PERPETUITIES (AMENDMENT) BILL
Second Reading
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The Hon. R. J. WEBSTER (Minister for Planning and Minister for Energy) [5.37]: I move:
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
Leave granted.
The object of this bill is to rectify an anomaly in the application of the rule against perpetuities as between superannuation funds and pooled superannuation trusts.
The rule against perpetuities was developed by the courts to prevent interests in property from being "tied up" for too long by their owners. Prior to the introduction of the rule, property owners were able to control the future use of their estates by vesting their property in ongoing trusts.
The rule was therefore designed to prevent interests that were to arise in the future from arising at too remote a time.
Its original purpose was to ensure that property holdings could be freely dealt with and to that extent it represented a victory by the courts over owners of large estates seeking to prevent disposal of these properties.
Over the years, however, the rule frequently operated to bring about results which could not be justified, and from time to time therefore its application has had to be modified.
Following a major review by the New South Wales Law Reform Commission in 1983 the Government of the day resolved to effect a general reform of this area of the law. The vehicle for change was the Perpetuities Act 1984 one of the provisions of which, section 13, exempted superannuation funds from compliance with the rule.
The main reasons for the exemption were to allow superannuation funds to be indefinitely continuing and so to maximise the benefits built up by the fund, and to allow new members to be admitted from time to time.
However, superannuation funds do not carry out all their investment activities directly. Many are now pooling much of their funds into entities known as "pooled superannuation trusts" which then invest the pooled funds and obtain the higher rate of return available to investments of large amounts.
Pooled superannuation trusts are usually established as a unit trust with units being allocated to the unitholders in proportion to the amounts contributed by them. In addition to superannuation funds, other unit holders include approved deposit funds and other pooled superannuation trusts.
At the time of enactment of the Perpetuities Act in 1984 legal opinion was to the effect that pooled superannuation trusts did not fall foul of the rule against perpetuities and hence they were not expressly mentioned in the legislation.
Doubts subsequently arose, however, as to whether that opinion was correct and further advice was sought, this time from eminent Queens Counsel (including the Solicitor General).
The Solicitor General advised that it was clearly appropriate to amend section 13 of the Perpetuities Act 1984 to exempt pooled superannuation trusts from the rule against perpetuities.
Obviously, in this important matter there can be no room for uncertainty hence the need for this bill which will dispel any lingering doubt as to the efficacy of these trusts.
It is inconsistent that superannuation funds are exempt from the rule against perpetuities but that pooled superannuation trusts, which largely exist in order to invest the moneys held by superannuation funds, are not exempt from the rule. The reasons previously referred to for exempting superannuation funds from the rule are equally applicable to pooled superannuation trusts.
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I commend the bill.
Debate adjourned on motion by the Hon. Ann Symonds.