Statutes Amendment (Fund Selection and Other Superannuation Matters) Bill

Final Stages

Consideration in committee of the Legislative Council's amendments and suggested amendments.

The CHAIR: For the information of the committee, we have from the Legislative Council five amendments and 19 suggested amendments.

The Hon. V.A. CHAPMAN: I move:

That the Legislative Council's amendments and suggested amendments be agreed to.

I note the amendments to the bill presented from the other place and indicate that on this side of the house we accept the amendments.

The Hon. S.C. MULLIGHAN: I rise to make a few brief remarks about these amendments and what they seek to do to the bill, which has been considered initially here and then in the other place. As we have previously canvassed in this place, this bill seeks to provide a limited amount of choice for superannuants who are employed in the public sector. By its very nature, not just because it involves superannuation but because the employees affected by this bill have very different remuneration and superannuation arrangements, this bill has needed to be quite complex and technical in order to give the desired effect of the government's proposal.

You would recall, Chair, that the government's proposal in this regard is to allow a member of the public sector, as specified in the bill, the opportunity of taking their employer's mandatory superannuation contributions and investing them with an alternative superannuation fund other than the Super SA funds that are available. This has received a mixed response not just in this place but also amongst public sector employees. It has been greeted by some public sector groups quite warmly.

Perhaps the best example I can give of that is nurses, of course, because many thousands of nurses are not just employed in the public sector by public health institutions but are also employed in other capacities in other private health institutions and out of necessity under the existing arrangements they have had more than one superannuation fund—one administered by Super SA and one administered outside Super SA by virtue of their private employment. This gives those employees, for example, the opportunity to consolidate their arrangements, if they wish, outside Super SA.

The bill has had to be amended to make clearer the arrangements by which somebody can both elect that their compulsory superannuation contributions from the public sector as an employer can be directed to an alternative outside fund and try to set out some more specific arrangements for other public sector groups that have specific arrangements. This is where the bill enjoys less support than perhaps from those health workers I just mentioned. The best example of this is police.

Over past years, police have had remuneration arrangements whereby through their superannuation they were afforded more comprehensive insurance arrangements for their income and for their employment, quite obviously because of the dangerous nature of their job. The concern is that, if a police officer were to take advantage of the regime provided for in the bill and choose to have their superannuation contributions directed to a fund outside the public sector, they might not have sufficient contributions remaining within Super SA so that they can continue their insurance coverage should something happen to them in the line of duty, so to speak.

That has been a significant point of consternation between the Police Association and the government around the bill. The government has attempted, as far as I can understand, to better particularise and articulate how exactly that mechanism is meant to work.

As far as I understand it—and this is a question that I will have for the Deputy Premier so I can effectively talk about it now and she can take it on notice—there is a concern amongst police officers and their representatives that there is no requirement for Super SA to proactively notify a police officer whether they have a sufficient balance in their Super SA account in order to maintain that insurance coverage.

If a police officer elects to have their mandatory contributions provided to an outside superannuation fund, the idea would be that some balance is retained within Super SA in order to pay for the insurance premiums so that they could have appropriate insurance coverage to protect them as they carry out their duty.

It would be very difficult, of course, for a police officer to try to estimate how much money should be retained within Super SA in order to maintain that insurance coverage and then work out how much money could be directed outside of Super SA to another complying superannuation fund in the private sector and how much should be retained in Super SA. There has been an ongoing concern from police about whether Super SA will be obliged under the bill, as it is to be amended, if these amendments are supported, to notify police officers on a regular basis—for example, perhaps annually—how much money needs to be retained in a Super SA account in order to maintain that insurance coverage. That is a critical issue.

I have to say that the broader public sector union, the Public Service Association, seems somewhat resigned to this change, given that the government is supporting it and there is obviously sufficient crossbench support in the other place to support this measure. Of course, there is a very great risk for the public sector association, or should I say for its members, that a move to allow Super SA not only to allow members to leave but also to allow members to consolidate their external holdings from outside the public sector superannuation environment from a private fund into the public environment, may elicit the interest of the commonwealth government.

Chair, you may be aware that South Australia, as far as I am able to tell, is the last parliament and the last public sector regime around the country—other than for some discrete funds, such as judges, etc.—that enjoys what is called constitutional protection, and that is protection from the regular taxation environment of superannuation contributions as they are paid by an employer. To put that into slightly better and more succinct English, currently all public servants in South Australia are not obliged to pay the 15 per cent contributions tax on superannuation contributions.

That is very different from what happens for private sector employees in South Australia and around the rest of the country. There is a great concern that moving in this area to allow choice of fund out of the fund, but also to allow consolidation in private funds into the fund of active contributors to Super SA, may mean that the federal government is finally agitated enough about the issue to remove South Australia's much appreciated tax-free environment.

What would that mean, roughly? If the $8½ billion or so that is spent across the public sector on employee expenses were to be taxed for superannuation contributions, in very rough terms that would equate to an increased tax burden on more than 100,000 South Australians of about $100 million a year.

That would obviously be a very big hit to prospective South Australian retirees' retirement incomes in the future and, of course, not a bad little revenue boom if you are a federal treasurer. The only thing that bestows constitutional protection is the fact that South Australia's schemes are listed in a schedule, which is subject to some federal regulations regulating superannuation arrangements. That is to say that it can be done by the stroke of a pen of a federal Treasurer, assistant treasurer or minister for finance, who may have carriage of these matters, to change those regulations and remove that constitutional protection and have it laid before both houses.

The claim being made in the other place by Rob Lucas is that if that were ever to happen to South Australia—and of course it has happened around the country for all of the other states—those regulations could be disallowed. Grateful as we are to have representation in both houses of federal parliament, I cannot see the majority of members from other states and territories in both chambers thinking, 'I should really stick my neck out for those South Australians who are enjoying the last of the tax-free environments.' I cannot see that happening and I certainly cannot see it happening where it is done by a government, which enjoys a majority in the lower house, or, even if they did not enjoy a majority in the Senate, that the Senate would want to do that.

This is a risk. It is a risk that we have continued to raise. We have resisted successive treasurers over the last 20 years as they have come looking for this. We have had to negotiate agreements with federal treasurers not to do this and the quid pro quo of their not doing this is not messing around with our superannuation arrangements.

I do not detract from the choice that this bill seeks to give South Australian superannuants who are employed in the public sector. Of course, that is going to be attractive for some people. Of course, many people take the view that they are better off in charge of their own superannuation funds, their own retirement moneys, themselves. I respect that view. But the risk to the rest, the risk to more than 100,000 South Australians, is that we may lose this constitutional protection.

I will not stand in the way of these amendments. I am happy to let the government in this place progress them and get them through because I think we have read the room with regard to this, but I do want to continue placing on the record that concern. In the very brief time that is left to us before the break, if the Deputy Premier were able to answer the first query that I raised about providing information to police officers, I would be most grateful.

The Hon. V.A. CHAPMAN: I do not think any new matter has been raised by the member, but I am happy to go through it, although there will not be sufficient time before lunch to be able to do that.

It is accurate to say that the union representing the Police Association has raised a number of matters during the course of the debate and the progress of this bill, because obviously police officers, for the reasons that have been explained, enjoy a number of extra entitlements and have special arrangements, so it is not surprising that their union or their association would want to make sure that there are protections for their members. We fully understand that. But they have been traversed at length in the other place.

I know the member again raises a concern about the obligation to notify and how often it should be in relation to a member's entitlement and obligation to be able to keep sufficient balance for the purposes servicing the liability that he has referred to. These matters have been well and truly canvassed. I do not think I can actually add any more. He raises concerns about the fragility of having a regulation disallowance process. I cannot make that any clearer, and I think the Treasurer has made a comment about that in the other place as well.

I thank the member for his contribution and indication of support of the amendments. There is merit, as he suggests, in relation to allowing the members here to have a choice. This bill will effect that. I thank the opposition for their indication of support and move that the amendments be accepted.

Motion carried.

Sitting suspended from 13:00 to 14:00.