EXPLANATORY STATEMENT

ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION

SUBJECT: SIXTEENTH AMENDING DEED TO THE DEED TO ESTABLISH AN OCCUPATIONAL SUPERANNUATION SCHEME FOR COMMONWEALTH EMPLOYEES AND CERTAIN OTHER PERSONS PURSUANT TO SECTION 5 OF THE SUPERANNUATION ACT 1990

Authority

The Minister for Finance, for and on behalf of the Commonwealth, established an occupational superannuation scheme to provide benefits for certain of the Commonwealth’s employees and for certain other people by Deed dated 21 June 1990 under section 4 of the Superannuation Act 1990.  In this statement the Deed is called “the Trust Deed”.  The occupational superannuation scheme is known as the Public Sector Superannuation Scheme (PSS).

2.      Section 5 of the Superannuation Act 1990 (1990 Act) provides that the Minister for Finance and Administration may amend the Trust Deed by signed instrument, subject to obtaining the PSS Board’s consent to the amendment where necessary.

3.             The Minister has amended the Trust Deed and the Rules for the Administration of the Superannuation Scheme set out in the Schedule to the Trust Deed by the following signed instruments:

4.             On 26 June 2002 the Minister for Finance and Administration amended the Rules for the Administration of the PSS set out in the Schedule to the Trust Deed by signed instrument.  That instrument is called the Sixteenth Amending Deed in this statement.

5.             Section 5 of the 1990 Act deals with amendments made to the Trust Deed.  This section allows the Minister to amend the Trust Deed provided that the PSS Board has consented to the amendment.  However, paragraph 5(1A)(b) prescribes a number of exemptions where the PSS Board’s consent is not required to an amendment to the Trust Deed.

6.             Sub-paragraph 5(1A)(b)(i) exempts an amendment that relates to a payment by an employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993 (the SIS Act)) that will, after the making of the amendment, be required or permitted to be made under the 1990 Act.  Subsection 5(1B) provides that for the purposes of that sub-paragraph a payment under the Trust Deed or the Rules is taken to be a payment by an employer-sponsor.

7.             The amendments included in the Sixteenth Amending Deed prevent the payment of member contributions, and therefore the accrual of employer benefits, after age 70.  This amendment is necessary to ensure that the PSS continues to comply with the requirements of the SIS Act.  Also included are amendments which will permit eligible temporary residents to access their PSS preserved benefits, including the employer component, on permanent departure from Australia.  As employer benefits are payable under the PSS Rules and are paid by the Commonwealth, the amendments relate to a payment by an employer-sponsor because of subsection 5(1B).  The amendments therefore did not require the consent of the PSS Board.

Date of Effect of the Sixteenth Amending Deed

8.             Clause 1 specifies that the amendments of the Rules made by the Sixteenth Amending Deed come into effect on the later of:

(a)          the date of gazettal; and

(b)          1 July 2002.

Amendments to the Rules

Background

9.             Regulations under the Superannuation Industry (Supervision) Act 1993 (SIS Act) were amended in 2002 to allow:

(a)          working people aged over 70 but less than 75 to make personal contributions to superannuation;

(b)          eligible temporary residents to take their preserved superannuation benefit in cash on permanent departure from Australia.

10.         The Sixteenth Amending Deed amended the PSS Rules to prevent PSS members from accruing employer benefits after reaching age 70, as this is not permitted under the SIS Regulations.  As employer benefits in the PSS are linked to member contributions, it was necessary to prevent PSS members from paying member contributions after reaching age 70 to avoid an accrual of employer benefit.  It is proposed that a later Amending Deed will allow voluntary member contributions for those PSS members who have reached age 70, without any additional employer benefit accruing to the member.  This Deed will be made if the PSS Board consents to the necessary amendments.

11.         The Sixteenth Amending Deed also amended the PSS Rules to allow former PSS members to access their preserved benefit on permanent departure from Australia, provided that the payment is permitted by the SIS Act.

AMENDMENTS TO THE RULES – DETAILED DESCRIPTION

Age 70 changes

12.         Division 1 of Part 4 specifies when contributions must be paid by members.  Employer benefits in the PSS are linked to the payment of member contributions.

13.         Subclause 2.1 replaced Rule 4.1.1 to add the requirement that contributions should not be paid after a member reaches age 70.  Subclause 2.2 added the same requirement to Rule 4.1.5, to ensure that member contributions are not permitted to be paid after a member reaches age 70.

Permanent departure overseas

14.         Division 1 of Part 8 specifies when a PSS preserved benefit becomes payable to a preserved benefit member.

15.         Subclause 2.3 replaced paragraph (e) of Rule 8.1.1 to allow former PSS members who have departed Australia permanently to access their preserved benefit on, provided that the payment is permitted by the SIS Act.  This approach ensures that eligible temporary residents will be able to take their preserved superannuation benefit in cash on permanent departure from Australia, in accordance with the requirements of the SIS Regulations.