Royal Commission into Trade Union Governance and Corruption

The Royal Commission into Trade Union Governance and Corruption was established in March 2014 to enquire into and report on the governance arrangements of trade unions and their officers.

In particular, the Royal Commission was tasked with considering financial management and the adequacy of existing laws with respect to the integrity of financial management. However, the Commission has broadly interpreted its terms of reference and released a discussion paper entitled ‘Options for Law Reform’ on 19 May 2015.

The discussion paper raises for debate certain proposals for law reform, including amendments to superannuation laws, stating that “the potential for coercive conduct and conflicts of interest in enterprise bargaining identified in respect of employee benefit funds also exists in respect of superannuation funds.”

In the discussion paper, the Royal Commission raises the issue that some  trade unions associated with superannuation funds may be paid substantial sums in respect of directors’ fees, reimbursement of directors’ expenses, office rental, advertising expenses and sponsorship. However, this issue is not explored further and is merely used as a prelude to a proposal to reform laws on choice of superannuation fund and default superannuation fund provisions contained in enterprise agreements.

Choice of fund

Part 3A of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act) sets out the choice of fund requirements.

An employer will meet the choice of fund requirements where they make superannuation contributions to a fund chosen by the employee in accordance with the provisions.

If the employee does not choose a fund  then the employer can make contributions  to any eligible choice fund. An eligible choice fund is a complying superannuation fund or retirement savings account. However, a superannuation contribution to a fund by  an employer for the benefit of an employee is also deemed to be made in compliance with the choice of fund requirements if the contribution is made under certain industrial instruments such as an Australian workplace agreement, collective agreement, enterprise agreement, State award or State agreement.

It is the Royal Commission’s view that the current provisions of the SG Act deny employees covered by these types of industrial instruments freedom of choice. In the discussion paper, the Royal Commission poses the question: “why should some, but not other, employees be denied choice of superannuation fund?” Specifically, the Royal Commission seeks feedback on why provisions contained in section 32C of the SG Act should not be repealed.

Default superannuation fund clauses

Some enterprise agreements specify the default superannuation fund to which employers must make superannuation contributions where an employee does not make a choice of fund.

In the discussion paper, the Royal Commission also raises the question of whether unions should be able to negotiate for terms in an enterprise agreement which specify a particular default superannuation fund that has financial links with that  union. Whilst acknowledging that industry superannuation funds provide a good return for members, the Royal Commission seeks feedback in relation to what, if any, amendments should be made to the Fair Work Act 2009 (Cth) concerning the permissible terms in an enterprise agreement in relation to superannuation funds.

Choice of fund for temporary residents

The right of some employees to choose their superannuation fund has already seen recent minor reform through the commencement of the Superannuation Guarantee (Administration) Amendment Act 2015 (Cth). From 1 July 2015, the obligation for employers to provide a choice of fund to employees who hold a temporary visa under the Migration Act 1958 (Cth) (ie temporary residents), or in circumstances where superannuation funds merge, has been removed.

Therefore, employers will no longer  have to provide a standard choice form to a temporary resident employee. It is intended that these changes will reduce the administrative burden for employers.

Bottom line for employers

  • Employers interested in making submissions in relation to the choice of fund requirements and the ability for trade unions to negotiate default superannuation fund provisions in enterprise agreements should liaise with key stakeholders within their organisation. Submissions are due by 21 August 2015.
  • From 1 July 2015, employers no longer have to provide standard choice forms to temporary resident employees.