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representatives vote 2021-06-03#15
Edited by
mackay staff
on
2021-06-12 09:21:33
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Title
Adjournment — Consideration in Detail- Treasury Laws Amendment (Your Future, Your Super) Bill 2021 - Consideration in Detail - "Best financial interests" definition
Description
<p class="speaker">Craig Kelly</p><p>by leave—I move amendments (2) and (3), as circulated in my name, together:</p><p class="italic">(2) Schedule 1, item 18, page 9 (after line 22), after section 32R, insert:</p>- The majority voted in favour of *disagreeing* with [amendments](https://www.openaustralia.org.au/debate/?id=2021-06-03.140.1) introduced by Warringah MP [Zali Steggall](https://theyvoteforyou.org.au/people/representatives/warringah/zali_steggall) (Independent), which means they failed.
- MP Steggall [explained her amendment](https://www.openaustralia.org.au/debate/?id=2021-06-03.140.1):
- > *These amendments are in respect of the change that is identified in relation to the definition of 'best financial interests' duty. Item 9 of the amendment bill omits 'best interests' and replaces it with 'best financial interests' in the Superannuation Industry (Supervision) Act 1993. The government states that it wishes to increase the accountability of trustees in their day-to-day operations and investing members' money. Whilst this may, at first blush, appear sensible, it has significant potential consequences for the interests and wellbeing of super members and is in fact not founded on any recommendation or proper basis. This is because, when considering whether something is in best financial interests alone, we also capture a large number of activities and investments that exist in a grey area and that may in fact be beneficial to members of super funds but are potentially now going to be excluded as a result of this amendment. For example, an ethical super fund purchasing carbon offsets or spending money planting trees to reduce emissions to achieve an overarching goal of reaching a net zero emissions goal around their investment portfolio—something which the member would arguably want—could now be prohibited under the best financial interests covenant, unless we have a major change from this government, in accepting putting a price on carbon or in actually ensuring that there is proper financial recognition of the impact of our emissions.*
- ### What does the bill do?
- According to the [bill homepage](https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:legislation/billhome/r6672), the bill was introduced to:
- * *provide that if a new employee has an existing 'stapled' superannuation fund and does not choose a fund to receive contributions, their employer is required to make contributions on behalf of the employee into the stapled fund; and ensure that employers are not in breach of various rules, or are not liable for superannuation guarantee charge, in certain circumstances;*
- * *require the Australian Prudential Regulation Authority to conduct an annual performance test for MySuper products and other products to be specified in regulations;*
- * *require trustees of registrable superannuation entities and self managed superannuation funds and directors of the corporate trustee of a registrable superannuation entity to perform their duties and exercise their powers in the best financial interests of the beneficiaries;*
- * *reverse the evidential burden of proof for the best financial interests duty so that the onus is on the trustee of a registrable superannuation entity;*
- * *allow regulations to be made to prohibit certain payments made by trustees of registrable superannuation entities and prescribe additional requirements on trustees and directors of trustee companies of registrable superannuation entities;*
- * *allow contraventions of record-keeping obligations specified in regulations to be subject to a strict liability offence; and*
- * *remove an exemption from disclosing information about certain investments under the portfolio holdings disclosure rules.*
<p class="italic">32S Excluded occupations</p><p class="italic">(1) This section applies in relation to an employer and an employee if the employee is employed in an occupation where the rate of death in the workplace is more than one in 100,000 per year, averaged over a five-year period, as determined by the Australian Government Actuary.</p><p class="italic">(2) For the purposes of this Act, the most recent notification to the employer:</p><p class="italic">(a) by the Commissioner; and</p><p class="italic">(b) relating to a request by the employer (or by the employer's agent) for the Commissioner to identify any stapled fund for the employee;</p><p class="italic">is taken to be that the Commissioner is satisfied that there is no stapled fund for the employee.</p><p class="italic">(3) On 1 July each year, the Australian Government Actuary must publish a list of occupations where the rate of death in the workplace is more than one in 100,000 per year, averaged over a five-year period.</p><p class="italic">(4) An employee in an occupation identified by this section is considered not to have a stapled fund.</p><p class="italic"> <i>Note: The intent of amendment 2 is to ensure that the stapling provisions do not apply to workers employed in dangerous occupations.</i></p><p class="italic">(3) Schedule 3, items 18 and 19, page 32 (lines 6 to 24), after section 117A, insert:</p><p class="italic">117B Excluded occupations</p><p class="italic">(1) Regulations made for the purposes of section 117A may not prescribe any investment or type of investment, under any circumstances, in any of the following industries:</p><p class="italic">a. mining;</p><p class="italic">b. agriculture;</p><p class="italic">c. energy production;</p><p class="italic">d. oil or gas extraction;</p><p class="italic">e. oil or gas refining;</p><p class="italic">f. steel or mineral refining;</p><p class="italic">g. cement or concrete products;</p><p class="italic">h. salt mining and refining;</p><p class="italic">i. defence industries;</p><p class="italic">j. shipbuilding;</p><p class="italic">k. firearms and ammunition production;</p><p class="italic">l. hunting and the export of kangaroo meat;</p><p class="italic">m. manufacturing;</p><p class="italic">n. horticulture;</p><p class="italic">o. aquaculture;</p><p class="italic">p. grain handling;</p><p class="italic">q. sugar industries;</p><p class="italic">r. timber and paper products;</p><p class="italic">s. pet food manufacturing;</p><p class="italic">t. rubber, plastic and cable-making industries;</p><p class="italic">u. hair and beauty;</p><p class="italic">v. dredging and port authorities;</p><p class="italic">w. fisheries;</p><p class="italic">x. retail;</p><p class="italic">y. textiles;</p><p class="italic">z. telecommunications;</p><p class="italic">aa. information technology;</p><p class="italic">bb. pharmaceuticals and health products;</p><p class="italic">cc. construction services;</p><p class="italic">dd. science, education, and universities;</p><p class="italic">ee. Australian cultural productions;</p><p class="italic">ff. dams and weirs;</p><p class="italic">gg. deep sea fishing;</p><p class="italic">hh. live cattle, sheep, and other animal exports;</p><p class="italic">ii. train manufacturing;</p><p class="italic">jj. electric vehicle manufacturing;</p><p class="italic">kk. tourism;</p><p class="italic">ll. accommodation;</p><p class="italic">mm. healthcare;</p><p class="italic">nn. childcare;</p><p class="italic">oo. infrastructure;</p><p class="italic">pp. road or rail transport; or</p><p class="italic">qq. air or sea transport.</p><p class="italic"><i>Note: The intent of amendment 3 is to prevent the use of the regulation-making power prohibiting an investment in any of the specified industries.</i></p><p>When I was 14 years of age, my family moved out of my family home. I could no longer go to my old school. But one of the guys that was working for my father at the time, a gentleman called Paul, was about three years older than me. He came and picked us up every day and drove me to school and drove me home. He was like a bit of an elder brother. A year later, he was involved in a car accident while doing a delivery to Newcastle. He lost his arm and lost part of the sight in his right eye. I've seen, over my career before I came to this place, many terrible accidents in the workplace. When I look at this legislation, there is a risk—and I acknowledge it's a small risk, but it only has to be one person—that, when we staple someone's funds, we will also staple their insurance policy. And there is a risk that, when someone moves from a job in an office—where the risk could be a paper cut or the photocopier lid closing down hard on their arm—to a dangerous occupation, they could suffer an injury and they might be underinsured. My conscience will not allow me to vote for any legislation that allows that risk, even if it is for one person. I hope I have support from the entire House on that.</p><p>On amendment (3), I agree that we should be very careful in government about giving powers to ourselves to make decisions that override the private economy. I appreciate there are many decisions that we see from the large union-controlled super funds that are not necessarily in the best interests. Rather than get rid of that whole section, I have suggested that we have a list of special industries that are excluded from this provision. They would include mining; oil and gas extraction; oil and gas refining; cement and concrete products; hunting and the export of kangaroo meat; rubber, plastic and cable making industries; dredging and port authorities; dams and weirs; live cattle, sheep and other animal exports; and, of course, health and beauty. There is a longer list which everyone can read. I commend those amendments to the House.</p> <p class="speaker">Trent Zimmerman</p><p>The question is that the amendments be disagreed to.</p><p>Question agreed to.</p> <p class="speaker">Zali Steggall</p><p>by leave—I move amendments (1) to (14), as circulated in my name, together:</p><p class="italic">(1) Schedule 3, heading, page 29 (line 1), omit "Best financial interests duty", substitute "Duties of trustees".</p><p class="italic">(2) Schedule 3, item 9, page 30 (lines 21 and 22), omit the item.</p><p class="italic">(3) Schedule 3, item 11, page 31 (line 1), omit "<i>financial</i>".</p><p class="italic">(4) Schedule 3, item 13, page 31 (lines 14 and 15), omit the item.</p><p class="italic">(5) Schedule 3, item 15, page 31 (line 21), omit "<i>financial</i>".</p><p class="italic">(6) Schedule 3, item 16, page 31 (lines 26 and 27), omit the item.</p><p class="italic">(7) Schedule 3, item 17, page 32 (line 1), omit "<i>financial</i>".</p><p class="italic">(8) Schedule 3, item 20, page 32 (line 28), omit "financial".</p><p class="italic">(9) Schedule 3, item 20, page 33 (line 1), omit "financial".</p><p class="italic">(10) Schedule 3, item 20, page 33 (line 10), omit "financial".</p><p class="italic">(11) Schedule 3, item 21, page 33 (line 14), omit "financial".</p><p class="italic">(12) Schedule 3, item 21, page 33 (line 18), omit "9, 11, 16", substitute "11".</p><p class="italic">(13) Schedule 3, item 21, page 33 (line 23), omit "amendments made by items 13 and 15 of this Schedule apply", substitute "amendment made by item 15 of this Schedule applies".</p><p class="italic">(14) Schedule 3, item 22, page 34 (line 16), omit "financial".</p><p>These amendments are in respect of the change that is identified in relation to the definition of 'best financial interests' duty. Item 9 of the amendment bill omits 'best interests' and replaces it with 'best financial interests' in the Superannuation Industry (Supervision) Act 1993. The government states that it wishes to increase the accountability of trustees in their day-to-day operations and investing members' money. Whilst this may, at first blush, appear sensible, it has significant potential consequences for the interests and wellbeing of super members and is in fact not founded on any recommendation or proper basis. This is because, when considering whether something is in best financial interests alone, we also capture a large number of activities and investments that exist in a grey area and that may in fact be beneficial to members of super funds but are potentially now going to be excluded as a result of this amendment. For example, an ethical super fund purchasing carbon offsets or spending money planting trees to reduce emissions to achieve an overarching goal of reaching a net zero emissions goal around their investment portfolio—something which the member would arguably want—could now be prohibited under the best financial interests covenant, unless we have a major change from this government, in accepting putting a price on carbon or in actually ensuring that there is proper financial recognition of the impact of our emissions.</p><p>I don't think the change that is proposed in this bill by the government is necessary. Commissioner Hayne was clear that he saw the existing best interests covenant as adequate. The common-law definition was also upheld by Justice Jagot in APRA v Kelaher. Therefore, amendments (1) to (14) seek to omit any reference to 'financial' in the best interests covenant. This will amend schedule 3 of the bill and remove that reference to 'financial'. The government has refused to clarify that social corporate programs will not be excluded or targeted. In fact, they are likely to be targeted by this amendment. This raises serious questions as to the motivation and the true intent of the government with this amendment, and therefore I commend my amendments to the House.</p> <p class="speaker">Helen Haines</p><p>I wish to make a short statement about the detailed amendments from the member for Warringah. Last night I set out my criticisms of schedule 3 of this bill. While I'm pleased to see the government capitulate on the absurd directions power that section 117A would have given to the Treasurer, there are still serious deficiencies in schedule 3. The Hayne royal commission explicitly opposed a revision of the best interests covenant. The Superannuation Committee of the Law Council of Australia have also done the same, and they've done so for good reason, because there's no clear rationale for the wholesale revision of the best interests test. Schedule 3, as amended, would wipe out years of jurisprudence overnight and create needless uncertainty, and the last thing our super savings need is needless uncertainty.</p><p>Limiting the best interests test to pure financial interests misunderstands people's relationship with their super. There are good reasons to use a stick to focus the minds of superannuation trustees to ensure that they're acting in their members' best interests, especially when it comes to political advertising or lobbying. But, if you have to use a sharp stick, do that, not a blunt rock like this. If the government wanted a sharp stick, it could have refined the existing covenants set out in section 52 of the Superannuation Industry (Supervision) Act. That would have allowed the government to weed out excessive spend on political advertising and lobbying without punishing ethical investments that are good for bank accounts and for our environment. If that's not what the government is intending then it should say so right now explicitly in this bill, not in regulations.</p><p>There are also many other parts of this bill outside of schedule 3 that could be improved with good amendments, including the sequencing issue, stapling in high-risk industries and the selective performance testing of some funds but not others. I'm committed to working with my crossbench colleagues in the Senate to continue to improve this bill, and I'll reserve my final judgement when it comes back to this House, amended, for final consideration.</p> <p class="speaker">Tony Smith</p><p>The question is that the amendments moved by the member for Warringah be disagreed to.</p>
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