Michael Johnson (Ryan, Liberal Party) Share this | Hansard source

I am pleased to speak on this very important Tax Laws Amendment (Simplified Superannuation) Bill 2006, which I know the constituents of the Ryan electorate, which I very proudly represent in this parliament, will have a deep and abiding interest in. I am pleased to hear from the shadow Treasurer that his party also supports this government bill. I certainly look forward to hearing more detail from him and his colleagues on superannuation, which is of course part of the overall economic security of Australians. He talked about wealth creation and wealth security for Australians. That was somewhat hypocritical because Australians in this country today under the Howard government have far more economic security and are far more secure in their family lives and in their financial futures than they have ever been under any Labor government. I would certainly prefer to have the current administration running the policies of this country than the opposition.

The important thing that this bill raises is economic security for Australians. As I said, part of that economic security is people’s superannuation, because we are living in a time when people are living longer and they want their future financial security to be assured. This government is very keen to ensure that Australians have financial security into their old age. The changes that this bill brings to our superannuation architecture are very important.

Australia’s superannuation pool is set to hit the $1 trillion mark some time in the next few months. This is very welcome. I think it is important that credit is given where it is due. All members on this side of the chamber acknowledge that the superannuation initiative came from the Labor Party when it was in government. But the disappointing aspect of all this is that the Labor Party does not support the Howard government when it comes up with good policy and good initiatives. That is a reflection of the thinking of the current Labor Party.

We do not want to rest on our laurels about the superannuation pool and structure; we want to improve it and ensure that Australians embrace superannuation as the best way to protect their future. That is why the Howard government is very keen to continue reforms and continue to bring in policies that will really make a difference.

The shadow Treasurer was talking about how his side of politics should claim all the credit. None other than a former Labor minister has praised the Howard government and the Treasurer for the bold initiatives that it is bringing into policy and legislation. I think it is very important that we tell Australians when a former Labor minister responsible for the area of superannuation gives huge points to the Treasurer and the government for bringing in bold superannuation initiatives and not let that go unnoticed. I certainly do not want it to go unnoticed here in the parliament and leave my constituents in Ryan out of the loop on what the two sides of politics think about superannuation policy. In an article in the Australian in May 2006 former federal Labor minister Susan Ryan talks about the differences between the government’s superannuation ideas and policies and those of Labor. It is very instructive and telling. I would like to quote from this article because I think it is very relevant—certainly it is for Ryan taxpayers. I quote:

Where does the plan leave Labor? Not scrabbling around in the stale detail of yesterday’s policies, I hope.

Big challenges remain: helping the low-paid to save enough for the tax-free stage to matter, or finding ways to compensate women for super lost from years out of paid work caring for families. Maybe faced with the Treasurer’s bold gazumping of Labor’s cherished but slightly shabby super property, the Opposition will find the resolve to get another big picture worked out, and the wherewithal to let voters know about it.

They certainly have not done that. They do not have any ideas at all about superannuation in 2007 and about letting the voters know about it. It is important in this country that we encourage a culture of saving. It is important that we inform young Australians in particular that it is important to keep one eye on the future because there will come a time when they will need resources at a latter stage of their lives.

The reforms are the biggest changes to happen to superannuation for two decades. There is absolutely no doubt about that. As I said, the former Labor minister Susan Ryan endorses that view. I know that the opposition do not agree with that, but of course they would not in their current position. It is expected that these reforms will impact over 10 million Australians, 1.3 million employers and more than 310,000 superannuation funds.

The proposed changes were outlined in the working paper ‘A plan to simplify and streamline superannuation’ which was released as part of the budget. Following the release of that working paper, the government received over 1,500 written submissions and more than 3,500 phone calls from the community with comments and suggestions about the reforms and the transitional arrangements. Together, the reforms and the transitional arrangements represent a massive $7.2 billion investment by the federal government to simplify and streamline Australia’s superannuation system.

The complexities of the old superannuation system were staggering. I will give an example of the circumstances in which an Australian, maybe in the latter stages of their life, was meant to digest the complexity of the superannuation architecture as it existed. I will use the words of the Treasurer in his address to the National Press Club in May 2006 because they are helpful in explaining how difficult it is for an older Australian to comprehend the complexity of superannuation:

If you have a pre July ’83 contribution, 5 per cent is taxed at marginal tax rate. If you have a concessional contribution 5 per cent is taxed at marginal tax rate. If it’s an undeducted contribution that part is exempt. For invalidity post June of 1994 that part is exempt. If it’s a capital gains tax roll in that part is exempt. If it’s non-qualifying, that part is taxed at marginal rates. If it’s post June of 1983 you have a threshold and if it’s excessive it’s 38 per cent.

For everyday Australians, facing this sort of scenario in handling their superannuation portfolio really is too much. I am delighted that the government is taking this very bold initiative to redress the complexity in our superannuation architecture. It is that kind of complexity which diminishes Australians’ overall confidence in our superannuation system’s ability to provide for them adequately in their retirement.

Following these reforms, the sort of circumstance I just touched on will be abolished and replaced with one simple rule—that is, if you are over 60, whether you access your superannuation as a pension or as a lump sum, you will pay no tax. Not only will this reduce complexity but the government estimates it will boost an average weekly retirement income of $1,000 by $170. The changes will reduce complexity not only for retirees but also for superannuation funds and employers. I would trust that any drop in administrative costs experienced by the superannuation industry would be transferred to the consumer through a lessening of the administrative fees they charge, because we know that the superannuation industry is swimming in almost $1 trillion of funds.

Where previously a person’s superannuation benefits had to be paid out when that person reached 65 and was no longer gainfully employed, those sections of the legislation will be repealed under this bill and the person will now have the option to leave their benefits in their superannuation fund indefinitely, withdrawing as much or as little as they choose at any time after their preservation age. In order to minimise the risk of people abusing these very generous reforms, restrictions will still apply to the amount someone can place in their superannuation fund as a tax deductible contribution. However, the limits will be simpler and fairer with the old cumbersome age limits scrapped in favour of one single limit of $50,000 per annum in pre-tax contributions and $150,000 per annum in post-tax contributions. Not only will this negate the risk of people abusing the system as a tax haven, it will also enable younger Australians to save more and save earlier by removing the $15,000-plus contribution limit for under 35s.

It really is important that all of us encourage younger Australians in our electorates to consider their financial position and the amount of money they can put into their superannuation funds. Clearly young people have been amongst the biggest winners from these sweeping changes to superannuation unveiled in the budget, with the abolition of the age based limits on deductible super contributions from 1 July 2007. It certainly does make super far more attractive to generations X and Y and, in particular, to those in self-employment who have the capacity to invest in their superannuation schemes.

On this side of the House, the small business constituency is a very high priority. I only wish that those opposite would share our view and our philosophy of giving more attention to and showing more affection for the small businesses of our country.

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