New ADF Superannuation Legislation Acts in Commonwealth

Last Thursday 10 September 2015, the Commonwealth Parliament assented three Australian Defence Force (ADF) Superannuation Bills aiming to "introduce new modern superannuation arrangements for people joining the ADF on and after 1 July 2016."

Background to the New Scheme 

According to the Bills Digest, these bills form a package of three Acts which propose a new superannuation scheme (ADF Super), which replaces the currently existing Military Superannuation and Benefits Scheme (MSBS).

The MSBS scheme is a defined benefit superannuation scheme that consists of a member funded component (from employee contributions) as well as a defined benefit that in broad terms is based on years of service and final salary. In contrast, private sector employees and more recently engaged public sector employees are generally members of accumulation superannuation schemes—where the final benefit is related to the value of employer and employee contributions as well as associated earnings over time.

Some features of the MSBS, which generally provides a greater benefit for longer serving ADF members, may be incompatible with general superannuation arrangements and penalise members who serve for shorter periods. A 2007 review of military superannuation arrangements recommended that the MSBS scheme be closed and replaced by an ADF-specific accumulation superannuation scheme.

The main purpose of the newly Assented Acts is to establish arrangements for a new superannuation scheme from 1 July 2016 for certain members of the ADF. The Acts also provides that the new scheme is to be administered and managed by the Commonwealth Superannuation Corporation (CSC). As the existing MSBS also includes incapacity and death cover arrangements, these elements are being separated from the ADF Super scheme.

Australian Defence Force Superannuation Act 2015 (No. 119 of 2015)

This Act provides for three key elements of the new scheme, according to its Explanatory Memorandum:

• Outlines eligibility, contributions (employer and employee) and membership for the new ADF Super Scheme;
• Provides for ADF Super to be established under a trust deed (a legislative instrument that is not disallowable); and
• Specifies that the CSC will be the trustee for ADF Super.

Defence Legislation Amendment (Superannuation and ADF Cover) Act 2015 (No. 120 of 2015)

This Act provides for the transitional and consequential arrangements in moving current members of the ADF over the the new ADF Super scheme including:

• Specifying the employer contribution rate of 16.4 per cent for ADF Super as an amendment to the Defence Act 1903 (Cth);

• Introducing flexible service conditions for permanent members of the ADF; and

• Any other consequential and transitional arrangements involved with establishing ADF Super.

Australian Defence Force Cover Act 2015 (No. 118 of 2015)

This Act exists for the sole purpose of introducing standalone statutory death and invalidity cover (ADF Cover) for members of ADF Super and those ADF personnel who would have been members of ADF Super but for choosing their own superannuation fund.

At least part of all the new Acts was commenced on 10 September 2015 with Act 119 of 2015 being wholely commenced on that day. 

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