Response by Construction Income Protection Limited to discussion paper
options for law reform - Royal Commission into Trade Union Governance
and Corruption
The responses of Construction Income Protection Limited (CIPQ) in respect of relevant issues raised by the Discussion Paper on options for law reform are as follows:
Question
number Question for discussion Response by CIPQ
59 Should ASIC class order CO02/314 be revoked or amended? CIPQ is not affected by CO02/314 and does not seek to respond to this question. 60 Should ASIC class order CO08/1 be revoked or amended? For the purposes of class order CO08/1, a group purchasing body is a body which
arranges for the issue of an insurance policy or for a person to be covered by an existing insurance policy.
CIPQ acts as a conduit for the payment of premiums between those seeking insurance cover (typically the employers) and the issuer of the insurance coverage (i.e. those entitles which are engaged in an insurance business). The policy is held in the name of CIPQ. The persons covered by the policy are typically employees of those employers who are seeking the cover.
The description of CIPQ’s operations in the discussion paper1 is inaccurate. Question
60 appears to be misconceived and may have been generated by a misunderstanding of CIPQ’s method of operating.
There is no indication in the discussion paper:
(a) as to what, if any, of the elements of relief conferred currently by class order CO08/01 would result in enhanced governance, if removed; or
(b) why ASIC’s view that the relief currently conferred by the class order is justified (given the compliance with the relevant requirements of the Corporations Act would be disproportionately burdensome) is incorrect. The reason for these ‘gaps’ in the discussion paper is most likely to be found, it is
respectively suggested, on the basis that an improvement in CIPQ’s governance (if there is, in fact, any issue in that regard) was never seriously envisaged as a potential consequence of any revocation or amendment of class order CO08/1.
CIPQ is a company limited by guarantee. CIPQ is not, and cannot, by definition be a managed investment scheme for the purposes of the Corporations Act.2
CIPQ complies fully with all of its statutory obligations and requirements. So too do all other entities that are relevantly involved in the processes and transactions to which CIPQ is a party.
In any event, what advantage could be achieved for any stakeholder if CIPQ3 was, in
fact, required to register as managed investment scheme? Notably, none has been identified in the discussion paper.
CIPQ is not required to hold an AFLS covering any service it provides if it does so as a representative for another entity which carries on a financial services business and which holds an AFSL that covers those services.4 In any event, what advantage could
possibly be achieved for any stakeholder if CIPQ5 was, in fact, required to hold an
AFSL? Again, notably, none was identified in the discussion paper. There is nothing to suggest that the absence of an AFSL being held by CIPQ has been the cause of any mischief or concern.
A positive response to question 60 could only be motivated, it is respectfully suggested, by an apparent desire to unreasonably burden CIPQ. It could not be motivated by a desire to achieve any identifiable benefit or advantage for CIPQ’s stakeholders.
Further, ASIC has granted the relief because ASIC has assessed that compliance with those requirements by CIPQ (in circumstances in which it operates) would be
disproportionately burdensome. That view is, it is submitted, unquestionably correct. No explanation is given as to why CIPQ stakeholders should not have confidence in ASIC’s ability to make that assessment. No circumstances, it is submitted, in fact, exist in that regard.
The answer to question 60 must, therefore, be ‘no’. 61 Should amendments be made to the definition of ‘insurance
business’ and/or ‘life insurance business’ in the Insurance Act 1973 (Cth) and the Life Insurance Act 1995 (Cth) respectively so as to bring employee benefit funds providing or purchasing
CIPQ is a company limited by guarantee and is required to comply with the provisions of the Corporations Act. It is now, and has always been, subject to the regulatory oversight of ASIC. Question 61 appears to assume, without explaining why, ASIC’s regulatory oversight of CIPQ is not sufficient.
2 see paragraph (d) of the definition of managed investment scheme in section 9 3 despite its status as a body corporate
4 see section 911A(2) of the Corporations Act
insurance cover within APRA’s regulatory oversight? That said, CIPQ, as a matter of principle, has no objection to being brought within APRA’s regulatory oversight.
The purpose, function and manner of that oversight needs, however, to be identified and well defined.
Addressing this issue by tinkering with the definition ‘insurance business’ and/or ‘life insurance business’ under the Insurance Act 1973 or the Life Insurance Act 1995 simply illustrates a lack of understanding of the functions and operations of CIPQ. CIPQ does not presently rely upon any of the exemptions or exclusions from the definition of ‘insurance business’ under the Insurance Act 19736 for the purposes of
CIPQ’s operations so as to fall outside the ambit of that definition.
Consequently, torturing the definition of ‘insurance business’ or ‘life insurance business’ to somehow capture the operations or functions of CIPQ is very likely to bring about unproductive consequences if the prudential requirements for entities otherwise engaged in those forms of business (under existing legislation) are attempted to be applied to CIPQ.
The discussion paper suggests that the issue which is sought to be addressed by question 61 is in connection with ‘governance issues’ for these entities. No explanation is given as to why expanding the definition of either ‘insurance business’ or ‘life insurance business’, when clearly CIPQ does not engage in such business, would, in any way, improve ‘governance’ or would otherwise deliver any identifiable benefit or advantage to any stakeholder.
Therefore, it is respectively submitted, that the issue is not whether some form of regulatory oversight may, in fact, be appropriate, for CIPQ but rather to ensure that the regulator, if given jurisdiction in relation to CIPQ, has a proper understanding of the services it provides and has the relevant and appropriate statutory ‘tools’ to apply oversight in a manner which would either assist in achieving confidence and stability on each entity or identifiable benefits and advantages for stakeholders (and others dealing with that entity).
62 Should amendments be made to the conditions of exemption in section 58PB(4) of the Fringe Benefits Tax Assessment Act 1986 (Cth)?
CIPQ is not affected by the concession conferred under section 58PB(4) of the Fringe Benefits Tax Assessment Act and does not seek to respond to this question.
63 Should specific legislation be introduced which subjects some or all employee benefit funds to independent governance,
supervision and reporting requirements overseen by either ASIC, APRA or another regulator? If so, what requirements should be imposed?
See response to question 61.
64 Should amendments be made to sections 172 and/or 194 of the Fair Work Act prohibiting an enterprise agreement from
containing terms requiring employers to make payments: (a) to any employee benefit fund;
(b) to a specific employee benefit fund, or to a fund or scheme with reference to a specific employee benefit fund;
(c) to a specific employee benefit fund other than as a default;
(d) to an employee benefit fund in which an employee organisation or official of an employee organisation negotiating an enterprise agreement has an interest or from which the employee organisation or its officials derives a benefit; or
(e) to an employee benefit fund which is not an approved employee benefit fund?
CIPQ is not aware of any approved employee benefit fund failing to pay the full quantum of any workers’ benefits in circumstances where the worker has qualified for that payment under the relevant rules for the fund. No evidence of any such a failure ever occurring was adduced before the Royal Commission or any previous Royal Commission. How then could a complete prohibition on the making of payments to an employee benefit fund for the purposes of securing future payment of benefits for workers be justified (when all of the employee benefit funds in question are
undoubtedly and observably achieving the purpose for which they were established)? CIPQ respectfully suggests that, at a minimum, an enterprise agreement ought to be allowed to specify an employee benefit fund as a default fund into which payments could be made to comply with the obligations created under that document. The mechanism, in this regard, could be similar to the regime which is in place in relation to compulsory superannuation contributions.
65 Should an employee organisation bargaining for an enterprise agreement be required to disclose financial benefits, whether direct or indirect, that would be derived by the employee organisation from the terms of the proposed enterprise agreement? If so, what should the consequences be if an employee organisation breaches the disclosure requirements?
CIPQ has no objection, in principle, to any union bargaining for an enterprise
agreement being required to disclose financial benefits, whether direct or indirect, that would be derived by that union from the terms of the proposed enterprise agreement.
Insurance business under the Insurance Act 1973 is defined to mean:
‘The business of undertaking liability, by way of insurance (including re-insurance), in respect of any loss or damage, including liability to pay damages or compensation, contingent upon the happening of a specified event and includes any business incidental to the insurance business as so defined, but does not include:
(a) life insurance business;
(b) accident insurance business undertaken solely in connection with life insurance business;
(c) pecuniary loss insurance business carried on solely in the course of carrying on banking business and for the purposes of that business by an ADI; (d) business in relation to the benefits provided by a friendly society or trade union to its members or their dependants;
(e) business in relation to benefits provided for its members or their dependants by an association of employees or of employees and other persons that is registered as an organisation or recognised under the Fair Work (Registered Organisations) Act 2009;
(f) business in relation to a scheme or arrangement under which superannuation benefits, pension benefits or payments to employees or their dependants (and not to any other persons) on retirement, disability or death are provided by an employer or an employer’s employees or by both, wholly through an organisation established solely for that purpose by the employer or the employer’s employees or by both;
(g) business in relation to a scheme or arrangement for the provision of benefits consisting of:
(i) the supply of funeral, burial or cremation services, with or without the supply of goods connected with any such service; or
(ii) the payment of money, upon the death of a person, for the purposes of the whole or a part of the expense of and incidental to the funeral, burial or cremation of that person,
and no other benefits, except benefits incidental to the scheme or arrangement; or
(h) business undertaken by a person, being a carrier, carrier’s agent, forwarding agent, wharfinger, warehouseman or shipping agent, relating only to the person’s liability in respect of goods belonging to another person and in the possession, or under the control, of the first mentioned person for the purpose of the carriage, storage or sale of those goods; or
(i) business undertaken by a person, being an innkeeper or lodging-housekeeper, relating only to the person’s liability in respect of goods belonging to another person and in the possession or under the control of a guest at the inn or lodging-house of which the first-mentioned person is the innkeeper or lodging-housekeeper or deposited with the innkeeper or lodging-housekeeper for safe custody;
(j) business of insuring the property of a registered religious institution (within the meaning of the Fringe Benefits Tax Assessment Act 1986) where the person carrying on the business does not carry on any other insurance business;
(ja) health related business within the meaning of section 131-15 of the Private Health Insurance Act 2007 carried on by a private health insurer within the meaning of that Act through a health benefits fund within the meaning of section 131-10 of that Act; or
