2019-2020- 2021-2022

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2022

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by the authority of the Minister for Finance,
Senator the Hon Simon Birmingham)

 

PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2022

General outline

The Public Sector Superannuation Legislation Amendment Bill 2022 (the Bill) makes consequential amendments to the Parliamentary Superannuation Act 2004 (PS Act), Superannuation Act 2005 (PSSAP Act), and the Federal Circuit and Family Court of Australia Act 2021 (FCFC Act) as a result of the Government’s Your Future, Your Super (YFYS) reforms relating to the annual performance test for MySuper products and superannuation fund ‘stapling’. The YFYS reforms applied effectively to some Commonwealth-run accumulation schemes, but the above superannuation arrangements have complexities that prevented full alignment of treatment. Accordingly this Bill ensures that relevant Commonwealth superannuation arrangements are treated consistent with sector-wide reforms that already apply to most superannuation schemes run for the benefit of other Australians.

Since 1 July 2021, the Australian Prudential Regulation Authority (APRA) undertakes an annual performance test for MySuper products. Where the product has failed the performance test in two consecutive years, the fund is required to notify its current members that it failed the test, and is unable to accept new members into the product. To mitigate against the risk of adverse consequences for scheme members, if an existing default fund fails performance tests and is barred from taking new members, the Bill allows superannuation contributions for new persons to be defaulted to a well-performing fund.

Since 1 November 2021, if a new employee has an existing ‘stapled’ superannuation fund and does not choose a fund when they start a new job, then the new employer’s contributions on behalf of the employee are generally paid to the employee’s previously stapled fund.

The Bill also makes a minor technical changes to the Governance of Australian Government Superannuation Schemes Act 2011 (GAGSS Act) and the Parliamentary Business Resources Act 2017 (PBR Act).

Parliamentary Superannuation Act 2004 (PS Act)

The PS Act sets out the superannuation arrangements for parliamentarians who join (or re-join) the Parliament on or after 9 October 2004. Under the current arrangements, these parliamentarians can have their employer superannuation contributions paid only to a fund that they choose or the default fund (MySuper product). There is no provision for employer superannuation contributions in respect of new parliamentarians to be paid to a pre-existing (stapled) fund as provided for under the YFYS reforms.

The proposed amendments to the PS Act will bring it into line with the general choice of fund requirements by removing the existing choice of fund provisions in the PS Act and instead rely on the general requirements as set out under the Superannuation Guarantee (Administration) Act 1992 (SG Act). This will also enable the PS Act to be in line with the new YFYS reforms including the ability to make employer superannuation contributions for new parliamentarians to a stapled fund, except where a new fund is chosen by the Parliamentarian.

The Bill also makes minor consequential amendments to the PBR Act and puts in place transitional arrangements as a result of the changes to the PS Act.

The Bill also amends the PS Act to put in place new arrangements for the determination of a default fund for parliamentarians if an existing default fund cannot accept new members because of not meeting for two consecutive years the annual performance test for MySuper products. This ensures that the Commonwealth can continue to meet its obligations under the SG Act where it is required to specify the fund to which contributions will be paid if a parliamentarian does not choose a superannuation fund and has no stapled fund.

A new default fund can only be determined in accordance with a method prescribed by the Minister for Finance in a disallowable legislative instrument.

The prescribed method must include: a requirement that the fund be a complying superannuation fund; and either an assessment of funds according to fees and costs and investment returns (such as through an open tender process), or a comparison of one or more publicly available rankings of funds that take account of fees and costs and investment returns (such as reference to the ranking of funds of the Australian Taxation Office (ATO) website Your Super comparison tool).

The Minister must therefore make a selection of a default fund based on objective factors. The selection method must also be formalised in a legislative instrument and published. The method is therefore transparent to the Parliament and the wider public and subject to disallowance.

Superannuation Act 2005 (PSSAP Act)

The PSSAP Act established the Public Sector Superannuation Accumulation Plan (PSSAP) on 1 July 2005. PSSAP is an open defined contribution scheme. PSSAP is generally available to persons who commenced as Commonwealth employees and persons who were appointed to statutory offices on or after 1 July 2005, and certain other prescribed persons. The Commonwealth Superannuation Corporation (CSC) is the trustee and administrator of PSSAP.

Under the PSSAP Act the PSSAP (MySuper product) is the default fund for Australian Public Service (APS) employees. If a new APS employee does not choose a superannuation fund and, has no pre-existing (stapled fund) then they become a member of PSSAP and their employer contributions are paid to PSSAP (MySuper product).

The Bill amends the PSSAP Act to enable the Minister to prescribe a method through a disallowable legislative instrument to determine an alternative default fund for APS employees (and other prescribed persons). This would only apply if the PSSAP (MySuper product) were not able to accept new members, because of the APRA performance test. PSSAP continues to be a well-performing fund and, like other funds, could only ever be prevented from accepting new members if it were to fail performance tests in two consecutive years. While there is no expectation that an alternative default fund will need to be designated, prescribing a default approach is consistent with the laws applying to all other major funds and important to safeguard the long term interests of members.

The prescribed method must include: a requirement that the fund be a complying superannuation fund; and either an assessment of funds according to fees and costs and investment returns (such as through an open tender process), or a comparison of one or more publicly available rankings of fund that take account of fees and costs and investment returns (such as reference to the ranking of funds on the ATO website Your Super comparison tool). Consistent with the treatment for other schemes covered by the Bill, the selection method is therefore open and is based on objective criteria that support the appointment of a well-performing fund. This helps safeguard the interests of members.

The amendments ensure that if a scenario ever arose where the PSSAP (MySuper product) could not accept new default members that the Commonwealth could continue to meet its choice of fund obligations under the SG Act.

The amendments will also allow the Minister to determine, through a disallowable legislative instrument, administration matters related to an alternative default fund. This is to ensure alignment and continuation of employer contribution arrangements for the alternative default fund with those that currently apply in relation to PSSAP.

As CSC would not be the trustee or administrator of any alternative default fund, the Bill makes a minor consequential amendment to the GAGSS Act that establishes CSC and sets out its responsibilities.

Federal Circuit and Family Court of Australia Act 2021 (FCFC Act)

Currently under the FCFC Act, Commonwealth superannuation contributions for Judges’ of Division 2 of the Federal Circuit and Family Court of Australia can only be paid to a fund chosen by the Judge. The Bill amends the definition of ‘Commonwealth superannuation contribution’ in the FCFC Act to enable the contribution to be paid to a fund chosen by the Judge, but if there is no chosen fund, to a pre-existing (stapled) fund or if there is no chosen or stapled fund, to a default fund.

The fund to which employer superannuation contributions are paid to will be determined under the choice of fund (including stapling) arrangements set out under the SG Act.

Financial impact

The Bill does not have any financial impact.

Statement of Compatibility with Human Rights

The Bill does not engage any of the human rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Consequently, the Bill is compatible with those human rights and freedoms.

 

 

PUBLIC SECTOR SUPERANNUATION LEGISLATION AMENDMENT BILL 2022

Notes on clauses

Clause 1 – Short Title

1.      Clause 1 provides for the Act to be cited as the Public Sector Superannuation Legislation Amendment Bill 2022 (the Act).

Note: The clauses in the Bill will become sections of the Act on Royal Assent.

Clause 2 – Commencement

2.                  Clause 2 sets out the commencement provisions for the Bill. Commencement details for specific provisions are included in the table in subclause 2(1).

3.                  Item 1 of the table provides that the whole of this Act is to commence on the day after the Act receives Royal Assent.

4.                  The note at the end of the table in subclause 2(1) clarifies that the table only relates to provisions of the Act as originally enacted, and that it will not be amended to deal with any later amendments of the Act.

5.                  Subclause 2(2) clarifies that the information in column 3 of the table is not part of the Act.

Clause 3 – Schedules

6.                  Clause 3 provides that legislation specified in a Schedule to the Act is amended or repealed as set out in the applicable items in the relevant Schedule. It also provides that any other item in a Schedule to the Act has effect according to its terms.

Schedule 1 – Amendments

Part 1 – Main amendments

Parliamentary Superannuation Act 2004

7.                  Item 1 removes the redundant definitions of an ‘administering authority’ and a ‘basic contributions fund’ in section 3 of the Parliamentary Superannuation Act 2004 (PS Act). Item 2 inserts new definitions of a ‘chosen fund’ and a ‘default fund’ in section 3 of the PS Act. The new terms will replace the previous use of the term ‘basic contributions fund’ in the PS Act. The use of the term ‘chosen fund’ will align with the term used in the general choice of fund requirements as outlined in the Superannuation Guarantee (Administration) Act 1992 (SG Act). The term ‘default fund’, for a person, has the meaning given under subsection 17(1) of the PS Act.

8.                  Item 3 removes the redundant definition of a ‘RSA’ in section 3 of the PS Act, while item 4 inserts in section 3 of the PS Act the term ‘stapled fund’ which has the same meaning as in the SG Act.

9.                  Item 5 repeals subsection 8(1) of the PS Act and replaces it with a new subsection 8(1) which, allows the Commonwealth, as an employer to make superannuation contributions for new parliamentarians to a chosen fund, a stapled fund (if there is no chosen fund), or a default fund (if there is no chosen fund or stapled fund). The note under new subsection 8(1) of the PS Act refers the reader to Part 3A (choice of fund requirements) of the SG Act.

 

Example 1

Harriet joins the Parliament after the commencement of the amendments. Harriet does not choose a superannuation fund, and the ATO has advised that Harriet has the pre-existing fund RTS (stapled fund). Employer contributions in relation to Harriet will be paid to Fund RTS.

Example 2

Peter joins the Parliament after the commencement of the amendments. Peter does not choose a superannuation fund and the ATO has advised that Peter has no pre-existing (stapled fund). Employer contributions in relation to Peter will be paid to the default fund (see examples 3 to 5 below regarding the relevant default fund for the member).

Note: The preference continues to be for a person to choose a fund. The parliamentarian is able to choose another complying superannuation fund or Retirement Savings Account (RSA) to receive the employer contributions at any time after the occurrences outlined in examples 1 and 2 above, provided the complying fund or RSA can accept the contributions.

10.              New subsection 8(1) will not affect the fund to which superannuation contributions are payable for existing parliamentarians covered by the PS Act who joined prior to the commencement of the amendments. Superannuation contributions for existing parliamentarians continue to be payable, unaffected, to their previously chosen fund or default fund if they have not chosen a superannuation fund.

11.              Item 6 removes the redundant term ‘basic contributions fund’ in subsection 8(6) of the PS Act and, through reference to subsection 8(1) of the PS Act, provides for employer contributions for new parliamentarians to be paid to their chosen fund, stapled fund, or the default fund.

12.              Item 7 removes the redundant term ‘basic contributions fund’ in subsection 8(6) of the PS Act and replaces it with the reference to ‘the fund’ (being a fund as referred to in subsection 8(1) of the PS Act).

13.              Item 8 repeals Division 2 of the PS Act, which provides choice of fund arrangements for parliamentarians independently of the SG Act. This Division is no longer required as the PS Act will, through the changes made in this Bill, rely on the general choice of fund arrangements as set out under the SG Act.

14.              Item 9 repeals section 17 of the PS Act, and inserts a new section 17 setting out the arrangements for determining a default fund.

15.              New subsection 17(1) of the PS Act provides that the default fund for a person to whom Division 1 of Part 2 of the PS Act applies is the fund or scheme determined in accordance with a method specified for that purpose in a legislative instrument made by the Minister under new subsection 17 (3).

16.              New subsection 17(2) of the PS Act provides that the Minister must ensure that, at all times, there is one (and only one) default fund for each person to whom Division 1 of Part 2 of the PS Act applies. This will ensure that consistent with the YFYS reforms applying to the wider industry, if a parliamentarian’s default fund were to fail the APRA performance test, the person will remain in that same fund (and not be forced to move to the new default fund) unless they choose to have their employer contributions paid to another fund. Under the YFYS reforms, superannuation funds are required to notify their members where their MySuper product has failed the APRA performance test but are permitted to accept continued contributions from existing members in the product. Accordingly where an old default fund is failing, members in that fund will receive a warning and then have the opportunity to migrate based on their own choice, whether to the new default or to another fund of their choice.

17.              Existing parliamentarians would remain in their current default fund unless they chose another fund in line with the YFYS reforms. There could be a different default fund for different parliamentarians depending when they commence in Parliament if the older default fund is unable to accept new members due to failing the APRA annual performance test for two consecutive years and a new default is designated for new members. In any case, Parliamentarians can also have a stapled fund or choose a new fund, so it is normal anyway for contributions of different persons to go to different funds.

18.              New subsection 17(3) of the PS Act provides that the Minister may, by legislative instrument, specify a method for determining that a fund or scheme is the default fund for a person to whom Division 1 of Part 2 of the PS Act applies.

19.              Item 9 also inserts a note under subsection 17(3) of the PS Act, notifying the reader to subsection 13(3) of the Legislation Act 2003, which provides that a person, in making a legislative instrument or notifiable instrument, may identify the class or classes of person to whom a prescribed matter applies.

20.              New subsection 17(4) of the PS Act provides that a method specified under subsection 17(3) must:

·         require that, to be determined to be the default fund, a fund or scheme must be a complying superannuation fund (other than a self managed superannuation fund) at a particular time (paragraph 17(4)(a)); and include:

­      an assessment of funds and schemes according to relative fee levels, costs and investment returns (paragraph 17(4)(b)(i)); or

­      a comparison of one or more publicly available rankings of funds and schemes that take account of relative fee levels, costs and investment returns (paragraph 17(4)(b)(ii)).

Example 3

There is currently only one default fund under the PS Act for current parliamentarians. A new member who enters Parliament after the commencement of the amendments who does not choose a fund and who does not have a stapled fund (as identified by the ATO), will have employer superannuation contributions made to the default fund (MySuper product) that is in place at that time.

Example 4

If the current default fund subsequently fails the APRA performance test over two consecutive years and is unable to accept new members, employer contributions will continue to be made to the current default fund for those parliamentarians in example 3 while they remain in Parliament unless they choose a different fund. The old members will receive warnings about the status of the old default and have every opportunity to migrate their superannuation.

Example 5

If the current default fund (MySuper product) can no longer accept new members, the Minister can specify a method in a legislative instrument under subsection 17(4) to determine a new default fund (Fund B) to which employer contributions will be paid for new parliamentarians who do not have a chosen fund or stapled fund. As a result, there are two default funds for the PS Act arrangements – one for existing parliamentarians and one for new parliamentarians. The PS Act and the transitional provisions in item 39 of the Act allows multiple default funds at any one time for different classes of persons; however, there can only be one default fund for a particular person at any time. Members of the old default can for instance choose to join the new default, or another fund of their choice.

21.              New subsection 17(5) of the PS Act provides that, despite subsection 14(2) of the Legislation Act 2003, an instrument under subsection 17(3) of the PS Act may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time.

22.              This is necessary because subsections 17(1) and 17(3) of the PS Act provide for a default fund to be determined in accordance with a specified method. It is envisaged that the method, for example, could refer to the ranking of superannuation fund MySuper products as published by the ATO. As the ATO updates the rankings on a regular basis it is necessary for the method to determine the default fund to be able to ‘point’ to the appropriate MySuper product at any given time, not just at the time the legislative instrument determining the method is made.

23.              New subsection 17(6) of the PS Act provides that a determination made under subsection 17(3) of the PS Act is subject to disallowance under section 42 of the Legislation Act 2003. This is in spite of Item 3 of the table in section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015, which exempts instruments (other than regulations) relating to superannuation from the disallowance process. This is consistent with the treatment of other public sector superannuation instruments that are exposed to disallowance because of their public interest implications. The disallowance provision is a safeguard that gives the Parliament confidence that the Minister must choose a selection method that is faithful to the requirements. Each House of the Parliament has the chance to judge whether the Minister has chosen objective criteria to ensure a well-performing fund is chosen and to disallow the method if they consider that the method is inappropriate.

24.              Item 10 inserts new section 17A to the PS Act to provide that for the purposes of subsection 32C(2) of the SG Act, the applicable default fund (as determined in accordance with a prescribed method made by the Minister under subsection 17(3) of the PS Act) for a person to whom Division 1 of Part 2A applies is the sole eligible choice fund (default fund) for the Commonwealth for that person.

Superannuation Act 2005

25.              Section 3 of the Superannuation Act 2005 (PSSAP Act) sets out a simplified outline of the PSSAP Act. Item 11 amends section 3 to make a reference to the Minister being able to specify a method for determining that another fund is the alternative mandated (default) fund for a class of persons and that an employer may be required to pay contributions to that fund for an employee.

26.              Item 12 inserts the following terms in subsection 4(1) of the PSSAP Act:

·         ‘alternative mandated fund’ to provide that, for a class of persons, it means the fund determined under subsection 19A(1) of the PSSAP Act to be the ‘alternative mandated fund’ for that class of persons.

·         ‘complying superannuation fund’ to provide that it means a complying superannuation fund within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993.

·         ‘default member’ to provide that a ‘default member’ of an ‘alternative mandated fund’ for a class of persons has the meaning given by section 19C of the PSSAP Act.

·         ‘self managed superannuation fund’ to provide that it has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

27.  Section 16 of the PSSAP Act currently provides that the PSSAP is the sole eligible choice fund (default fund) for the purposes of subsection 32C(2) of the SG Act (contributions to a default fund) for a person, who is eligible to become a PSSAP member and who is an APS employee or is included in a determination by the Minister.

28.              Item 16 inserts new paragraph 16(1)(d) into the PSSAP Act after paragraph 16(1)(c) to provide that section 16 does not apply to a person where that person is a ‘default member’ of an ‘alternative mandated fund’ for a class of persons. This means that PSSAP is not the sole eligible choice (default) fund in relation to a person where the person is a ‘default member’ of an ‘alternative mandated fund’. Section 19D of the PSSAP Act provides for the ‘alternative mandated fund’ to be the sole eligible choice (default) fund for the person.

29.              The examples below show how section 16 would operate where there is an ‘alternative mandated fund’.

Example 6

Ted is employed by Department XY as an APS employee. Ted has not chosen a superannuation fund, has no pre-existing (stapled) fund and is a member of PSSAP. Ted is not a default member of an alternative mandated fund.

Under section 16, PSSAP is Ted’s sole eligible choice fund (default fund) for the purposes of subsection 32C(2) of the SG Act. Therefore, Department XY is required to make employer contributions for Ted to PSSAP.

Example 7

Susan is employed by Department ABC as an APS employee. Susan has not chosen a superannuation fund and has no pre-existing (stapled) fund. Susan is a default member of the alternative mandated fund QPR. Fund QPR became the alternative mandated fund in accordance with a method specified by the Minister. This was necessary because PSSAP has failed the APRA performance test and cannot accept new members.

Department ABC has to make employer contributions to fund QPR.

30.              Items 13, 14, 15, 17, 18 and 19 make consequential amendments to section 14 and section 16 of the PSSAP Act to reflect the amendment to subsection 16(1) by item 16 and also to insert a reference to section 32ZAB of the SG Act.

31.              Section 32ZAB of the SG Act provides that if an employer cannot make contributions to PSSAP on behalf of an employee because of section 60F of the Superannuation Industry (Supervision) Act 1993 (as a consequence of 2 consecutive failed annual performance assessments) then section 16 of the PSSAP Act no longer applies. That is, PSSAP is no longer the default fund for an APS employer of a new APS employee. If this were to occur then new subsection 19A(1) and paragraph 19A(2)(a) of the PSSAP Act allows an ‘alternative mandated fund’ (default fund) for a class of persons to be determined in accordance with a method specified by the Minister in a legislative instrument.

32.              Item 20 inserts new paragraph 19(1)(c) after paragraph 19(1)(b) of the PSSAP Act to provide that section 19 applies to person who is a ‘default member’ of an ‘alternative mandated fund’. Currently section 19 defines the designated employer of a member of PSSAP. After the amendment made by item 20, it will also define the designated employer of a person who is also in an ‘alternative mandated fund’. In example 7 above, Department ABC would, under section 19, be the designated employer of Susan.

33.              Item 21 inserts a new Part 4A and heading, section 19A, section 19B, section 19C, section 19D into the PSSAP Act and a number of notes. The new Part 4A and sections relate to the determination of an ‘alternative mandated fund’ by the Minister and administration arrangements related to that fund.

34.              Section 32C of the SG Act sets out when contributions satisfy the choice of fund requirements. There are three main provisions where contributions satisfy the choice of fund requirements:

·         subsection 32C(1) – contributions to a fund chosen by a person;

·         subsection 32C(1A) – contributions to a person’s stapled fund or

·         subsection 32C(2) – contributions to a person’s eligible choice (default fund).

35.              New Part 4A is only relevant for the purposes of subsection 32C(2) of the SG Act, that is, employer contributions to a person’s eligible choice (default fund) and only in the event that employer contributions cannot be made to the PSSAP (MySuper product) in relation to a relevant person because of section 60F of the SIS Act.

36.              New subsection 19A(1) of the PSSAP Act provides that the alternative mandated fund for a class of persons is the fund determined in accordance with a method specified for that purpose in an instrument made by the Minister under new paragraph 19A(2)(a).

37.              New subsection 19A(2) of the PSSAP Act provides that the Minister may, by legislative instrument:

·         specify a method for determining that a fund is the alternative mandated fund for a specified class of persons (new paragraph 19A(2)(a); and

·         determine requirements for the administration (that is, employer contribution arrangements) for the alternative mandated fund for a class of persons in relation to a default member of that fund in respect of particular employment or the holding of a particular office (new paragraph 19A(2)(b).

38.              New subsection 19A(3) of the PSSAP Act provides that a method specified under paragraph 19A(2)(a) must:

·         require that, to be determined to be the alternative mandated fund for a class of persons, a fund must be a complying superannuation fund (other than a self managed superannuation fund) at a particular time (paragraph 19A(3)(a)); and include:

­    an assessment of funds according to relative fee levels, costs and investment returns (subparagraph 19A(3)(b)(i)); or

­    a comparison of one or more publicly available rankings of funds that take account of relative fee levels, costs and investment returns (subparagraph 19A(3)(b)(ii)).

39.              New subsection 19A(4) provides that without limiting the requirements that can be determined under paragraph 19A(2)(b), the requirements may provide for either or both:

·         the rate at which contributions are payable to an ‘alternative mandated fund’ (subparagraph 19A(4)(a)); and

·         the superannuation salary, or method of determining superannuation salary on which contributions are to be based (subparagraph 19A(4)(b)).

40.              The note under new subsection 19A(4) of the PSSAP Act refers the reader to subsection 13(3) of the Legislation Act 2003 which provides that a person, in making a legislative instrument or notifiable instrument, may identify the class or classes of person to whom a prescribed matter applies.

41.              New subsection 19A(5) of the PSSAP Act provides that if a determination is made under paragraph 19A(2)(b) in relation to a new default fund then the contribution rate has to be not less than the rate of employer contributions that are payable to CSC in respect of an ‘ordinary employer-sponsored member’ of PSSAP. This ensures that the employer contribution arrangements for the new default fund for new employees will align with those that apply in relation to PSSAP.

42.              New subsection 19A(6) of the PSSAP Act provides that, despite subsection 14(2) of the Legislation Act 2003, a determination under subsection 19A(2) may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time.

43.              This necessary because subsection 19A(1) and subparagraph 19A(2)(a) of the PSSAP Act provides for an ‘alternative mandated fund’ to be determined in accordance with a specified method. It is envisaged that the method, for example, could refer to the ranking of superannuation fund MySuper products as published by the ATO. As the ATO updates the rankings on a regular basis it is necessary for the method to determine the ‘alternative mandated fund’ to be able to ‘point’ to the appropriate MySuper product at any given time, not just at the time the legislative instrument determining the method is made.

44.              New subsection 19A(7) of the PSSAP Act specifically provides that a determination under subsection 19A(2) of the PSSAP Act is subject to disallowance by the Parliament under section 42 of the Legislation Act 2003. This is despite item 3 of the table under section 9 of Legislation (Exemptions and Other Matters) Regulation 2015 made for the purposes of paragraph 44(2)(b) of the Legislation Act 2003, which exempts superannuation legislative instruments (other than regulations) from the disallowance process.  This is consistent with the treatment of other public sector superannuation instruments that are exposed to disallowance because of their public interest implications. The disallowance provision is a safeguard that gives the Parliament confidence that the Minister must choose a selection method that is faithful to the requirements. Each House of the Parliament has the chance to judge whether the Minister has chosen objective criteria to ensure a well-performing fund is chosen and to disallow the method if they consider that the method is inappropriate.

45.              Item 6 of the table under section 11 of the Legislation (Exemptions and Other Matters) Regulation 2015 provides that an instrument under section 19A(2) is not subject to sunsetting.

46.              New section 19B of the PSSAP Act provides that if in an instrument is in force under paragraph 19A(2)(a), the Minister has specified a method for determining that a fund is the alternative mandated fund for a class of persons, the designated employer of a default member of that fund in respect of particular employment or the holding of a particular office must pay to the trustee of that fund, in accordance with an instrument (the administration instrument) in force under paragraph 19A(2)(b), any contributions that, under the administration instrument, are payable by the employer in respect of the member.

47.              The note at the end of section 19B of the PSSAP Act refers the reader to subsection 19(2) of the PSSAP Act which defines the ‘designated employer’ of a ‘default member’.

48.              New section 19C of the PSSAP Act sets out when a person is a ‘default member’ of an ‘alternative mandated fund’ in respect of particular employment or the holding of a particular office. Under section 19C of the PSSAP Act a person will be a default member of an ‘alternative mandated fund’ if:

·         the person is included in a class of persons for which there is in place an ‘alternative mandated fund’ (subsection 19C(a));

·         the person would in relation to their employment or office, be eligible to be a member of PSSAP (subsection 19C(b));

·         the person’s employer in making a contribution to the ‘alternative mandated fund’ would rely on subsection 32C(2) of the SG Act (contribution to a default fund) to satisfy the choice of fund requirements in relation to that contribution (subsection 19C(c)); and

·         the person’s salary or wages within the meaning of the SG Act would be taken into account for the purpose of making a calculation under section 19 of that Act (subsection 19C(d)).

49.              Notes 1 and 2 under section 19C are signposts for the reader. Note 1 under section 19C informs the reader that subsection 32C(2) of the SG Act can only be relied on if there is no chosen fund for the person and the most recent notification from the Commissioner of Taxation is that there is no stapled fund for the person. Note 2 under section 19C informs the reader that under section 19D, the ‘alternative mandated fund’ for a class of persons may be the sole eligible choice fund for the employer of a person included in a class of persons.

50.              New subsection 19D(1) of the PSSAP Act sets out when an ‘alternative mandated fund’ is the sole eligible choice fund (default fund) for a person’s employer at a particular time for the purposes of subsection 32C(2) of the SG Act. Subsection 32C(2) of the SG Act relates to an employer making contributions to a eligible choice (default fund) which is in effect where contributions go to a fund’s MySuper product.

51.              An ‘alternative mandated fund’ will be the default fund (MySuper product) for a person’s employer if:

·         in an instrument in force under paragraph 19A(2)(a), the Minister has specified a method for determining a fund is an ‘alternative mandated fund’ for a specified class of persons (subsection 19D(1));

·         the person is included in the specified class of persons (subsection 19D(1));

·         the person’s is an APS employee (subparagraph 19D(1)(a)(i)) or their employment is specified in a written determination made by the Minister (subparagraph 19D(1)(a)(ii));

·         the person is eligible to become a member of PSSAP because of being an APS employee or their particular employment is specified in the written determination (paragraph 19D(1)(b)); and either or both of the following apply:

·   the employer cannot make contributions to PSSAP on behalf of the person because of section 60F of the Superannuation Industry (Supervision) Act 1993 (as a consequence of 2 consecutive failed assessments) (subparagraph 19D(1)(c)(i)); or

·   at an earlier time, the employer relied on subsection 32C(2) of the SG Act to satisfy the choice of fund requirements in relation to a contribution to the ‘alternative mandated fund’ for the benefit of the person (subparagraph 19D(1)(c)(ii)); and

·         the ‘alternative mandated fund’ is covered by a paragraph of section 32D of the SG Act, for example a complying superannuation fund (paragraph 19D(1)(d)).

52.              Under section 19D, depending on circumstances, over time there could be more than one ‘alternative mandated fund’ in relation to APS employees of a particular department. However, it is not usually intended that the ‘alternative mandated fund’ in relation to a specific APS employee will change over time. The examples below explain how section 19D is intended to operate in practice.

Example 8 - Henry

Henry becomes an APS employee (employed by the Department of GHT) on 1 August 2026.

There is no method in place under paragraph 19A(2)(a) of the PSSAP Act for determining an alternative mandated fund.

Therefore, subsection 19D(1) of the PSSAP Act does not apply and PSSAP is the sole eligible choice fund (default fund) under section 16 of the PSSAP Act for the Department of GHT in relation to Henry for the purposes of subsection 32C(2) of the SG Act).

Henry has not chosen a superannuation fund and has no stapled fund. Therefore, subsection 32C(1) and subsection 32C(1A) of the SG Act are not relevant.

To satisfy section 32C of the SG Act, the Department of GHT will have to make employer contributions to the PSSAP (MySuper product) in relation to Henry-in reliance on subsection 32C(2) of the SG Act (contributions to a default fund).

Example 9 - Sally

Sally becomes an APS employee (employed by the Department of GHT) on 1 November 2026.

PSSAP has failed the APRA performance test and cannot accept new members. In accordance with a method specified by the Minister under paragraph 19A(2)(a) of the PSSAP Act, Fund AB (a complying superannuation fund) became the alternative mandated fund (default fund) on 1 October 2026) for persons who become an APS employee on or after 1 October 2026.

Ø  Subsection 19D(1) of the PSSAP Act applies – there is in place an instrument  under paragraph 19A(2)(a) of the PSSAP Act, and Sally is included in the relevant class of persons.

Ø  Subparagraph 19D(1)(a)(i) of the PSSAP Act applies – Sally is an APS employee.

Ø  Paragraph 19D(1)(b) of the PSSAP Act applies - Sally is eligible to become a PSSAP member under subparagraph 13(1)(a)(i) of the PSSAP Act.

Ø  Subparagraph 19D(1)(c)(i) of the PSSAP Act applies – Department of GHT cannot make contributions to the PSSAP (MySuper product) because of section 60F of the SIS Act.

Ø  Paragraph 19D(1)(d) of the PSSAP Act applies – Fund AB is a complying superannuation fund.

Therefore, Fund AB is the sole eligible choice fund (default fund) for Department of GHT in relation to Sally.

If Sally does not choose a superannuation fund (and has no stapled fund), then the Department of GHT makes employer contributions for the purposes of subsection 32C(2) of the SG Act (contributions to a default fund) to Fund AB for Sally.

Note 1– Department of GHT is still able to make employer contributions to PSSAP in relation to Sally if Sally chooses PSSAP as her superannuation fund or PSSAP is her stapled fund.  

Note 2 – Department of GHT is still required to make employer contributions to PSSAP in relation to Henry as he is not in the specified class of persons to which Fund AB applies, and section 60F of the SIS Act does not prevent Department of GHT making employer contributions (to satisfy subsection 32C(2) of the SG Act) to the PSSAP (MySuper product). However, Henry would receive a notification that his fund has failed the performance test and could choose to move to another fund.

Example 10 -Tom

Tom becomes an APS employee (employed by the Department of GHT) on 1 December 2030.

Fund AB has failed the APRA performance test and cannot accept new members. In accordance with a method specified by the Minister under paragraph 19A(2)(a) of the PSSAP Act, Fund XYZ (a complying superannuation fund) became the alternative mandated fund (default fund) on 1 October 2030 for persons who become an APS employee on or after 1 October 2030.

Ø  Subsection 19D(1) of the PSSAP Act applies - there is in place an instrument under paragraph 19A(2(a)) of the PSSAP Act, and Tom is included in the relevant class of persons.

Ø  Subparagraph 19D(1)(a)(i)) of the PSSAP Act applies - Tom is an APS employee.

Ø  Paragraph 19D(1)(b) of the PSSAP Act applies - Tom is eligible to become a PSSAP member under subparagraph 13(1)(a)(i) of the PSSAP Act.

Ø  Subparagraph 19D(1)(c)(i) of the PSSAP Act applies - Department of GHT cannot make contributions to the PSSAP (MySuper product) because of section 60F of the SIS Act.

Ø  Paragraph 19D(1)(d) of the PSSAP Act applies - Fund XYZ is a complying superannuation fund.

Therefore, Fund XYZ is the sole eligible choice fund (default fund) for Department of GHT in relation to Tom.

If Tom does not choose a superannuation fund (and has no stapled fund) then the Department of GHT makes employer contributions for the purposes of subsection 32C(2) of the SG Act (contributions to a default fund) to Fund XYZ (MySuper product) for Tom.

Note 1 – Department of GHT is still able to make employer contributions to PSSAP in relation to Tom if Tom chooses PSSAP as his superannuation fund or PSSAP is his stapled fund. 

Note 2 – Department of GHT is still required to make employer contributions to PSSAP in relation to Henry because he is not covered by the specified class of persons to which either Fund AB (MySuper product) or Fund XYZ (MySuper product) applies, and section 60F of the SIS Act does not prevent Department of GHT making employer contributions (to satisfy subsection 32C(2) of the SG Act) to PSSAP (MySuper product). However, Henry would receive a notification that his fund has failed the performance test and could choose to move to another fund.

Note 3 – Department of GHT is still required to make employer contributions to Fund AB (MySuper product) in relation to Sally because Department of GHT at an earlier time for the purposes of subsection 32C(2) of the SG Act made contributions to Fund AB (MySuper product) and therefore satisfies subparagraph 19D(1)(c)(ii) of the PSSAP Act. However, Sally would receive a notification that her fund has failed the performance test and could choose to move to another fund.

53.              New subsection 19D(2) of the PSSAP Act provides that a determination under subparagraph 19D(1)(a)(ii) is a legislative instrument. New subsection 19D(3) of the PSSAP Act specifically provides that a determination under subparagraph 19D(1)(a)(ii) is subject to disallowance by the Parliament under section 42 of the Legislation Act 2003. This is despite item 3 of the table under section 9 of Legislation (Exemptions and Other Matters) Regulation 2015 made for the purposes of paragraph 44(2)(b) of the Legislation Act 2003, which exempts superannuation legislative instruments (other than regulations) from the disallowance process. This is consistent with the treatment of other public sector superannuation instruments that are exposed to disallowance because of their public interest implications. The disallowance provision is a safeguard that gives the Parliament confidence that the Minister must choose a selection method that is faithful to the requirements. Each House of the Parliament has the chance to judge whether the Minister has chosen objective criteria to ensure a well-performing fund is chosen and to disallow the method if they consider that the method is inappropriate.

54.              Item 6 of the table under section 11 of the Legislation (Exemptions and Other Matters) Regulation 2015 provides that a determination under subparagraph 19D(1)(a)(ii) of the PSSAP Act is not subject to sunsetting.

55.              New subsection 19D(4) of the PSSAP Act defines the term ‘employment’ as having the same meaning as in the SG Act.

56.              Items 22, 23, 24, 25, 26 and 27 make consequential amendments to a number of provisions of the PSSAP Act as result of the insertion of new Part 4A into the PSSAP Act.

57.              Item 22 amends subsection 20(2) of the PSSAP Act, which provides that CSC is responsible for administration of the PSSAP Act. Item 22 inserts the words ‘(other than Part 4A)’ after the words ‘this Act’ in subsection 20(2) of the PSSAP Act to ensure that CSC is not responsible for the administration of Part 4A of the PSSAP Act as Part 4A does not relate to administration of PSSAP.

58.              Item 23 amends paragraph 32(1)(a) of the PSSAP Act. Section 32 of the PSSAP Act relates to the making of certain legislative instruments by the Minister. Paragraph 32(1)(a) of the PSSAP Act provides that section 32 applies to any declaration, determination or instrument made under by the Minister under the PSSAP Act other than under section 10 or 16 of the PSSAP Act. Item 23 amends paragraph 32(1)(a) of the PSSAP Act to make reference to determinations made under Part 4A of the PSSAP Act.

59.              Items 24 and 25 amend section 33 of the PSSAP Act. Section 33 of the PSSAP Act currently enables the Minister to delegate all or any of his powers under the Act or regulations to CSC or certain specified persons.

60.              Item 25 amends section 33 by inserting subsection 33(2) of the PSSAP Act to provide that the Minister cannot delegate his power to make a determination under subsection 19A(1) of the PSSAP Act. This means that the Minister cannot delegate the responsibility to determine a method for determining a default fund.

61.              Item 24 renumbers section 33 to subsection 33(1) as a consequence of subsection 33(2) of the PSSAP Act being inserted by item 25.

62.              Item 26 amends subsection 34(1) of the PSSAP Act. Section 34 of the PSSAP Act currently provides that the costs of the administration of the PSSAP Act and the Trust Deed including the costs of and incidental to the management and investment of the PSSAP Fund are to be paid by CSC out of the PSSAP Fund. Item 26 amends subsection 34(1) to provide that subsection 34(1) does not apply to the costs of administration of Part 4A of the PSSAP Act. The new Part 4A relates to the determination of an ‘alternative mandated fund’ by the Minister and administration arrangements related to that fund.

63.              Section 45 provides that regulations may be made by the Governor‑General prescribing any matters required or permitted to be made by the PSSAP Act or necessary or convenient to be prescribed for carrying out or giving effect to the PSSAP Act. Subsections 45(2) and (3) provides that regulations cannot be made without the consent of CSC unless they meet certain requirements.

64.              Item 27 amends section 45 of the PSSAP Act to insert a new subsection 45(4) of the PSSAP Act to provide that the consent of CSC is not required to regulations prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to Part 4A of the PSSAP Act.

Part 2 – Consequential amendments

65.              Part 2 of the Bill makes consequential amendments to the GAGSS Act and the PBR Act.

66.              Item 28 amends the definition of ‘Act administered by CSC’ in section 4 of the GAGSS Act. Under paragraph (i) of the definition the ‘Superannuation Act 2005’ is included as an Act administered by CSC. Item 28 amends paragraph (i) to provide that the Superannuation Act 2005 (other than Part 4A of that Act) is captured by paragraph (i) of the definition of ‘Act administered by CSC’.

Parliamentary Business Resources Act 2017

67.              Under the Parliamentary Business Resources Act 2017 (BPR Act), a member of the Parliament to which the PS Act applies can elect to sacrifice part (up to 50 per cent) of their base salary and instead have contributions (salary sacrifice) made to a superannuation fund or Retirement Savings Account (RSA). The election must also specify the superannuation fund or RSA to which the salary sacrifice contributions are to be paid to.

68.              Where the election specifies the member’s ‘chosen basic contributions fund’ or ‘default basic contributions fund’ as defined under the PS Act the member does not have to provide evidence that the particular fund will accept the salary sacrifice contributions. As these terms are being repealed from the PS Act, minor consequential amendments are required to the PBR Act. This therefore changes language without changing the effect of the relevant provisions regarding salary sacrifices.

69.              Item 29 repeals the definition of a ‘chosen basic contributions fund’ in section 5 of the PBR Act.

70.              Item 30 inserts the new definition of a ‘chosen fund’ in section 5 of the PBR Act. The term ‘chosen fund’ has the same meaning as in Part 3A of the SG Act.

71.              Item 31 repeals the definition of a ‘default basic contributions fund’ in section 5 of the PBR Act.

72.              Item 32 inserts new definitions of a ‘default fund’ and ‘stapled fund’ in section 5 of the PBR Act. The definition of ‘default fund’, for a person, has the same meaning as in the PS Act. The definition of ‘stapled fund’, for a person, has the same meaning as in the SG Act.

73.              Item 33 omits the redundant term ‘default basic contributions fund’ in paragraph 19(4)(a) of the PBR Act and replaces it with the term ‘person’s default fund or stapled fund’. This will mean that where a person wishes to make additional superannuation contributions to a superannuation fund under the PBR Act by way of a salary sacrifice arrangement, evidence that the fund can accept the additional contributions will not be required if the person elects the additional contributions to be made to their current default fund or stapled fund. This will continue the current intent that applies to additional contributions made to the default basic contributions fund.

74.              Item 34 omits the redundant term ‘chosen basic contributions fund of the person’ in paragraph 19(4)(b) of the PBR Act and replaces it with the term ‘person’s chosen fund’. This will mean that, where a person wishes to make additional superannuation contributions by way of a salary sacrifice arrangement they can be made to their chosen fund.

75.              Item 35 omits the redundant term ‘default basic contributions fund’ in paragraph 22(5)(a) of the PBR Act and replaces it with the term ‘person’s default fund or stapled fund’ for circumstances where a person wishes to change the fund to which superannuation contributions are made.

76.              Item 36 omits the redundant term ‘chosen basic contributions fund of the person’ in paragraph 22(5)(b) of the PBR Act and replaces it with the term ‘person’s chosen fund’ for circumstances where a person wishes to change the fund to which their additional superannuation contributions are made.

Part 3 – Other amendments

Federal Circuit and Family Court of Australia Act 2021

77.              Currently, the words ‘the Judge’s choice of’ in the definition of ‘Commonwealth superannuation contribution’ in subsection 7(1) of Federal Circuit and Family Court of Australia Act 2021 (FCFC Act) preclude the Commonwealth’s superannuation contributions for Judges’ of Division 2 of the Federal Circuit and Family Court of Australia (FCFC) to be paid to a stapled fund or default fund as determined under the SG Act.

78.              Item 37 omits the words ‘the Judge’s choice of’ in the definition of ‘Commonwealth superannuation contribution’ in subsection 7(1) of the FCFC Act.

79.              This will mean that the fund to which the Commonwealth’s superannuation contributions are to paid to will be determined under the general choice of fund (including stapling) arrangements set out under the SG Act.

80.              A Division 2 Judge appointed after the commencement of the amendments will still be able to choose a complying superannuation fund or RSA to which the Commonwealth superannuation contributions are paid. However, where no choice is made when they first join, the Judge’s pre-existing (stapled) fund as notified by the ATO will be the fund to which Commonwealth superannuation contributions are made. In the absence of a chosen fund or a stapled fund, the Commonwealth superannuation contributions will be paid to the employer’s default fund.

81.              The Federal Court as the ‘responsible Department’ under the SG Act is responsible for selecting the default fund for FCFC (Division 2) Judges’. The Federal Court is the ‘responsible Department’ under the SG Act because the remuneration (including superannuation) of FCFC (Division 2) Judges’ is paid from an annual appropriation provided to the Federal Court under annual Appropriation Acts. This is because the Federal Court is responsible for provided shared corporate services to the FCFC.

82.              There are no changes to the Commonwealth superannuation contribution rate for Division 2 Judges and also no changes to the benefits payable under the FCFC Act in respect of a retired disabled Judge or upon the death of a Judge or retired disabled Judge.

Part 4 – Transitional provisions

83.              Item 38 is a transitional provision that provides that a choice notice that was given under the PS Act is to be treated as if it was a notice given by the person under paragraph 32F(1)(a) of the SG Act. This ensures that where a parliamentarian has already chosen a fund under the existing provisions of the PS Act that the fund will also be the person’s chosen fund under the SG Act choice of fund arrangements and the Commonwealth superannuation contributions will continue to be paid to that fund.

84.              Item 39 is a transitional provision that ensures that the default fund specified in the current declaration made prior to the commencement of the amendments to the PS Act will continue to be the default fund for existing parliamentarians covered by the PS Act after the PS Act is amended.

85.              However, the default fund specified in the current declaration will cease to be the default fund for new parliamentarians if the Minister makes an instrument under subsection 17(3) of the PS Act that specifies a method that determined a new default fund for these parliamentarians (subitem 39(3)). The current default fund would cease to be the default fund for new parliamentarians from the date specified in the instrument made under subsection 17(3) of the PS Act.

86.              Subitem 39(3) also provides that if, for example, an instrument made by the Minister under subsection 17(3) of the PS Act specified a method that determined a new default fund for parliamentarians who entered the Parliament after a specified date, then this new default fund rather than the current default fund would be the default fund for those new parliamentarians. In this case, there would be two default funds, one for existing parliamentarians and one for new parliamentarians.