Michael McCormack (Riverina, National Party, Parliamentary Secretary to the Minister for Finance) Share this | Hansard source

I rise as well to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015, and I endorse the words of the member for Herbert, who said this is all part of the tax white paper process and all part of streamlining government business to ensure that we enable the people of Australia—the taxpayers and superannuation earners of Australia—to have the best possible way to be able to get ahead in society.

Schedule 1 to the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015 amends the scrip-for-scrip rollover rules to ensure that they are better targeted and work as they were meant to work, and that is so important. This measure is an integrity measure which guarantees that opportunities for entities to indefinitely defer tax are taken away. Scrip-for-scrip rollover rules provide tax relief for certain merger and acquisition transactions. They apply where shares or interests in a company or trust are exchanged for similar shares or interests. The tax ordinarily payable at the time of the exchange is held over; it is deferred until the new shares or interests are sold. This decreases the cost of takeovers and mergers, as the acquiring entity does not need to compensate the share or interest holders for tax which would otherwise be payable.

The rollover ensures that tax is not getting in the way of mergers and acquisitions occurring in Australia, and we need to be able to do that. This government is all about making it easier and more streamlined for business activity to occur, and we just heard that from the member for Herbert—getting out of the way and removing the impediments so that we can allow business to get on with the job that they do for themselves, to increase their wealth and prosperity, to make it easier for them to employ people and to get the economy ticking again. We have had one Minister for Small Business since our election on 7 September 2013. Labor had six ministers for this important portfolio in six years. I appreciate this is not the small business minister's legislation; it is the Assistant Treasurer's. But it relates very much to the core priorities of this government: to help business, to build wealth and to encourage prosperity.

Integrity rules in the scrip-for-scrip rollover stop entities from accessing the tax relief in some circumstances — generally where both the acquiring entity and the entity being acquired are run by the same group or individual. A recent court decision, Commissioner of Taxation v AXA Asia Pacific Holdings Ltd [2010] FCAFC 134—the AXA case—highlighted that there were unintended consequences as to how the laws were unfolding in the business world—hence this amendment. The integrity rules were not functioning as intended and were being bypassed. This circumvention was done by temporarily suppressing the ownership rights of related parties through a new issue of instruments. This measure bolsters these rules to ensure entities cannot inappropriately access tax relief via this structure. The tighter integrity rules will be applicable both to trusts and to companies. Further, the measure also changes the handling of some 'downstream' acquisitions which involve the use of debt to reduce tax payable.

These amendments are necessary to guarantee that the rollover cannot be accessed inappropriately, to overcome issues with the use of debt in certain transactions and to ensure that the rules apply to both company and trust restructures. These amendments are deliberately focused and they will have an impact only on those merger and acquisition transactions which inappropriately access rollover relief.

Consequently, it is not anticipated that they will make restructures more burdensome in Australia. We do not want to do that. This measure is not expected to affect small business, and that is vital. As with all government policy, it comes after careful consideration and due consultation. There is an unspecifiable but potentially large revenue protection linked with these amendments, and that is good.

Schedule 2 is about the exemption of income earned in overseas employment. This measure removes an income tax exemption presently being accessed by Australian government employees who are posted overseas for more than 90 days to deliver official development assistance. The intent of this income tax exemption is to provide relief from double taxation, but it no longer has this effect. Instead, it now serves to give a tax break for many Australians who are not liable to pay income tax on their foreign earnings in Australia or in the overseas country.

In the 2009-10 budget the former Labor government had tightened the eligibility for this particular exemption. This income tax measure will go one step further by ensuring that all government employees who deliver official development assistance overseas are subject to Australian income tax on their pay and on their allowances. This change will take effect from 1 July next year. This change does not apply to the taxation arrangements for private sector aid workers or charity workers, who do such a valuable job; we recognise that. It does not apply to Australian Defence Force and Australian Federal Police personnel, who, we also recognise, do a fantastic job, as do Public Service employees. The existing eligibility for an income tax exemption on income earned while working overseas will continue for the groups I just mentioned—the ADF, the AFP. This amendment was announced in the 2014-15 budget and it will result in a gain to revenue over the forward estimates of $6.7 million.

The schedule 3 small lost member account threshold measure raises the current lost superannuation account balance threshold below which small lost superannuation accounts must be transferred to the Australian Taxation Office. This measure was initially announced by Labor in the 2013-14 budget; however, as with so many other things, so much other legislation, whether through incompetence or procrastination Labor did not legislate the measure. On 6 November 2013 the then recently elected coalition government announced it would enact the measure as part of a broader announcement about previously announced but unlegislated tax and superannuation measures.

Mr Husic interjecting—

We hear the member for Chifley interjecting, but he knows that there was so much unenacted legislation that Labor talked about and did media releases about but never did anything else about—never brought it into the House, never brought it into the Senate, never brought it on for debate. That was because they knew it was bad policy or they merely procrastinated. That happened so often from 2007 to 2013.

Dr Leigh interjecting—

At present—the member for Fraser can be quiet too; he needs to listen up; he might learn something—lost member super accounts containing less than $2,000 must be transferred from superannuation funds to the ATO as unclaimed superannuation money. This measure will increase the $2,000 threshold in two phases—firstly, to $4,000 from New Year's Eve this year, and then to $6,000 from 31 December next year. This is good policy. It is sensible. It is overdue legislation. Lost super is a super account held by a super fund where the fund has lost contact with the member, or the account has been idle for more than five years.

When we look at how people get into super, we know that around 70 per cent of employees are members of the default fund which is offered by their particular employer. When many people change jobs, and we hear that people these days will change their jobs up to seven times in their career lifetime—some of the Labor members after the next election might need to start looking around for a new job, because they will certainly need a new job after the next election—

Opposition members interjecting—

I can hear the cacophony of noise. I have obviously struck a nerve there, as they realise their short term in this place. But, when people change jobs, they often end up with a new super account and they fail to consolidate existing accounts. As a result, many people end up with more superannuation accounts than they want or they need. The ATO says nearly half of all working Australians—45 per cent in fact—have more than one super account. In many cases, members are not even aware that they have lost super accounts. They do not know. They are not aware of it. Superannuation is one of those things where a lot of people, whilst it is very important to them and very important to their future, are not aware of how much they hold, let alone of how many accounts that they might have. For super accounts with smaller balances, the costs of fees and charges and insurance premiums can pass the actual investment returns. This can be especially problematic for lost super accounts, because, in the majority of cases, the members are not even aware, as I stated before, that they actually even have these accounts and can end up losing money which was meant for their retirement. Transferring lost super accounts with low balances to the ATO helps to protect such accounts and preserves their value until they can be reunited with their rightful owner, the particular member. The ATO does not charge any fees for maintaining these accounts. Individuals are able to recoup their super money from the ATO at any time. Members are paid interest calculated in accordance with the consumer price index when their money—and it is their money—is reclaimed.

In the 2015-16 budget the government announced six measures to reduce red tape for superannuation funds by removing redundant reporting obligations and streamlining some of the lost and unclaimed superannuation administrative arrangements. These include updating the definition of 'uncontactable' to account for contemporary forms of member communication (for example over the internet, online); supporting eligible rollover funds proactively consolidating lost accounts; and allowing direct payments of lost super held by the ATO to persons with a terminal illness. These changes will make it easier for individuals to be reunited with their lost and unclaimed superannuation moneys. This is reasoned, measured and compassionate.

Opposition members interjecting—

This government is about being reasoned, measured and compassionate, member for Jagajaga. The ATO has strategies in place to reunite members with lost and unclaimed superannuation accounts and to reduce the number of unnecessary and inactive accounts in the superannuation system. Some of the strategies are matching superannuation accounts to an individual, providing this information on an online portal, and proactively working with super funds to ensure they have updated contact details for lost members. There is an estimated total fiscal impact of $483.9 million over the forward estimates. I commend the original motion to the House.

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