13701  Cat. No. 97 2829 5  ISBN 0644 518693

1998

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 1998

EXPLANATORY MEMORANDUM

(Circulated by authority of Senator the Hon. Richard Alston, Minister for Communications, the Information Economy and the Arts)

TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 1998

OUTLINE

This Bill amends the Telstra Corporation Act 1991 to repeal the provisions which require the Commonwealth to retain two-thirds of the equity in the company.

A Preamble to the Bill sets out the policy objectives for the Bill and reaffirms the Parliament’s commitment to the comprehensive community and regulatory safeguards recently enacted in the 1997 telecommunications legislation, including the universal service obligations.

The Bill also amends the Telecommunications Act 1997 to enable the Australian Communications Authority to give remedial directions to carriage service providers requiring them to take specific action to ensure that they do not contravene Customer Service Guarantee performance standards.

The current provisions of the Telstra Corporation Act which provide a power for the Minister to give directions to Telstra and place reporting obligations on Telstra will cease to apply on a date to be proclaimed when the Minister is satisfied that the Commonwealth’s equity has declined below 50 per cent.

The foreign ownership provisions will be amended to apply the 35% total and 5% individual limits in such a way that if the Commonwealth sells its remaining shares in more than one tranche, the limits will apply to the proportion of non-Commonwealth shares following the sale of each tranche.

In general, the current provisions of the Telstra Corporation Act which provided a robust basis for the sale of one-third of the equity in Telstra will be retained for the purposes of the further sale.  The provision requiring the Commonwealth to conduct the sale in accordance with Chapter 7 of the Corporations Law will also be retained.

Amendments will be made to the sale provisions to:

.	insert a power to make regulations to specify exceptions to the general exemption from State and Territory stamp duty and other taxes in relation to the sale;

.	enable changes to be made by disallowable instrument to Telstra’s constitution to remove special privileges enjoyed by the Commonwealth when it is no longer the majority shareholder;

.	clarify the Commonwealth’s ability to use the special appropriation mechanisms of the Act to pay any claims against indemnities issued by the Commonwealth in the sale process;

.	give the relevant Ministers a power to direct Telstra in relation to the giving of assistance in connection with a sale scheme;

.	make it clear that no liability or remedy may arise under stock exchange listing rules from giving such assistance or providing information to the Commonwealth in connection with a sale scheme; and

.	update the delegation provisions.

The provisions in the Telstra Corporation Act relating to Telstra’s base of operations, headquarters and nationality of the Chairman and a majority of directors are being retained.  However, the requirement for Telstra to be incorporated in the ACT will be widened to permit it to be incorporated in any State or internal Territory of Australia to avoid discrimination in favour of any particular State or Territory.

The Bill includes transitional provisions which, notwithstanding Telstra ceasing to be Commonwealth controlled, preserve the rights of Telstra employees who have long service leave or maternity leave entitlements or certain retirement benefits under Commonwealth legislation, while they remain Telstra employees.

Transitional provisions will also:

.	preserve the operation, in respect of events occurring prior to Telstra ceasing to be Commonwealth controlled, of the Crimes (Superannuation Benefits) Act 1989 and Director of Public Prosecutions Act 1983; and

.	ensure that from the cessation of Commonwealth control, Telstra’s liability in respect of injuries suffered by employees prior to 1 July 1989 continues under section 128A of the Safety, Rehabilitation and Compensation Act 1988;

.	remove Telstra from the operation of the Occupational Health and Safety (Commonwealth Employment) Act 1991 from the cessation of Commonwealth control;

.	make it clear that Telstra employees’ access to Public Service mobility rights ceases when the Commonwealth no longer has a controlling interest;

.	end Telstra’s future liability under the Commonwealth Borrowing Levy Act 1987.

The Bill makes other minor consequential changes and removes certain spent provisions.

FINANCIAL IMPACT STATEMENT

Costs and benefits from the sale are difficult to quantify at this stage.  However, revenue of around $14 billion was achieved from the sale of the first third of Telstra.  The remaining two thirds of Telstra has a current market value of about $40 billion.  The amount raised on the sale would be dependent on the sale processes and market circumstances at the time.

The costs of organising a sale are expected to be in line with previous Commonwealth experience and of the order of less than 2% of gross sale proceeds.

REGULATION IMPACT STATEMENT

Issue

There is no good public policy reason, nor market failure reason, for the Australian Government to continue to own a telecommunications carrier.  It is Government policy that, if it receives a mandate at the next Federal election, it will sell the remaining two-thirds of the Commonwealth's equity in Telstra Corporation Ltd. 

Objective

The objective of the legislation is to enable the Commonwealth to sell its remaining two-thirds stake in Telstra.  Key community and regulatory safeguards are already set out in telecommunications legislation.  The proposed legislation also maintains Australian ownership and control of Telstra - foreign ownership limits will continue to be applied, as will requirements for Telstra’s base of operations, headquarters and nationality of the Chairman and a majority of directors to be Australian.  Through enabling the further sale of Telstra, the legislation also aims to provide revenue which can be used to retire government debt and deliver a social bonus.

Options

To enable the Commonwealth to sell its remaining two-thirds share in Telstra there must be an amendment to the Telstra Corporation Act.  Section 8AB of this Act currently provides that neither the Commonwealth nor Telstra can do anything which would cause the Commonwealth’s stake (described in a number of ways in the legislation) to fall below two-thirds.  Design and management of the sale process will be the responsibility of the Minister for Finance and Administration.

There is no alternative option which would enable the Commonwealth to sell its remaining two-thirds stake in Telstra.

Impact Analysis

It is intended that the further privatisation of Telstra will enhance its competitiveness and performance.

The proposed legislation will reduce the administrative requirements placed on Telstra as a result of direct Government ownership.  These requirements relate to the governance of Telstra and include the directions power for the Minister (Part 3) and reporting requirements on Telstra and it is intended that these will cease to apply on a date to be proclaimed when the Minister is satisfied that the Commonwealth’s equity has declined below 50 per cent.  A provision is also to be inserted to enable changes to be made by regulation to Telstra’s constitution to remove special privileges enjoyed by the Commonwealth once the Commonwealth is no longer the majority shareholder.  The Government will continue to have in place requirements for carriers to have approved industry development plans. 

The proposed legislation will, however, in no way lessen the obligations placed on Telstra as a telecommunications carrier and service provider under other legislation.  The legislation re-affirms the commitment to key community and regulatory safeguards such as universal service obligations; continued residential access to untimed local calls; the customer service guarantee; special benefits for rural and regional customers; the price-cap regime and the maintenance of a flexible regulatory structure that is designed to stimulate competition in the telecommunications market and thus deliver cheaper prices and improved services to Australian residential and business telecommunications users.

Amendment to the Telecommunications Act 1997 is also proposed to strengthen the Customer Service Guarantee (CSG) scheme contained in Part 9 of the Act.  This will enable the ACA to give remedial directions to carriage service providers where there are systemic problems arising in relation to CSG performance standards.

It is intended to retain a number of provisions in the existing legislation which require Telstra to effectively be Australian controlled.  The foreign ownership provisions will be amended to apply the announced 35% total and 5% individual limits, in such a way that if the Commonwealth sells its remaining shares in more than one tranche, the limits will apply to the proportion of non-Commonwealth shares following the sale of each tranche.  Consistent with the Government’s announcement, provisions relating to Telstra’s base of operations, headquarters and nationality of the Chairman and a majority of directors to be Australian are being retained.

The requirement for Telstra to be incorporated in the Australian Capital Territory will be amended to permit Telstra to be incorporated in any State or Territory of Australia.

The provision for stamp duty exemption for the sale transaction will be retained in the legislation.  However, a power will be inserted to make regulations to specify exceptions to the general exemption from State and Territory stamp duty and other taxes in relation to the sale.  This will provide a mechanism for the Commonwealth to consider the application of stamp duty to the sale in the context of Commonwealth/State taxation arrangements.

The proposed legislation will also retain (and clarify where necessary) provisions relating to the conduct of the sale, including providing for exemptions from Corporations law, securities exchange listing rules and common law/equity in relation to assistance provided under the legislation for the sale scheme.  The further sale process will be conducted consistent with Chapter 7 of the Corporations Law.

The impact of the above legislation on the operations of businesses other than Telstra would largely be indirect.  However, certain sectors of the business community may be affected by the provision of opportunities to be involved in the sale process.

The business sector will benefit indirectly from the further widening of share ownership in Australia.  Telstra employees, current shareholders and new shareholders will be given the opportunity to increase or obtain a stake in the company.

The scale of the proposed capital raising will be significant relative to the scale of the Australian equity markets.  This may lead to some market liquidity effects and to some commercial pressure on share prices generally and on contemporary capital raising by other firms.  These factors will be addressed further when planning a specific sale scheme pursuant to the legislation.

None of the above impacts are easily quantifiable.  However, it is difficult to see that there would be any adverse impact on the business sector by the proposed legislation.

Costs and benefits from the sale are also difficult to quantify at this stage.  However, revenue of around $14 billion was achieved from the sale of the first third of Telstra. The remaining two-thirds of Telstra has a current market value of about $40 billion.  The amount raised on the sale would be dependent on the sale processes and market circumstances at the time.

Administrative Simplicity, Economy and Flexibility

The proposals to reduce the governance requirements placed on Telstra as the Commonwealth interest declines should reduce the administrative burden on Telstra and on the agencies involved in collecting and evaluating the information required under the current legislation.

Review

No review is envisaged for this legislation.

NOTES ON CLAUSES

Preamble

The Bill includes a Preamble which sets out the policy objectives for the legislation and reaffirms the comprehensive community and regulatory safeguards enacted in telecommunications and trade practices legislation.

Clause 1 - Short title

This clause provides that the Act may be cited as the Telstra (Transition to Full Private Ownership) Act 1998.

Clause 2 - Commencement

This clause provides for the commencement of the Act.

Royal Assent

Clause 2(1) provides for the Act (subject to specific commencement provisions outlined below) to commence upon Royal Assent.

First proclaimed day

Schedule 2 contains provisions which repeal the provisions in Division 2 of Part 2 of the Telstra Corporation Act which require the Commonwealth to retain two-thirds of the equity in Telstra.  This repeal is not to take effect until after the first general election for the House of Representatives after 15 March 1998 (the date of the announcement of the Government’s decision to sell the remaining Commonwealth interest in Telstra).

Clause 2(2) provides that Schedule 2 commences on a day to be fixed by Proclamation.

Clause 2(3) prevents such a Proclamation being made before the return of writs for the first general election of the members of the House of Representatives that occurs after 15 March 1998.

Designated day

Schedule 3 inserts a new Part 3A in the Telstra Corporation Act which contains transitional provisions relating to the sale by the Commonwealth of its remaining equity interest in Telstra.  Some of those transitional provisions relate to Commonwealth Acts which cease to apply to Telstra when the Commonwealth ceases to hold a majority of the voting shares in Telstra.

Accordingly, the day this occurs (the designated day) has been chosen as the day on which various Commonwealth Acts should cease to apply in relation to Telstra and transitional provisions should operate to preserve employee entitlements and benefits.

Clause 2(4) provides for Schedule 3 to commence on the designated day.

The designated day is declared by the Minister under clause 3 of the Bill and is the day which, in the Minister’s opinion, is the first day on which a majority of the voting shares in Telstra are or were acquired by persons other than the Commonwealth.

Second proclaimed day

Schedule 4 of the Bill includes provisions which repeal:

.	the reporting requirements on Telstra which are imposed by Division 3 of Part 2 of the Telstra Corporation Act; and

.	the Minister’s power in Part 3 of the Act to give directions to Telstra in the public interest.

The reporting requirements and directions power should cease to apply after the Commonwealth ceases to hold a majority equity interest in Telstra.

Special commencement arrangements apply to Schedule 4 to provide for the repeal of the reporting requirements after the Commonwealth ceases to hold a majority equity interest in Telstra.

Clause 2(5) provides that Schedule 4 commences on a day to be fixed by Proclamation.

Clause 2(6) prevents such a Proclamation being made until the Minister has certified in writing that the majority-interest sale time has occurred.

The ‘majority-interest sale time’ is defined in clause 2(8) to mean the first time after the commencement of Schedule 2 when the Commonwealth no longer meets various tests of majority Commonwealth ownership or control.  These tests are based on the current tests found in subsection 8AB(2) of the Telstra Corporation Act.

First annual general meeting of Telstra held after the second proclaimed day

Section 36 of the Telstra Corporation Act requires the Auditor-General to be the auditor of Telstra.  Schedule 5 of the Bill provides for the repeal of this requirement.

Clause 2(7) provides that Schedule 5 commences at the end of the first annual general meeting of Telstra held after the commencement of Schedule 4.  This ensures that there will be no disruption of any audit which is only partially completed at the time the Commonwealth ceases to have a majority equity interest in Telstra.

Clause 3 - Designated day for Telstra

This clause provides a mechanism for public notification of the day on which the Commonwealth ceases to have a controlling interest in Telstra.  Various provisions of the Bill will operate with effect from the designated day.  For example, the employee benefits saving provisions will apply from that day.

Clause 3(1) provides that the Minister must declare the day on which a majority of the voting shares in Telstra are acquired by persons other than the Commonwealth as the ‘designated day’ for Telstra.

Clause 3(2) provides that the declaration has effect accordingly.

Clause 3(3) requires a copy of the declaration to be published in the Gazette within 21 days after the designated day.

Clause 4 - Schedule(s)

Clause 3(1) provides for the making of the amendments and repeals to the Acts and regulations specified in the Schedules in accordance with the items in the Schedules and for the other items in the Schedules to have effect according to their terms.

Clause 3(2) ensures that the amendment of regulations in the Schedules does not prevent later amendments or repeal of those regulations by the Governor-General.

Schedule 1 - Amendments commencing on Royal Assent

Commonwealth Borrowing Levy Act 1987

Item 1 - Item 22 of the Schedule

This item repeals the reference to ‘Telstra Corporation Ltd’ in the Schedule to the Commonwealth Borrowing Levy Act 1987 so that a levy cannot be imposed under that Act on any new Telstra borrowings.  The levy is currently set at a level of zero so the provision has no practical operation.

Item 2 – Transitional

This item is a transitional provision which provides that Telstra is not liable, from Royal Assent, to pay any levy imposed under the Commonwealth Borrowing Levy Act 1987 in respect of any borrowing undertaken before that time, though it is still required to pay an amount that became payable before Royal Assent.

Telecommunications Act 1997

Item 3 - After section 236

Part 9 of the Telecommunications Act 1997 provides for the customer service guarantee.  Section 234 sets out performance standards in relation to customer service that carriage service providers must comply with.

If a carriage service provider (csp) contravenes a performance standard, it is liable to pay damages to the customer for the contravention.

This item inserts a new section 236A in the Telecommunications Act which will give the Australian Communications Authority (the ACA) a power to give a csp remedial directions about compliance with performance standards.  This power is intended to be used to address any systemic problems that arise in a csp’s performance.

Systemic problems may come to the attention of the ACA in a number of ways - the Telecommunications Industry Ombudsman (the TIO) may advise the ACA that it is receiving a large number of complaints about a particular csp’s performance.  The ACA may become aware of a csp’s declining performance while carrying out its duty of monitoring performance under section 105 of the Telecommunications Act.

New subsection 236A(1) provides that the section applies if a csp is subject to a standard in force under section 234 of the Telecommunications Act.

New subsection 236A(2) gives the ACA the power to give the csp a direction requiring the csp to:

.	take specified action directed towards ensuring that the csp does not contravene, or is unlikely to contravene the standard; or

.	to take such action as will ensure that the extent of the provider’s compliance reaches or exceeds a specified goal or target.

New subsection 236A(3) gives examples of the kinds of directions that can be given to a csp.

New subsection 236A(4) provides that, except in a case where the Minister directs the ACA to make a direction, the ACA must consult the TIO.

New subsection 236A(5) provides that a csp must not contravene a direction.  This provision has the effect of applying the enforcement mechanisms in the Act.  Section 98 and clause 1 of Schedule 2 to the Act make it a service provider rule that a service provider must comply with the Act.  Subsection 101(1) makes a contravention of a service provider rule a civil penalty provision.  Under subsection 570(3), the maximum pecuniary penalty for a service provider contravening subsection 101(1) is $10 million.

New subsection 236A(6) makes a direction a disallowable instrument which must be notified in the Gazette and tabled in the Parliament and which is subject to disallowance by either House of the Parliament.

Telstra Corporation Act 1991

Item 4 - Section 3

Section 3 of the Telstra Corporation Act contains definitions of terms used in the Act.  The Act uses the term ‘Minister for Finance’.

This item inserts a definition of ‘Minister for Finance’ which reflects the change in title of that Minister to the Minister for Finance and Administration.

Item 5 - Paragraph 8BC(b)

This item makes a minor technical amendment to update certain terms reflecting revised terminology used in the Telecommunications Act 1997.

Item 6 - Paragraph 8CC(b)

This item makes a minor technical amendment to update certain terms reflecting revised terminology used in the Telecommunications Act 1997.

Schedule 2 - Amendments commencing on the first proclaimed day

Telstra Corporation Act 1991

Item 1 - Section 3 (definition of rights)

This item amends the definition of the term ‘rights’ in section 3 consequential upon the repeal of Part 2C by item 47 of this Schedule.

Item 2 - Section 8AA

This item amends the simplified outline to Part 2 of the Telstra Corporation Act consequential upon the repeal of Division 2 of Part 2 by the following item.

Item 3 - Division 2 of Part 2

Division 2 of Part 2 of the Telstra Corporation Act requires the Commonwealth to retain two-thirds of the equity interest in Telstra.

This item repeals that Division to enable the Commonwealth to sell its remaining equity interest in Telstra.

Item 4 - Subsection 8AJ(2)

Subsection 8AJ(2) of the Telstra Corporation Act defines the term ‘Telstra Sale Scheme’ for the purposes of the Act.

This item amends subsection 8AJ(2) to make a technical amendment consequential upon the repeal of Division 2 of Part 2 by the preceding item.  The amendment recognises that the object of a Telstra Sale scheme may be to transfer the whole or a part of the Commonwealth’s equity in Telstra to other persons.

Item 5 - Subsection 8AJ(3)

This item repeals subsection 8AJ(3) consequential upon the repeal of Division 2 of Part 2 by item 3 of this Schedule.

Item 6 - At the end of section 8AK

Section 8AK of the Telstra Corporation Act provides that stamp duty or other tax is not payable under a law of a State or Territory in respect of designated matters (ie. certain matters relating to entering into or carrying out a Telstra Sale Scheme).

It is proposed to include a regulation making power to clarify that it is possible to enable stamp duty or other taxes to apply in some circumstances or for particular kinds of stamp duty to apply to some transactions related to the sale.  Accordingly, this item adds a new subsection 8AK(3) which ensures that the regulations can create exceptions to the general prohibition on stamp duty or other taxes applying to the sale.

Item 7 - At the end of subsection 8AL(2)

Subsection 8AL(1) of the Telstra Corporation Act provides an appropriation for the costs and expenses incurred by the Commonwealth in connection with carrying out a Telstra Sale Scheme.  Clause 8AL(2) gives examples of the costs and expenses which are covered by subsection 8AL(1).

This item adds calls on indemnities granted by the Commonwealth as a further example of the costs and expenses covered by subsection 8AL(1).

Item 8 - Sections 8AM to 8AP (inclusive)

Sections 8AM to 8AP relate to the Commonwealth taking over obligations of Telstra or a Telstra subsidiary before the first sale of voting shares in Telstra.

These provisions were never used and are now spent.  This item provides for their repeal.

Item 9 - After subsection 8AQ(4)

Section 8AQ of the Telstra Corporation Act provides that Telstra, or a member of the Board, may on their own initiative assist the Commonwealth in connection with carrying out a Telstra sale scheme.

These are standard provisions which apply generally in legislation relating to the sale of Commonwealth assets.  However, section 8AQ does not include provisions which enable the Minister or the Minister for Finance and Administration to give directions about the giving of such assistance.

It is intended as part of the sale process to indemnify the directors of Telstra in relation to the assistance they give to the Commonwealth.  The directions power provides a mechanism to manage the accountability for the potential exposure under the indemnity.

This item inserts new subsections (4A) and (4B) which allow the Minister or the Minister for Finance to give directions to Telstra or a member of the Board about giving assistance to the Commonwealth.

Item 10 - Subsection 8AQ(5)

This item makes a minor technical amendment consequential to the amendment in the preceding item.

Item 11 - Subsection 8AQ(5)

This item makes a minor technical amendment consequential to the amendment in item 9.

Item 12 - After paragraph 8AQ(5)(a)

Section 8AQ of the Telstra Corporation Act provides that Telstra, or a member of the Board, may on their own initiative assist the Commonwealth in connection with carrying out a Telstra sale scheme.

Subsection 8AQ(5) of the Telstra Corporation Act is included to avoid any doubt that actions taken under section 8AQ do not contravene the Corporations Law or a rule of common law or equity.

This item inserts a new paragraph 8AQ(5)(ab) to also avoid any doubt that actions taken under section 8AQ do not contravene the listing rules of a securities exchange.  Because of the definition of ‘securities exchange’ added by item 14 and related definitions in section 8AY and the Corporations Law, this exemption only applies in relation to local Australian securities exchanges.

Item 13 - Subsection 8AQ(6)

This item makes a minor technical amendment consequential to the amendment in item 9.

Item 14 - At the end of section 8AQ

This item inserts definitions of the terms ‘listing rules’ and ‘securities exchange’ in section 8AQ consequential to the insertion of a new paragraph 8AQ(5)(ab) by item 12.

Item 15 - Paragraph 8AS(1)(b)

Section 8AS of the Telstra Corporation Act enables the Minister for Finance to authorise the payment to Telstra of an amount the Minister considers reasonable in relation to expenses incurred by Telstra or a member of the Board in giving assistance in connection with a Telstra sale scheme.

This item repeals paragraph 8AS(1)(b) which otherwise limits the kinds of assistance in relation to which payment can be made under section 8AS.

Item 16 - Paragraph 8AS(1)(c)

This item makes a minor technical amendment consequential to the repeal in the preceding item.

Item 17 - At the end of section 8AS

This item adds a new subsection 8AS(4) which is included for the avoidance of doubt.  The new subsection makes it clear that section 8AS, by providing specifically for the making of a payment to Telstra, does not limit the general executive power of the Commonwealth to make a payment to Telstra or the member of the Board.

Item 18 - After section 8AU

This item inserts a new section 8AUA in the Telstra Corporation Act to provide a simple mechanism to remove special rights and privileges of the Commonwealth that are included in Telstra’s articles, once the Commonwealth no longer controls a majority of the voting shares in Telstra.

In the absence of such a provision, the company may be put to the expense of holding a general meeting to make the necessary changes to the articles.

New section 8AUA - Alteration of Telstra’s constitution after the minority-interest sale time

New subsection 8AUA(1) enables the Minister to alter Telstra’s constitution if:

.	the alteration relates to a Telstra sale scheme;

.	the effect is to remove, restrict or limit any rights, privileges or immunities of the Commonwealth or Minister or remove any requirements for Commonwealth or Ministerial consent or direction; and

.	the instrument is made before the repeal of Division 3 of Part 2 (which contains Telstra’s reporting obligations).

New subsection 8AUA(2) requires the Minister to consult the members of the Board of Telstra before making such an instrument.

New subsection 8AUA(3) makes the instrument a disallowable instrument which must be notified in the Gazette and tabled in the Parliament and which is subject to disallowance by either House of the Parliament.

New subsection 8AUA(4) makes it clear that the making of such an instrument does not contravene the Corporations law, a listing rule or a rule of common law or equity.

New subsection 8AUA(5) makes it clear that the Telstra Corporation Act does not prevent further alteration of Telstra’s constitution if such an instrument is made.

New subsection 8AUA(6) contains definitions of the terms ‘listing rules’ and ‘securities exchange’.

Because of section 8AY and related definitions in the Corporations Law, the definition of ‘securities exchange’ only includes local Australian securities exchanges.

Item 19 - After paragraph 8AW(5)(a)

Subsection 8AW(5) of the Telstra Corporation Act is included to avoid any doubt that the use or disclosure of information by the Commonwealth under section 8AW does not contravene the Corporations Law or a rule of common law or equity.

This item inserts a new paragraph 8AW(5)(ab) to also avoid any doubt that such use or disclosure does not contravene the listing rules of a securities exchange.  Because of the definition of ‘securities exchange’ added by item 21 and related definitions in section 8AY and the Corporations Law, this exemption only applies in relation to local Australian securities exchanges.

Item 20 - Subsection 8AW(6)

This item inserts a definition of the term ‘listing rules’ in subsection 8AW(6) consequential to the insertion of new paragraph 8AW(5)(ab) by the preceding item.

Item 21 - Subsection 8AW(6)

This item inserts a definition of the term ‘securities exchange’ in subsection 8AW(6) consequential to the insertion of new paragraph 8AW(5)(ab) by item 19.

Item 22 - At the end of paragraph 8BB(1)(b)

This item makes a minor technical amendment consequential to the amendment in the following item.

Item 23 - After paragraph 8BB(1)(b)

This item amends a delegation provision to enable the Minister to delegate powers under the Part to the Chief Executive, Office of Asset Sales and IT Outsourcing.

Item 24 - At the end of paragraph 8BB(2)(b)

This item makes a minor technical amendment consequential to the amendment in the following item.

Item 25 - After paragraph 8BB(2)(b)

This item amends a delegation provision to enable the Minister for Finance and Administration to delegate powers under the Part to the Chief Executive, Office of Asset Sales and IT Outsourcing.

Item 26 - Section 8BE (after note 2)

This item inserts a Note 2A as a consequence of the amendment to clause 12 of the Schedule to the Telstra Corporation Act made by item 57 of this Schedule.

Item 27 - Paragraph 8BG(a)

Section 8BG of the Telstra Corporation Act sets out the foreign ownership limits which apply in relation to Telstra.

Paragraph 8BG(a) sets out the maximum aggregate foreign ownership allowed in Telstra, which is currently 11.6667% or 35% of one-third of the shares in Telstra.

This item changes the maximum aggregate foreign ownership allowed in Telstra to 35%.  Due to the amendment of clause 12 of the Schedule to the Telstra Corporation Act made by item 57, aggregate foreign ownership is only measured in relation to shares held by persons other than the Commonwealth.  This ensures that if the further sale of shares occurs in more than one tranche, the 35% limit automatically applies to the shares in non-Commonwealth hands following the sale of each tranche.

Item 28 - Paragraph 8BG(b)

Section 8BG of the Telstra Corporation Act sets out the foreign ownership limits which apply in relation to Telstra.

Paragraph 8BG(b) sets out the maximum individual foreign ownership allowed in Telstra, which is currently 1.6667% or 5% of one-third of the shares in Telstra.

This item changes the maximum individual foreign ownership allowed in Telstra to 5%.  Due to the amendment of clause 12 of the Schedule to the Telstra Corporation Act made by item 57, individual foreign ownership is only measured in relation to shares held by persons other than the Commonwealth.  This ensures that if the further sale of shares occurs in more than one tranche, the 5% limit automatically applies to the shares in non-Commonwealth hands following the sale of each tranche.

Item 29 - Section 8BG (notes 1, 2 and 3)

This item repeals notes 1, 2 and 3 at the end of section 8BG as a consequence of the amendments in the preceding two items and the repeal of Division 5 of Part 2A (see item 34).

A new note is substituted as a consequence of the amendment to clause 12 of the Schedule to the Telstra Corporation Act made by item 57 of this Schedule.

Item 30 - Section 8BG (note 4)

This item makes a minor technical amendment consequential to the amendment in the preceding item.

Item 31 - Subparagraph 8BH(b)(ii)

Section 8BH creates an offence for persons who acquire shares in a company with the result that an unacceptable foreign ownership situation is created or exacerbated.

This item amends subparagraph 8BH(b)(ii) to reflect the change to the maximum aggregate foreign ownership allowed in Telstra from 11.6667% to 35%.

Item 32 - Subparagraph 8BH(b)(iii)

Section 8BH creates an offence for persons who acquire shares in a company with the result that an unacceptable foreign ownership situation is created or exacerbated.

This item amends subparagraph 8BH(a)(iii) to reflect the change to the maximum individual foreign ownership allowed in Telstra from 1.6667% to 5%.

Item 33 - Section 8BH (notes 1, 2 and 3)

This item repeals notes 1, 2 and 3 at the end of section 8BH as a consequence of the amendments in the preceding two items and the repeal of Division 5 of Part 2A (see item 34).

A new note is substituted as a consequence of the amendment to clause 12 of the Schedule to the Telstra Corporation Act made by item 57 of this Schedule.

Item 34 - Division 5 of Part 2A

Division 5 of Part 2A of the Telstra Corporation Act provided a mechanism for regulations to reduce the ownership limit percentages in the event that the Commonwealth’s one-third equity interest in Telstra was transferred in two or more tranches.

This item repeals this Division as a consequence of the amendment to clause 12 of the Schedule to the Telstra Corporation Act made by item 57 of this Schedule.  The amendment to clause 12 provides for foreign ownership to be measured only in relation to shares held by persons other than the Commonwealth.  This ensures that if the further sale of shares occurs in more than one tranche, the foreign ownership limits automatically apply to the shares in non-Commonwealth hands following the sale of each tranche.

Item 35 - Subsection 8BS(1)

Subsection 8BS(1) of the Telstra Corporation Act requires Telstra to ensure that it remains incorporated under the Corporations Law of the ACT.  There is no reason in principle why Telstra should not be able to be incorporated anywhere in Australia.

This item amends subsection 8BS(1) to require Telstra to remain incorporated under the Corporations Law of a State or an internal Territory.  

‘State’ is defined in paragraph 17(o) of the Acts Interpretation Act 1901 to mean a State of the Commonwealth of Australia.  ‘Internal Territory’ is defined in paragraph 17(pe) of that Act.

Item 36 - Section 8BV

Section 8BV of the Telstra Corporation Act enables the Minister, by notice before the minority-interest sale time (ie. the time when a person other than the Commonwealth first became the legal owner of voting shares in Telstra) to require Telstra’s constitution to divide its ordinary shares into particular classes.

This provision has not been used and is now spent.  This item accordingly provides for its repeal.

Item 37 - At the end of paragraph 8CB(1)(b)

This item makes a minor technical amendment consequential to the amendment in the following item.

Item 38 - After paragraph 8CB(1)(b)

This item amends a delegation provision to enable the Minister to delegate powers under the Part to the Chief Executive, Office of Asset Sales and IT Outsourcing.

Item 39 - At the end of paragraph 8CB(2)(b)

This item makes a minor technical amendment consequential to the amendment in the following item.

Item 40 - After paragraph 8CB(2)(b)

This item amends a delegation provision to enable the Minister for Finance and Administration to delegate powers under the Part to the Chief Executive, Office of Asset Sales and IT Outsourcing.

Item 41 - After Part 2A

This item inserts a new Part 2AA in the Telstra Corporation Act to prevent Telstra entering into schemes to avoid the application of provisions of the Act, such as the foreign ownership provisions, the requirements for its head office and base of operations to be in Australia and the price-cap regime in Part 6 of the Act.

Part 2AA - Anti-avoidance

New section 8CCA - Anti-avoidance

New subsection 8CCA(1) provides that Telstra must not, either alone or together with other persons, begin to carry out a scheme for the sole or dominant purpose of avoiding the application of any provision of the Act.

New subsection 8CCA(2) makes a contravention of new subsection (1) a ground for obtaining an injunction under Division 1 of Part 2B of the Act.

New subsection 8CCA(3) provides that a contravention of new subsection (1) does not affect the validity of any transaction.

New subsection 8CCA(4) provides a definition of the term ‘scheme’ for the purposes of the section.

Item 42 - Part 2B (heading)

Part 2B - Remedial provisions relating to Telstra

The following item amends section 8CD, the injunction provision in Part 2B of the Telstra Corporation Act, to enable injunctions to be sought in relation to the anti-avoidance provision to be inserted by the preceding item.

This item amends the heading to Part 2B consequential to the amendment in the following item.

Item 43 - Subsection 8CD(1)

Subsection 8CD(1) of the Telstra Corporation Act enables the Federal Court to grant a restraining injunction in relation to a contravention of Part 2 or 2A of the Act.

This item amends subsection 8CD(1) to enable the Federal Court to also grant a restraining injunction for a contravention of new Part 2AA of the Act to be inserted by item 41.

Item 44 - Sections 8CI, 8CJ and 8CK

This item makes minor technical amendments consequential to the repeal of Division 2 of Part 2 by item 3 of this Schedule.

Item 45 - Subsections 8CI(6) and 8CJ(6)

This item makes minor technical amendments consequential to the repeal of Division 2 of Part 2 by item 3 of this Schedule.

Item 46 - Section 8CL

This item makes a minor technical amendment consequential to the repeal of Division 2 of Part 2 by item 3 of this Schedule.

Item 47 - Part 2C

Part 2C of the Telstra Corporation Act provides for the reaffirmation of the universal service obligation.

The wording in Part 2C reflected the provisions of Part 13 of the Telecommunications Act 1991, which was current at the time Part 2C was enacted.  That wording is now out of date as the universal service obligation is now provided for in Part 7 of the Telecommunications Act 1997.

It is proposed to repeal Part 2C given that it is now out of date.  The preamble to the Bill reaffirms the Parliament’s commitment to the comprehensive community and regulatory safeguards enacted in the Telecommunications Act 1997, Part 6 of the Telstra Corporation Act and Parts XIB and XIC of the Trade Practices Act 1974.  Specific reference is made to the universal service obligation in paragraph (a) in the Preamble in replacement for the existing reaffirmation of the universal service obligation in the Telstra Corporation Act 1991.

Item 48 - Section 32

This item makes a minor technical amendment consequential to the amendment to section 8BS(1) of the Telstra Corporation Act made by item 35 of this Schedule.

Item 49 - Subsections 36(3) and (4)

This item makes minor technical amendments consequential to the amendment to section 8BS(1) of the Telstra Corporation Act made by item 35 of this Schedule.

Item 50 - After subsection 36(3)

Section 36 of the Telstra Corporation Act requires the Auditor-General to be the auditor of Telstra.  Item 1 of Schedule 5 provides for the repeal of this requirement at the end of the first annual general meeting of Telstra held after the commencement of Schedule 4.  This ensures that there will be no disruption of any audit which is only partially completed at the time the Commonwealth ceases to have a majority equity interest in Telstra.

It is intended that Telstra be able to appoint a further auditor.  This will enable a handover period from the Auditor-General to the new auditor.

This item inserts a new subsection 36(3A) which enables the Board to appoint an additional auditor of Telstra.  The Corporations Law will have effect as if the additional auditor had been appointed to a vacancy.  The Board is required to consult with the Auditor-General before making such an appointment.

Item 51 - Subsection 36(4)

This item amends subsection 36(4) consequential to the amendment in the preceding item.

Item 52 - At the end of section 36

This item inserts a new subsection 36(6), a transitional provision to provide for the continued application of references in section 36 in a situation where provisions of the Corporations Law are replaced.

Item 53 - Subsection 41(1)

This item makes a minor technical amendment consequential to the repeal of Part 2C of the Telstra Corporation Act made by item 47 of this Schedule.

Item 54 - Clause 2 of the Schedule (paragraph (b) of the definition of foreign person)

This item makes a minor technical amendment to paragraph (b) of the definition of ‘foreign person’ in clause 2 of the Schedule to the Telstra Corporation Act.

The amendment deems a company incorporated outside Australia to be a foreign person for the purposes of the ownership provisions of the Act where a foreigner holds a stake in the company of ‘15% or more’, rather than the current amount of ‘more than 15%’.

The amendment aligns the definition in the Telstra Corporation Act more closely with the definition of a ‘foreign person’ in subsection 5(1) of the Foreign Acquisitions and Takeovers Act 1975.

Item 55 - Clause 2 of the Schedule (paragraph (c) of the definition of foreign person)

This item makes a minor technical amendment to paragraph (c) of the definition of ‘foreign person’ in clause 2 of the Schedule to the Telstra Corporation Act.

The amendment deems a company to be a foreign person for the purposes of the ownership provisions of the Act where a group of foreigners holds a total stake in the company of ‘40% or more’, rather than the current amount of ‘more than 40%’.

The amendment aligns the definition in the Telstra Corporation Act more closely with the definition of a ‘foreign person’ in subsection 5(1) of the Foreign Acquisitions and Takeovers Act 1975.

Item 56 - Subparagraphs (b)(iii) and (iv) of clause 3 of the Schedule

This item makes a minor technical amendment to subparagraphs (b)(iii) and (iv) of the Schedule to the Telstra Corporation Act to remove unnecessary references to New Zealand citizens.

Item 57 - After subclause 12(4) of the Schedule

This item amends clause 12 of the Schedule to the Telstra Corporation Act, which deals with the determination of the direct control interest that a person holds in Telstra.  Clause 11 of the Schedule provides for the calculation of a stake a person holds in a company for the purposes of the foreign ownership restrictions on Telstra, by reference to the direct control interests that the person and the person’s associates hold in the company.

This item inserts a new clause 12(4A) which provides that in determining the direct control interest of a particular type that a person holds in Telstra, it is to be assumed that the only shares in Telstra are the shares held by persons other than the Commonwealth.

New clause 12(4B) provides that for the purpose of subclause 12(4A), a ‘share’ does not include an interest in a share.  Clause 8 of the Schedule contains a definition of the term ‘interest in a share’ for the purposes of the ownership provisions.  New clause 12(4B) displaces this definition, so that clause 12(4A) would have the ordinary meaning that shares held in legal ownership by persons other than the Commonwealth are taken into account for the purposes of the foreign ownership restrictions.  Because the shares held by the Commonwealth are ignored, it follows that any interests in and rights flowing from those shares must also be ignored.

Accordingly, if a Telstra sale scheme for the sale of the remaining Commonwealth equity involves the sale of shares in more than one tranche, the number of shares that can be held by foreign persons will increase progressively with each tranche, but will always be limited to 35% in aggregate, and 5% individually, of the shares no longer held in legal ownership by the Commonwealth.

Item 58 - Subclause 12(5) of the Schedule

This item makes a minor technical amendment consequential to the amendment made by the following item.

Item 59 - At the end of clause 12 of the Schedule

Clause 12 of the Schedule to the Telstra Corporation Act provides the mechanism for calculating a person’s ‘direct control interests’ in a company at a particular time.  Under clause 11, in determining a particular type of stake that a person holds in a company, the person’s direct control interests of that type are aggregated with the ‘direct control interests’ of that type held by the person’s associates.

Clause 12(5) of the Schedule provides a fractional tracing rule for the purpose of identifying a person’s interest in a company when that interest may be held through interposed companies.

When calculating the interests of a group of persons for the purposes of the 35% aggregate foreign ownership limitations, it is arguable that the fractional tracing rule can result in the anomalous situation that foreign interests held through an interposed foreign company are counted in addition to the interests of the first foreign company (a form of double counting).

This item inserts new clauses 12(6) and (7) which have the effect of ensuring that this form of double counting does not occur.

Schedule 3 - Amendments commencing on the designated day

Long Service Leave (Commonwealth Employees) Regulations

Item 1 - Schedule 1A (item 4)

This item repeals item 4 in Schedule 1A of the Long Service Leave (Commonwealth Employees) Regulations to ensure that from the designated day, Telstra employees will not continue to accrue benefits under the Long Service Leave (Commonwealth Employees) Act 1976.

Item 10 of this Schedule inserts a new Division 1 of Part 3A in the Telstra Corporation Act which includes savings provisions for Telstra employee long service leave entitlements accrued up to the designated day.

Maternity Leave (Commonwealth Employees) Regulations

Item 2 - Schedule 2A (item 2)

This item repeals item 2 in Schedule 2A of the Maternity Leave (Commonwealth Employees) Regulations.

The amendment ensures that employees of Telstra do not, from the designated day, continue to be eligible for maternity leave under the Maternity Leave (Commonwealth Employees) Act 1973.  

Item 10 of this Schedule inserts a new Division 4 of Part 3A in the Telstra Corporation Act which includes savings provisions for maternity leave entitlements of Telstra employees accrued up to the designated day, including benefits for those employees entitled to begin their maternity leave within the 12 months following the designated day.

Occupational Health and Safety (Commonwealth Employment) Act 1991

Item 3 - Schedule

This item omits a reference to Telstra from the Schedule to the Occupational Health and Safety (Commonwealth Employment) Act 1991 (the ‘OH&S Act’), so that Telstra is not, from the designated day, deemed to be a Government Business Enterprise for the purposes of that Act.  After the designated day, a Telstra body will also not be a Commonwealth authority for the purposes of the Act.

Item 10 of this Schedule inserts a new section 9S in the Telstra Corporation Act which is a related transitional provision.

Telstra Corporation Act 1991

Item 4 - Section 3

Section 3 of this Bill provides a mechanism for the Minister to declare a designated day for Telstra.

This item inserts a definition of the term ‘designated day’ for the purposes of the new Part 3A inserted by item 10 of this Schedule.

Item 5 - Section 3

This item inserts a definition of the term ‘employee’ in section 3 consequential upon the inclusion of a new Part 3A containing various employee benefit savings provisions (see item 10 of this Schedule).

Item 6 - Section 3

This item inserts a definition of the term ‘Long Service Leave Act’ in section 3 of the Telstra Corporation Act consequential upon the inclusion of a new Part 3A containing employee benefit savings provisions relating to long service leave.

Item 7 - Section 3

This item inserts a definition of the term ‘Maternity Leave Act’ in section 3 of the Telstra Corporation Act consequential upon the inclusion of a new Part 3A containing employee benefit savings provisions relating to maternity leave.

Item 8 - Section 3

This item inserts a definition of the term ‘SRC Act’ in section 3 of the Telstra Corporation Act consequential upon the inclusion of a transitional provision relating to safety, rehabilitation and compensation by item 10 of this Schedule.

Item 9 - Section 3

This item inserts a definition of the term ‘Telstra body’ in section 3 of the Telstra Corporation Act.

‘Telstra body’ is defined to mean Telstra or a Telstra subsidiary.  For the purposes of the employee benefit savings provisions, a reference to a Telstra body means a body corporate that was a Telstra body immediately before the designated day.  This will ensure the effectiveness of the savings provisions if a Telstra subsidiary subsequently ceases to be owned by Telstra after the designated day.

Item 10 - Before Part 4

This item inserts a new Part 3A in the Telstra Corporation Act dealing with transitional provisions relating to the sale of the remaining Commonwealth equity interest in Telstra.

Part 3A - Transitional provisions relating to the sale by the Commonwealth of its remaining equity interest in Telstra

The transitional provisions continue or modify certain obligations of Telstra and its subsidiaries.  They also provide for the continuation of certain employee benefits arising from pre-sale service that otherwise would be foregone due to the sale.  The saving provisions also recognise post-sale service of specific categories of employees as public employment for the purposes of qualifying for certain deferred pension benefits.

Many of the transitional and savings provisions operate in relation to the ‘designated day’.  Clause 3 of the Bill provides a mechanism for public notification of the day on which the Commonwealth ceases to have a controlling interest in Telstra.  The ‘designated day’ is the day declared under that new section.

Division 1 - Long service leave

Employees of Telstra currently accrue long service leave entitlements under the Long Service Leave (Commonwealth Employees) Act 1976 (the ‘LSL(CE) Act’).

However, for most employees, pre-sale service of less than 10 years will not normally qualify for any long service leave entitlement under the LSL(CE) Act.  To ensure equity, these provisions provide that when those employees either complete 10 years service with Telstra or cease to be employees in circumstances under which the LSL(CE) Act entitlements would have applied had a majority of voting shares in Telstra not been sold, long service leave benefits at the LSL(CE) Act standard are provided in respect of service before the designated day.

As a result of these provisions, a Telstra employee with 9 years service as at the designated day could be granted long service leave of 9/10ths of 3 months once the employee has served a further one year with a Telstra body (making a combined service period of 10 years). The employee’s long service leave entitlements relating to service after the designated day will accrue and be credited in accordance with the long service leave regime in place after the designated day.  The Division also saves entitlements accrued under the LSL(CE) Act before the designated day (generally by those employees with at least 10 years service before the designated day).

New section 9A – Interpretation

This clause provides for the definition of terms used in this Division.  

New subsection 9A(1) provides that expressions used in this Division have the same meaning as in the LSL(CE) Act. 

The ‘combined service period’ of an employee is defined in new subsection 9A(2) as the total of the employee’s service for the purposes of the LSL(CE) Act before the designated day and the employee’s service with a Telstra body after the designated day.

New section 9B – Long service leave for employees with less than 10 years service

This provision applies to a person who was an employee of Telstra immediately before the designated day and whose period of service at the designated day was less than 10 years.  If the employee continues to be employed by a Telstra body until his or her combined service period is at least 10 years, a Telstra body may grant the employee long service leave.

New subsection 9B(5) provides for granting of long service leave at retirement or retrenchment as long as the employee has a combined service period of at least one year.  Leave granted under this clause is to be taken so as to expire immediately before the employee retires or is retrenched (new section 9B(7)).

New subsection 9B(6) allows for a Telstra body to grant long service leave on half pay.

New subsection 9B(8) provides for the application of section 20 of the LSL(CE) Act to calculate the rate of salary to be used in working out the full salary of an employee for the purposes of this provision.

In each case the period of long service leave is calculated by reference to the period of service as at the sale day (new section 9E).

New section 9C – Payments in lieu of long service leave for employees with less than 10 years service

New section 9C provides that a Telstra body must, in certain circumstances, pay an amount to an employee in lieu of the employee taking long service leave (new subsection 9C(1)).  For new section 9C to apply, an employee must have been an employee of Telstra immediately before the designated day and not have accrued a period of service under the LSL(CE) Act of 10 or more years at that time (new subsection 9C(2)).

New section 9C applies to persons who cease to be employees of Telstra after the sale day, but not to those who cease to be employees because they die (new subsection 9C(3)).  If a person ceases to be an employee and has at that time a combined service period of at least 10 years, the employing Telstra body must pay him or her an amount in lieu of long service leave (new subsection 9C(4)).  This includes a person who voluntarily leaves employment prior to reaching the minimum retirement age.

If a person does not have a combined service period of 10 years or more, but does have a combined service period of at least one year, then he or she is entitled to be paid an amount in lieu of long service leave if the reason that he or she ceases to be an employee is:

.	that he or she has reached minimum retirement age or because of retrenchment (new subsection 9C(5)); or 

.	because of ill health (new subsection 9C(6)).

The amount that an employee is paid in lieu is equivalent to his or her full salary in respect of his or her long service leave credit under new subsection 9E(2).  

New subsection 9C(9) provides for the application of section 21 of the LSL(CE) Act to calculate the rate of salary to be used in working out the full salary of an employee for the purposes of this provision.

New section 9D – Payments on the death of an employee

New section 9D requires payment to a deceased employee’s dependant (or dependants) of the amount that would have been payable to the employee under new section 9C on the day of the employee’s death, as if the employee had at that time stopped being an employee having reached the minimum retirement age.  This provision applies if immediately before the designated day the employee had less than 10 years service and at the time of death had a combined service period of at least one year.

New section 9E – Employee’s long service leave credit for the purposes of sections 9B and 9C

New section 9E defines the long service leave credit of a Telstra employee as being equal to the employee’s long service leave credit under the LSL(CE) Act as at the designated day.  In cases falling under new section 9C, the long service leave credit is reduced by any amount of leave already taken under new section 9B.

New section 9F – Division not to affect an employee’s post-sale long
service leave rights

New section 9F is included to avoid doubt and declares that the provisions of the Division do not affect an employee’s post-sale long service leave rights.  

Long service leave associated with service after the designated day with Telstra will be a matter for Telstra and its employees to agree in the context of relevant State and Territory legislation.

New section 9G – Saving – Long Service Leave Act

New section 9G ensures that accrued long service leave credits (ie for those employees with 10 or more years of service on the designated day) arising from previous service with Telstra under the LSL(CE) Act are retained post-sale.

Division 2 - Operation of the Safety, Rehabilitation and Compensation Act 1988

New section 9H - Operation of section 128A of the SRC Act

New section 9H provides that a Telstra body that was, before the designated day, liable as a prescribed Commonwealth authority to pay an amount in respect of an injury, loss or damage suffered by one of its employees prior to 1 July 1989, under section 128A of the SRC Act, continues to be so liable after the sale day.

Division 3 - Retirement Benefits

New section 9J - Deferred benefits under the Defence Force Retirement and Death Benefits Act 1973

This new section relates to the Defence Force Retirement and Death Benefits Act 1973 (the ‘DFRDB Act’).  Current employees of a Telstra body who were formerly members of the Defence Force and who have elected to take deferred benefits under the DFRDB Act are required to complete an aggregate of 20 years (in most circumstances) in the Defence Force or in subsequent public employment to enable benefits to be paid.

In the absence of a specific provision, an employee who has not served the required period prior to the Commonwealth ceasing to have a controlling interest in a Telstra body would lose his or her entitlement to the benefits available under the DFRDB Act.

New section 9J is intended to enable former members of the Defence Force who:

.	are employed by a Telstra body on the sale day;

.	had deferred their benefits under the DFRDB Act; and

.	were accruing service in public employment with that body;

to count employment with the Telstra body as public employment even after the designated day.

Subject to relevant eligibility criteria, these employees would be entitled to their deferred benefits if they remain with the Telstra body (or in other public employment) until the qualifying period (usually 20 years) is completed.

New section 9K – Period of eligible employment for the purposes of Division 3 of Part IX of the Defence Force Retirement and Death Benefits Act 1973

This new section provides that any period of employment with a Telstra body which would have been eligible employment for the purposes of Division 3 of Part IX of the DFRDB Act (which allows for the preservation of rights of contributing members who cease to be members of the Defence Force), prior to the designated day will continue to be regarded as eligible employment for the purposes of the person qualifying for deferred benefits.

New section 9L – Application of the Superannuation Act 1976

This new section provides that if an employee of a Telstra body was an eligible employee for the purposes of the Superannuation Act 1976 immediately before the designated day, the employee is taken to have ceased to be an eligible employee for the purposes of that Act on the designated day.  Employees of a Telstra body will no longer be entitled to contribute to the Commonwealth Superannuation Scheme established under that Act.

Employees of Telstra who are members of the CSS will have various options in relation to their superannuation benefits which are provided for in the Superannuation Act 1976 and regulations made under that Act.

Division 4 – Other transitional and saving provisions

New section 9M – Telstra employees not on maternity leave immediately before the designated day

Certain Telstra employees are currently entitled to benefits provided under the Maternity Leave (Commonwealth Employees) Act 1973 (the ‘ML(CE) Act’) including maternity leave of up to 12 months, of which 12 weeks may be on full pay and the remainder without pay.

This new section will preserve the entitlements of women employed by Telstra on the designated day to apply for, and be granted leave under, the ML(CE) Act provided that the woman would have been entitled to begin such leave within 12 months of the designated day.

New section 9N – Telstra employees on maternity leave on the designated day

This new section preserves the existing rights of those employees who are on maternity leave on the designated day.

New section 9P – Saving – Crimes (Superannuation Benefits) Act 1989

The Crimes (Superannuation Benefits) Act 1989 will cease to apply to acts or omissions of employees of a Telstra body that would or might constitute corruption offences, where those acts or omissions occur on or after the designated day.

New subsection 9P(1) allows the Act to continue to apply in relation to a corruption offence committed by an employee of a Telstra body before the designated day.

New subsection 9P(2) prevents a superannuation order made under the Act from affecting employer superannuation contributions made by a Telstra body on or after the designated day.

New subsection 9P(3) provides that a superannuation scheme to which a Telstra body contributes as an employer on or after the designated day is not a superannuation scheme for the purposes of the Act in relation to a corruption offence committed after the designated day, and employer contributions to that scheme may not therefore be the subject of a superannuation order.

New subsection 9P(4) provides that where a superannuation order may be made affecting an employee’s entitlements under the Commonwealth Superannuation Scheme and employer contributions in relation to that person’s membership of the Scheme have been paid but no corresponding benefits have been paid to the person, then the superannuation order can only order that an amount be paid to the Commonwealth.

New subsection 9P(5) provides that where an employee has received a superannuation payment from the Consolidated Revenue Fund then the relevant superannuation order is that the employer contributions and interest component are to be repaid to the Commonwealth.

New section 9Q – Saving – Director of Public Prosecutions Act 1983

This new section ensures that the Director of Public Prosecutions Act 1983 continues to apply to acts or omissions that occurred prior to the designated day and that civil remedies in relation to those matters can continue to be pursued.  This provision is required because the Director of Public Prosecutions Act will no longer apply to a Telstra body as a ‘Commonwealth authority’ from the designated day.

New section 9R - Avoidance of doubt - cessation of mobility rights

This provision is included to avoid any doubt in relation to the cessation of mobility rights after the designated day.  On the cessation of Commonwealth control of Telstra, the residual mobility rights (if any) of employees of Telstra bodies under Part IV of the Public Service Act 1922 and the repealed Officers’ Rights Declaration Act 1928 will be extinguished.

New section 9S - Refund of contribution paid under the Occupational Health and Safety (Commonwealth Employment) Act 1991

Item 3 of this Schedule omits a reference to Telstra from the Schedule to the Occupational Health and Safety (Commonwealth Employment) Act 1991 (the ‘OH&S Act’), so that Telstra is not, from the designated day, deemed to be a Government Business Enterprise for the purposes of that Act.  After the designated day, a Telstra body will also not be a Commonwealth authority for the purposes of the Act.

This new section provides for a refund if the designated day falls part way through a financial year and the Telstra body has paid a contribution under section 67H of the OH&S Act in respect of the administration of that Act.

Schedule 4 - Amendments commencing on the second proclaimed day

Telstra Corporation Act 1991

Item 1 - Section 8AA

This item makes a minor amendment to the simplified outline of Part 2 of the Telstra Corporation Act consequential upon the amendment made by the following item.

Item 2 - Division 3 of Part 2

Division 3 of Part 2 of the Telstra Corporation Act sets out special reporting requirements for Telstra, including the giving of financial statements, notification of significant events, keeping Ministers informed and requirements for corporate plans.

It is inappropriate to continue to have special reporting requirements that favour the Commonwealth in a situation where the Commonwealth no longer holds a majority equity interest in Telstra.

Accordingly, this item provides for the repeal of Division 3 of Part 2.

Item 3 - Subsection 8AW(1)

This clause makes a minor technical amendment to subsection 8AW(1) of the Telstra Corporation Act consequential upon the repeal of Division 3 of Part 2 by the preceding item.

Item 4 - Paragraph 8AX(1)(a)

This clause makes a minor technical amendment to paragraph 8AX(1)(a) of the Telstra Corporation Act consequential upon the repeal of Division 3 of Part 2 by item 2.

Item 5 - Subsection 8AY(1)

This clause makes a minor technical amendment to subsection 8AY(1) of the Telstra Corporation Act consequential upon the repeal of Division 3 of Part 2 by item 2.

Item 6 - Part 3

Part 3 of the Telstra Corporation Act gives the Minister the power to give Telstra such directions as appear to the Minister to be necessary in the public interest.

This item provides for the repeal of that Part.  It would be inappropriate to retain such a power in a situation where the Commonwealth no longer holds a majority equity interest in Telstra.

The public interest in telecommunications is protected through the comprehensive community and regulatory safeguards set out in the Telecommunications Act 1997, the Telstra Corporation Act 1991 and Parts XIB and XIC of the Trade Practices Act 1974.  Section 581 of the Telecommunications Act gives the Australian Communications Authority a broad power of direction over carriers and carriage service providers in relation to the performance of its telecommunications functions and powers.  An additional power of Ministerial direction over Telstra in the Telstra Corporation Act is unnecessary and furthermore conflicts with the rights of other shareholders in the company.

Schedule 5 - Amendment commencing at the end of the first annual general meeting of Telstra held after the second proclaimed day

Telstra Corporation Act 1991

Item 1 - Section 36

Section 36 of the Telstra Corporation Act requires the Auditor-General to be the auditor of Telstra.  This item provides for the repeal of this requirement.

Clause 2(7) provides that Schedule 5 commences at the end of the first annual general meeting of Telstra held after the commencement of Schedule 4.  This ensures that there will be no disruption of any audit which is only partially completed at the time the Commonwealth ceases to have a majority equity interest in Telstra.

Item 2 - Transitional - cessation of Auditor-General’s appointment as Telstra’s auditor

This item is a transitional provision which ensures that a replacement auditor for the Auditor-General may be appointed at the first annual general meeting of Telstra held after the commencement of Schedule 4 as if a vacancy in the office of auditor had arisen at the start of the meeting.