explanatory statement

Issued by the authority of the Minister for Finance and Administration

Superannuation Act 1976

Declaration under paragraph (ec) of the definition of eligible employee included in subsection 3(1)

The Superannuation Act 1976 (the Act) makes provision for and in relation to the Commonwealth Superannuation Scheme (CSS) for Australian Government employees and for certain other persons.

Subsection 3(1) of the Act contains the definition of the term ‘eligible employee’ that describes various classes of persons who may contribute to the CSS (ie CSS members).  Paragraph (ec) of the definition provides that the Minister may declare a class of persons to be CSS members.

The Superannuation (CSS) (Eligible Employees – Inclusion) Declaration 2003 (the Principal Declaration) identifies the persons who are declared CSS members under paragraph (ec) of the definition of eligible employee. In most cases the classes of persons declared to be CSS members in respect of particular employment will not include persons who are, or who are required to become, a member of a ‘superannuation scheme’ in respect of that employment and persons who become a member of such a ‘superannuation scheme’ at a later date.

The purpose of the Superannuation (CSS) (Eligible Employees – Inclusion) Amendment Declaration 2005 (No. 1) (the Amending Declaration) is to amend the Principal Declaration to ensure that the choice of superannuation fund requirements do not change the intention of the Principal Declaration.

Subsections 4(1) and (2) of the Principal Declaration identify the classes of persons who qualify as CSS members.  Persons cannot be CSS members if they are or are required to be a member of a ‘superannuation scheme’ as defined in section 3(1) of the Principal Declaration.  The definition of the term ‘superannuation scheme’ in the Principal Declaration relies on a ‘superannuation scheme’ applying to a person because they are engaged in certain employment.  The definition does not cover contributions to a superannuation fund where there is no common employment-related feature shared by the members or a Retirement Savings Account (RSA).

From 1 July 2005, most employers making superannuation guarantee contributions on behalf of an employee will be required to provide employees with a choice of superannuation fund to which those contributions will be paid.  Employer contributions made to the CSS, the Public Sector Superannuation Scheme (PSS) or in accordance with the Superannuation (Productivity Benefit) Act 1988 (PB Act) are exempt from the choice of superannuation fund requirements.  Employers who have employees in alternative arrangements are likely to have to comply with the choice of superannuation fund requirements in respect of those employees.

Persons excluded from the CSS by membership of a ‘superannuation scheme’ related to their employment in accordance with the definition of ‘superannuation scheme’ in the Principal Declaration may not continue to be excluded if they exercise choice to move to a superannuation fund that is not a scheme applying to that person because they are engaged in that employment.  If the definition of ‘superannuation scheme’ is not changed to recognise that most employees are to be offered choice of superannuation fund from 1 July 2005, the result could be that these employees may unintentionally become CSS members.

From 1 July 2005, the Amending Declaration amends the definition of ‘superannuation scheme’ and introduces a new definition, ‘alternative superannuation scheme’, so as to cover any superannuation fund or RSA.

The Amending Declaration generally provides that persons specified in the Principal Declaration will continue to be CSS members if employer contributions made in relation to particular employment are not paid to an ‘alternative superannuation scheme’.

The Amending Declaration includes some technical amendments to clarify some provisions in the Principal Declaration.

The Amending Declaration has been prepared in consultation with the Office of Legislative Drafting and Publishing.  No further consultation is required as the instrument is machinery in nature and does not substantially alter existing arrangements.

The Amending Declaration is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Amending Declaration commences on 1 July 2005.

The details of the Amending Declaration are explained in the Attachment.

Attachment

Superannuation (CSS) (Eligible Employees – inclusion) Amendment Declaration 2005 (No. 1)

Section 1

This section provides that the name of the Declaration is the Superannuation (CSS) (Eligible Employees – Inclusion) Amendment Declaration 2005 (No. 1).

Section 2

This section provides for the Declaration to commence on 1 July 2005.

Section 3

This section provides that Schedule 1 of the Declaration amends the Superannuation (CSS) (Eligible Employees – Inclusion) Declaration 2003 (the Principal Declaration).

Schedule 1 – Amendments

Item 1 inserts a definition of alternative superannuation scheme into subsection 3(1) of the Principal Declaration.  The definition is used in some of the provisions in Schedule 1 of the Principal Determination to exclude certain persons from being eligible employees (ie CSS members).  The definition is limited to a superannuation scheme that is receiving contributions in relation to a person’s employment or holding of an office.

There are some exceptions to the definition so that a person having contributions made to a superannuation scheme that would otherwise be an alternative superannuation scheme remains an eligible employee.  These exceptions were previously included in the definition of ‘superannuation scheme’ and various subparagraphs in subsection 4(2) of the Principal Declaration which are amended by items 6 to 15.  These exceptions are:

·        contributions made to a superannuation scheme in relation to another employment or holding of another office;

·        where membership of a superannuation scheme is only for the preservation or payment of productivity related benefits as defined in section 110A of the Superannuation Act 1976;

·        participation in a superannuation scheme on behalf of a member solely for the employer satisfying their obligations under the Superannuation Guarantee (Administration) Act 1992;

·        a superannuation scheme to which contributions are made in relation to a person only in relation to performance pay; or

·        for a prescribed person (see item 3), a superannuation scheme to which a person is taken to be a member for top-up purposes (salary sacrifice arrangements) under subsection 3(2).

Item 2 inserts a definition of member in relation to a Retirement Savings Account (RSA) into subsection 3(1) of the Principal Declaration.  The definition includes as a member of a superannuation scheme a person who holds an RSA.

Item 3 amends the definition of performance pay in subsection 3(1) of the Principal Declaration to include a payment made under an agreement under Part VIB of the Industrial Relations Act 1988 that was in force before 15 November 1996.

Item 3 also inserts a definition of prescribed person into subsection 3(1) of the Principal Declaration.  This item is used to limit the exception in subparagraph (b)(v) of the definition of alternative superannuation scheme to persons who can choose whether to take part of their remuneration in a non-monetary form.  This removes the need for subsection 4(3) of the Principal Declaration.  As a consequence of the amendments made by item 3, item 16 omits subsection 4(3) of the Principal Declaration.

Item 4 substitutes a new definition of superannuation scheme in subsection 3(1) of the Principal Declaration to mean any scheme, fund or arrangement that pays superannuation or retirement benefits and expands the definition to include an RSA within the meaning of the Retirement Savings Account Act 1997.

Item 5 omits subsection 3(4) from the Principal Declaration as a consequence of the new definition of alternative superannuation scheme and its application.

Subsection 4(2) of the Principal Declaration identifies those classes of people who become CSS members under the Principal Declaration.  A number of provisions exclude people from CSS membership under the Principal Declaration if they are members of a superannuation scheme, as currently defined in the Principal Declaration, except if:

·        the superannuation scheme is the CSS or a scheme to which contributions are made in relation to the person only in relation to performance pay; or

·        the person is a person who can choose whether to take part of their remuneration in a non-monetary form and the scheme membership is taken to be for top-up purposes.

These exclusions are now included in the definition of alternative superannuation scheme.  Items 6 to 15 amend various subparagraphs in subsection 4(2) of the Principal Declaration to replace the existing provisions with a reference to membership of an alternative superannuation scheme.