banks. 'We don't want the banks having anything to do with superannuation; we've got to protect the industry super funds' patch.' You could rewrite and reproduce that ad; instead of the fox being the banks, you could make the fox the union movement and you would have a very similar message in my opinion. So we've got Industry Super Australia. Obviously, they're a very effective lobbying outfit. We also have Industry Fund Services, with 23 of the 28 Industry Super Holdings shareholders using Industry Fund Services as a service provider. Then we've got links to Industry Funds Investments Limited. Again, very similar people are involved. We have Super Members Investments Limited, the IRIS fund, the AUSfund, IFS Insurance Solutions, IFM Investors—investment and fund managers for 24 of the 28 industry funds. We've got Industry Fund's financial service. We've got the Industry Funds Management (Nominees 2).

So we've got a huge interconnected network of service providers to the industry super funds with a significant lack of transparency and—this is the concerning piece—similar people involved across those organisations. For example, Mr Garry Weaven, who is chair of Industry Super Holdings, is also a senior member of Industry Super Australia. He is also intimately involved with The New Daily, which is an online industry super news website. He has also been involved with ME Bank, which, obviously, has links to the industry super funds as well. There are people like Linda Rubinstein. She has a significant number of roles across this network of interconnected companies. Again, we've got a large, vertically integrated set of arrangements with very little oversight as to what is going on within that with Australian retirees' savings. So at least one of these figures—Garry Weaven, Michael Migro and Linda Rubinstein—is on the board of every entity in the ISH group. Garry Weaven, in addition to being chair of ISH, is chair of The New Daily and IMF Investors. He is also a director of Industry Super Australia. Michael Migro, in addition to being an ISH director, is director of IFM Investors and Industry Super Fund Services and all of its related entities, including AUSfund and IRIS fund. Linda Rubinstein, in addition to being the ISH director, is chair of IFS and all of its related industries, including AUSfund and IRIS fund, and she is a director of IFM. So we have a situation where we've got a significant amount of money—$71 billion in Australians' hard-earned savings—encapsulated in this network of interactions with a significant lack of transparency.

We heard some very strong words from our previous two contributors in this debate about what this bill was going to do. The bill was going to 'dismantle'; it was going to 'abolish'; it was going to 'break apart'. What is the core thing that people seem to be railing against that is going to have this outcome? Having one-third independent directors. Think about that for a moment—that having one-third independent directors, not Liberal Party appointees, is going to dismantle, abolish or break apart. Who are those opposite really trying to convince? Who are they talking to? I don't think they're talking to the people saving for their retirement; they're talking to the unions. No-one in their right mind, quite frankly, could say that having one-third independent directors, which was recommended by the Cooper review—a review set up by the Labor Party—could in any way dismantle, abolish or break apart the industry super funds. What it will do is add a modicum of independent directorial skill to those boards.

Whilst a variety of directors with a range of skills is important, independent directors are vital, particularly in sectors like this where the risks from the kind of vertical integration that I described earlier are apparent. We need to be able to look transparently. We need to ensure that the only thing that the directors care about when they're making decisions on behalf of their industry super funds is the retirement savings of their members. That is the only thing they should be talking about. The idea that having one-third independent directors dismantles anything, abolishes anything or breaks apart anything is just a nonsense.

The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the cognate bill represent an important reform that strengthens Australia's compulsory superannuation system, in particular for default MySuper products. The package was developed with the clear objective to improve outcomes for consumers. It should never be forgotten that the superannuation sector has grown to over $2 trillion. This is the result of the government forcing people to save part of their own money. In that environment, where the government has compelled people to put part of their money aside for their retirement, it's not enough to merely say, 'Oh, there's nothing to see here.' We have to have the structures and systems in place to ensure that decisions are made solely for the benefit of superannuants. This is Australians' own money. Australians have the right to expect that the industry is held to the highest standards of transparency and accountability—no more closed shops or cosy deals. That's what Australians want. They deserve nothing less than the maximum level of transparency and the highest quality of oversight for their retirement savings.

The change is also designed to make superannuation more consumer friendly and to make superannuation providers more accountable for how they use their members' money. These bills enact more robust prudential standards, improved enforcement and greater transparency. This will boost confidence that super savings are being managed in the best interests of members. Many of these measures have been on the policy agenda for several years and have been recommended by past reviews into superannuation. As I said, some of these things were recommended under reviews of the system undertaken by past Labor governments, but ignored.

Who could possibly argue against independent directors? In normal circumstances, the closed shop of big business and big unions with the lack of transparency would be ringing alarm bells in the opposition and the Australian Greens. Yet, in this case, what do we hear? We hear, 'Nothing to see here.' Surely, everyone in the space would appreciate that the lack of independent board members leads to a potential perception, and a potential reality, of actions that are not in the best interests of Australian superannuants. There can be no argument that members of superannuation funds, the hardworking people of Australia, deserve the best and brightest minds sitting around the board tables of Australian superannuation funds, and this includes industry superannuation funds. That is why the government is committed to legislating consistent and appropriate standards of governance, including minimum levels of independence, across the entire superannuation sector.

The superannuation sector has evolved considerably since the introduction of compulsory superannuation in 1992. Not only has it evolved; it has grown. It is now a significant part of our financial sector. As such, it has a lot of power and influence over other parts of the financial sector, and on that basis it needs to face similar governance rules. Governance arrangements simply have not kept up. Superannuation is larger and more complex, with a more diverse membership. Funds themselves have evolved. They have opened up to competition so that they can appeal to a wider variety of members. They are competing actively for market share beyond their traditional industry based membership. These things need to be taken into account.

An industry super fund that represents a particular industry no longer just has members from that industry. As such, the governance arrangements, particularly in terms of having more independent directors, are vital. Some trustee boards do not have governance arrangements that reflect the important role they play in ensuring that the retirement savings of their members are invested to maximise returns. These standards would not meet the expectations of the Australian people. Endeavouring to lift the independence of the superannuation sector should not just be a priority of ours; it should actually be a priority of the industry itself. The risks are all on the downside. Strengthening trustee board structures, through increased independence, is in everyone's best interests. The government makes no apologies for putting the interests of superannuation members ahead of any self-interest of the industry. In particular, the statutory minimum requirement for one-third independent directors, including an independent chair, is a very significant reform and, to me, it should be something that could be supported by everyone in this chamber. I personally think that there is an argument for having 100 per cent independent directors, selected solely on their ability to oversee the money of Australian retirees, who—I once again remind all in this place—are forced to save their money. They are forced to put their money into super. It is not a choice.

There have been numerous inquiries that have recommended a majority of independent directors, including the Financial System Inquiry and an inquiry by the Financial Services Council at one point. The one-third benchmark, as I have said, matches the proposal put forward in the Cooper review. The Cooper review was commissioned by the then Labor government, and that is a good start. It is also a very modest start. It does not dismantle; it does not destroy; it does not do any of the things that the other side are arguing it does. Without a minimum standard, fund members may be exposed to detrimental outcomes that can arise through poor decision-making or failure to deal with conflicts of interests appropriately.

We've clearly got what should be a fairly non-contentious change, and yet those opposite are doing all they can to undermine and frustrate one-third independent directors—not appointees of the Liberal Party and not appointees of any particular part of business, but independent directors who are there solely to look after the members' interests, Yet that can't be supported in this place. I find that staggering.

12:08 pm

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I would like to contribute to this debate on a change in the management of industry super funds from—as Senator Brockman just said—a ratio of fifty-fifty union officials and management to one-third union officials, one-third management and one-third independent. I have some real concerns about some of the management of these industry super funds—real concerns. I'm glad to see they will be included in the terms of reference for the royal commission. I noted Senator Whish-Wilson on TV on the weekend saying, 'This is terrible, including the industry super funds in the royal commission.' But when Senator Whish-Wilson put forward—I think it was last May—the commission of inquiry bill, which actually passed the Senate here on the voices, one of his terms of reference was donations made by financial services entities to political parties. It was actually in that commission of inquiry that I gave Senator Whish-Wilson a commitment that I would support it; it was conditional on that. It is amazing—I can't hold this photo up; that would be a prop.

But let's go back to 2007. I refer to AustralianSuper. Here is a photo of the inaugural AustralianSuper trustee board—I will give it to Senator Payne to have a look at when I've finished with it. The following directors are representatives of AustralianSuper: there's a bloke up the back, Greg Combet. Here's a bloke in the front, his name is Mr Bill Shorten. Alongside him is a fellow I know pretty well, Senator Doug Cameron. They were the inaugural directors of AustralianSuper.

It's amazing: in 2007 AustralianSuper made a donation. How much, you ask? $27,500. Senator Payne, I wonder where the donation went? It actually went to the Australian Workers' Union. It was listed by AWU on the AEC declarations as a donation. And shortly after—you're not going to believe what I'm going to say, Mr Acting Deputy President Leyonhjelm—the Australian Workers' Union made a donation of $25,000, to who? Mr Bill Shorten's election campaign. Isn't that amazing? To someone who is a director of AustralianSuper. Or is it just coincidental that $27,500 is donated from AustralianSuper to the Australian Workers' Union and, shortly afterwards, $25,000 goes to Mr Shorten's election campaign? You wonder why we're a little cynical about the management of these industry super funds. It was listed on the website of the AEC declarations as a donation. For how long? For 10 years—from 2007 until 2017, when this particular donation was highlighted in the media. Then it was changed: 10 years later it was changed to being listed as 'other receipt'. I think that is quite strange, and some questions need to be answered.

Let's look at industry super funds. There is one union that benefits more than any other from cash flows courtesy of the retirement savings of hardworking Australians. That prize goes to none other than—you'd have heard of them, Mr Acting Deputy President—the CFMEU. According to AEC disclosures over the 10 years to 2015-16, the CFMEU was the beneficiary of payments from no less than four industry super funds—Cbus, First Super, BUSSQ and Mine Wealth and Wellbeing—worth more than, listen to this figure, $12 million. We are about to see that this is just the tip of the iceberg.

The bulk of this $12 million comes from just one fund: the industry fund representing timber workers, good hardworking Australian workers. It's called First Super. The CFMEU has fessed up to the payment of more than $830,000 from First Super in 2006-07; almost $850,000 in 2007-08; almost $890,000 in 2008-09; and this almost doubles in 2009-10 to nearly $1.6 million, followed by three consistent years of over $1.6 million a year in the 2010-11, 2011-12 and 2012-13 financial years. That is more than $9 million from one super fund going to the CFMEU in just seven years. 'Why is it so?' Professor Sumner Miller would ask.

However, a curious thing happens in the three years from 2013-14. The CFMEU claims it has received not one cent from First Super. According to the Australian Electoral Commission, which records these transactions, the numbers aren't out for 2016-17, but it will be interesting to see if the same thing happens again. According to First Super's financial statement for the year ending 30 June 2016, eight coordinators were employed by the CFMEU and supplied on contract to First Super. The total payments for that year were $1.762 million and $1.72 million for the previous year to 30 June 2015. In the latest financial statement of the fund, the CFMEU received over $1.5 million to employ just six full-time and two part-time coordinators. How's that for good pay! I will repeat it: the CFMEU received over $1.5 million to employ just six full-time and two part-time coordinators—so it works out at about $200,000-plus for each of the full-time workers and, of course, less for the part-time workers. These payments are not disclosed in the CFMEU financial statements, despite the CFMEU and First Super being related entities. Further, as noted above, there are no payments from First Super to the CFMEU disclosed to the AEC for these years, perhaps in breach of the AEC rules. This equates to an average salary of just over $220,000 per coordinator.

First Super is spending the retirement savings of hardworking people in the timber and furniture industry, many of whom are on annual salaries of around $40,000. They'd love to get the $250,000 or so a year they'd get if they were with the CFMEU. They are fighting every day just to keep their jobs—and fighting off the Greens, of course—and they are getting dudded by their own super fund, which is paying CFMEU operatives on average $220,000 a year. These are $40,000-a-year timber workers. What are those operatives doing to earn more than five times the average salary of a timber worker?

Who is running this mob? It's Mr Michael O'Connor, a man well known to the shadow industrial relations minister. The CFMEU in Australia is Australia's most militant union. The union or its representatives have been respondents in at least 40 separate matters before the court, facing a total of 1,779 suspected contraventions. Over $10 million in penalties has been awarded against the CFMEU by courts across the country—more than $10 million in fines. Coincidentally, this is about the same amount of money that the CFMEU has pocketed from the retirement savings of the members of First Super. The CFMEU's history of thuggery and abuse on work sites around the country is well documented, but the fact that this union is the beneficiary of the retirement savings of ordinary timber workers is something that this parliament needs to fix.

So what is wrong with having independent directors on the board? I'll tell you why it's being opposed—and probably by the Greens as well. Look up the history. Google 'CFMEU donations to the Greens'. I can't believe that the CFMEU would donate to the Greens. It's the Construction, Forestry, Mining and Energy Union. What do the Greens despise? They despise construction; they hate forestry and cutting down trees; they vehemently oppose mining; and, when it comes to energy, it has to be the expensive renewables. Why does the CFMEU donate to the Greens? I just can't fathom that.

This legislation will bring about a bit of fairness by ensuring that a third of the board of directors is actually independent—not linked to the employers, not linked to the workers and not linked to the unions. Millions of dollars pours into the Labor Party coffers from the union movement to help them with their election campaigns. And, as we know, when it comes election campaigns, it's no money, no mission. It's as simple as that. But those opposite have a full flow of money, and I'm very suspicious that a lot is coming out of the retirement savings of ordinary, hardworking Australians—and that is wrong. I repeat what Senator Whish-Wilson had in his terms of reference for his commission of inquiry. It says at part 4: 'Donations made by financial services entities'—such as industry super—'to political parties'. That was in the Banking and Financial Services Commission of Inquiry Bill 2017, which passed this parliament in, I think, May this year. So I'm very pleased to see that that will be drawn into the royal commission.

I'm glad that we are having a royal commission. In my opinion, we should have had it years ago. In 2013, the Senate Economics Legislation Committee, chaired by Mark Bishop, a Labor senator—a pretty decent bloke and a good bloke to work with—recommended a royal commission. But what did Mr Shorten do when he was part of the government? Nothing. What did Mr Bowen do? Nothing. If we had had it earlier we may have headed off the alleged catastrophes that AUSTRAC have now brought into the public arena.

So I would ask that those sitting on the crossbenches seriously consider what this legislation does. It brings in fairness. What is wrong with having a third of the directors on the board of an industry super fund being independent—and perhaps having even more financial and business experience to invest the money wisely? Nothing whatsoever. That is why we need crossbench support here. We need the crossbenchers to shape up and say, 'If there are 12 on the board of the directors, we'll have four from an industry super fund, four from the employers and four totally independent.' There's nothing wrong with that. So I urge the crossbenchers to consider that and support this legislation.

12:19 pm

Photo of Fraser AnningFraser Anning (Queensland, Pauline Hanson's One Nation Party) Share this | | Hansard source

This is not my first speech. I rise to speak to the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 currently before the Senate. This legislation seeks to ensure that, within three years, all superannuation boards have at least one-third independent non-executive directors and an independent chairman. The clear purpose of this legislation is to prevent conflicts of interest and to better protect fund members' interests.

The government has developed this legislation in response to concerns expressed by the regulator, APRA, that some trustees of superannuation funds did not appear to be putting the best interests of members first. Concerns have been expressed that some industry super funds have boards stacked with union officials whose first loyalty may be to their unions and not just the superannuation fund members. This is a clear conflict of interest. This may mean that members' funds may not be invested with the sole aim of maximizing returns, but may instead be invested in a manner that supports the political goals of unions. What this legislation does not consider, however, is the excess fees charged by retail super funds. In contrast, on not-for-profit industry superannuation, the Rainmaker report on revenue collected from Australia's $2.1 trillion in superannuation assets found that the banks pocketed almost $9 billion in fees, taken directly from the superannuation of ordinary working Australians. In fact, a report by the Grattan Institute found that, thanks to the retail superannuation sector, super fees overall in Australia were around three times the median OECD rate.

The involvement of banks in running retail super funds puts them centrestage in the fee gouging of Aussie workers. It is disappointing that the government has ignored this pressing issue and only focused on the role of unions in super funds. In addition to the fee rip-off, which the bill before us ignores, concerns have been expressed that imposing a quota for independent directors may lead to less qualified directors ending up on boards. Given the issue of the banks charging excessive super fees, there is a real risk that the proposed legislation may lead to boards stacked with banking and finance professionals who will reduce the accountability of boards to fund members and will further drive up fees. Other concerns have included that tinkering with the corporate governance of funds that are currently performing well may place at risk the rates of growth achieved by existing directors. A number of organisations have approached me and expressed grave concerns. Whether the proposed change is good or bad is clearly going to depend on how the position of 'independent director' is defined in the legislation. I am not confident that the definition proposed by the government in the current bill achieves the necessary balance.

While supporting the intent of the government to fix the real problem identified by APRA, I also wish to ensure that changes made do not accidently force well-run super funds to shed highly qualified and capable directors because they fail to comply with the government's requirements. I am therefore foreshadowing an amendment to the definition of 'independent director'. Instead of the long and involved definition proposed by the government, my proposal is to simply adopt the existing corporate definition. Given that the government's declared intent for this and other related bills is to bring superannuation fund governance into line with standard corporate governance principles, I cannot see that my proposed amendment would be objectionable to the government.

12:24 pm

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

It gives me great pleasure today to rise to talk about the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017. As a government, we are interested in ensuring the economic security of all Australians. If you look at our work over the previous years, it's been about delivering on a strong plan for our economy to grow jobs and ensure that all Australians, whether they are from regional Australia or capital cities, have access to well-paid employment. Similarly, though, as a government we want to ensure that as Australians near retirement they will receive their superannuation in a way that benefits their retirement. At the end of the day, it is Australians' money. Their employer puts it into their superannuation accounts every single week and it is there to accrue and provide for their retirement.

I want to thank my colleague Senator Williams for his earlier contribution on this bill around how sometimes industry super funds are used, or should I say misused, to fund election campaigns—the Leader of the Opposition's election campaign and so on. That is not the way that we want the retirement savings of hardworking Australians to be used. Through the passage of this bill, we are seeking to ensure that the governance of those industry super funds is appropriate, that it meets with community expectations. Currently, as we know, the governance model sees half of an industry super fund board being made up of employers and half being members of a union. I have looked at the Australian Super trustee board photo and there's a very young Billy Shorten and, prior to coming to this place, a Mr Doug Cameron and a Mr Greg Combet. We see that, with these industry funds, maybe it's a pathway to parliament.

Photo of David LeyonhjelmDavid Leyonhjelm (NSW, Liberal Democratic Party) Share this | | Hansard source

Senator McAllister?

Photo of Jenny McAllisterJenny McAllister (NSW, Australian Labor Party) Share this | | Hansard source

Mr Acting Deputy President, you might remind Senator McKenzie that she ought to refer to Mr Shorten and Senator Cameron by their correct titles.

Photo of David LeyonhjelmDavid Leyonhjelm (NSW, Liberal Democratic Party) Share this | | Hansard source

Thank you.

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

My apologies. I did say prior to coming to this place, it's Mr Doug Cameron. I hope he's no longer on that board, given that he is now a senator. But, yes, Leader of the Opposition Bill Shorten was a member of the inaugural AustralianSuper trustee board. I think what we have to ensure is that we have good governance of the industry superannuation boards.

There is currently $2.3 trillion in the superannuation industry in entrustment for the retirement of Australians, and the majority of that is located within industry super funds. We need to ensure that they are being governed in the best interests of their members, rather than the best interests of the Labor Party and the retirement savings of their members. We want to ensure that Australians have more control over their superannuation providers and a stronger regulator to ensure their money is being managed in their best interests. That is an entirely appropriate thing to do. I know those opposite would like to characterise this as an anti-union measure, an anti-worker measure; it is not. It is about ensuring proper oversight of Australian's hard-earned superannuation, so that it is not funnelled off to people's election campaigns but being reinvested to ensure that their money grows and provides a nest egg for their retirement, which is the entire purpose of the superannuation system. It needs to be managed in their best interests, which is why these proposals will ensure the governance of superannuation industry funds with a third of the board to come from employer groups—let's face it, that is the group putting money into the industry super fund on behalf of hardworking Australians. A third will be from the union movement, and a third will be independent directors. When we look at issues of failure of governance, right across organisations and corporations in this country, many times it is a failure of governance; it is a failure of leadership at the board level to rein in managing directors, to ensure appropriate oversight on strategic plans and to ensure that the organisation is following its mission. The mission of industry super funds should be to maximise the retirement savings for each and every one of their members. It should not be about allowing funding for a variety of campaigns in the Australian Labor Party. I know Matt Thistlethwaite, from the other place, was also heavily involved in industry super funds. I haven't done an audit of ALP senators and ALP members from the other place who have sat on industry super fund boards and compared it to this side of the chamber, but I bet that the other side of politics has many more board members of industry super funds than my side of politics does. We want to put confidence and trust back into the system that that money is being used and spent appropriately.

The superannuation member outcomes package represents important reforms that strengthen the foundations of Australia's compulsory superannuation system, in particular for default MySuper members. The package has been developed with a clear objective to improve outcomes for consumers. Consumer focused reforms make superannuation more consumer friendly and make superannuation providers more accountable for how they use their members' money. You can't just drop it into somebody's election campaign. I know that some of the members—maybe the majority of members—of industry super funds may even vote for the ALP, but, I tell you what—they will not be happy to know the hard-earned money of their blood, sweat and tears, which should be providing for their retirement, is being funnelled into certain election campaigns, here or there—wherever the Labor Party sees a need. It is absolutely inappropriate. Ensuring that our boards are governed appropriately and that we're maximising the return for those hardworking Australians as they enter retirement is the focus of these reforms. I hope the chamber supports what is an equitable distribution of responsibility around the board—a third to unions, a third to employers and a third to independent directors, who come with fresh eyes and no baggage on what is sometimes a very complicated and ideologically driven conversation when it comes to the 'unions v employers' situation. We don't want that sort of argument occurring with the hard-earned savings of Australian workers.

Many of the measures in this legislation have been on the policy agenda for several years and have been recommended by past reviews into superannuation. The proposed parliamentary amendments to the portfolio holdings disclosure measure in the bill will increase transparency by extending the portfolio holdings disclosure to assets held by associated and non-associated pooled superannuation trusts. These changes will guarantee that the assets held by pooled superannuation trusts will be required to be disclosed in respect of each investment option, provided by a registrable superannuation entity licensee, and make it explicitly clear that all investment options are subject to the new PHD requirements. We want to clarify that choice products that have multiple investment options are also subject to these requirements. We want to ensure that superannuation for Australians is very clear and easy to understand. Many of us, myself included, just press the button on the default setting when we start a new job, and we trust that that industry super fund is looking after our retirement savings. There have been some issues where that hasn't been the case. For ultimate clarity we need to ensure that the governance of those boards actually holds true and actually makes sure they are solely and wholly focused not on the re-election of Labor Party candidates in any given election but on maximising the retirement savings for Australians.

There are people in the superannuation industry and system that support the government's reform agenda in this space. I'd like to quote Jeremy Cooper, the ALP-appointed chair of the 2010 super system review. He said to the Senate Economics Legislation Committee hearing on 10 October this year:

… providing for independent directors shouldn't diminish the representation of members but actually enhance it.

This is about enhancing the representation of working Australians in their own industry super fund, so I'm looking forward to those opposite supporting these measures and increasing the input of independent directors into the governance of industry super fund boards. He went on to say:

So, rather than the model being broken, I think this is the 21st-century answer to our highly successful superannuation system—how we can govern it better and, most particularly, how we can make people who are forced to save into it feel confident that the standards of governance is at or near world's best practice.

And shouldn't that be what we're aiming for? We are a developed country. We have a strong financial system. Shouldn't we be ensuring that the $2.3 trillion of working Australians' retirement savings is governed with world's best practice? If the ALP-appointed chair to the 2010 super system review, Jeremy Cooper, can get on board, I call on Labor Party senators to similarly back this legislation, back Australian workers and give them the confidence that their retirement savings are being managed and acquitted for with the highest possible standards, with world's best practice standards for governance.

Again in the same hearing Mr Cooper went on to say:

… for funds in the equal representation frame at the moment, the reform is sympathetic to that model in the sense that they merely need to rearrange themselves … to allow for one-third representation by independent directors. To me, that does not disrupt the benefits of equal representation: you still have member representatives and employer representatives—

So no-one is kicking the unions off the table. Let's stop the scare campaign. What we need to do is ensure that, rather than have two sides of what can sometimes be quite a difficult conversation in this country, we have some independent directors there to bring some sanity, some calm and some expertise to the management of Australian workers' industry super retirement funds.

Professor Graeme Samuel was appointed by the board to conduct an independent review into governance arrangements at the CFMEU. The CFMEU trusted Graeme Samuel, a former ACCC commissioner, to look into their governance arrangements. If the CFMEU can trust Graeme Samuel, I wonder why those opposite do not back his evidence to the Senate Economics Legislation Committee inquiry hearing this year into this legislation when he said:

… I don't draw a great distinction between the structures of corporate governance; I'm more concerned about the reality of it.

So let's stop having an esoteric argument about who has more numbers where. Let's actually focus on the reality for maximising the retirement savings of working Australians and giving them the confidence that their hard-earned money and the profits from it are actually delivering for them in retirement. He went on to say:

Where you've got proprietors or sponsors that are heavily involved in the board … there's a tendency for the skills metrics to be less relevant.

Do you know what he's saying?

Mr Samuel is basically saying that, when you look at that industry super fund board I was speaking about earlier, with the opposition leader, Bill Shorten, Mr Combet, and, at the time prior to his senatorship, Mr Doug Cameron, the skills metric is not such a great concern, because, really, we're interested in other things. If we went through the board appointments of industry super funds, we would see they're either holding bays for soon-to-be senators or members or, indeed, retirement packages for former senators and former members.

Senator O'Neill interjecting

Acting Deputy President, I'm seeking your protection from Senator O'Neill.

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

Yes. Order on my left! Senators are entitled to be heard in silence.

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

Thank you, Mr Acting Deputy President, for your protection. What Graeme Samuel is actually saying is that there's a tendency for skills metrics to be less relevant; there are other things. When we're looking at who are going to be the union reps on these boards, other things come into play—not the skill sets or the capacity for good governance of the retirement savings of workers. That's where independent directors become much more relevant; it's where the skills metrics and the qualities that they can provide become more relevant. Now, isn't that a good thing? No-one is saying there shouldn't be union representation on the industry super fund board, and nor is anyone saying there shouldn't be employer representatives, but there should be a recognition that, by setting up this type of arrangement for the retirement savings of workers—hardworking Australians who put their money into an industry super fund, which is often the default setting—we're not actually getting the skill set we need to govern the board and deliver on what should be about maximising retirement savings, not making sure we're funnelling money to Labor Party campaigns right around the country.

Let's get real here. If it were about getting rid of union representation on industry super funds, it would look a lot different to this particular set of reforms. These are reforms recommended through a range of inquiries. There was the ALP appointed chairman. Graeme Samuel was appointed to look into the governance of the CFMEU.

Senator O'Neill interjecting

Senator O'Neill, if the CFMEU can handle his expertise on governance, I don't know why you can't. Maybe I need to look to the senators opposite who looked to the CFMEU for their backing to get into this place. Maybe they'd look a little more kindly. I know that you're not a CFMEU girl, but—

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

Senator McKenzie, I ask you to address your comments through the chair, please.

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

That is highly appropriate, Mr Acting Deputy President, and so I shall. Thank you for that timely reminder of the standing orders.

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

Interjections are disorderly, I remind the chamber, and senators are entitled to be heard in silence.

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party) Share this | | Hansard source

Thank you very much, Mr Acting Deputy President, for your protection again. If the CFMEU can back Graeme Samuel, get on board, boys and girls, because this is about fairness and ensuring those boards have the highest quality governance and the skill set that they need. Let's face it, if we look at the membership, you might park someone you are thinking about for a future Senate spot or it might be somewhere you quickly park retiring senators or members who may have no other place to go and still need to pay the mortgage. We need to have at the forefront of our minds, as we address these bills and the measures before us, how we ensure the retirement savings of working Australians in industry super funds are best acquitted. I think that is by increasing the number of independent members on the board.

I could go to more. We've got some support from David Murray and Gene Tilbrook, the acting chairman of the Australian Institute of Company Directors. Fantastic. They might have something to say about good corporate governance and what that might look like. Does it require certain skill sets? Yes, it does. But let's look at what Gene Tilbrook actually said:

A system that is trusted with the retirement savings of all Australians needs the highest standards of governance ...

And that does not mean a 50-50 split; it means ensuring the boards of the industry super funds have the skill sets they need to deliver. We should all be backing that. We should all have in our minds ensuring that we are maximising the retirement savings of hardworking Australians. We can do that by increasing the number of independent directors and the skill sets available to those boards as they make those decisions. Gene Tilbrook closed by saying:

The inclusion of independent directors is widely recognised as a critical element of good corporate governance.

(Time expired)

12:45 pm

Photo of Rex PatrickRex Patrick (SA, Nick Xenophon Team) Share this | | Hansard source

I rise briefly to put on the record the position of the Nick Xenophon Team on 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. At this point in time the Nick Xenophon Team is not prepared to support the strengthening trustee arrangements bill.

The Nick Xenophon Team is continuing to negotiate in good faith with Minister O'Dwyer on the accountability and member outcomes in the superannuation measures bill. We hold real concerns about the transparency measures in relation to choice products. We support transparency measures, but we cannot support this bill until we are satisfied there will be consistency, to the extent that it is possible, across MySuper and choice products. I understand the opposition has amendments to move in relation to this issue, but the Nick Xenophon Team is not satisfied that they will have the desired effect. The Nick Xenophon Team is continuing discussions with the minister's office and with the sector in relation to this issue. Mr Acting Deputy President, I understand these bills are being debated as a package; however I ask that the question on the strengthening trustee arrangements bill be put separately.

12:46 pm

Photo of Concetta Fierravanti-WellsConcetta Fierravanti-Wells (NSW, Liberal Party, Minister for International Development and the Pacific) Share this | | Hansard source

I too rise to make a contribution on the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. Given the compulsory nature of our superannuation system, the government ultimately bears responsibility for the prudent management of and confidence in our superannuation system.

APRA-regulated superannuation funds hold $1.4 trillion in compulsorily deferred wages on behalf of ordinary, hardworking Australian people. There can be absolutely no argument that members of superannuation funds—those hardworking Australian people—have to have the best and the brightest minds sitting around the board tables of the superannuation funds in Australia. That is why we as a government are committed to legislating appropriate standards of governance. Being consistent with these appropriate standards of governance means that we need to include minimum levels of independence across the entire sector.

We have seen the superannuation industry evolve considerably since the introduction of compulsory superannuation in 1992—and this has been a very, very positive thing—but, at the same time, governance arrangements have not kept up with this growth. This is despite the fact that superannuation funds have become larger. They have certainly become more complex and they certainly have more diverse memberships. The funds themselves have evolved and have been opened up to competition so that they can appeal to a wider range of members. They are competing actively for market share beyond what have been their traditional membership bases, including multiple employers across multiple industries.

We know that some trustee boards do not have appropriate governance arrangements in place to reflect the very important role they play in ensuring that the retirement savings of their members are appropriately dealt with. These standards need to meet the expectations of the Australian people. In some cases, they do not. Therefore, endeavouring to lift the level of independence in the superannuation sector should be a priority not just for the government and for all of us but also for the industry itself. Strengthening trustee board structures through greater independence is, in my view, in everyone's interests.

This bill includes the previously introduced measure aimed at increasing independence of the boards of superannuation funds in Australia. This has been a measure on the policy agenda for several years and has been recommended by previous reviews that have been undertaken in relation to superannuation. This government makes no apology for seeking to put the interests of the superannuation fund members ahead of the self-interest of the industry. So I'd like to take the time, if I may, to make a closer examination of some of the schedules to the superannuation package and to look at some of the ways that this is going to be beneficial. During the course of my intervention, I will also reflect on something that is very important in the Illawarra. It is something that has been raised with me repeatedly by the victims of financial fraud who have been actively seeking changes to legislation, and seeking to have issues that arose out of the Trio collapse dealt with appropriately.

Let's look at schedule 1 of this bill. Schedule 1 creates a statutory minimum requirement for one-third of the directors to be independent directors, including an independent chair on the superannuation trustee boards. We think that, without this minimum standard, fund members may be exposed to detrimental outcomes that can arise through poor decision-making or failure to deal with conflicts of interest appropriately—and haven't we seen that in recent years! This schedule includes a new definition of 'independent' that will ensure that a director of a superannuation trustee board is able to exercise independent judgement.

Let's look at schedule 2, with regard to the board of the Commonwealth Superannuation Corporation. This schedule will enable the trustee for the Australian government's main civilian and military superannuation schemes to comply with new independent requirements. This goes, in particular, to strengthening trustee arrangements.

I want to focus now on improving accountability and members' outcomes in the superannuation bill. From the government's perspective, this bill will give everyday Australians more control over their superannuation providers, and a stronger regulator to ensure their money is being managed in their best interests. The Superannuation Member Outcomes Package represents an important set of reforms that strengthen the foundation of our compulsory superannuation system, in particular for default MySuper members. This is a package that has been developed with the unequivocal, clear objective of improving outcomes for consumers.

The superannuation sector has grown to over $2 trillion. This has been largely as a consequence of the mandatory nature of the system. And, of course, all Australians rightly expect that the superannuation industry be held to the highest standards of transparency and accountability. Consumer-focused reforms to make superannuation much more consumer-friendly and superannuation providers more accountable for how they use their members' money will be welcomed. Add to that stronger prudential standards, better enforcement and more transparency, and it will lead to a boost in the confidence people have that their super savings are being managed in their best interests.

Many of the measures, including these measures, have been on the policy agenda for several years and, as I've indicated before, been recommended by past reviews into superannuation. This legislation includes important measures aimed at increasing choice and transparency. It also includes important measures aimed at strengthening supervision of the sector but also boosting trustee accountability and improving member engagement. It also closes a legal loophole that has been used, regrettably, by unscrupulous employers to short-change employees who choose to make salary sacrifice contributions into their superannuation accounts.

I'd like to examine a number of the schedules and make some general observations in relation to that. Firstly, in relation to schedule 1 of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017, the annual MySuper outcomes assessment, an outcomes test will strengthen obligations on trustees to consider the appropriateness of the MySuper product on an ongoing annual basis. This test will be in two stages. One will require trustees to consider what MySuper is offering—its design, investment scope, insurance framework and scale—and the other will require that trustees compare their MySuper products with other MySuper products. We believe that, to ensure that the financial interests of members are promoted, trustees should give consideration to the overall quality of their products. This test is designed to inform a trustee's assessment of their product. It won't weaken or lessen their obligation to promote the financial interests of their members through net returns. The importance of net returns, clearly, in promoting the financial interests of the members of the fund should remain foremost in any trustee's mind.

Through the outcomes test, the APRA, the Australian Prudential Regulation Authority, will be able to obtain a more comprehensive view of how funds are working to improve the quality of their products and have stronger grounds to engage with trustees, most especially, where there are concerns about their products. There will obviously be requirements to publicly release information and so, ultimately, this will all add to transparency. There will also be provisions about authority to offer, with only suitable trustees being able to offer MySuper products, and products being removed when they are no longer suitable. These authorisation changes will improve the quality of the products on offer.

Schedule 3 deals with director penalties. The current gap in the criminal and civil penalty framework concerning the conduct by a director or trustee of a superannuation fund will be addressed as a result of the changes to this schedule. Directors will now be held accountable for their conduct in the same way as directors of managed investment schemes. They will be subject to both civil and criminal penalties if they fail to execute their responsibilities to act in the interests of their members or if they use their position to further their own interest to the detriment of members.

I want now to come to schedule 4, which deals with approval to own or control an RSI licence. Members will have a greater level of protection against fraud when a change of ownership or control of a trustee takes place. As I said, we have seen this spectacularly in the past. As I indicated earlier in my speech, one was in relation to the Trio collapse, and I know that many of the victims of that collapse took advice from providers in the Illawarra and they have been arguing consistently for quite a number of years to seek redress. The provisions of schedule 4 will go a long way to ensuring and affording necessary protections against fraud, especially when a change of ownership or control of a trustee takes place—that was one of the complexities in relation to the Trio collapse. Given the detrimental outcomes that can arise through the mismanagement of funds, we believe that no-one should be able to own or control a super fund without APRA's approval. This change will make the superannuation industry broadly consistent with the change of ownership requirements of other industries regulated by APRA.

Schedule 5 will deal with APRA's directions power. APRA has powers across the credit union, the banking, the friendly society, the insurance and the superannuation sectors. Now, as a consequence of the legislation, those powers will be harmonised. When APRA has prudential concerns and, again, harking back to things that have happened in the past, when those circumstances do occur where prudential concerns or APRA's concerns are engaged, it will be able to intervene early and address those concerns so that action can be taken early in the piece—it's the old adage of prevention being better than cure—and, therefore, act in the best interests of its members, rather than delaying it. The new powers will enable APRA to take action to ensure that the intent of the law is given effect to, including the new outcomes test and the enhanced and better management-reporting requirements that have been delivered as part of this package.

I now look at schedule 6, which deals with portfolio holdings disclosures. This measure will enable members and interested parties to see where superannuation funds are investing their contributions. Importantly, this will ensure that members' contributions are invested appropriately and, therefore, it will empower members not only to know that but to make their funds a lot more accountable. Of course, the changes in this particular area will reduce the complexity of the current law. It was introduced in 2012, but has never commenced. The bill will limit portfolio holdings disclosure to assets held directly and to investments through associated entities, including initial investments made into non-associated entities.

We know how important our superannuation system is, and the important bearing it has on the retirement incomes of each and every Australian, especially those Australians who have invested heavily and want to know not only that they are getting a good return but also where their money is being invested. Requiring funds to disclose their portfolio holdings is also consistent with best international practice. Of 25 markets looked at by international financial market analysts Morningstar, Australia is currently the only market with no implemented regulation form of portfolio holdings disclosure.

In the limited time available to me, I will also briefly mention that schedule 7 looks at annual members' meetings. This is a measure to improve accountability and ensure that members have full opportunity to ask questions and get appropriate answers, not just of the trustees but of their fund's officers, auditors and actuaries. Schedule 8 deals with issues from choice of fund to workplace determinations and enterprise agreements. Given compulsory super's important contribution to individual retirement incomes, individuals should be able to know where their funds are invested. Other schedules deal with reporting standards and with ensuring salary sacrifice integrity.

1:07 pm

Photo of Anne RustonAnne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | | Hansard source

I too would like to make a contribution on these two very important bills, 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. I stand here today because I think these two bills are tremendously important to every Australian, when you consider that a substantial amount of their salary or wage every week goes towards superannuation. This system was designed many years ago to make sure that we as a country could support our workers in their retirement, to give them the flexibility to look after their own interests on retirement. At least 9.5 per cent of every Australian's wage or salary goes into their superannuation account.

Our younger generation, especially, will have the benefit of this kind of superannuation for their entire working lives; unlike you and I, who possibly haven't had that luxury. It just so important for these young people. It seems to me a tremendously reasonable thing to expect a very high level of transparency, accountability and oversight to make sure that that massive amount of money—I understand we have $2.5 trillion worth of funds—is managed in a manner that maximises opportunities for young Australians, and for all Australians, when they retire, because they will rely on the returns of these superannuation investments.

Our ageing population and the lengthening time spent in retirement continue to reinforce and underline the absolute importance of us making sure that we do the very, very best we can to ensure that those people who have been entrusted with this money do the very best they can to make sure that it is managed and invested in the way that is likely to deliver the best possible return. It seems pretty reasonable that we should be expecting a level of transparency and accountability that equates to the magnitude of the amount of money that they have available to invest.

One of the things that I've heard in the contributions from the other side is a suggestion that these particular measures, these two particular bills, are in some way unfairly targeting one component of the superannuation industry. Having had a chance to have a quick look through these bills, it seems quite clear that every superannuation fund, no matter whether an industry fund, a union fund or a banking fund—whatever it is—will be required to meet the same requirements of transparency and accountability. Every measure applies equally to every fund. I'm a little bit confused as to why we would be suggesting that this is in any way unfair or unbalanced, in terms of the debate that has been ensuing on the other side of the chamber. As I said, I would think that anything that strengthens the level of accountability and transparency in anything that we do as governments or anything that we do on behalf of other members of the public can only be a good thing. To suggest that one group or one type of product is being unfairly targeted, or that one type of product is superior to another—once again, it is really important that everybody gets an opportunity to have a level of understanding of what's going on here.

There are a number of measures that are included in the two bills, and Minister Fierravanti-Wells has just gone through, in quite significant detail, the various schedules in the legislation. The request or the suggestion that there should be a level of independence of the people that sit on these particular boards—and, as I say, this is trillions of dollars worth of people's money that we're handling here and looking after—does seem to me to be a reasonably sensible measure that we should be considering. To suggest that the employees that sit on some of these boards are the ones who are actually delivering that level of independence—I suppose you would have to start questioning the level of independence that some of the people that are purportedly there as employees are providing to the board. You have to consider that they're at a level within the organisations that they have come from that is much higher than the average everyday worker. I mean, we're not talking about people who are miners, timber workers or retail and hospitality workers; those aren't the people that are being put forward as the employee representatives onto many of the these organisations. We're talking about people at the level of chief investment officer.

When you look through a number of the people who are on these boards in these particular roles, they are actually making massive amounts of income. My understanding is that the median salary received by these particular chief investment officers on the funds averaged out at about $420,000. My understanding is that there were a series of bonuses that were paid in addition to that sort of money. In the case of UniSuper and AustralianSuper, the bonuses in the 2016-17 financial year totalled three-quarters of a million dollars. We're not talking about people who are at the grassroots, who actually understand what the difference between having superannuation and not having it means. For that reason, the government believes that these reforms and the presence of independent directors on these funds' boards can serve no other purpose than being beneficial to the delivery of a good outcome for all workers. To that end, it's somewhat puzzling why those opposite would suggest that this isn't a good thing to do.

I now turn to the level of transparency, accountability and oversight that is being suggested in the first of these two bills, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017. Overall, it's designed to enable the people who are investing in these organisations to have a greater level of granularity, I suppose, in seeing what's actually happening within the organisation, and so to have a greater capacity to see where their money is being invested and how it's being invested, and, most particularly, to give them the opportunity to have some oversight as to when money is being spent outside of what we would consider direct investment. I would suggest that the majority of Australians whose money is in these funds would actually think that the money was all being invested in assets that were returning on that investment—stocks, shares, property and the like. I would suggest that it is very unlikely that many Australian workers would actually think that a superannuation fund would be, for instance, spending huge amounts of money on sponsorship or on marketing.

Whilst there may be some very good reasons for spending money on sponsorship and marketing for a super fund—we all know that marketing is a legitimate business expense, and that sponsorship also has a role to play—I don't think it's unreasonable for those sorts of expenses and expenditures to be made publicly available to the people who are putting their money in. They can, first of all, see what it's being spent on, and then decide whether that's a sensible thing to be spending it on. I think the AEC has stated that around $53 million has been paid to trade unions over the past 10 years from these funds. This would suggest there is every reason that it should be made publicly available. If the funds can demonstrate the value to their members, and the members are convinced of the value of the this kind of sponsorship or marketing expenditure—well, that's all fine. But I think they have every right to know. Particularly when you're talking about the kinds of sums that we're talking about here, they have every right to know.

The expectation that a super fund is required to disclose what it's spending—and to disclose and demonstrate to its members that what it is spending is in the best interests of all of its members—doesn't seem to me to be an unreasonable thing. I call on everybody in this chamber to stand up and tell us why, if they think that that isn't a good thing. It's all well and good to say that we need to do these things, but we have to give the power to an oversight body to make sure that they are being delivered.

In the case of superannuation, the Australian Prudential Regulation Authority, APRA, is the appropriate body through which we need to determine that this level of transparency is being upheld: to require that there is a level of oversight and supervision, I suppose, of funds; to allow APRA to go into super funds and ask them questions about how they're spending their money; to ask them questions about what their investment strategy is; and to ask them to justify to why they believe that their investment strategy is the best investment strategy in the current economic climate. For the fees that are being paid—for not just the board fees but for all of the fees that get paid within the organisation—once again, there needs to be a capacity for APRA to go in there and ask questions as to whether the level of fees and the levels of payments are appropriate for that type of activity, and whether they are value for money for the people whose money we're investing. Obviously, insurance arrangements are very important. APRA should have the ability to ask questions of super funds in relation to their insurance arrangements.

Those are just a few examples of things that I would think it would not be unreasonable for a member of a super fund to be expecting the prudential regulator to have the ability to go in and ask about. The most important thing is for the regulator to have the ability to take action if they think that the operation of any super fund is not necessarily in the best interests of its members. Once again, it strikes me as tremendously reasonable that an independent regulator has the power to ask simple and obvious questions—questions that anybody in this chamber would think they should have the right to have answered—when you consider that it's the money of the people of Australia, the workers of Australia, which is being invested here. I think it's entirely reasonable that they should not only have the right to be able to ask questions about how it's being spent but also have the confidence and the security to know that the regulator has the power and the capacity to be able to go in and, if they believe that the actions of any super fund are not in the best interests or it is not delivering the best outcomes, take action. Once again, I fail to see why you couldn't accept or support that as an option.

There is the requirement for direct accountability to the members—to the people who are actually paying the money. If I were investing in a business or a publicly listed company, I would have every right to turn up at least once a year to ask questions of the board, the chief executive and the management team about the performance of that company throughout the year. So I think it is completely reasonable for members—bearing in mind, nobody has to turn up to a corporate AGM, so nobody has to turn up to an industry fund or a superannuation fund AGM—to have the right to attend an AGM, if they wish to. It is entirely reasonable to ask a superannuation fund to have an annual general meeting, just like a publicly listed company, because it empowers members to have greater involvement and a greater say in what's happening with their super fund.

These are just three simple overarching improvements that we are seeking to make through the first of these two bills, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017, and I am absolutely at a loss as to why everybody wouldn't be overwhelmingly embracing these changes. As a government, we are very keen to make sure that there is a level of transparency because, to be perfectly fair, when you see cases like Chiquita Mushrooms or Clean Event, they raise questions about the operations and the integrity of the actions of some of these funds and the unions, and what they are doing here. So I would have thought that having broader transparency and accountability would protect everybody in this space, and everybody would be able to say: we have strong, rigid infrastructure in which we operate and, to that end, we can be confident that everybody's best interests are being looked after.

Equally, with the second of these bills, Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, as I said briefly in my opening remarks, to ask for one-third of the directors of a superannuation fund to be independent seems pretty sensible to me. If you have a look at corporate Australia, there is a trend towards independent directors. This is for a whole heap of reasons, not the least of which is that it gives the board a greater range of skills and experiences to enable it to perform better. Nobody could disagree that the broadest and best range of skills that you're able to bring to your board does nothing but accentuate value to the board; it certainly doesn't detract from it. To suggest that a third of the board directors on super funds be independent strikes me as a fantastic opportunity for these funds to be able to get some skills that they may otherwise not get, because it is compulsory. In no way does this actually alter the balance between employers and employees and how they are represented in these funds. We can still have a level of equity. We're just suggesting that one-third of them need to be independent so we can bring in some skills that otherwise may not be available to these boards, if they are restricted in their membership criteria. To say that one-third of the members can't be union officials, can't be bank executives and need to be free from conflict sounds pretty sensible to me. Free from conflict—you can't be a beneficiary of a sponsorship, for instance, from one of these super funds and sit on the board; and you can't come from a financial institution. I suggest that, like the first bill, all this bill serves to do is strengthen the protection for everybody, to give a greater advantage to those superannuation funds. Once again, I'm really surprised that anybody in this chamber wouldn't seek to support the bill. As I said to start with, we're talking about the vehicles through which compulsory superannuation is invested in Australia on behalf of all taxpayers. In any other circumstance you would think that the core goal of the organisation entrusted to do that would be to try to deliver, through the operation of the institution, the best possible outcomes in terms of return on investment to people whose money they have been entrusted to invest. Why would you throw away any opportunity—as these bills are offering to those funds—to enable those funds to be strengthened, to be more transparent, to be more accountable, to have greater scope and to have access to greater skills? It really does defy common sense.

The question that many Australians should probably be asking of those who will vote against these bills is: 'Why are you voting against these bills?' If you genuinely have a reason for voting against these bills, not just some sort of myth that this is some 'go get the unions' type of activity, then you need to come out and tell me why strengthening accountability, transparency, governance and providing additional skills and access to those skills can possibly be a bad idea. On the basis of believing this is absolutely in the best interests of every single Australian who has a massive investment in their future, in their retirement, in these superannuation funds, I stand here today to commend both of these bills to the house.

1:26 pm

Photo of Jonathon DuniamJonathon Duniam (Tasmania, Liberal Party) Share this | | Hansard source

What a difference a week makes when you consider the pace of debate in this place compared to last week. I suppose the current subject matter might mean a slightly lower degree of interest. That is not to say superannuation isn't important, but, for those in the gallery, it's probably a slightly dryer debate than the one you missed out on last week. Anyway, thank you for being with us.

It is a pleasure to join my colleagues to contribute to the debate on the two bills we're debating at the moment: 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. As many of those who've spoken before me in this debate have said, the focus of the legislation we're debating at the moment is on putting consumers at the heart of it and making sure that the superannuation sector is governed and regulated properly. It is on making sure that the members—who often have very little say and very little power—have a greater degree of oversight and a degree of control over the choices made around their future savings—savings for their retirement, which are exceptionally important.

It is a pleasure, as I have said, to contribute to this debate. Turning briefly to the elements of both pieces of legislation, as Senator Ruston, the previous speaker in this debate, and also Senator Fierravanti-Wells have said, one does have to wonder why there is a degree of opposition to some of the measures we're talking about here. They are very straightforward and they are improvements. They are enhancements to existing regulation. They are a better safety mechanism and a better regime that ensures members' interests are looked after.

I will look at Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 first. As Senator Ruston mentioned, there are three broad areas. I will go into a little more detail and then consider them as a whole. The superannuation industry requires trustees to assess on an annual basis whether the outcomes that have been delivered by MySuper products are promoting the financial interests of MySuper members. That is a key element of this legislation, so it's incredibly important.

What is superannuation there for? It is there for those who contribute to it for their future, for their savings and for their retirement. Superannuation helps people to stand on their own two feet when they are no longer receiving an income from employment. If they weren't born wealthy, this is their way of making sure that their retirement is comfortable and that they are going to be well looked after, so superannuation is about the members. They're the people putting the funds in; they're the ones who, ultimately, are going to be taking the funds out; and we need to make sure that their interests are protected and guarded at all costs.

As stated previously, the legislation allows Australian Prudential Regulation Authority, APRA, to refuse or cancel an authority to offer a MySuper product if it has reason to believe the registrable superannuation entity or licensee may fail to comply with its obligations. I think that degree of control on the part of the regulator is important. We need a safety mechanism or a safety switch to ensure that those entities who are in the market purporting to offer a particular form of service actually do that and that they're held to account, and to ensure that their members can rest assured that they will actually have what they are told they will have.

The legislation also enables the imposition of civil and criminal penalties on the directors of those registrable superannuation entities or licensees who fail to execute their responsibilities to act in the best interests of members or who use their position to further their own interests to the detriment of members. I think that's a pretty straightforward element of this legislation. We wouldn't tolerate it in the private sector when it comes to the directorship of private entities here in Australia and we certainly wouldn't tolerate it when it comes to senior office holders in government—be they elected officials or appointed officials—so why would it be any different here? We need to make sure there is consistency, and I have heard 'consistency' uttered in this debate previously. This legislation does bring consistency about, but, on such an important issue, by making sure there is no ability for people to use their position to further their own interests to the detriment of members.

The legislation allows APRA to refuse authority for a change of ownership or control, where it has concerns about the person seeking ownership or control, and to give a direction to a person to relinquish control of an RSE licensee and remove or suspend an RSE licensee where it is subject to the control of its owner. It also aligns APRA's directions powers in relation to the superannuation industry with its broader directions powers in the banking and insurance industry, again, to bring about consistency and to ensure that APRA, in discharging its duties, is doing so in a consistent fashion. This, again, blows out of the water the argument that somehow it is a targeted attack on certain sectors and certain entities. This proves that this is about consistency and making sure a level playing field, if you will, is applied to this. It also requires RSE licensees to hold annual members meetings, which provides, as Senator Ruston said earlier on, a greater degree of direct accountability between members and their funds to understand—in the same way a shareholder can with a private entity in which they may hold shares—why decisions are made and to seek explanations for decisions which do not deliver the best outcomes. Often there are good explanations for these sorts of things happening, but this legislation will ensure that members do have the capacity at least to ask those questions.

The legislation will also require superannuation funds to disclose on a semi-annual basis investments they hold directly or through associated entities and initial investments into non-associated entities. The 'T' word, transparency—something which we are big on and which I will come to more broadly later on—is a critical part of this legislation. If there's nothing to hide, then there's nothing to worry about and then there's nothing to oppose in this legislation. There's no need to be concerned about things like transparency. We here in politics are subject to extreme levels of transparency—people know what time we fly; what airline we are on and how much it costs; how many reams of paper are used in our electorate offices; how often we fill up our cars with petrol or diesel. Transparency is a good thing. We in this place spend taxpayers' money and we are accountable to the taxpayers of Australia, and so should the directors and managements of superannuation funds be accountable to their members. So those are some of the areas in the first bill I mentioned, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017.

Of course the other piece of legislation we are talking about today is the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, which is the one that I think has garnered the highest degree of interest, certainly in terms of the limited media interest there has been in this legislation. It requires registrable superannuation entity licensees to have at least one-third independent directors and it requires the chair of the board of directors to be one of those independent directors.

I'm going to go over some of the ground that has already been gone over in this debate. Having that independence in what is a significant and important entity, and one that holds in its hands the future of many Australians, ensuring that decisions are made are in accordance with members' wishes, is a good thing. It's something that many have talked about with great positivity. I will come to some of the comments made by observers and stakeholders alike with regard to the three broad areas of the legislation. In summary, they are: governance arrangements relating to trustees—who they are and how they are appointed—which I have just gone over; the members' outcomes—ensuring that members have a capacity to have some oversight over their superannuation funds and decisions that are made, and that the best decisions are being made in their interests—and, of course, delivering on member choice as well.

Noting that, as I understand it, 20 per cent of all members of superannuation funds in this country can't choose where they'll be making their compulsory superannuation contributions, it is important that in that situation there is a degree of accountability for people who manage those funds. Also, when you can't make a choice about where your superannuation contributions are going to be made, you will see people with multiple accounts. This results in higher fees, so that, at the end of the day, there is less for them to draw on in their retirement. This bill is doing away with this duplication and the rigid approach that has been taken by some entities to not allow individuals to choose the fund they contribute to.

I think that choice is a good thing in this country. It helps people to be more self-sustaining in their retirement. That's why I think all the elements of this bill are critically important and are great initiatives, and that's why I think they have been so broadly welcomed. I will outline some of those endorsements a little later on, but the key points are: it is about improving standards of accountability, transparency and the like, and it is also about making sure consumers are at the heart of the decision-making process.

I note the significance of superannuation in the quarter of a century—the 25-odd years—that compulsory superannuation contributions have been a part of the way of life in Australian society. They have grown from around $136 billion in 1992, when I was about nine years of age, to nearly $2.5 trillion. That's a significant amount of money in anyone's terms. The important thing to remember in all of this is that those funds are the Australian people's funds. They are the funds that people will be drawing on and relying upon in their retirement, so that they don't have to rely on the taxpayer. I think we would all agree that, if we can, it's best to ensure that people have the capacity to rely on their own savings rather than on the pension. I accept and understand that there are, unfortunately, some people who will not have that opportunity and who are unable to put away superannuation contributions to a level that would mean they would be completely self-sustainable financially in retirement. But this is something we should foster, and this legislation will enhance our ability as a country to ensure that that does happen here.

The word 'expectation' has been used a lot in the debate. In this day and age, I think expectations are critical. For those consumers who can choose which super fund they contribute to, they will vote with their feet. So, enhancing the ability for people to have a choice over which super fund they use is, I think, an exceptionally good thing, and it is consistent with what we're doing in other parts of the economy and other parts of the business world. If you look at banking, the shift in the way banks have been interacting with their consumers, the abolition of ATM withdrawal fees, and the different ways that banks try and attract business has been possible because there is that flexibility and choice on the part of members. Enhancing that flexibility and ability for consumers to choose meets their expectations. It's 2017 and people want to make sure they have the best product for them.

It's also about how members' money is going to be used. They want to know that the directors and the people who are making the decisions around how the money—that people have put away every fortnight or every month—which is stored away in large funds, is being used to enhance the outcomes for them at the end of their careers, when they have finished working. They want to make sure that they have more money there than they put in, and the biggest amount possible. I think that's what we all want. For the sake of clarity, I should put on the record—and it's an important point to make—that there is a misnomer out there that politicians are on a massive defined pensions scheme. I can assure you that that is not the case. It's a normal pension scheme, like that of any other public servant or any private sector employee. So we too want to make sure that our contributions to our superannuation schemes are performing in the best way possible. The independence and transparency that these bills will bring about will help in making sure that superannuation funds perform to the best level possible. We live in an age of scrutiny: there is greater scrutiny of government, as I said before, and of individual members of parliament, corporate entities, banks and, of course, superannuation funds. It is to be expected.

People are more engaged with how their funds are to be used. In Tasmania, one business I've seen, Tas Ethical, assists Tasmanians in making decisions around how their money is invested. That is a sign that the community are more interested in making sure that their money is used in accordance with things that they think are right, and the proper use of their funds, as opposed to just investing and not having any oversight or understanding of how the money will be used. Having said that, though, for a great number of younger Australians—and I think I can still cling on to that moniker of 'younger Australian' for myself—there is not a great deal of interest in how superannuation funding is used, managed and allocated. Particularly in this day and age where young people will transition from one line of work to another, they will probably have multiple funds and not a great degree of interest, at a younger age, in how their superannuation is being managed. That is something that I think is probably on a downward trend.

We all need to think about our retirement. We have an ageing population and, as Senator Ruston said, the cost to the taxpayer of supporting the ageing population through pension and other health-related costs is going up, and it is something that we need to manage. I think there is a realisation on the part of some young Australians that we need to make sure that our superannuation is working for us, because one day we will be relying on it. The capacity to rely on pensions for years and years to come will, I think, be diminished, given the amount that it will cost the taxpayer with our ageing population. So I think it is sensible in that respect. As I say, it is about—consistent with the trend in Australia for people to have greater levels of knowledge—being informed about how their funds are being spent, and knowing whether that is supportive of a cause that they would identify with. For some people it may be the environment and for others it may be related to animal welfare or the like. People are seeking to have the capacity to make a choice, and these bills are providing that.

I will go to some of the endorsements that have been pronounced in relation to this legislation, starting with the governance and management arrangements around superannuation funds and the chair of the 2010 super system review. Many of these are contributions that were made to the Senate Economics Legislation Committee, which inquired into this legislation, chaired by the hardworking Senator Jane Hume from Victoria. Jeremy Cooper, who was appointed by the former Labor government to conduct the super system review, said:

… providing for independent directors shouldn't diminish the representation of members but actually enhance it. So, rather than the model being broken, I think this is the 21st-century answer to our highly successful superannuation system—how we can govern it better and, most particularly, how we can make people who are forced to save into it feel confident that the standards of governance is at or near world's best practice.

David Murray, who was appointed by this government to the 2014 financial system inquiry, made a contribution to the same Senate committee I mentioned earlier. He said:

When a governing body sits to serve the interests of the people it's meant to serve, it shouldn't be constrained by peripheral interests. That's why, in my view, independence is very important—independence from the executive and independence from peripheral interests.

I think that's absolutely right. People make claims about interference with decision-making processes and undue influence being exercised. Well, here we are talking about some independence being injected into the directorships of these entities so that we make sure there is true independence in the interests of members.

Louise Petschler, General Manager Advocacy at the Australian Institute of Company Directors, said:

The AICD considers that introducing a requirement for at least one-third of the board to be comprised of independent directors will strengthen governance within the superannuation sector.

That is comprehensive. There's no two ways to read that. It is a fairly clear indication that they accept and believe in these amendments.

The final one I'll refer to is Bill Kelty, the former union leader. In an article published in The Australian sometime back, he said:

This is compulsory legislation, therefore the level of trust and accountability must not be less than what … corporations in Australia apply, it should be greater.

Those sorts of endorsements and key points are critical to ensure that we have the best system possible, that it is world's best practice. It is for those reasons that I'm supporting this legislation; I think young Australians will benefit.

1:47 pm

Photo of James McGrathJames McGrath (Queensland, Liberal National Party, Assistant Minister to the Prime Minister) Share this | | Hansard source

It gives me great pleasure to rise this afternoon to speak on the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the cognate bill—two bills that are part of the coalition's commitment to deliver for Australians and part of our commitment to bring necessary reform across all elements of the finance sector. These bills will give Australians more control over their providers and a strong regulator to ensure their money is being managed in their best interests—and that's what this comes down to. This is about being on the side of the consumer and making sure that the consumer, the working man and woman who are putting money into these huge industry super accounts—the people who own the money, the people who earned the money—will have more control. This package represents important reforms that will strengthen the foundations of Australia's super system, in particular, for default MySuper members. The package has been developed with that clear objective: to improve outcomes for consumers.

The super sector has grown to over $2 trillion, largely as a result of the mandatory nature of the system we have here in Australia. The Australians who are earning this money expect the industry to be held to the highest standards of transparency and accountability. This bill includes previously introduced measures aimed at increasing choice and transparency. It also includes new measures to strengthen supervision of the super sector, boost trustee accountability and improve member engagement. Many of the measures in this bill have been on the policy agenda for several years and have been recommended by past reviews into the super industry. The bill also closes a legal loophole that has been used by unscrupulous employers to short-change employees who choose to make salary sacrifice contributions into their super accounts.

It's best that we go through the bill and look at it in detail, in terms of how the schedules are going to operate. In schedule 1, the outcomes test will strengthen the obligation on trustees to consider the appropriateness of their MySuper product on an ongoing annual basis. The outcomes test will comprise two stages: one which requires trustees to consider their MySuper offering—the design, investment, insurance strategies and scale—and another which requires the trustee to compare their MySuper product with other MySuper products. We believe that, in order to promote the financial interests of their members, trustees should give consideration to the overall quality of their MySuper product. The outcomes test is designed to help inform a trustee's assessment of their MySuper product; it is not meant to weaken or lessen the trustee's primary obligation to promote the financial interests of their MySuper members through net returns. The importance of net returns in promoting the financial interests of members should remain at the forefront of the trustee's mind when assessing the MySuper product.

Through the outcomes test, the Australian Prudential Regulation Authority, APRA, will be able to obtain a more comprehensive view of how funds are working to improve the quality of their MySuper products, and will have stronger grounds to engage with trustees where it has concerns. Trustees will also be required to publicly release the outcomes test determination and a summary of the assessment and comparisons that led to the determination. The government has also tasked APRA with applying a modified version of the outcomes test in relation to Choice products that will require relevant trustees to regularly assess how outcomes are delivered across their business operations and whether they are providing quality, value-for-money outcomes for Choice members.

Schedule 2 concerns the authority to offer a MySuper product: we want APRA to ensure that only suitable trustees are able to offer MySuper products, and that MySuper products are removed from trustees when they are no longer suitable. The MySuper authorisation changes will improve the quality of MySuper products by allowing APRA to refuse or cancel an authority to offer a MySuper product if APRA has a reason to believe the trustee may fail to comply with its obligations. The changes will provide APRA with more scope to ensure that trustees who are authorised to offer a MySuper product are in a position to provide products of sufficient quality to promote the financial interests of members.

We also need to make sure that we address director penalties, which are touched upon in schedule 3. The current gap in the criminal and civil penalty framework concerning misconduct of a director or a trustee will be addressed as a result of these changes. Directors will now be held accountable for their conduct in the same way as directors of managed investment schemes. A directors may be subject to both civil and criminal penalties if they fail to execute their responsibilities to act in the interests of members or if they use their position to further their own interests to the detriment of members.

Schedule 4 will give members a greater level of protection against fraud when a change of ownership or control of a trustee takes place. Given the potential detrimental outcomes that may arise through the mismanagement of funds, we believe that no-one should be able to own or control a fund without APRA's approval. This change will make the industry broadly consistent with the change-of-ownership requirements of other industries regulated by APRA.

In schedule 5, APRA's powers across the credit union, banking, friendly society, insurance and super sectors will now be harmonised. When APRA has prudential concerns, it will be able to intervene early to address its concerns in a way that ensures required actions are in the best interests of members. APRA's new powers will provide it with the ability to take action to ensure that the intent of the law is realised, including the new outcomes test and enhanced management reporting requirements being delivered as part of this package.

In schedule 6, we'll see a measure that will enable members and interested parties to see where funds are investing member contributions. This will ensure, amongst other things, that member contributions are being invested appropriately by empowering members and interested parties to make their funds more accountable. The changes will significantly reduce the complexity of the current law, which was introduced in 2012 but has never commenced. The bill limits portfolio holdings disclosure to assets held directly in investments through associated entities, including initial investments made into non-associated entities. We know that the performance of the super system has a direct bearing on the retirement incomes of each and every Australian. That's why it's important that members can see where their funds are being invested and can compare the relative performance of their funds to other funds. Requiring super funds to disclose their portfolio holdings is also consistent with international best practice. Australia is currently the only market of 25 international markets looked at by financial analyst Morningstar with no implemented, regulated form of portfolio holdings disclosure.

In schedule 7, we are improving accountability because we're requiring funds to hold annual member meetings where members have the opportunity to ask questions and get answers not just of their trustees but also of their executive officers, auditors and actuaries. All members will finally have the opportunity to ask questions about all areas of the fund's performance and operations. Trustees will have another way that they can improve their engagement with their members. Members will also be provided with key documents which outline their fund's performance and operations. To ensure that annual members' meetings suit their funds' members, trustees will have the option to hold their annual members' meetings electronically.

In schedule 8, we look at the choice of fund to workplace determinations and enterprise agreements. Given compulsory super's important contribution to individual retirement incomes, individuals should be able to decide where their compulsory super goes. This measure will provide choice of fund for more Australians employed under federal EBAs and workplace determinations. Expanding choice should reduce the need for multiple accounts, involving multiple fees and insurance premiums. This can help to improve people's super savings and standard of living in retirement. Giving more employees choice of fund also aims to promote member engagement and reduce fees through increased competition.

In schedule 9, we look at reporting standards. This measure will amend the Financial Sector (Collection of Data) Act 2001 to provide APRA with the ability to obtain information on expenses incurred by funds. This additional information will enable APRA and, ultimately, members to understand the full picture of how funds are using member contributions and will enable APRA to consider whether expenses of individual funds are in line with their obligations as a trustee.

In schedule 10 we close a longstanding loophole, to prevent employers from using people's salary-sacrificed super contributions to reduce their super guarantee obligations. The changes will prevent employers from using—

Debate interrupted.