Andrew Laming (Bowman, Liberal Party) Share this | Hansard source

It is great to follow the member for waning to talk about three unrelated but important schedules in this bill.

The first one is quite an esoteric recasting of the scrip for scrip arrangements that apply to mergers and acquisitions. The second one—more relevant to many of us, I think—is the tax treatment of money earned overseas, particularly by Australian government employees who are deployed for 90 days or more. Then finally there is one that is very close to the hearts of us all: lost superannuation. Australia is second only to Chile in leading the way in superannuation reform; setting up private superannuation alternatives to state funded pensions. But this great challenge remains: unlinked superannuation accounts, particularly the smaller ones, being lost by Australians.

Briefly, without detaining the House further, the important changes in the scrip for scrip arrangements basically recognise that increasingly it was not working in the way it is was intended. This was initially to promote the process of mergers and acquisitions in this country, to make sure there were not tax impediments to doing it. But what was discovered was that these laws were being used inappropriately. This is effectively an integrity measure. It would be very difficult for anyone to disagree, particularly where tax rollover relief was being provided to entities where related parties were both the vendor and the purchaser.

These can potentially apply where a company or trust is exchanging for similar shares or interests, and the tax that is ordinary payable at the time of the exchange is basically deferred until those new shares or interests were sold. This reduces the cost of takeovers and reduces the complexity of the M&A process, as the acquiring entity does not have to compensate for the share or interest holders for those taxes that would otherwise be payable. A recent court decision, which has probably prompted these arrangements, highlighted that the integrity rules were not operating as was intended and that to strengthen these rules would be a common-sense approach. The measure also changes the treatment of some acquisitions which involve the use of debt to reduce tax payable. It is all common sense, and I do not think there would be any controversy in this House for moving ahead with those changes.

Secondly, there are not a large number of us who get to work overseas, but it is common for young professionals and certain placements are tax exempted. This bill particularly focuses on overseas development assistance and Australian government employees who could be posted overseas for more than 90 days and potentially be earning untaxed income. These ideas were originally put in place because we were trying to avoid double taxation, but that is no longer the case. It is very important to mention that these moves, which were initiated by the previous government and are being tightened in this process by the current government, will not have an impact on private aid workers, charity workers or Australian Defence Force personnel.

Fifteen years ago I found myself completing an overseas degree and acquiring a job at the World Bank. It very much surprised me that the country was effectively blind to my earnings while I was working for the World Bank, and this was under this fairly unusual concession that allows money earned under these arrangements to be tax free. While I was not on a direct placement from the Australian government, my next job was working for the transitional authority in East Timor. That was a similar arrangement. I was employed under the UN, but it was not an official Australian appointment so it still basically meant that all of that very generous payment for those months I worked overseas was not considered as taxable income in Australia. While I might have benefited temporarily from those arrangements, $6.7 million over the forward estimates would be secured with this policy change. I think this is a small but important modification to ensure a fairer tax system.

Lastly there is the great concern that not only do many of us have default accounts—and we are placed with a default superannuation account often by nothing more than the tick of a box—but, with increasingly mobile gen Y working populations moving between jobs, many have a number of accounts, and not all of them are easily able to be streamlined or merged. That means we have a significant risk of lost superannuation accounts. I do not have to tell this place that everyone is fearful that these small balances—often in accounts either you have lost track of or you cannot close—will be subjected to extraordinary fees relative to the size of the account itself. It makes a certain sort of patronising sense that those moneys should be recouped and held by the Australian Tax Office to seek some protection from those fees but, on the other side of the coin, I think we should be working harder to reunite people with their accounts and let them make their own individual decisions.

I am pleased with where this is heading. I am pleased that the current lost member super account threshold is around $2,000, below which it is transferred to the ATO. That will increase in two phases—at the end of this year to $4,000 and at the end of next year to $6,000. Obviously, when we look at how people get into super, we can see that nearly three-quarters of people are using a default account. At that time these major providers really should be working harder to make sure they keep all the required data to be able to stay in touch with their members and, more importantly, to keep it current and up-to-date. We live in a world now where electronic communication completely dominates and we should not be relying on postal communication. With mobile phones, smartphones and handsets these numbers do not change, particularly for young Australians in the workforce. That number has a very low turnover rate and is likely to remain accurate for years.

The ATO identifies that around 45 per cent of Australians are in this invidious position where they cannot bring all of their accounts together to simplify these arrangements. While the ATO does not charge any fees here, fundamentally, as a conservative government we would rather see people take responsibility for their accounts themselves than fall back on that more patronising notion that we have the ATO going around sweeping up small accounts because it is better for us.

I am glad that we have seen a multipronged approach to having better quality personal information, having a better understanding of mobile populations, working much harder to keep track of people's savings and having up-to-date contact details—something that every entity and agency should be doing. The ATO in particular has a few strategies to reunite members with lost and unclaimed superannuation. These include matching superannuation accounts to an individual and providing this information in an online portal that is easy to access and can be easily promoted, working proactively with super funds to make sure those addresses are constantly updated and, as I said, increasingly using mobile phone numbers to do that. These are three very common-sense measures. The estimated total fiscal impact of $483 million over the forward estimates is not inconsiderable and is further evidence that the coalition is keeping our tax system up to standard.

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