I rise tonight to support these bills, which establish the Australian Defence Force Superannuation Scheme, as well as introduce a new death and disability scheme and make the changes necessary for workplace flexibility within the ADF. They are in keeping with Labor's vision to modernise the Australian Defence Force. This modernisation was the key focus of Project Suakin, initiated by Labor when we were in government.
In fact, I remember when it was launched by the member for Batman. Project Suakin aims to deliver a contemporary workforce with a range of full-time and part-time service categories and options. These form a service spectrum that allows ADF members to continue to serve as their circumstances change across their working lives. This flexible model benefits those seeking part-time work and aims to increase the participation of women in the ADF.
Absolutely fundamental to this is the portability and modernisation of the Australian Defence Force superannuation scheme. That is why this legislation has bipartisan support to move away from the current scheme, the Military Superannuation and Benefits Scheme, or MSBS, to an accumulation scheme, ADF Super. By moving away from the restrictions imposed by the current defined benefits scheme, flexibility is enhanced. Crucially, these bills will provide encouragement and support for women's participation in the ADF as well as accommodate those members who might wish to engage in other work but then return to the ADF. Australia needs to be constantly on the lookout to ensure that the employment conditions of the ADF are in line with changing requirements and life paths of its members. We must continuously work to ensure that those who serve this nation, those who put their lives on the line in defence of this nation, have access to best-practice systems —and that includes superannuation.
That brings me to this legislation, the Australian Defence Force Superannuation Bill 2015. This legislation establishes a new, modern and more flexible superannuation system, to be known as ADF Super. The new scheme applies to any Australian Defence Force members joining after 1 July 2016. Personnel who are currently members of the MSBS can choose to opt in to the new ADF Super, but it will not be compulsory.
ADF Super has an employer contribution rate of 16.4 per cent. This rate is higher than that applied to the Public Service in general and we believe it clearly recognises the unique nature of military service which arises from a number of factors. These include: liability for combat operations; a military discipline code; a regimented way of life; long and irregular working hours; statutory retiring ages well below the community norms; high standards of physical fitness; frequent relocation; and separation from family.
We believe this higher contribution rate also recognises the generally shorter periods of service in the ADF compared to the Public Service. According to 2007 census data, the average service period for ADF members is 6.8 years. This is down from 10 years in 1997. I am proud to say that Labor worked tirelessly with the government on this scheme to secure the 16.4 per cent contribution rate. In fact, I have been working since February this year to negotiate a single-tier system after the government originally proposed a two-tiered superannuation system. The initial proposal would have seen ADF personnel receive a government contribution rate of 15.4 per cent which would then increase to 18 per cent for those engaged in warlike operations. However, Labor had significant concerns with this type of two-tiered system, especially the fact that it would undermine the team ethos of the ADF.
But it was not just Labor who had concerns about a two-tiered system. The Chief of the Defence Force, Air Chief Marshal Mark Binskin, raised concerns with the government's approach at Senate estimates. He said: My preference would be to try and do a flat rate which is a mid-point that actually doesn't have the clunkiness between the war-like operations and the peacetime.
The President of the Defence Force Welfare Association, David Jamison, also criticised the government over its lack of consultation on the new scheme. He said:
… the consultation has more been information sessions on what the administration is coming up with rather than listening …
Aside from the clunkiness of the two-tiered system, as described by the Chief of the Defence Force, Labor felt it would have been administratively cumbersome and confusing—for example, the difficulty of determining at which point an ADF member entered a 'warlike' operation. Also, imagine the administrative nightmare if a particular operation was retrospectively declared 'warlike'. Given these concerns, Labor was pleased the government backed down from its two-tiered proposal a few months ago.
ADF Super deals with some of the concerns with the current MSBS system—namely, the lack of flexibility and the lack of portability of a member's superannuation benefit when they leave the ADF. I will go first to the issue of flexibility. The new ADF Super scheme recognises that members of the ADF may want to move in and out of the ADF. It will help facilitate movement across the different job streams in the ADF. It will also allow for permanent part-time work to reflect different needs at different stages of life. These are all elements of a modern, flexible superannuation system, elements that the MSBS system lacks. Under the MSBS arrangement, members of the permanent force who wish to work other than full time are required to take part-time leave without pay. The period of part-time leave without pay cannot exceed 21 days for any particular period without having adverse superannuation consequences by creating a break in service.
I will go secondly to the issue of portability. ADF Super recognises that military service is no longer for life, as members are serving shorter periods before moving on to outside employment. The new scheme enables personnel to take their superannuation with them upon leaving the ADF, giving them the option to roll it into another super fund, an option not available under the existing MSBS. Under the MSBS arrangement, it is impossible for members of the ADF to move in and out of service without incurring costs and rigidities in their superannuation.
Under the new ADF Super, there will also be no requirement for members to make employee contributions to their super. This differs from the current scheme, which requires a minimum employee contribution of five per cent of salary. The removal of compulsory employee contributions not only brings the ADF in line with other modern super arrangements; it gives ADF personnel greater choice when it comes to their income management. For example, members of MSBS who opt in to the new ADF Super will immediately receive a five per cent increase to their take home pay as there is no longer a need to make compulsory employee contributions.
To give a better understanding of how the new ADF Super will enhance flexibility and portability, I would like to introduce Sally, whose case illustrates the change being made. Sally is in MSBS having joined the ADF in 2010. She is on part-time leave without pay and, although she is being paid on a pro rata basis, she has to contribute to MSBS at the full-time rate in accordance with the conditions of MSBS. Sally will move to a permanent part-time arrangement in August 2016, after the new military superannuation arrangements have been introduced. Moving to ADF Super will enable Sally to stop making mandatory contributions of five per cent of her pay, which will offset some of the financial loss of not earning a full-time wage. She will also be able to move her super benefit accrued in ADF Super when she leaves the ADF in the future.
Although this is one specific case, there are many like Sally in the ADF who will benefit from the enhanced flexibility of the new scheme. Under ADF Super, members will for the first time be able to choose which superannuation fund they belong to. I also note that the introduction of the new scheme is also in line with the move in the public sector away from defined benefit schemes to accumulation schemes.
This legislation also provides for stand-alone statutory death and invalidity cover for members of ADF Super, to be known as ADF Cover. That is because it is difficult for ADF members to obtain death and invalidity cover at a reasonable cost under group insurance arrangements. ADF Cover ensures a replacement for the existing scheme. ADF Cover is designed to be consistent with the death and invalidity benefits provided under the current MSBS. It will ensure that ADF members are properly looked after for the rest of their life, if required, in the event that they are injured during their ADF service.
Both sides of politics can be proud of the work that has been done in government in recent years to increase flexibility, inclusivity and diversity within the ADF. The introduction of this legislation enhances this flexibility, inclusivity and diversity. These three bills introduce important and necessary reforms for the modernisation of the ADF workforce and bring about important changes. ADF Super brings the ADF into line with the rest of the government sector in not having a defined benefit scheme with its long-term unfunded liabilities. It means for the first time that ADF members will be able to transfer their super scheme to new employment when they leave the ADF. This means that employer contributions can be carried across to new employment, which would not be possible under the old defined benefit scheme.
ADF Super also enables members to move in and out of service without incurring costs and rigidities in their superannuation. This in particular will provide encouragement and support for women's participation in the ADF as well as accommodate those members who might wish to engage in other work but then return to the ADF. Flexibility, inclusivity and diversity are each crucial to Defence's ability to operate at peak performance and demonstrate maximum capability.
At the handover ceremony in the middle of last year the current Chief of the Defence Force, Air Marshal Mark Binskin, said that we should not be shy in talking about the very real advances we are making across Defence as we seek a culture of inclusion and not of exclusion. Just as the former Chief of Navy and now Vice Chief of the Defence Force, Vice Admiral Ray Griggs, has said:
We can only fight and win as a team and to do that we must respect all elements of the team; if we don't have an inclusive culture we can never reach our full potential.
These bills go some way in achieving this inclusivity and I commend them to the House.