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2004-2005
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
THE SENATE
TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 2005
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Communications, Information
Technology and the Arts, Senator the Hon. Helen Coonan)
2
TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP)
BILL 2005
OUTLINE
The Telstra (Transition to Full Private Ownership) Bill 2005 (the Bill) amends the
Telstra Corporation Act 1991 (the Telstra Corporation Act) to repeal the provisions
that require the Commonwealth to retain at least 50.1 per cent of its equity in Telstra
Corporation Limited (Telstra).
The Bill gives the Commonwealth the flexibility to use a wide range of approaches to
conduct the sell down of Telstra either through a single tranche, several tranches or
other approaches such as placements. The Minister for Finance and Administration
will be able to make a determination setting out rules governing a Telstra sale scheme.
To ensure that any proposed access by Telstra to securities markets does not
compromise the Commonwealth's objective of divesting its entire equity in Telstra, the
Minister for Finance and Administration will also be able to direct Telstra not to
engage in any specified securities issuance activities outside a Telstra sale scheme.
Part 1 of Schedule 1 to the Bill makes amendments to the Telstra Corporation Act that
will allow the Commonwealth to sell its remaining equity interest in Telstra. Item 36 in
Part 1 of Schedule 1 inserts a new Part 2C of the Telstra Corporation Act that re-
affirms the universal service obligation, the digital data service obligation and the
customer service guarantee.
Part 2 of Schedule 1 to the Bill makes amendments to various Acts and regulations as
a consequence of Telstra ceasing to be Commonwealth controlled, which will occur
when the Commonwealth ceases to hold the majority of the voting shares in Telstra.
Transitional amendments will 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:
require Telstra to continue to deal with any requests under the Freedom of
Information Act 1982 for access to a document in the possession of Telstra
that have not been finally disposed of when Telstra ceases to be
Commonwealth controlled and preserve the rights of persons making such
requests under the Administrative Appeals Tribunal Act 1975;
enable the Commonwealth Ombudsman to continue to investigate any
complaints in relation to action taken by Telstra that have not been finally
disposed of when Telstra ceases to be Commonwealth controlled;
preserve the operation, in respect of events occurring prior to Telstra ceasing
to be Commonwealth controlled, of the Crimes (Superannuation Benefits) Act
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1989 and Director of Public Prosecutions Act 1983;
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.
The current provisions of the Telstra Corporation Act that enable the Minister for
Communications, Information Technology and the Arts to give certain directions to
Telstra in the public interest and that impose certain reporting obligations on Telstra
will cease to apply when the Minister for Communications, Information Technology
and the Arts is satisfied that the Commonwealth's equity in Telstra has fallen to 15 per
cent or less, known as the `85% sale day' (Part 3 of Schedule 1 to the Bill). This
threshold is consistent with the level at which substantial interest considerations are
triggered under the Foreign Acquisitions and Takeovers Act 1975. It has been chosen
to help ensure that if a multiple tranche sale is necessary, the Commonwealth continues
to be fully informed on Telstra's actions and plans until the Commonwealth no longer
holds a substantial interest in Telstra.
Section 53 of the Constitution provides that a proposed law appropriating revenue or
moneys shall not `originate in the Senate'. The Bill therefore temporarily `switches
off' various appropriation provisions in the Telstra Corporation Act that provide
funding for the payment of the Commonwealth's costs for the way its sells its shares in
Telstra, reimburse Telstra and its Board for costs of assisting the Commonwealth with
the sale and provide for payment of compensation for any acquisition of property
otherwise than on just terms as a result of a Telstra sale scheme (see items 19, 23 and
28 of Schedule 1 to the Bill). These appropriation provisions will be `switched on'
again following the passage and Royal Assent of this Bill and the Telecommunications
Legislation Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2
and Schedule 4 of that Bill).
FINANCIAL IMPACT STATEMENT
The full financial costs and benefits from a future sale or sales of the Commonwealth's
remaining shareholding in Telstra are difficult to quantify at this stage. However the
Government has stated that sale will only proceed when an appropriate return for
taxpayers could be achieved.
Actual sale proceeds and costs are dependent on a number of future variables,
including:
overall market conditions;
expected demand for Telstra shares;
Telstra's performance;
the outcomes of the new CEO's operational review; and
the implementation of regulatory changes.
The total market value of the Commonwealth's remaining shares in Telstra based on
the share price on 31 August 2005 is about $30 billion. The amount raised on a future
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sale or sales would be dependent on the sale processes, the structure of the offer and
market circumstances at the time.
The costs of conducting a sale are dependent on the structure and size of a sale. A
future sale is expected to be a complex undertaking with a large number of service
providers which will be subject to a competitive tendering exercise for these services.
Nevertheless, it is expected that sale costs will be consistent with the level in the
previous Telstra 2 Share Offer. The Department of Finance and Administration will
manage the sale process.
The forward estimates include the effect of the sale of the Australian Government's
shareholding in Telstra, noting that the level of proceeds will depend, inter alia, on the
prevailing levels of world equity markets at the time and that the timing of the sale
could be adjusted if market levels are considered unlikely to provide an appropriate
return to taxpayers.
Proceeds from sale of the Commonwealth's remaining shareholding in Telstra may be
used to reduce net debt or allocated to the proposed Future Fund. Regardless of how
the proceeds are used, the Commonwealth will continue to receive income flows from
investments (either in the form of interest on term deposits at the Reserve Bank of
Australia or through the Future Fund receiving interest and dividends on its
investments).
A $2 billion dedicated Communications Fund will be established by the
Telecommunications Legislation Amendment (Future Proofing and Other Measures)
Bill 2005 to fund the Commonwealth Government's response to any recommendations
proposed by the Regional Telecommunications Independent Review Committee to the
Government in a report of a review of the adequacy of telecommunications services in
regional, rural and remote parts of Australia.
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NOTES ON CLAUSES
Clause 1 - Short title
Clause 1 provides that the Bill, when enacted, may be cited as the Telstra (Transition
to Full Private Ownership) Act 2005.
Clause 2 - Commencement
Clause 2 provides for various provisions of the Bill, when enacted, to commence on
specified days or times.
Clauses 1 to 5 of the Bill will commence on Royal Assent (see item 1 in the table under
subclause 2(1)). Part 1 of Schedule 1 to the Bill will also commence on Royal Assent
(see item 2 in the table). Part 1 of Schedule 1 will amend the Telstra Corporation Act
to allow the Commonwealth to sell the Commonwealth's remaining equity interest in
Telstra.
The remaining provisions of the Bill will commence on specified days or times, as
discussed in the notes to clauses 3 and 4.
Clause 3 - Designated day
Part 2 of Schedule 1 makes consequential amendments to various Acts and
regulations, and includes certain transitional arrangements. It permits the Auditor-
General to resign as auditor of Telstra and inserts a new Part 3A in the Telstra
Corporation Act that contains transitional provisions relating to the sale by the
Commonwealth, or by a separate company, of the Commonwealth's remaining equity
interest in Telstra. Some of those transitional provisions relate to Commonwealth Acts
that 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.
Item 3 in the table under subclause 2(1) provides for Part 2 of Schedule 1 to
commence on the designated day.
The designated day is declared by the Minister for Communications, Information
Technology and the Arts under clause 3 and is the day that, in the Minister's opinion,
is the first day on which a majority of the voting shares in Telstra are held by persons
other than the Commonwealth.
In determining the voting shares that the Commonwealth holds it will be necessary to
count any voting shares held by a `category A hybrid-security issuer company' (see the
definition of `the Commonwealth' in subclause 3(7)). A category A hybrid-security
issuer company will be a wholly-owned Commonwealth company that issues sale-
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scheme hybrid securities (see items 5, 12 and 13 of Schedule 1 to the Bill). Voting
shares held by a `category B hybrid-security issuer company' (a non-wholly
Government owned hybrid-security issuer company specified by the Minister for
Finance and Administration under proposed subsection 8AJ(6B)) will not be counted
for this purpose.
As part of the sale scheme arrangements, it is possible that the Commonwealth may
transfer some of its shares in Telstra to a separate company (a hybrid-security issuer
company) that would issue sale-scheme hybrid securities. `Sale-scheme hybrid
security' is defined in item 16 of Schedule 1 to the Bill to mean an interest-bearing
security, a share, or any other security or financial product that is issued on the basis
that it will or may be redeemed in exchange for, exchanged for, or converted to, a
share or shares in Telstra; an option to acquire a share or shares in Telstra; or a
security or a financial product relating to Telstra that is specified in a written
declaration made by the Minister for Finance and Administration.
Hybrid securities are a broad classification for a group of securities that combine both
debt and equity characteristics. The additional characteristics, compared to ordinary
equity, make these securities attractive to additional groups of investors. Accessing all
relevant investor groups will be an important consideration for the successful conduct
of further sales of Telstra. Typically a hybrid security will be capable of exchange into
the underlying Telstra share or shares at a specified future date.
In addition, for the purposes of the declaration by the Minister for Communications,
Information Technology and the Arts of the `designated day', if a share in Telstra is an
investment of the proposed Future Fund or the Communications Fund, it will be taken
to be held by a person other than the Commonwealth (see subclause 3(3)).
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is possible some Telstra shares may
be notionally transferred to the Future Fund in the future.
The Telecommunications Legislation Amendment (Future Proofing and Other
Measures) Bill 2005 provides for the establishment of the Communications Fund. The
Communications Fund will be used to finance the implementation of the
Commonwealth Government's response to the recommendations of the proposed
Regional Telecommunications Independent Review Committee. This Fund may also
receive Telstra shares which may technically remain in Commonwealth ownership.
In the case of a temporary acquisition of Telstra shares by a person other than the
Commonwealth under a stock borrowing arrangement with the Commonwealth, the
borrowed share will be taken to be held by the Commonwealth for the purposes of
clause 3 of the Bill (subclause 3(4)).
The Minister's declaration of the `designated day' under subclause 3(1) will have effect
accordingly (subclause 3(2)).
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The Minister's declaration will be a legislative instrument for the purposes of the
Legislative Instruments Act 2003 (the Legislative Instruments Act) (subclause 3(5)).
The declaration will therefore be required to be registered on the Federal Register of
Legislative Instruments and tabled in Parliament. However, the Minister's declaration
will not be subject to Parliamentary disallowance. As the Minister, acting on
appropriate advice from Telstra and others, will be in the best position to decide when
the designated day occurs, it is not appropriate that the Minister's declaration be
subject to Parliamentary disallowance.
The designated day may be earlier than the day on which the Minister's declaration
under subclause 3(1) is registered under the Legislative Instruments Act (subclause
3(6)).
The effect of subsections 12(2) and (3) of the Legislative Instruments Act is that
subject to any contrary provision for commencement of an instrument in the enabling
legislation for the instrument, an instrument will have no effect if it would take effect
before the date it is registered and as a result:
(a) the rights of a person (other than the Commonwealth or an authority of the
Commonwealth) as at the date of registration would be affected so as to
disadvantage that person; or
(b) liabilities would be imposed on a person (other than the Commonwealth or an
authority of the Commonwealth) in respect of anything done or omitted to be
done before the date of registration.
While there is no intention that the Minister's declaration under subclause 3(1) will
have such a result, subclause 3(6) is a contrary provision for the purposes of
subsection 12(3) of the Legislative Instruments Act and therefore avoids any argument
that the designated day cannot occur on a day that is earlier than the day on which the
Minister's declaration is registered on the Federal Register of Legislative Instruments.
Clause 4 - 85% sale day
Part 3 of Schedule 1 to the Bill will repeal Division 3 of Part 2 of the Telstra
Corporation Act, which imposes reporting obligations on Telstra. It will also repeal
proposed section 8AYA, inserted by item 27 of Schedule 1 to the Bill, which enables
the Minister for Finance and Administration to direct Telstra not to dilute the
Commonwealth's equity in Telstra or engage in specified securities issuance activities.
The object of proposed section 8AYA is to ensure that any proposed access by Telstra
to securities markets outside a Telstra sale scheme does not compromise the
Commonwealth's objective of divesting its entire equity in Telstra. Part 3 of Schedule
1 to the Bill will also repeal Part 3 of the Telstra Corporation Act, which enables the
Minister for Communications, Information Technology and the Arts to give certain
directions to Telstra in the public interest.
It is proposed to repeal these provisions when the Minister for Communications,
Information Technology and the Arts is satisfied that the Commonwealth's equity has
8
fallen to 15 per cent or less, known as the `85% sale day' (see item 4 in the table under
subclause 2(1) and subclause 4(1)). This threshold is consistent with the level at which
substantial interest considerations are triggered under the Foreign Acquisitions and
Takeovers Act 1975. It has been chosen to help ensure that if a multiple tranche sale is
necessary, the Commonwealth continues to be fully informed on Telstra's activities
and plans until the Commonwealth no longer holds a substantial interest in Telstra.
In determining the voting shares that the Commonwealth holds it will be necessary to
count any voting shares held by a `category A hybrid-security issuer company' (see the
definition of `the Commonwealth' in subclause 4(7)). A category A hybrid-security
issuer company will be a wholly-owned Commonwealth company that issues sale-
scheme hybrid securities (see items 5, 12 and 13 of Schedule 1 to the Bill). Voting
shares held by a `category B hybrid security issuer company' (a non-Government
hybrid-security issuer company specified by the Minister for Finance and
Administration under proposed subsection 8AJ(6B)) will not be counted for this
purpose.
As part of the sale scheme arrangements, it is possible that the Commonwealth may
transfer some of its shares in Telstra to a wholly-owned Commonwealth company (a
hybrid-security issuer company) that would issue sale-scheme hybrid securities. `Sale-
scheme hybrid security' is defined in item 16 of Schedule 1 to the Bill to mean an
interest-bearing security, a share, or any other security or financial product that is
issued on the basis that it will or may be redeemed in exchange for, exchanged for, or
converted to a share or shares in Telstra; an option to buy a share or shares in Telstra;
or a security or a financial product relating to Telstra that is specified in a written
declaration made by the Minister for Finance and Administration.
In addition, for the purposes of the declaration by the Minister for Communications,
Information Technology and the Arts of the `85% sale day', if a share in Telstra is an
investment of the proposed Future Fund or the Communications Fund, it will be taken
to be held by a person other than the Commonwealth (see subclause 4(3)).
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is possible that some Telstra shares
may be notionally transferred to the Future Fund in the future.
The Telecommunications Legislation Amendment (Future Proofing and Other
Measures) Bill 2005 provides for the establishment of the Communications Fund. The
Communications Fund will be used to finance the implementation of the
Commonwealth Government's response to the recommendations of the proposed
Regional Telecommunications Independent Review Committee. This Fund may also
receive Telstra shares which may technically remain in Commonwealth ownership.
In the case of a temporary acquisition of Telstra shares by a person other than the
Commonwealth under a stock borrowing arrangement with the Commonwealth, the
9
borrowed share will be taken to be held by the Commonwealth for the purposes of
clause 4 of the Bill (subclause 4(4)).
The Minister will be required to declare the 85% sale day by written instrument
(subclause 4(1)). The Minister's declaration will have effect accordingly (subclause
4(2)).
The Minister's declaration will be a legislative instrument for the purposes of the
Legislative Instruments Act (subclause 4(5)). The Minister's declaration will therefore
be required to be registered on the Federal Register of Legislative Instruments and
tabled in both Houses of Parliament. However, the Minister's declaration will not be
subject to Parliamentary disallowance. As the Minister, acting on appropriate advice
from Telstra and others, will be in the best position to decide when the 85% sale day
occurs, it is not appropriate that the Minister's declaration be required to be subject to
Parliamentary disallowance.
The 85% sale day may be earlier than the day on which the Minister's declaration
under subclause 4(1) is registered under the Legislative Instruments Act (subclause
4(6)).
The effect of subsections 12(2) and (3) of the Legislative Instruments Act is that
subject to any contrary provision for commencement of an instrument in the enabling
legislation for the instrument, an instrument will have no effect if it would take effect
before the date it is registered and as a result:
(a) the rights of a person (other than the Commonwealth or an authority of the
Commonwealth) as at the date of registration would be affected so as to
disadvantage that person; or
(b) liabilities would be imposed on a person (other than the Commonwealth or an
authority of the Commonwealth) in respect of anything done or omitted to be
done before the date of registration.
While there is no intention that the Minister's declaration under subclause 4(1) will
have such a result, subclause 4(6) is a contrary provision for the purposes of
subsection 12(3) of the Legislative Instruments Act and therefore avoids any argument
that the 85% sale day cannot occur on a day that is earlier than the day on which the
Minister's declaration is registered on the Federal Register of Legislative Instruments.
Clause 5 - Schedule(s)
Subclause 5(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.
Subclause 5(2) ensures that the amendment of regulations in the Schedules does not
prevent later amendments or repeal of those regulations by the Governor-General.
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Schedule 1--Amendments
Part 1--Amendments commencing on Royal Assent
Telstra Corporation Act 1991
Items 1 to 6 - Insertion of definitions of `category A hybrid-security issuer
company', `category B hybrid-security issuer company', `Communications
Fund', `Future Fund, `hybrid-security issuer company', and `sale-scheme hybrid
security' in section 3 of the Telstra Corporation Act
Item 5 provides for the definition of `hybrid-security issuer company' to be inserted in
section 3 of the Telstra Corporation Act. This term will have the meaning given by
section 8AJ of that Act as proposed to be amended by items 12, 13 and 14 of Schedule
1 to the Bill.
As part of the sale scheme arrangements, it is possible that the Commonwealth may
transfer some of its shares in Telstra to a separate company (a hybrid-security issuer
company) that would issue sale-scheme hybrid securities. `Sale-scheme hybrid
security' is defined in item 6 to have the meaning given by proposed section 8AJA of
the Telstra Corporation Act (see the discussion at item 16 below).
There will be 2 types of hybrid-security issuer company. A `category A hybrid-
security issuer company' will be a wholly-owned Commonwealth company that issues
sale-scheme hybrid securities. A `category B hybrid-security issuer company' will be a
non-wholly Government owned hybrid-security issuer company specified in a written
declaration made by the Minister for Finance and Administration under proposed
subsection 8AJ(6B) of the Telstra Corporation Act (see items 1, 2, 5, 12 and 13 of
Schedule 1 to the Bill). The Commonwealth's holding of voting shares in Telstra will
be taken to include Telstra voting shares held by a category A hybrid-security company
in certain circumstances (see the definition of `the Commonwealth' in subclauses 3(7)
and 4(7) of the Bill, proposed subsection 8AYA(12), 8AYB(7) and proposed section
8AYC of the Telstra Corporation Act, and the definition of `Telstra body' inserted by
items 62 and 63 of Schedule 1 to the Bill). The Commonwealth's holding will not be
taken to include a Telstra voting share held by a category B hybrid-security issuer
company for these purposes.
Item 3 inserts a definition of `Communication Fund' for the purposes of subclauses
3(3), 4(3) and proposed subsections 3B(3), 8AJ(6D), proposed subsections 8AYA(10)
and 8AYB(4), proposed section 8AYD and proposed subclause 12(4AA) of the
Schedule to the Telstra Corporation Act. The Communications Fund is established by
the Telecommunications Legislation Amendment (Future Proofing and Other
Measures) Bill 2005 and will be used to finance the implementation of the
Commonwealth Government's response to the recommendations of the proposed
Regional Telecommunications Independent Review Committee.
Item 4 inserts a definition of `Future Fund' for the purposes of subclauses 3(3), 4(3)
and proposed subsections 3B(3), 8AJ(6D), proposed subsections 8AYA(10) and
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8AYB(4), proposed section 8AYD and proposed subclause 12(4AA) of the Schedule
to the Telstra Corporation Act. At the time the Bill was introduced, the Future Fund
had not yet been established. The purpose of the Future Fund will be to strengthen the
Commonwealth's long-term financial position in dealing with unfunded superannuation
liabilities. It is proposed that the Future Fund be established by the Future Fund Bill
2005 which will identify assets that are investments of the Future Fund. It is possible
that some Telstra shares may be notionally transferred to the Future Fund in the future.
Item 7 - Amendment of section 8AA of the Telstra Corporation Act
Section 8AA of the Telstra Corporation Act contains a simplified outline of Part 2 of
that Act which deals with Commonwealth ownership of Telstra.
Item 7 amends the simplified outline as a consequence of item 8 below to indicate that
the Commonwealth will be able, after the Bill receives Royal Assent, to sell its
remaining equity interest in Telstra.
Item 8 - Repeal of Division 2 of Part 2 of the Telstra Corporation Act
Item 8 repeals Division 2 of Part 2 of the Telstra Corporation Act which deals with
Commonwealth ownership of Telstra, with effect from the day on which the Bill
receives Royal Assent. This will enable the Commonwealth to sell its remaining equity
interest in Telstra from that day. The timing of any sale or sales will, of course,
depend on prevailing market conditions.
Items 9 to 15 - Amendment of section 8AJ of the Telstra Corporation Act
Subsection 8AJ(1) of the Telstra Corporation Act provides that the object of section
8AJ is to define certain sale-scheme related expressions. Item 9 provides that one of
the objects of section 8AJ will be to define `hybrid-security issuer company' (see item
12).
Subsection 8AJ(2) of the Telstra Corporation Act defines the term `Telstra sale
scheme' for the purposes of the Act. This subsection and subsequent subsections are
intended to give a broad and flexible meaning to the term `Telstra sale scheme'.
Item 10 amends subsection 8AJ(2) to make a technical amendment consequential on
the repeal of Division 2 of Part 2 by item 8. 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 11 repeals subsection 8AJ(3) consequential on the repeal of Division 2 of Part 2
by item 8 and replaces it with new subsections 8AJ(3), (3A) and (3B). These new
provisions will enable the Minister for Finance and Administration (see the definition of
`Minister for Finance' in section 3 of the Telstra Corporation Act) to make a written
determination setting out rules that are to be complied with by a Telstra sale scheme.
The Minister's determination is of a legislative character and will therefore be a
legislative instrument for the purposes of the Legislative Instruments Act. However,
because the Minister's determination is, in effect, a direction to Telstra which is
12
exempt from Parliamentary disallowance under item 41 of the table in subsection 44(2)
of the Legislative Instruments Act and in the interests of ensuring commercial certainty
in connection with a Telstra sale scheme, the Minister's determination will not be
subject to Parliamentary disallowance (proposed subsection 8AJ(3B)).
The period over which the sale scheme provisions will operate is not clear at this time.
It may be necessary, depending on market conditions operating at the time of the sale,
for additional rules governing a sale scheme to be established which operate with the
force of law. This item provides the legislative framework for such rules. The formal
sale period for a share offer takes place over a limited time, typically 6 to 7 weeks. If
the circumstances require the issue of a Ministerial determination, a high degree of
certainty of operation is likely to be required. This certainty would not be available if
the determination were subject to disallowance for a period that could go beyond the
completion of the share offer.
As a result of subsection 33(3) of the Acts Interpretation Act 1901, the Minister's
determination will be able to be varied or revoked at any time.
Item 12 adds additional matters that a Telstra sale scheme may involve.
A Telstra sale scheme may involve the Commonwealth or Telstra issuing sale-scheme
hybrid securities (proposed paragraph 8AJ(4)(k)). `Sale-scheme hybrid security' is
defined in item 6 to have the meaning given by proposed section 8AJA of the Telstra
Corporation Act (see the discussion on item 16 below).
A Telstra sale scheme may also involve an arrangement under which one or more
designated companies (each of which is called a `hybrid-security issuer company')
issues sale-scheme hybrid securities (proposed paragraph 8AJ(4)(l)). Item 13 inserts
new subsection 8AJ(6A) which provides that for the purposes of section 8AJ, a
designated company is either a wholly-owned Commonwealth company or a body
corporate other than a wholly-owned Commonwealth company specified in a written
declaration made by the Minister for Finance and Administration under paragraph
8AJ(6A)(b). Item 14 provides a signpost definition of `designated company'.
As a result of item 15, the term `wholly-owned Commonwealth company', as used in
proposed paragraph 8AJ(4)(l) will be defined to have the same meaning as in the
Commonwealth Authorities and Companies Act 1997 (CAC Act), ignoring any sale-
scheme hybrid securities issued by the company concerned (to take account of the fact
that the hybrid-security issuer company will be able to issue shares in itself that are
redeemable in exchange for, exchanged for, or convertible to shares in Telstra).
Section 34 of the CAC Act provides that for the purposes of that Act a `wholly-owned
Commonwealth company' means any Commonwealth company, other than a company
in which any of the shares are beneficially owned by a person other than the
Commonwealth. A `Commonwealth company' is a Corporations Act company in
which the Commonwealth has a controlling interest. However, it does not include a
company in which the Commonwealth has a controlling interest through one or more
interposed Commonwealth authorities or Commonwealth companies.
Proposed subsection 8AJ(6B) provides for the Minister for Finance and
13
Administration to specify, in a written declaration, the names of hybrid-security issuer
companies, other than wholly owned Commonwealth companies, that are to be
category B hybrid-security issuer companies. The Commonwealth will be taken to
include a category A hybrid-security company, but not a category B hybrid-security
issuer company, in certain circumstances, including for the purposes of determining the
voting shares in Telstra that the Commonwealth holds (see the definition of `the
Commonwealth' in subclauses 3(7) and 4(7) of the Bill, proposed subsection
8AYA(12), 8AYB(7) of the Telstra Corporation Act and the definition of `Telstra
body' inserted by items 62 and 63 of Schedule 1 to the Bill).
A declaration by the Minister for Finance and Administration under proposed
paragraph 8AJ(6A)(b) or proposed subsection 8AJ(6B) will be administrative in
character and therefore not a legislative instrument for the purposes of the Legislative
Instruments Act (proposed subsection 8AJ(6C)).
A Telstra sale scheme may also involve the guarantee by the Commonwealth of the
obligations of a hybrid-security issuer company in relation to sale-scheme hybrid
securities (for example, obligations to make payments of interest or dividends or other
non-monetary obligations) (proposed paragraph 8AJ(4)(m)).
A Telstra sale scheme may also involve a securities lending arrangement (see, for
example, subclauses 3(4) and 4(4) of the Bill) (proposed paragraph 8AJ(4)(n)).
Proposed section 8AJ(6D) provides that for the purposes of section 8AJ, if a share in
Telstra is an investment of the proposed Future Fund or the proposed Communications
Fund, the share will be taken to be held by a person other than the Commonwealth.
This will ensure that any future realisation of Telstra shares by the Future Fund or the
Communications Fund will be treated like any realisation and not as a Telstra sale
scheme.
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is possible that some Telstra shares
may be notionally transferred to the Future Fund in the future.
The Communications Fund will be established by the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 and will be used to
finance the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
Item 16 - Insertion of proposed section 8AJA of the Telstra Corporation Act
Item 16 inserts proposed section 8AJA of the Telstra Corporation Act. Proposed
section 8AJA defines `sale-scheme hybrid security' for the purposes of the Act, as
14
proposed to be amended by the Bill (see, for example, proposed paragraphs 8AJ(4)(k),
(l) and (m), proposed paragraphs 8AK(1)(ka) to (kg)).
The ability to issue hybrid securities as part of a Telstra sale scheme will provide
additional flexibility in the structuring of such a scheme. Hybrid securities are a broad
classification for a group of securities that combine both debt and equity
characteristics. The additional characteristics, compared to ordinary equity, make
these securities attractive to additional groups of investors. Accessing all relevant
investor groups will be an important consideration for the successful conduct of further
sales of Telstra. Typically a hybrid security will be capable of exchange into the
underlying Telstra share or shares at a specified future date.
For the purposes of the Telstra Corporation Act, a `sale-scheme hybrid security' will
be broadly defined to mean:
(a) an interest-bearing security that is issued on the basis that it will or may be
exchanged, redeemed in exchange for, or converted to, a share or shares in
Telstra; or
(b) a share (in the hybrid-security issuer company) that is issued on the basis that it
will or may be redeemed in exchange for or converted to a share or shares in
Telstra; or
(c) any other security or financial product that is issued on the basis that it will or
may be exchanged, redeemed in exchange for, or converted to, a share or
shares in Telstra; or
(d) an option to acquire a share or shares in Telstra; or
(e) a security, or a financial product, that is specified in a written declaration made
by the Minister for Finance and Administration and relates directly or indirectly
to Telstra (proposed subsection 8AJA(1)).
The term `security' is defined in proposed subsection 8AJA(8) to have the same
meaning as in Chapter 7 of the Corporations Act 2001. Section 761A of the
Corporations Act provides that `security' means:
(a) a share in a body; or
(b) a debenture of a body; or
(c) a legal or equitable right or interest in a share in, or debenture of, a body; or
(d) an option to acquire, by way of issue, a security covered by paragraph (a), (b)
or (c);
but does not include an excluded security (which relates to rights to participate in a
retirement village scheme).
15
The term `financial product' is defined in proposed subsection 8AJA(8) to have the
same meaning as Chapter 7 of the Corporations Act 2001. Division 3 of Part 7.1 of
the Corporations Act defines what a financial product is. In general, a financial
product includes an arrangement through which, or through the acquisition of which, a
person makes a financial investment, manages financial risk or makes non-cash
payments.
The references to a security, share or financial product that `will be redeemed' in
exchange for a share or shares in Telstra, `will be converted to' or `will be exchanged
for' a share in Telstra are references to an issue of the security, share or financial
product on the basis that redemption, conversion or exchange will be mandatory (by
either the holder or the issuer) after a specified period.
The references to a security, share or financial product that `may be redeemed' in
exchange for a share or shares in Telstra, `may be converted to' or `may be exchanged
for' a share in Telstra are references to an issue of the security, share or financial
product on the basis that redemption or conversion will be optional (by either the
holder or issuer) after a specified period.
A security or financial product covered by proposed subsection 8AJA(1) may, but
need not, include a charge, lien or pledge (proposed subsection 8AJA(2)). The term
`charge' is defined in proposed subsection 8AJA(8) to have the same meaning as in the
Corporations Act 2001. Section 9 of the Corporations Act provides that `charge'
means a charge created in any way and includes a mortgage and an agreement to give
or execute a charge or mortgage, whether on demand or otherwise.
An interest-bearing security that is issued on the basis that it will or may be redeemed
in exchange for or converted to, or will or may be exchanged for, a share or shares in
Telstra may be issued in Australia or overseas and may be denominated in Australian
or foreign currency (proposed subsection 8AJA(3)).
A share that is redeemable in exchange for a share or shares in Telstra may be issued in
Australia or overseas and any rights or obligations in relation to the share may be
denominated in Australian or foreign currency (proposed subsection 8AJA(4)).
Similarly, a non-interest bearing security or financial product that is redeemable in
exchange for, or may be exchanged for, or is convertible to, a share or shares in
Telstra, or a security or financial product specified in a Ministerial declaration (see
above), may be issued in Australia or overseas and may be denominated in Australian
or foreign currency (proposed subsection 8AJA(5)).
An option to acquire a share or shares in Telstra may be issued in Australia or overseas
and the exercise price may be denominated in Australian or foreign currency (proposed
subsection 8AJA(6)).
A declaration by the Minister for Finance and Administration of a security or financial
product under proposed subparagraph 8AJA(1)(i)(i) is legislative in character and will
therefore be a legislative instrument for the purposes of the Legislative Instruments
Act. However, in the interests of ensuring commercial certainty in connection with a
16
Telstra sale scheme, the Minister's declaration will not be subject to Parliamentary
disallowance.
Items 17 and 18 - Amendments of subsection 8AK(1) of the Telstra Corporation
Act
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).
For the purposes of proposed paragraph 8AK(1)(kf), item 17 inserts a definition of
`charge'. The term `charge' is defined to have the same meaning as in the
Corporations Act 2001. Section 9 of the Corporations Act provides that `charge'
means a charge created in any way and includes a mortgage and an agreement to give
or execute a charge or mortgage, whether on demand or otherwise.
Item 18 expands the list of designated matters in subsection 8AK(1), where the matter
relates to the entering into or carrying out of a Telstra sale scheme, to include:
the issue of sale-scheme hybrid securities (see item 16);
the receipt of money by the Commonwealth, or its agent, in respect of the issue of
sale-scheme hybrid securities;
the receipt of money by a hybrid-security issuer company (see item 12), or its
agent, in respect of the issue of sale-scheme hybrid securities;
the redemption, exchange or conversion of sale-scheme hybrid securities;
the transfer by a hybrid-security issuer company of a share in Telstra held by the
company;
the grant of a charge, lien or pledge (whether in connection with sale-scheme
hybrid securities or otherwise);
an agreement relating to certain matters covered by specified paragraphs of
subsection 8AK(1); and
a securities lending arrangement relating to shares in Telstra (see, for example,
subclauses 3(4) and 4(4) of the Bill).
17
Item 19 - Insertion of proposed subsection 8AL(3) of the Telstra Corporation
Act
Subsection 8AL(1) of the Telstra Corporation Act provides an appropriation to the
extent necessary for the purpose of the payment or discharge of the costs, expenses
and other obligations incurred by the Commonwealth in connection with the
formulation, entering into, or carrying out, of a Telstra sale scheme.
Section 53 of the Constitution provides that a proposed law appropriating revenue or
moneys shall not `originate in the Senate'. Item 19 therefore inserts proposed
subsection 8AL(3) which temporarily `switches off' the appropriation in subsection
8AL(1). The appropriation in subsection 8AL(1) will be `switched on' again following
the passage and Royal Assent of this Bill and the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 4
of Schedule 4 of that Bill).
Items 20 to 22 - Amendment of section 8AR of the Telstra Corporation Act
Items 20 to 22 update references to provisions in the Corporations Act 2001 in
paragraphs 8AR(1)(b) and (c) of the Telstra Corporation Act and repeal subsections
8AR(2) and (3) as a consequence of the updated references.
Section 8AQ of the Telstra Corporation Act provides for Telstra to assist the
Commonwealth in connection with a Telstra sale scheme. Paragraph 8AR(1)(b)
provides that the assistance mentioned in section 8AQ may take the form of giving of
financial assistance (within the meaning of section 205 of the Corporations Act).
Section 205 has been repealed. The repeal of section 205 was contemplated by
subsection 8AR(2) which provides that if section 205 were repealed and replaced by a
comparable provision, the reference in paragraph 8AR(1)(b) to section 205 was to be
read as a reference to the replacement provision. The relevant provisions dealing with
financial assistance are now in Part 2J.3 of the Corporations Act.
Paragraph 8AR(1)(c) provides that the assistance mentioned in section 8AQ may take
the form of the giving of a financial benefit to a related party (within the meaning of
Part 3.2A of the Corporations Act). Part 3.2A has been repealed. The repeal of Part
3.2A was contemplated by subsection 8AR(3) which provides that if Part 3.2A were
repealed and replaced by a comparable provision, the reference in paragraph
8AR(1)(c) to Part 3.2A was to be read as a reference to the replacement provision.
The relevant provisions dealing with the giving of financial benefits to related parties
are now in Chapter 2E of the Corporations Act.
Item 23 - Insertion of proposed subsection 8AS(5) of the Telstra Corporation Act
Subsection 8AS(3) of the Telstra Corporation Act provides an appropriation for the
purposes of a payment to Telstra or a Telstra Board member to reimburse expenses
incurred in giving assistance to the Commonwealth in connection with a Telstra sale
scheme.
18
Section 53 of the Constitution provides that a proposed law appropriating revenue or
moneys shall not `originate in the Senate'. Item 23 therefore inserts proposed
subsection 8AS(5) which temporarily `switches off' the appropriation in subsection
8AS(3). The appropriation in subsection 8AS(3) will be `switched on' again following
the passage and Royal Assent of this Bill and the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 5
of Schedule 4 of that Bill).
Item 24 - Amendment of section 8AT of the Telstra Corporation Act
Section 8AT of the Telstra Corporations Act provides, among other things, that
Chapter 7 of the Corporations Act 2001 binds the Crown in right of the
Commonwealth to the extent to which that Chapter deals with a formulation, entering
into, or carrying out of a Telstra sale scheme. Division 3 of Part 7.10 of the
Corporations Act contains insider trading prohibitions. Subsection 1043A(1) of the
Corporations Act prohibits a person who possesses inside information from buying or
selling shares or other financial products if in possession of inside information. Inside
information means information that is not generally available but if it were generally
available, a reasonable person would expect it to have a material effect on the price or
value of particular shares or other financial products. Section 1043F of the
Corporations Act provides a `Chinese Walls' exemption from the insider trading
prohibitions for bodies corporate.
Item 24 inserts proposed subsection 8AT(5) of the Telstra Corporation Act to provide
a defence to the Commonwealth from the insider trading prohibitions in the
Corporations Act. This defence is based on the exemption for bodies corporate in
section 1043F of the Corporations Act.
Proposed subsection 8AT(5) provides that the Commonwealth does not contravene
the insider trading prohibition in subsection 1043A(1) of the Corporations Act by
entering into a transaction or agreement in relation to shares in Telstra, sale-scheme
hybrid securities or a Telstra sale scheme merely because of information in the
possession of a Commonwealth employee or a Commonwealth office holder if:
(a) the decision to enter into the transaction or agreement was taken on its behalf
by a person or persons other than that officer or employee; and
(b) it had in operation at that time arrangements that could reasonably be expected
to ensure that:
(i) the information was not communicated to the person or persons who
made the decision; and
(ii) no advice with respect to the transaction or agreement was given to that
person or any of those persons by a person in possession of the
information; and
(c) the information was not so communicated and no such advice was given.
19
Proposed subsection 8AT(6) provides that a reference in proposed subsection 8AT(5)
to an officer of the Commonwealth includes a reference to the holder of an office
under a law of the Commonwealth.
Items 25 and 26 - Amendment of section 8AV of the Telstra Corporation Act
Items 25 and 26 update a reference to a provision in the Corporations Act 2001 in
subsection 8AV(5) of the Telstra Corporation Act and repeal subsection 8AV(6) as a
consequence of the updated reference.
Section 8AV of the Act deals with certain reductions in Telstra's share capital in
connection with a Telstra sale scheme. Subsection 8AV(5) includes a reference to
section 195 of the Corporations Act. Section 195 now deals with an unrelated subject
matter (restrictions on voting by directors of public companies). The relevant
provisions of the Corporations Act on share capital reductions are now contained in
Part 2J.1 of the Corporations Act.
Item 25 therefore replaces the reference to section 195 with a reference to Part 2J.1 of
the Corporations Act and item 26 repeals subsection 8AV(6) (which contemplated the
possible replacement of section 195 and is no longer required).
Item 27 - Insertion of sections 8AYA, 8AYB, 8AYC and 8AYD of the Telstra
Corporation Act
Proposed section 8AYA - Minister for Finance may direct Telstra not to dilute
the Commonwealth's equity in Telstra etc.
Item 27 inserts a new section 8AYA in the Telstra Corporation Act to give the
Minister for Finance and Administration (see the definition of `Minister for Finance' in
section 3 of the Act) a reserve power to direct Telstra not to engage in any specified
activities outside a Telstra sale scheme that may dilute the Commonwealth's equity.
The reference to `the Commonwealth' in proposed section 8AYA will include a
category A hybrid-security issuer company (proposed subsection 8AYA(12)) to which
the Commonwealth has transferred some of its shares in Telstra. The purpose of this
provision is to ensure that any proposed access by Telstra to equity markets does not
compromise the Commonwealth's objective of divesting its entire equity in Telstra.
Proposed subsection 8AYA(1) defines `equity-dilution conduct' for the purposes of
proposed section 8AYA. This is conduct that will result, or is likely to result, in a
dilution of the Commonwealth's equity in Telstra and is not carried out under a Telstra
sale scheme.
Proposed subsection 8AYA(2) provides that in determining whether conduct is equity-
dilution conduct, regard must be had to the economic and commercial substance of the
conduct. This recognises that there may be certain fund raising activities that Telstra
proposes to engage in that are desirable and do not compromise the Commonwealth's
objective of divesting its equity in Telstra.
20
Proposed subsection 8AYA(3) provides that proposed subsection (2) does not, by
implication, limit proposed subsection (1). This will allow regard to be had to other
relevant matters in determining whether particular conduct is equity-dilution conduct
as defined by proposed subsection (1).
Proposed subsections 8AYA(5) and (6) require that Telstra notify the Minister for
Finance and Administration of any proposed equity-dilution conduct or security-issue
conduct at least 30 days (or such shorter period as the Minister allows) before
engaging in that conduct. The notice will need to set out details of Telstra's proposal
to engage in that conduct and give Telstra's reasons for the proposal. `Security-issue
conduct' is conduct that consists of the issue of a security or of a financial product
(proposed subsection 8AYA(4)).
The term `security' is defined in proposed subsection 8AYA(12) to have the same
meaning as in Chapter 7 of the Corporations Act 2001. Section 761A of the
Corporations Act provides that `security' means:
(a) a share in a body; or
(b) a debenture of a body; or
(c) a legal or equitable right or interest in a share in, or debenture of, a body; or
(d) an option to acquire, by way of issue, a security covered by paragraph (a), (b)
or (c);
but does not include an excluded security (which relates to rights to participate in a
retirement village scheme).
The term `financial product' is defined in proposed subsection 8AYA(12) to have the
same meaning as Chapter 7 of the Corporations Act 2001. Division 3 of Part 7.1 of
the Corporations Act defines what a financial product is. The general definition of a
financial product set out in Subdivision B of Division 3 includes a facility through
which, or through the acquisition of which, a person makes a financial investment,
manages financial risk or makes non-cash payments.
Proposed subsection 8AYA(7), when read with subsection 46(3) of the Acts
Interpretation Act 1901, allows the Minister for Finance and Administration to direct
Telstra not to engage in:
(a) specified equity-dilution conduct or a specified class of equity-dilution conduct;
or
(b) specified security-issue conduct or a specified class of security-issue conduct.
Proposed subsection 8AYA(11) provides that any Ministerial direction under proposed
subsection 8AYA(7) will not be a legislative instrument for the purposes of the
Legislative Instruments Act (because the direction is administrative in nature). As a
consequence, the Minister's direction will not be required to be tabled in Parliament
21
and will not be subject to Parliamentary disallowance. The Minister for Finance and
Administration, acting on appropriate advice, will be in the best position to frame the
terms of a notice to Telstra under proposed subsection 8AYA(7) and it is not
appropriate that this notice be subject to Parliamentary disallowance.
Proposed subsection 8AYA(8) provides that Telstra must comply with any direction
under proposed subsection (7).
Proposed subsection 8AYA(9) provides that a breach of proposed section 8AYA will
not be an offence. However, a breach will be a ground for the Minister for
Communications, Information Technology and the Arts to obtain an injunction in the
Federal Court under Division 1 of Part 2B of the Telstra Corporation Act.
For the purposes of proposed section 8AYA, if a share in Telstra is an investment of
the proposed Future Fund or the proposed Communications Fund, it will be taken to
be held by a person other than the Commonwealth (see proposed subsection
8AYA(10)).
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is proposed that a notional transfer
of some Telstra shares to the Future Fund will take place under the Future Fund Bill.
The Communications Fund to be established by the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance
the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
Proposed section 8AYA will be repealed when the Minister for Communications,
Information Technology and the Arts is satisfied that the Commonwealth's equity has
fallen to 15 per cent or less, known as the `85% sale day' (see item 4 in the table under
subclause 2(1) and item 71 of Schedule 1 to the Bill).
Proposed section 8AYB - Telstra to give information to the Minister about the
level of non-Commonwealth ownership of shares in Telstra
The purpose of proposed section 8AYB is to enable the Minister for Communications,
Information Technology and the Arts to direct Telstra to give the Minister information
about the level of private ownership of shares in Telstra as a result of a Telstra sale
scheme (which may include the issue of sale-scheme hybrid securities by a hybrid-
security issuer company - see items 6 and 12). The Minister's direction will not be a
legislative instrument for the purposes of the Legislative Instruments Act (proposed
subsection 8AYB(6)). The Minister's declaration is of an administrative rather than a
legislative character and it is therefore not appropriate that it be required to be tabled
in Parliament and subject to Parliamentary disallowance.
22
A direction under proposed section 8AYB will assist the Minister to determine:
the `designated day' referred to in subclause 3(1) of the Bill (being the day on
which a majority of the voting shares in Telstra are held by persons other than the
Commonwealth or a category A hybrid-security issuer company) - this is the day
on which Part 2 of Schedule 1 to the Bill commences;
the `85% sale day' referred to in subclause 4(1) of the Bill (being the day on which
85% of the voting shares in Telstra are held by persons other than the
Commonwealth or a category A hybrid-security issuer company) - this is the day
on which Part 3 of Schedule 1 to the Bill commences.
Proposed subsection 8AYB(2) provides that Telstra must comply with any direction
under proposed subsection (1).
Proposed subsection 8AYB(3) provides that a breach of proposed section 8AYB will
not be an offence. However, a breach will be a ground for the Minister for
Communications, Information Technology and the Arts obtaining an injunction in the
Federal Court under Division 1 of Part 2B of the Telstra Corporation Act.
Proposed subsection 8AYB(4) provides that if a share in Telstra is an investment of
the proposed Future Fund or the proposed Communications Fund, it will be taken to
be held by a person other than the Commonwealth.
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is proposed that a notional transfer
of some Telstra shares to the Future Fund will take place under the Future Fund Bill.
The Communications Fund to be established by the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance
the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
Furthermore, in the case of a temporary acquisition of Telstra shares by a person other
than the Commonwealth under a stock borrowing arrangement with the
Commonwealth, the borrowed share will be taken to be held by the Commonwealth for
the purposes of proposed section 8AYB (proposed subsection 8AYB(5)).
Proposed subsection 8AYB(7) provides that a reference in proposed section 8AYB to
`the Commonwealth' includes a category A hybrid-security issuer company. This will
ensure that Telstra voting shares held by a category A hybrid-security issuer company
will be counted together with the voting shares held by the Commonwealth in
determining the situations mentioned in proposed subsection 8AYB(1).
23
Proposed section 8AYC - Application of the Ombudsman Act 1976 to Telstra
The purpose of proposed section 8AYC is to ensure that Telstra would continue to be
subject to the Ombudsman Act 1976 if the Commonwealth were to transfer some of its
shares in Telstra to a category A hybrid-security issuer company (see item 12). That
is, the purpose is to ensure that any such transfer would not result in an unintended
triggering of the `designated day' referred to in subclause 3(1) of the Bill.
The Ombudsman Act allows the Ombudsman to investigate action taken by a
Department or a `prescribed authority'. Section 3 of the Ombudsman Act provides
that a prescribed authority includes a Commonwealth-controlled company that is a
prescribed authority by virtue of section 3A of that Act. Section 3A provides that a
Commonwealth-controlled company is a prescribed authority unless certain exclusions
apply (none of which is relevant for present purposes).
`Commonwealth-controlled company' is defined in section 3 of the Ombudsman Act to
mean an incorporated company in which the Commonwealth `has an interest' that
enables the Commonwealth to control the composition of the board of directors, or the
majority of votes that might be cast at a general meeting or a majority of the issued
share capital of the company. If the Commonwealth were to transfer some of its
shares in Telstra to the hybrid-issuer security company, proposed section 8AYC will
ensure that Telstra will continue to be a `Commonwealth controlled company' for the
purposes of the Ombudsman Act notwithstanding the transfer.
Proposed section 8AYD - Controlling interest in Telstra
Proposed section 8AYD provides that in determining, for the purposes of the law of
the Commonwealth (other than the Telstra Corporation Act) whether the
Commonwealth has a controlling interest in Telstra, if a share in Telstra is an
investment of the proposed Future Fund or the proposed Communications Fund,
assume that any voting rights associated with the share were held by a person other
than the Commonwealth.
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is proposed that a notional transfer
of some Telstra shares to the Future Fund will take place under the Future Fund Bill.
The Communications Fund to be established the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance
the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
24
Item 28 - Insertion of proposed subsection 8BA(4) of the Telstra Corporation
Act
Subsection 8BA(3) of the Telstra Corporation Act provides an appropriation for the
payment of compensation for any acquisition of property otherwise than on just terms
as the result of a Telstra sale scheme.
Section 53 of the Constitution provides that a proposed law appropriating revenue or
moneys shall not `originate in the Senate'. Item 28 therefore inserts proposed
subsection 8BA(4) which temporarily `switches off' the appropriation in subsection
8BA(3). The appropriation in subsection 8BA(3) will be `switched on' again following
the passage and Royal Assent of this Bill and the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 (see clause 2 and item 6
of Schedule 4 of that Bill).
Items 29 to 34- Amendments of sections 8CI, 8CJ, 8CK and 8CL of the Telstra
Corporation Act
Items 29 to 34 make minor technical amendments consequential on the proposed
repeal of Division 2 of Part 2 by item 8 of Schedule 1 to the Bill.
Item 35 - Amendment of paragraph 26(b) of the Telstra Corporation Act
Paragraph 26(b) of the Telstra Corporation Act provides that Telstra is taken for the
purposes of laws of the Commonwealth, of a State or of a Territory not to be a public
authority or an instrumentality or agency of the Crown. Item 35 amends paragraph
26(b) to add the words `(however described)' after `Crown'. The purpose of this
amendment is to ensure that the provision has the widest possible operation to avoid
Telstra being found by a judge to be an emanation of the Crown having regard to the
variable language used by Commonwealth, State and Territory legislation when
describing public entities. The amendment is made out of abundant caution.
Item 36 - Insertion of new Part 2C of the Telstra Corporation Act -
Re-affirmation of the universal service obligation, the digital data service
obligation and the customer service guarantee
Item 36 inserts a new Part 2C of the Telstra Corporation Act to re-affirm the universal
service obligation, the digital data service obligation and the customer service
guarantee provisions of Parts 2 and 5 of the Telecommunications (Consumer
Protection and Service Standards) Act 1999 (the Telecommunications (Consumer
Protection and Service Standards) Act).
Proposed section 8CM - Re-affirmation of universal service obligation and
digital data service obligation
Part 2 of the Telecommunications (Consumer Protection and Service Standards) Act
currently imposes a universal service obligation (USO) on telecommunications carriers
to ensure that standard telephone services (ie. voice telephony) and payphones are
25
reasonably accessible to all people in Australia on an equitable basis, wherever they
reside or carry on business. The complementary digital data service obligation
(DDSO) underpins access on request to a 64 kbps (or comparable) data service. As an
adjunct to imposing this obligation on the telecommunications industry, Part 2 also
provides for the funding by telecommunications carriers of losses incurred in fulfilling
the universal service obligation. Currently Telstra is the national universal service
provider and a digital data service provider together with Hotkey Internet Services Pty
Ltd.
Standard telephone services are price-controlled and in high-cost areas the universal
service provider cannot always recover the full cost of providing services from the
customer. The losses incurred by universal service providers resulting from the supply
of loss-making services in the course of fulfilling the USO are shared among all carriers
in proportion to their eligible revenue. Each carrier's contribution is currently
calculated at the end of each financial year, and carriers pay their contributions in one
lump sum.
Proposed section 8CM of the Telstra Corporation Act provides for a re-affirmation of
Parliament's intention:
(a) that all people in Australia, wherever they reside or carry on business, will
continue to have reasonable access, on an equitable basis, to standard
telephone services, payphones and digital data services; and
(b) that the universal service obligation described in section 9 of the
Telecommunications (Consumer Protection and Service Standards) Act and the
digital data service obligation described in section 10 of that Act should be
fulfilled as efficiently and economically as possible.
Proposed section 8CN - Re-affirmation of the customer service guarantee
Under Part 5 of the Telecommunications (Consumer Protection and Service
Standards) Act the Minister may give the Australian Communications and Media
Authority (ACMA) a direction to make performance standards to be complied with by
carriage service providers in relation to customer service. Following directions from
the Minister to the Australian Communications Authority (ACA), the ACMA's
predecessor, the ACA has made the Telecommunications (Customer Service
Guarantee) Standard 2000 (No. 2), as amended. This CSG Standard cannot be varied
or revoked except in accordance with the Minister's direction (see section 125 of the
Telecommunications (Consumer Protection and Service Standards) Act).
The object of the CSG Standard is to encourage improvements in service and to guard
against poor service by requiring telephone companies to meet minimum standards.
The CSG Standard allows residential and small business customers to receive financial
compensation where performance requirements set out in the CSG Standard are not
met.
Under the CSG Standard, telephone companies are legally required to meet standards
on the time taken:
26
(a) to connect standard telephone services;
(b) to repair a fault or service difficulty; and
(c) to attend appointments with customers.
The CSG Standard covers the supply of standard telephone services, including voice
grade services used to access the Internet or for facsimile. The CSG Standard does
not apply to mobile services (except to the extent that a mobile service is supplied to
fulfil the universal service obligation), customer equipment or to customers who have
more than five telephone services.
Proposed section 8CN of the Telstra Corporation Act re-affirms Parliament's intention
that the Minister will take all reasonable steps to ensure that:
(a) the ACMA continues to make performance standards to be complied with by
carriage service providers in relation to customer service; and
(b) if a carriage service provider contravenes a performance standard, the carriage
service provider will continue to be liable to pay damages to the customer for
the contravention.
Item 37 - Amendment of paragraph 9(3)(b) of the Schedule to the Telstra
Corporation Act
Subclause 9(3) of the Schedule to the Telstra Corporation Act provides for interests in
Telstra shares acquired by underwriters and sub-underwriters in relation to the issue of
shares in Telstra under a Telstra sale scheme to be disregarded in certain
circumstances. This exemption has not been useful because Telstra sale schemes have
involved sales rather than the issue of shares.
Item 37 therefore extends subclause 9(3) of the Schedule to underwriting and sub-
underwriting of sales and not just issues of Telstra shares, and of Telstra sale schemes
generally.
Item 38 - Insertion of proposed subclauses 12(4AA) and 12(4AB) of the Schedule
to the Telstra Corporation Act
Subclause 12(4A) of the Schedule to the Telstra Corporation Act 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.
Item 38 inserts a new subclause 12(4AA) in the Schedule to provide that for the
purposes of subclause 12(4A) of the Schedule, if a share in Telstra is an investment of
the proposed Future Fund or the proposed Communications Fund, it will be taken to
be held by a person other than the Commonwealth. Item 38 also inserts a new
subclause 12(4AB) to give the Minister for Finance and Administration the flexibility
27
to specify that certain Telstra shares held by the Commonwealth are taken to be held
by a person other than the Commonwealth for the purposes of subclause 12(4A)
should it be necessary to do so as part of a Telstra sale scheme.
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is proposed that a notional transfer
of some Telstra shares to the Future Fund will take place under the Future Fund Bill.
The Communications Fund to be established by the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance
the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
Item 39 - Amendment of subclause 12(4B) of the Schedule
Subclause 12(4B) of the Schedule to the Telstra Corporation Act provides that for the
purpose of subclause 12(4A), discussed in item 38 above, `share' does not include an
interest in a share.
Item 39 omits the reference to `subclause 12(4A)' and substitutes a reference to
`subclauses (4A), (4AA) and (4AB)'. This amendment is consequential on the
amendment made by item 38.
Item 40 - Insertion of new subclause 12(8) of the Schedule
Item 40 provides that a declaration by the Minister for Finance and Administration
under proposed paragraph 12(4AB)(b) (discussed in the notes on item 38) is a
legislative instrument for the purposes of the Legislative Instruments Act. It will
therefore be required to be registered on the Federal Register of Legislative
Instruments and tabled in Parliament. However, in the interests of ensuring certainty in
connection with a Telstra sale scheme during the short Telstra sale scheme offer
period, the Minister's declaration will not be subject to Parliamentary disallowance.
Part 2--Amendments commencing on the designated day
Administrative Decisions (Judicial Review) Act 1977 (ADJR Act)
Item 41 - Insertion of paragraph (va) of Schedule 1 to the ADJR Act
The ADJR Act currently allows a person aggrieved by a decision of an administrative
character taken by Telstra under an enactment to apply to the Federal Court for a
review of that decision or to request a statement of reasons for the decision from
Telstra. Decisions that Telstra makes under telecommunications legislation (in
particular, the Telecommunications (Consumer Protection and Service Standards) Act
28
and instruments made under that Act) could possibly be characterised as decisions of
an administrative character under an enactment.
Item 41 inserts a new paragraph (va) of Schedule 1 to the ADJR Act to ensure that
with effect from the designated day (the day on which the Minister for
Communications, Information Technology and the Arts declares that a majority of the
voting shares in Telstra are held by persons other than the Commonwealth - see
subclause 3(1)), decisions of Telstra or a subsidiary of Telstra will not be subject to the
ADJR Act. Comparable exemptions for Qantas Airways Limited, Snowy Mountains
Engineering Corporation Limited and CSL Limited are contained in paragraphs (t), (u)
and (v) of Schedule 1 to the ADJR, being exemptions put in place as a result of the
change in the status of these companies from Commonwealth-owned companies to
fully privatised companies.
Archives Regulations
Item 42 - Repeal of regulation 2A of the Archives Regulations
Item 42 repeals regulation 2A of the Archives Regulations. Regulation 2A refers to
`AOTC' (which refers to the Australian and Overseas Telecommunications
Corporation, a predecessor to what is now Telstra Corporation Limited) and
prescribes AOTC and its subsidiary companies to be Commonwealth authorities for the
purposes of paragraph (c) of the definition of `authority of the Commonwealth' in
subsection 3(1) of the Archives Act 1983. Paragraph (c) provided that the definition of
`authority of the Commonwealth' in subsection 3(1) of the Archives Act included a
`prescribed company or association over which the Commonwealth is in a position to
exercise control' and was amended by the Archives Amendment Act 1995 to define a
Commonwealth-controlled company or a Commonwealth-controlled association to be
an authority of the Commonwealth.
The effect of regulation 2A, by prescribing the AOTC to be a Commonwealth
authority, is that Telstra is an authority of the Commonwealth for the purposes of the
Archives Act. It is proposed to repeal regulation 2A because Telstra will no longer be
a Commonwealth authority for the purposes of the Archives Act once it ceases to be
controlled by the Commonwealth. Regulation 2A will therefore be repealed with
effect from the `designated day'. The designated day is declared by the Minister for
Communications, Information Technology and the Arts under subclause 3(1) 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 held by persons other than the Commonwealth.
Section 28A of the Archives Act provides that if a company that is an authority of the
Commonwealth ceases, on a particular day, to be such an authority of the
Commonwealth, then, despite the company so ceasing:
(a) the records of the company that were in existence prior to that day continue to
be Commonwealth records for the purposes of the Archives Act; and
(b) the National Archives of Australia may make arrangements with the company
to enable those records to be dealt with in accordance with the provisions of
29
Part V of the Archives Act (dealing with Commonwealth records) as if Telstra
had not ceased to be an authority of the Commonwealth.
Telstra will therefore have to make arrangements with the National Archives of
Australia to enable its records to be dealt with in accordance with the Archives Act.
Any Telstra records will continue to be Commonwealth records after the designated
day and cannot be transferred unless this is authorised in accordance with paragraph
24(2)(b) of the Archives Act. The usual practice is for the National Archives to make
arrangements with the company concerned (in this case Telstra) for the disposition of
existing records based on the continuing needs of the Commonwealth and the public
and the business needs of the company. This may involve transferring the ownership
of some records of Telstra with no conditions attached, transferring the ownership of
some records with conditions attached (such as non-destruction for a specified time
and a continuing right of access by the Commonwealth) and identifying records which
constitute the archival resources of the Commonwealth. The ownership of this last
group is not transferred from the Commonwealth although arrangements may be made
for the company to have access to such records or to have copies.
Australian Security Intelligence Organisation Act 1979 (ASIO Act)
Items 43 to 46 - Amendments of section 4 and subsections 26(8) and 27A(5) of
the ASIO Act
Subsections 26(8) and 27A(5) of the ASIO Act refer to `a telecommunications system
controlled by Telstra Corporation Limited'. Given the current structure of the
telecommunications industry and the ability of any constitutional corporation to be
licensed as a telecommunications carrier, items 45 and 46 amend subsections 26(8) and
27A(5) to replace references to a telecommunications system operated by Telstra
Corporation Limited with references to a telecommunications system operated by a
carrier or carriage service provider within the meaning of the Telecommunications Act
1997.
Items 43 and 44 insert definitions of `carrier' and `carriage service provider' in section
4 of the ASIO Act as a consequence of the amendments made by items 45 and 46.
Freedom of Information Act 1982
Item 47 - Amendment of Division 1 of Part II of Schedule 2 to the FOI Act
Item 47 amends Division 1 of Part II of Schedule 2 to the Freedom of Information Act
1982 (FOI Act) to remove the entry in that Division relating to Telstra Corporation
Limited.
Section 7 of the FOI Act exempts certain persons, bodies and Departments specified in
Part II of Schedule 2 to the FOI Act from the operation of the FOI Act in relation to
the documents referred in Schedule 2. Division 1 of Part II of Schedule 2 specifies
Telstra Corporation Limited to be exempt from the operation of the FOI Act `in
relation to documents in respect of its commercial activities'. Telstra is otherwise
subject to the operation of the FOI Act because it is a `prescribed authority' under
30
Schedule 1 to the Freedom of Information (Miscellaneous Provisions) Regulations
1982 (the FOI Regulations) (see definition of `agency' in section 4 of the FOI Act).
The reason for the proposed amendment is that Telstra will no longer be a
Commonwealth authority once it ceases to be controlled by the Commonwealth. The
proposed amendment to the FOI Act will therefore commence from the `designated
day'. The designated day is declared by the Minister for Communications, Information
Technology and the Arts under subclause 3(1) 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 held by
persons other than the Commonwealth.
Freedom of Information (Miscellaneous Provisions) Regulations 1982
Item 48 - Amendment of Schedule 1 to the FOI Regulations
Item 48 omits the reference to Telstra Corporation Limited in Schedule 1 to the FOI
Regulations. Regulation 3 and Schedule 1 to the FOI Regulations specify the bodies
that are prescribed authorities for the purposes of the definition of `agency' in the FOI
Act. Subsection 4(1) of the FOI Act defines `agency' to mean a Department, a
prescribed authority or an eligible case manager. Section 11 of the FOI Act provides
that every person has a legally enforceable right to obtain access, in accordance with
the FOI Act, to a document of an agency other than an exempt document.
It is proposed to omit the reference to Telstra Corporation Limited from Schedule 1 to
the FOI Regulations because it would be inappropriate that Telstra continue to be a
prescribed authority for the purposes of the FOI Act after it ceases to be a
Commonwealth authority. The proposed amendment will therefore commence from
the `designated day'. The designated day is declared by the Minister for
Communications, Information Technology and the Arts under subclause 3(1) 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 held by persons other than the Commonwealth.
Item 49 - Repeal of Schedule 2 (table item 125A) to the FOI Regulations
Schedule 2 to the FOI Regulations specifies offices as principal offices for the purpose
of the definition of `principal officer' in paragraph (b)(i) of that definition in subsection
4(1) of the FOI Act (see regulation 4 of the FOI Regulations). This provision provides
that a `principal officer' means, in relation to a prescribed authority, the person
holding, or performing the duties of an office that is declared to be a principal office in
respect of the authority by the regulations. Table item 125A in Schedule 2 to the FOI
Regulations specifies the office of Chief Executive Officer to be the principal office for
Telstra Corporation Limited.
The proposed amendment will repeal table item 125A. The proposed amendment is
consequential to the proposed amendment in item 47 because that item will result in
the FOI Act no longer applying to Telstra once it ceases to be a Commonwealth
authority. Once this occurs, there will also be no need for a principal office to be
specified for Telstra for the purposes of the FOI Act. As will be the case with the
proposed amendment in item 47, the proposed amendment will commence from the
31
`designated day'. The designated day is declared by the Minister for Communications,
Information Technology and the Arts under subclause 3(1) 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 held by persons other than the Commonwealth.
Item 50 - Repeal of Schedule 3 (table item 12) to the FOI Regulations
Schedule 3 to the FOI Regulations specifies the Minister responsible for prescribed
authorities under the FOI Act. Subsection 4(1) of the FOI Act defines `responsible
Minister' in relation to a prescribed authority (other than in relation to a prescribed
authority referred to in paragraph (a) or (c) of the definition of prescribed authority) to
be the Minister declared by the regulations to be the responsible Minister in respect of
that authority.
Table item 12 in Schedule 3 to the FOI Regulations specifies the Minister for
Communications, Information Technology and the Arts (the effect of the Acts
Interpretation (Substituted References - Section 19B) Amendment Order 1997 made
by the Governor-General on 29 October 1997 is that the reference to the `Minister for
Communications and the Arts' is read as the `Minister for Communications,
Information Technology and the Arts') to be the responsible Minister in respect of
Telstra Corporation Limited.
The proposed amendment will repeal table item 12. The proposed amendment is
consequential to the proposed amendment in item 47 because that item will result in
the FOI Act no longer applying to Telstra once it ceases to be a Commonwealth
authority. Once this occurs, there will also be no need for a responsible Minister to be
specified for Telstra for the purposes of the FOI Act. As will be the case with the
proposed amendment in item 47, the proposed amendment will commence from the
`designated day'. The designated day is declared by the Minister for Communications,
Information Technology and the Arts under subclause 3(1) 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 held by persons other than the Commonwealth.
Item 51 - Transitionalrequests under the Freedom of Information Act 1982
Item 51 is a transitional provision that deals with FOI requests made to Telstra which
have not been disposed of before the commencement of the item. Item 51 also deals
with requests for review by the Administrative Appeals Tribunal (AAT) of a decision
Telstra had made under the FOI Act in relation to a particular document but which had
not been disposed of before the commencement of item 51.
As a result of the proposed amendments in items 47 to 50, on the `designated day' (ie
the day which, in the Minister's opinion, is the first day on which a majority of the
voting shares in Telstra are held by persons other than the Commonwealth) the FOI
Act and the FOI Regulations will no longer apply to Telstra because Telstra will not be
an `agency' for the purposes of the FOI Act. The provision in item 51 will deal with
the situation where an FOI request made to Telstra before the commencement of item
51 (i.e. the designated day) has not been finally disposed of immediately before that
day. In such a situation, the FOI Act and the FOI Regulations will continue to apply
32
to that request as if the proposed amendments in items 47 to 50 had not been made.
For example, if on the designated day Telstra had not yet made a decision under the
FOI Act in respect of a request for access to a document that was made before the
designated day, the FOI Act will continue to apply to that request so that Telstra will
be required to make a decision within the time limit specified under the FOI Act. The
ability of a FOI requestor to seek internal review of that decision will remain
unaffected. Equally, if an internal review decision had been made prior to the
designated day and the designated day occurs during the period in which the FOI
requestor may seek AAT review of the internal review decision, the transitional
provision in subitem 51(1) will allow the FOI requestor to apply to the AAT under the
Administrative Appeals Tribunal Act 1975 (AAT Act) for review of the internal
review decision.
If a FOI requestor has made an application for AAT review of a decision of Telstra
made under the FOI Act before the designated day or had requested a statement of
reasons under the AAT Act, item 51 also ensures that the AAT Act will continue to
apply to such an application or a request as if the amendments in items 47 to 50 (to the
FOI Act and the FOI Regulations) had not occurred.
Long Service Leave (Commonwealth Employees) Regulations 1957
Item 52 - Repeal of item 4 of Schedule 1A to the Regulations
Item 52 repeals item 4 in Schedule 1A to the Long Service Leave (Commonwealth
Employees) Regulations which declares the Australian and Overseas
Telecommunications Corporation Limited (now Telstra Corporation Limited) to be a
body corporate for the purposes of paragraph 4(6)(c) of the Long Service Leave
(Commonwealth Employees) Act 1976. Paragraph 4(6)(c) of that Act provides that a
reference in the Act to a person who is employed by, remunerated by, in the service of,
on loan to or appointed or engaged by the Commonwealth includes a reference to a
person who is employed by, remunerated by, in the service of, on loan to or appointed
or engaged by a company that is declared by the regulations to be a body corporate to
which this paragraph applies.
The purpose of the proposed amendment is 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 64 of Schedule 1 to the Bill 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 53 - Repeal of item 2 of Schedule 2A to the Regulations
Item 53 repeals item 2 in Schedule 2A to the Maternity Leave (Commonwealth
Employees) Regulations which declares the Australian and Overseas
Telecommunications Corporation Limited (now Telstra Corporation Limited) to be a
33
prescribed authority for the purposes of the Maternity Leave (Commonwealth
Employees) Act 1973. Section 5 of that Act provides that the Act applies to persons
employed by a prescribed authority.
The purpose of the proposed amendment is to ensure 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 64 of Schedule 1 to the Bill 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.
Ombudsman Regulations 1977
Item 54 - Amendment of Schedule 2 (table item 15) to the Ombudsman
Regulations
Item 54 omits a reference to Telstra in Schedule 2 to the Ombudsman Regulations.
Schedule 2 of the Ombudsman Regulations specifies the authorities that are prescribed
authorities for the purposes of the Ombudsman Act 1976. The Ombudsman Act
allows the Ombudsman to investigate action taken by a Department or a prescribed
authority. Section 3 of the Ombudsman Act provides that a prescribed authority
includes a body corporate prescribed by the regulations to be a prescribed authority.
It is proposed to omit the reference to Telstra from Schedule 2 to the Ombudsman
Regulations because Telstra will cease to be a Commonwealth authority on the
`designated day'. The proposed amendment will therefore commence from the
`designated day'. The designated day is declared by the Minister for Communications,
Information Technology and the Arts under subclause 3(1) 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 held by persons other than the Commonwealth.
Item 55 - Amendment of Schedule 4 (table item 17) to the Ombudsman
Regulations
Item 55 omits a reference to Telstra in Schedule 4 to the Ombudsman Regulations.
Schedule 4 to the Ombudsman Regulations specifies principal officers in respect of
prescribed authorities for the purposes of the Ombudsman Act 1976. Section 3 of the
Act provides that the principal officer of a prescribed authority includes an officer
prescribed by the regulations as such.
It is proposed to omit the reference to the Chief Executive Officer of Telstra from
Schedule 4 to the Ombudsman Regulations because Telstra will cease to be a
Commonwealth authority from the `designated day'. The proposed amendment will
therefore commence from the `designated day'. The designated day is declared by the
Minister for Communications, Information Technology and the Arts under subclause
34
3(1) 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 held by persons other than the Commonwealth.
Item 56 - Transitionalcomplaints and investigations under the Ombudsman
Act 1976
Item 56 is a transitional provision that will ensure that complaints made to the
Ombudsman, and investigations commenced by the Ombudsman, before the
commencement of the designated day, in relation to action by Telstra will continue to
be dealt with under the Ombudsman Act and the Ombudsman Regulations as if the
amendments in items 54 and 55 had not occurred.
It should also be noted that item 27 inserts proposed section 8AYC of the Telstra
Corporation Act to ensure that Telstra would continue to be subject to the
Ombudsman Act 1976 if the Commonwealth were to transfer some of its shares in
Telstra to a category A hybrid-security issuer company (see item 12). That is, the
purpose is to ensure that any such transfer would not result in an unintended triggering
of the `designated day' referred to in subclause 3(1) of the Bill.
Telstra Corporation Act 1991
Items 57 to 63 - Amendments of section 3 of the Telstra Corporation Act
Items 57 to 63 insert some new definitions in section 3 of the Telstra Corporation Act
that are consequential to the addition of proposed Part 3A in that Act (see item 64 in
Schedule 1).
Item 57 inserts a definition of the term `designated day' for the purposes of the new
Part 3A in section 3. Clause 3 of the Bill provides a mechanism for the Minister for
Communications, Information Technology and the Arts to declare a designated day for
Telstra.
Item 58 inserts a definition of the term `employee' in section 3 because new Part 3A
contains various employee benefit savings provisions.
Item 59 inserts a definition of the term `Long Service Leave Act' in section 3 because
new Part 3A contains employee benefit savings provisions relating to long service
leave.
Item 60 inserts a definition of the term `Maternity Leave Act' in section 3 because new
Part 3A contains employee benefit savings provisions relating to maternity leave.
Item 61 inserts a definition of the term `SRC Act' in section 3 consequential on the
inclusion of a transitional provision relating to safety, rehabilitation and compensation
by item 64 in Schedule 1 to the Bill (see proposed section 9H of the Telstra
Corporation Act) and provisions dealing with the refund of licence fees under existing
and former provisions of the Safety, Rehabilitation and Compensation Act 1988 in
respect of the administration of the Occupational Health and Safety (Commonwealth
Employment) Act 1991 (see proposed section 9R of the Telstra Corporation Act).
35
Item 62 inserts a signpost definition of the term `Telstra body' in section 3 and item 63
provides for the insertion of the detailed definition of `Telstra body' in proposed
section 3B 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 Telstra or a body corporate that was a Telstra
subsidiary immediately before the day on which a majority of voting shares in Telstra
are held by persons other than the Commonwealth (proposed subsection 3B(1)). This
will ensure the effectiveness of the savings provisions if a Telstra subsidiary
subsequently ceases to be controlled by Telstra after the designated day.
A reference to a Telstra body in any of the remaining provisions of the Telstra
Corporation Act will be a reference to Telstra or a body corporate that is a subsidiary
of Telstra at the relevant time (proposed subsection 3B(2)).
For the purposes of the reference to `the Commonwealth' in proposed paragraph
3B(1)(b) and proposed subsections 3B(3) and (4), the Commonwealth will be taken to
include a category A hybrid-security issuer company and, if a share in Telstra is an
investment of the proposed Future Fund or the proposed Communications Fund, the
share will be taken to be held by a person other than the Commonwealth (proposed
subsections 3B(3) and (5)).
At the time the Bill was introduced, the Future Fund had not yet been established. The
purpose of the Future Fund will be to strengthen the Commonwealth's long-term
financial position in dealing with unfunded superannuation liabilities. It is proposed
that the Future Fund be established by the Future Fund Bill 2005 which will identify
assets that are investments of the Future Fund. It is proposed that a notional transfer
of some Telstra shares to the Future Fund will take place under the Future Fund Bill.
The Communications Fund to be established the Telecommunications Legislation
Amendment (Future Proofing and Other Measures) Bill 2005 will be used to finance
the implementation of the Commonwealth Government's response to the
recommendations of the proposed Regional Telecommunications Independent Review
Committee. This Fund may also receive Telstra shares which may technically remain
in Commonwealth ownership.
Furthermore, in the case of a temporary acquisition of Telstra shares by a person other
than the Commonwealth under a stock borrowing arrangement with the
Commonwealth, the borrowed share will be taken to be held by the Commonwealth for
the purposes of proposed subsection 3B(1) (proposed subsection 3B(4)).
Item 64 - Insertion of new Part 3A - Transitional provisions relating to the sale
by the Commonwealth of its remaining equity interest in Telstra
Item 64 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.
36
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
savings 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 to 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 by the Minister for Communications, Information
Technology and the Arts by written instrument under subclause 3(1).
Part 3A--Transitional provisions relating to the sale by the
Commonwealth of its remaining equity interest in Telstra
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).
Proposed section 9A of the Telstra Corporation Act - Interpretation
Proposed section 9A provides for the definition of terms used in this Division.
Proposed subsection 9A(1) provides that unless the contrary intention appears,
expressions used in Division 1 of proposed Part 3A will have the same meaning as in
the LSL(CE) Act.
The `combined service period' of an employee is defined in proposed subsection 9A(2)
as the total of the employee's service for the purposes of the LSL(CE) Act before the
37
designated day and the employee's service with a Telstra body after the designated
day.
Proposed section 9B of the Telstra Corporation Act - 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 (as defined in item
62 of Schedule 1 to the Bill) until his or her combined service period is at least 10
years, a Telstra body may grant the employee long service leave.
Proposed 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 subsection is to be taken so as to expire immediately
before the employee retires or is retrenched (proposed subsection 9B(7)).
Proposed subsection 9B(6) allows for a Telstra body to grant long service leave on
half pay.
Proposed subsection 9B(8) provides for the application of a modified version 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 designated day (proposed section 9E).
Proposed section 9C of the Telstra Corporation Act - Payments in lieu of long
service leave for employees with less than 10 years service
Proposed section 9C provides that a Telstra body (as defined in item 62 of Schedule 1
to the Bill) must, in certain circumstances, pay an amount to an employee in lieu of the
employee taking long service leave (proposed subsection 9C(1)). For proposed
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 (proposed subsection 9C(2)).
Proposed section 9C applies to persons who cease to be employees of Telstra after the
designated day, but not to those who cease to be employees because they die
(proposed 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 the person an amount in lieu of long service leave (proposed subsection 9C(4))
unless he or she has requested the Telstra body otherwise (proposed subsections 9C(7)
and (8)). 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 unless the person has
requested the relevant Telstra body otherwise (proposed subsections 9C(7) and (8)) he
38
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
(proposed subsection 9C(5)); or
because of ill health (proposed 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 proposed subsection 9E(2).
Proposed subsection 9C(9) provides for the application of a modified version 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.
Proposed section 9D of the Telstra Corporation Act - Payments on the death of
an employee
Proposed section 9D requires payment to a deceased employee's dependant (or
dependants) of the amount that would have been payable to the employee under
proposed 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 and one or more dependants.
Proposed section 9E of the Telstra Corporation Act - Employee's long service
leave credit for the purposes of sections 9B and 9C
Proposed 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 proposed section 9C, the long service leave
credit is reduced by any amount of leave already taken under proposed section 9B.
Proposed section 9F of the Telstra Corporation Act - Division not to affect an
employee's post-sale long service leave rights
Proposed 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 (as defined in
proposed subsection 9A(2)).
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.
Proposed section 9G of the Telstra Corporation Act - Saving - Long Service
Leave Act
39
Proposed 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 and are
able to be dealt with by Telstra as if it were an approving authority under that Act.
Division 2--Operation of the Safety, Rehabilitation and
Compensation Act 1988 (`SRC Act')
Proposed section 9H of the Telstra Corporation Act - Operation of section 128A
of the SRC Act
Proposed section 9H provides that Telstra will continue to be liable, on or after the
designated day, as a prescribed Commonwealth authority for the purposes of section
128A of the SRC Act. Telstra will therefore continue to be liable to pay an amount in
respect of an injury, loss or damage suffered by one of its employees prior to 1 July
1989.
Division 3--Retirement benefits
Proposed section 9J of the Telstra Corporation Act - Deferred benefits under the
Defence Force Retirement and Death Benefits Act 1973
Proposed section 9J relates to the Defence Force Retirement and Death Benefits Act
1973 (the `DFRDB Act'). Current employees of a Telstra body (defined in item 62 of
Schedule 1 to the Bill) 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.
Proposed section 9J is intended to enable former members of the Defence Force who:
are employed by a Telstra body immediately before the designated 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.
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Proposed section 9K of the Telstra Corporation Act - Period of eligible
employment for the purposes of Division 3 of Part IX of the Defence Force
Retirement and Death Benefits Act 1973
Proposed section 9K 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.
Proposed section 9L of the Telstra Corporation Act - Application of the
Superannuation Act 1976
Proposed section 9L provides that if an employee of a Telstra body (as defined in item
62 of Schedule 1) 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 (CSS) established under that Act.
From the designated day, 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
Proposed section 9M of the Telstra Corporation Act - 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.
Proposed section 9M 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.
Proposed section 9N of the Telstra Corporation Act - Telstra employees on
maternity leave on the designated day
Proposed section 9N preserves the existing rights of those employees who are on
maternity leave on the designated day.
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Proposed section 9P of the Telstra Corporation Act - 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 (as defined in item 62 of Schedule 1 to the
Bill) that would or might constitute corruption offences, where those acts or omissions
occur on or after the designated day.
The term `corruption offence' is defined in section 3 of the Crimes (Superannuation
Benefits) Act and this definition will apply for the purposes of proposed section 9P of
the Telstra Corporation Act (see proposed subsection 9P(6)). A corruption offence is
an offence by a person who was an employee at the time when it was committed, being
an offence:
(a) whose commission involved an abuse by the person of his or her office as such
an employee; or
(b) that, having regard to the powers and duties of such an employee, was
committed for a purpose that involved corruption; or
(c) that was committed for the purpose of perverting, or attempting to pervert, the
course of justice.
Proposed 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.
Proposed subsection 9P(2) prevents a superannuation order made by a Court under the
Act from affecting employer superannuation contributions made by a Telstra body on
or after the designated day.
Proposed 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.
Proposed 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.
Proposed 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.
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Proposed section 9Q of the Telstra Corporation Act - Saving - Director of Public
Prosecutions Act 1983
Proposed section 9Q 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.
Proposed section 9R of the Telstra Corporation Act - Refund of part of fee paid
under section 104A of the Safety, Rehabilitation and Compensation Act 1988
Proposed section 9R provides for a refund by Comcare to Telstra if the designated day
falls part way through a financial year and Telstra has paid a licence fee under section
104A of the Safety, Rehabilitation and Compensation Act 1988 (referred to as the
SRC Act - see item 61 of Schedule 1) in respect of the administration of the
Occupational Health and Safety (Commonwealth Employment) Act 1991 (OH&S
Act).
For the financial years commencing on and after 1 July 2003, the fee associated with
the administration of the OH&S Act in relation to Telstra is charged under section
104A of the Safety, Rehabilitation and Compensation Act 1988. On 6 June 2003
Telstra was granted a new licence by the Safety, Rehabilitation and Compensation
Commission under Part VIII of that Act effective from 1 July 2003. The licence fee
payable under section 104A represents an amount estimated by the Commission and
Comcare in carrying out their respective functions under the OH&S Act during a
financial year.
Item 65 - Amendment of section 36 of the Telstra Corporation Act
Section 36 of the Telstra Corporation Act requires the Auditor-General to be the
auditor of Telstra.
Proposed subsection 36(1) will enable the Auditor-General to resign as Telstra's
auditor by written notice given to Telstra at any time on or after the designated day.
The designated day is declared by the Minister for Communications, Information
Technology and the Arts 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 held by persons other than the Commonwealth.
Proposed subsection 36(2) provides for the repeal of existing subsections 36(3),
36(3A) and (4) at the earlier of:
the time when the Auditor-General resigns;
the end of the first annual general meeting of Telstra held after the designated day.
Subsection 36(3) provides that the Auditor-General is taken to have been appointed
under section 327 of the Corporations Act 2001 (see now section 327A of that Act) to
43
be auditor of Telstra from its formation. Subsection 36(3A) allows for an additional
auditor to be appointed provided that the appointment complies with subsection
327(7) of the Corporations Act (see now subsection 328A(1) of that Act which
requires the person appointed to have consented to the appointment) and the Telstra
Board has consulted with the Auditor-General. Subsection 36(4) provides that section
328 (Nomination of auditors - see now section 328B) and section 329 (Removal and
Resignation of Auditors) of the Corporations Act do not apply in relation to the
Auditor-General's appointment as auditor of Telstra.
Proposed subsection 36(2A) provides that even if subsections 36(3), (3A) and (4)
remain in effect until the end of the first annual general meeting of Telstra held after
the designated day, a replacement auditor may be appointed at the meeting, in
accordance with the Corporations Act as if a vacancy in the office of auditor had arisen
at the start of the meeting.
Part 3--Amendments commencing on the 85% sale day
Telstra Corporation Act 1991
Part 3 of Schedule 1 to the Bill will repeal Division 3 of Part 2 of the Telstra
Corporation Act, which imposes reporting obligations on Telstra and Part 3 of the
Telstra Corporation Act, which gives the Minister for Communications, Information
Technology and the Arts the power to give Telstra such directions as appear to the
Minister to be necessary in the public interest. It will also repeal proposed section
8AYA, inserted by item 27 of Schedule 1 to the Bill, which enables the Minister for
Finance and Administration to direct Telstra not to dilute the Commonwealth's equity
in Telstra. The object of proposed section 8AYA is to ensure that any proposed
access by Telstra to equity markets outside a Telstra sale scheme does not compromise
the Commonwealth's objective of divesting its entire equity in Telstra.
It is proposed to repeal these provisions when the Minister for Communications,
Information Technology and the Arts is satisfied that the Commonwealth's equity has
fallen to 15 per cent or less, known as the `85% sale day' (see item 4 in the table under
subclause 2(1) and subclause 4(1)). This threshold is consistent with the level at which
substantial interest considerations are triggered under the Foreign Acquisitions and
Takeovers Act 1975. It has been chosen to help ensure that if a multiple tranche sale is
necessary, the Commonwealth continues to be fully informed on Telstra's activities
and plans until the Commonwealth ceases to hold a substantial interest in Telstra.
The Minister for Communications, Information Technology and the Arts will be
required to declare the 85% sale day by written instrument (subclause 4(1)). The
Minister's declaration will have effect accordingly (subclause 4(2)).
Item 66 - Amendment of section 8AA of the Telstra Corporation Act
Item 66 makes a minor amendment to the simplified outline of Part 2 of the Telstra
Corporation Act consequential on the amendment made by item 67.
Item 67 - Repeal of Division 3 of Part 2 of the Telstra Corporation Act
44
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's equity interest in Telstra has
fallen to 15% or less.
Accordingly, item 67 provides for the repeal of Division 3 of Part 2 with effect from
the 85% sale day.
Items 68 to 70 - Amendment of subsection 8AW(1), paragraph 8AX(1)(a) and
subsection 8AY(1) of the Telstra Corporation Act
Items 68 to 70 make minor technical amendments to subsection 8AW(1), paragraph
8AX(1)(a) and subsection 8AY(1) of the Telstra Corporation Act consequential on the
repeal of Division 3 of Part 2 by item 67.
Item 71 - Repeal of section 8AYA of the Telstra Corporation Act
Item 71 repeals proposed section 8AYA with effect from the 85% sale day. Proposed
section 8AYA, inserted by item 27 of Schedule 1 to the Bill, enables the Minister for
Finance and Administration to direct Telstra not to dilute the Commonwealth's equity
in Telstra. The object of proposed section 8AYA is to ensure that any proposed
access by Telstra to equity markets outside a Telstra sale scheme does not compromise
the Commonwealth's objective of divesting its entire equity in Telstra.
It is unnecessary for section 8AYA to continue to operate in a situation where the
Commonwealth's equity interest in Telstra has fallen to 15% or less. Accordingly,
item 71 provides for the repeal of proposed section 8AYA with effect from the 85%
sale day.
Item 72 - Repeal of Part 3 of the Telstra Corporation Act
Part 3 of the Telstra Corporation Act gives the Minister for Communications,
Information Technology and the Arts the power to give Telstra such directions as
appear to the Minister to be necessary in the public interest after consultation with the
Telstra Board.
Item 72 provides for the repeal of that Part with effect from the 85% sale day, which is
the day when the Minister for Communications, Information Technology and the Arts
is satisfied that the Commonwealth's equity in Telstra has fallen to 15 per cent or less.
It would be inappropriate to retain such a power in a situation where the
Commonwealth's equity interest in Telstra has fallen to this level.
The public interest in telecommunications is protected through the comprehensive
community and regulatory safeguards set out in the Telecommunications Act 1997, the
Telecommunications (Consumer Protection and Service Standards) Act 1999, the
45
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 and Media Authority a broad power of direction over carriers and
carriage service providers in relation to the performance of its telecommunications
functions and powers. Section 159 of the Telecommunications (Consumer Protection
and Service Standards) Act 1999 also empowers the Minister to direct Telstra to
comply with that Act. 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.