Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. What are the benefits of the government’s reforms to superannuation and what are the legislative arrangements to implement those reforms?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Hasluck for his question. In last year’s budget I announced the biggest reform of taxation arrangements for superannuation in Australia’s history. Those reforms dramatically simplify the taxation of superannuation and they make superannuation the preferred investment for every Australian. Every Australian who has money in a taxed superannuation fund, once they reach the age of 60, will be able to withdraw that sum entirely tax-free. It will be tax-free if it is taken out as a pension; it will be tax-free if it is taken out as a lump sum. In addition to that, the government announced its proposal to change the assets test taper rate on pensions so that 321,000 Australians will be eligible to benefit from improved arrangements from 20 September 2007.

What this will do is give many Australians an incentive to remain in the workforce after the age of 60, drawing down on their superannuation tax-free and having a part-time job at a lower marginal tax rate. It will also mean that Australians no longer have to pay for complicated advice when they are heading towards retirement. It will abolish reasonable benefits limits and it will encourage young people to get into superannuation through the course of their working lives. After 40 years of employer contributions, an average worker earning $1,000 a week is projected to increase their retirement income by 17 per cent as a result of these tax changes. A self-employed 25-year-old earning $28,000 and contributing two and a half thousand dollars a year would be expected to increase their pension benefit at retirement by over $88,000. These are reforms which will boost incentives for saving. These are reforms which will boost retirement incomes.

Susan Ryan, the former Labor minister, said after these reforms were announced, ‘Maybe faced with the Treasurer’s bold gazumping of Labor’s cherished but slightly shabby property the opposition will find the resolve to get another big picture worked out and the wherewithal to let voters know about it.’ Unfortunately the opposition has not managed to do that. I want to quote Garry Weaven, the ACTU adviser and superannuation fund advocate. He said, ‘The government’s budget initiatives have proved the Liberal Party is now the official party for superannuation.’ Garry Weaven is an ACTU adviser and lifetime ALP supporter. The good news is that the legislation for these reforms went through the parliament yesterday. This is now law. The biggest superannuation change in Australia’s history has now been enacted. It is going to give benefits to all Australians who save through superannuation, and it will take effect from 1 July this year.