EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Finance and Administration
Future Fund Act 2006
Proclamation
Subsection 2(1) of the Future Fund Act 2006 (the Act) provides that sections 3 to 85 of the Act commence on a day to be fixed by proclamation. Subsection 2(1) also provides that Schedules 1 to 3 to the Act commence automatically at the same time as sections 3 to 85. However, if these provisions are not commenced within six months of the date the Act receives the Royal Assent, they commence on the first day after the end of that six month period. The Act received the Royal Assent on 23 March 2006.
The purpose of the Proclamation is to fix 3 April 2006 as the day on which sections 3 to 85 of the Act commence.
The Act gives effect to the Government’s commitment to establish a dedicated financial asset fund to meet unfunded superannuation liabilities. The Act establishes:
- the Future Fund (the Fund), which is a financial asset fund consisting of cash and investments of the Fund;
- the Future Fund Board of Guardians (the Board) as a body corporate with statutory responsibility for managing the investments of the Fund; and
- the Future Fund Management Agency (the Agency) as a statutory agency with responsibility for assisting and advising the Board.
Sections 3 to 9 (Part 1) of the Act deals with the object of the Act, definitions and the meaning of financial assets.
Sections 10 to 13 (Part 2) outline the establishment of the Fund and the Special Account and the operation of the Fund.
Sections 14 to 32 (Part 3) deal with matters relating to the investment of the Fund including the objects of investment of the Fund, management of investments of the Fund, the Investment Mandate, restrictions, investment policies, securities lending arrangements, the use of investment managers, exemption from taxation, entitlement to franking credits and realisation of non-financial assets.
Sections 33 to 72 (Part 4) outline the establishment and functions and powers of the Board, terms and conditions for Board members, the process for meetings and resolutions without meetings, reporting obligations of the Board, duties of Board members and processes for dealing with conflicts of interests.
Sections 73 to 82 (Part 5) deal with the establishment and functions of the Agency, the management and staff of the Agency and other provisions such as the application of the Financial Management and Accountability Act 1997, annual reporting of the Agency and the engagement of consultants and advisers to the Board.
Sections 83 to 85 (Part 6) deal with miscellaneous matters including the determination of a Nominated Minister for various provisions of the Act, the crediting of miscellaneous receipts to the Fund and the making of regulations under the Act.
Schedule 1 explains credits of amounts and transfers of financial assets to the Fund whilst Schedule 2 deals with debits of amounts from the Fund. Schedule 3 establishes the concept of the Target Asset Level Declaration, which represents a declaration by an independent actuary of the amount that is expected to offset the present value of projected unfunded superannuation liabilities.
The commencement date of 3 April 2006 allows time to ensure that the Board and Agency are in a position to be able to independently carry out their respective duties when the Act effectively commences.
The Proclamation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Overview
The Future Fund Act 2006 was enacted by the Parliament of Australia and received Royal Assent on 23 March 2006. This legislation was introduced to address the need for a dedicated financial asset fund to meet unfunded superannuation liabilities. The Act aims to establish the Future Fund, a financial asset fund consisting of cash and investments, to be managed by the Future Fund Board of Guardians, with the support and advice of the Future Fund Management Agency. The primary objective of the Act is to ensure the establishment of a robust and sustainable financial asset fund capable of offsetting the present value of projected unfunded superannuation liabilities, thereby contributing to the long-term financial stability of the nation's superannuation system.
The Proclamation issued under the authority of the Minister for Finance and Administration fixes 3 April 2006 as the commencement date for sections 3 to 85 of the Act. This allows sufficient time for the Board and Agency to be fully operational and ready to independently carry out their respective duties. The Act covers various aspects, including the establishment and operation of the Fund, the investment policies and restrictions, the roles and responsibilities of the Board and Agency, and miscellaneous provisions such as the determination of a Nominated Minister for various provisions of the Act. Schedules 1 to 3 further elaborate on credits to the Fund, debits from the Fund, and the concept of the Target Asset Level Declaration, which represents an independent actuary's declaration of the amount expected to offset the present value of projected unfunded superannuation liabilities.
Scope and Application
The Future Fund Act 2006 applies to the establishment and management of the Future Fund, its Board of Guardians, and the Future Fund Management Agency. It sets out the legal framework for the creation of a financial asset fund designed to meet unfunded superannuation liabilities. The Act applies to the Future Fund Board of Guardians, as a statutory body corporate responsible for managing the investments of the Fund, and the Future Fund Management Agency, a statutory agency tasked with assisting and advising the Board. These provisions commence on 3 April 2006, as fixed by proclamation, to ensure the Board and Agency are operational and ready to execute their statutory responsibilities. The Act's scope extends to the Fund's investment strategies, Board governance, and Agency operations, and it includes definitions, operational guidelines, and regulatory requirements applicable to these entities. The Act’s provisions are applicable nationally as they concern Commonwealth entities, and its regulatory reach is further extended through subordinate instruments and regulations that may be made under the Act.
Key Provisions
The Future Fund Act 2006 (the Act) outlines the establishment and operation of the Future Fund, its Board of Guardians, and the Future Fund Management Agency. Sections 3 to 85 of the Act, which include the establishment of the Future Fund and its Board of Guardians, commence on a date fixed by proclamation (s 2(1)). In this case, the proclaimed commencement date is 3 April 2006 (Proclamation). The Act establishes the Future Fund as a financial asset fund designed to meet unfunded superannuation liabilities (s 10). The Board of Guardians, a body corporate, is responsible for managing the investments of the Fund (s 11), while the Future Fund Management Agency assists and advises the Board (s 73).
The Act imposes various obligations on the Board of Guardians and the Future Fund Management Agency. The Board must manage the investments of the Fund in accordance with the Investment Mandate and must establish and adhere to investment policies (ss 20, 22). The Board is also required to report on the Fund's activities and to deal appropriately with conflicts of interest (ss 50, 53). The Agency, on the other hand, is tasked with assisting and advising the Board, ensuring compliance with the Act, and providing necessary management and staff support (ss 73, 74). Both the Board and the Agency must ensure that the Fund's operations are transparent and accountable to the public.
Breaches of the Act may result in civil or criminal consequences. For instance, if a Board member fails to act in the best interests of the Fund, they may be subject to civil penalties (s 57). Similarly, if the Agency does not comply with its statutory obligations, it may face enforcement actions (s 77). Additionally, the Act provides for the imposition of fines for non-compliance, with the specific penalties varying depending on the nature and severity of the breach. For example, the maximum penalty for contravening certain investment restrictions is a fine of up to 500 penalty units (s 25). The Act also empowers the courts to impose penalties for serious breaches, including fines of up to 10,000 penalty units or imprisonment for up to five years (s 86).