Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

This government has an unhappy history on the subject of superannuation. In late 2007, the then opposition promised to change superannuation ‘not one jot, not one tittle’. Oh, how we remember the prophetic words of Kevin Rudd in 2007 when, as Leader of the Opposition, he said he was not going to touch superannuation. As is typical of Labor, it has broken that promise not once, but on numerous occasions. For example, Labor has halved the concessional contribution caps, penalising thousands of Australians who inadvertently exceeded them and undermining Australians’ incentives to save for retirement. Having broken not just that promise, the Labor Party then cut back the government co-contribution payments for the poorest people. If my memory serves me correctly that was in the 2008 budget, when they did not have to do it. Of course, they were projecting a surplus in the 2008 budget. How ambitious that was, that Labor should deliver a surplus budget! Of course, they never have and I doubt they ever will. But that did not stop the Labor Party, which cut back on the co-contribution payments for those on the lowest incomes. As if that is not enough—if that does not break the promise of ‘not one jot, not one tittle’—Labor mandated that industry funds be the default superannuation funds for the bulk of the modern awards, thereby closing down competition.

I see in the chamber the member for Dobell, who is not only a previous union official—so he would love the industry super funds—but who was also the beneficiary of union support during the recent election campaign and during the 2007 campaign. In fact, all the Labor members were. How do they pay back their union mates? They go and make the industry funds default funds under the modern award system.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

No competition!

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

No, you do not want competition from the private sector. For crying out loud! Industry funds? Bernie Fraser knows how to manage people’s money. He made a living out of it during those glorious days when he was at the Reserve Bank and upped interest rates to record levels. No, put him in charge of the nation’s superannuation—that would do the job. Then, in a further break of the Labor Party’s commitment to touch superannuation ‘not one jot, not one tittle’, as Kevin Rudd said, the Labor Party promised to tender the role of the superannuation clearinghouse to the private sector. But, instead, they went to Medicare. I thought Medicare had responsibility for refunding payments out of the MBS to individuals. But, no, the Labor Party, in its infinite monopolistic public sector wisdom, said, ‘Let’s get Medicare to become the clearinghouse for superannuation.’

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

No tender!

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

No, there was no tender. Why would there be a tender? It is Medicare. Medicare is a government owned monopoly. It is so obviously the case that they would make Medicare the only clearinghouse for superannuation. This is Labor writ large. Remember, they promised ‘not one jot, not one tittle’. In that unique Rudd-like language in 2007 they promised not to touch superannuation, and then the tentacles of socialism wrapped around the superannuation system at the behest of the government as they sought to deliver for their union mates in the industry funds but also, more significantly, as they sought to get their hands on Australians’ money. Of course, this is not just in superannuation. Not only does the Labor Party want to get their hands on Australians’ super, they want to get their hands on Australians’ income. That is why Labor increased so many taxes, from tax on alcopops to taxes on cars. And that is why the Labor Party has played around with a range of different concessions to ensure that Australians end up paying more tax, not less, to the government over the course of this government’s two terms.

Typical of the Labor Party, they do not want to admit that they have broken a promise—oh no, they would not admit that they have broken any promises. Obviously there has been a sea of promises. Today we had another illustration of a broken promise when the Prime Minister said that they were going to open some new detention centres, after having said before the election that they were unnecessary. It is not just the present Prime Minister or the previous Prime Minister who has chosen to break promises made by the Labor Party; it is the Deputy Prime Minister and Treasurer who, in May 2009, said:

The government will reduce the generosity of some superannuation concessions for those with greater private wealth.

The cap on concessional super contributions will be lowered and the matching rate of the superannuation co-contribution will be reduced temporarily.

That was 2009. In April 2010, the Deputy Prime Minister and Treasurer said:

We certainly didn’t breach any promise that we made about superannuation.

He lives in this different paradigm, this different universe, old Swanny. He is out there in his own little orbit going around in his own little planet, where he says there is no breach of any election promise—they didn’t breach any promise because the words of the former Prime Minister Kevin Rudd meant so little. They meant not one jot, not one tittle—all those changes they made to super never really happened. Well, they did. They are in the budget. But still they say they never really happened. He went on to say, and this shows the absurdity of his claims:

We certainly didn’t breach any promise that we made about superannuation. It is true that we changed the caps because the caps were excessively generous, and in changing them we did not breach any promise.

That is your Treasurer. Are you proud of this man?

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

No, he is not my Treasurer. You will speak through the chair, thank you.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Speaking through the chair, I can understand the Deputy Speaker disowning him.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Just direct your comments through the chair.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

To the member for Dobell and the two new members here, the member for Bass and the fellow in front of the member for Dobell—I am not sure where he comes from—

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

I took a seat off you!

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

What a rare moment that was. But I say to you—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for North Sydney will direct his comments through the chair.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I direct them through you, Mr Deputy Speaker, to the three Labor members over there and even to the member for Adelaide at the table, and I would ask those members: are you proud of a Treasurer who commits to keeping an election promise not to touch superannuation and then says, ‘Well, we changed the caps because the caps were excessively generous, and in changing them we did not breach any promise’. Isn’t there something ironic about that, or something hypocritical, when this comes from the lips of the Treasurer? He expects us to believe him on so many different things. It is Orwellian; the ministry of truth—I am telling you the truth; I am lying. That is what the word of the Treasurer amounts to.

The net effect of this tampering and backflip has been to undermine certainty and discourage Australians from saving. And naturally enough—how can they have confidence in a superannuation system, let alone confidence in a government, that fails to keep its promise? It was with the government’s record of meddling and interfering with superannuation in mind that the coalition approached the Superannuation Legislation Amendment Bill 2010. This bill is not a major reform of the superannuation system. It will do nothing to increase national savings. Nor does it address the important reforms laid out by the Henry taxation review. This bill essentially tidies up a few loose ends. It implements a range of measures and minor clarifications to Australia’s superannuation system.

First, it gives effect to the 2010-11 budget measures to allow for a transfer of unclaimed state and territory public sector superannuation moneys to the Commissioner of Taxation, as is the case for the private sector. That does not affect individuals; obviously those individuals have not claimed their super, and that money is sitting in state jurisdictions. Going to one place to claim unclaimed super is a good idea. That will facilitate state and territory authorities and public sector superannuation schemes paying unclaimed super money to the Commonwealth. This is a change to the current situation, and we think it is a pretty good idea so we will support it.

The bill also enables the taxation commissioner to accept and to subsequently pay out amounts transferred by state and territory authorities and public sector super schemes. Importantly, individuals will still be able to claim back their money from the Australian Taxation Office at any time. It will also provide a gain to revenue of $29.6 million over the forward estimates. What a surprise! They are running a budget deficit in excess of $40 billion. We think it is good from a procedural perspective but, such a surprise, it is a little revenue raiser for the Commonwealth as well. That should not surprise anyone. The Association of Superannuation Funds Australia claims:

The Commonwealth will not find it any easier to locate the owners of lost super when compared with state bodies. This illustrates that linking lost superannuation with new member accounts remains an ongoing issue. Nevertheless, the measure has the benefit of facilitating more uniform treatment of unclaimed money, and it is a one-stop shop.

I accept that. The second change will provide transitional relief for income tax deductibility of total and permanent disability insurance premiums which are paid by superannuation funds. Super funds generally take out death and disability insurance policies to insure their risk for a liability they may incur to their members. Legislative reforms in 2007 may have cast some confusion over the deductibility of that insurance. There was a clarification in 2009 to allow super funds to claim income tax deduction for the TPD insurance premiums to the extent the policies have the necessary connection to a liability of the fund to provide disability superannuation better.

This amendment will extend the commencement of the 2007 changes to 1 July 2011, and that gives the super funds time to switch administrative arrangements over to the new requirements. This measure has been discussed with the industry, superannuation and insurance companies have been calling for clarification, and we think it is a good idea. This aspect of the bill will apply to the income years 2004-05 to 2010-11, and the amendment is sensible.

The third change addresses the powers of superannuation funds to acquire an asset in the event of a breakdown of a relationship of a superannuation fund member, without contravening the prohibition against related-party acquisitions. It will, for example, allow a trustee to acquire the actual asset rather than accept cash or a replacement asset from the related party. The measure will ensure that section 66 of the act is not an impediment to separating partners achieving a clean break from each other in terms of their super arrangements.

There will also be additional minor clarifications to the tax treatment of super that will allow an individual to give a notice of intent to deduct a contribution to the successor superannuation fund where the contribution was made to the original super fund. It will allow employers to claim a deduction for super contributions made with respect to a former employee within four months of that employee ceasing employment and at any time after the employee ceases employment for contributions made to defined benefit interests.

It will also clarify that the due date of the shortfall interest charged for the purposes of excess contributions tax is 21 days after the commissioner provides notice of the amount payable, which is sensible. It allows the commissioner to exercise discretion to disregard or allocate to another financial year all or part of a person’s contributions for the purposes of excess contributions tax before an assessment is issued. Furthermore, it provides a regulation-making power to specify additional circumstances when a benefit from a public sector super scheme will have an untaxed element. In addition, it will streamline references to the immigration secretary and the immigration department in relation to the disclosure of migration and citizenship information.

These amendments provide clarifications to the legislation, in our view, and we believe they will improve the operation of superannuation provisions in the income tax legislation. So, in short, the coalition supports the amendments because they are sensible, they are practical and at the end of the day I think the industry wants them to help reduce red tape.

But of course this does not address the more substantive issue of how we increase national savings. The coalition accepts that as a nation we need to increase national savings. And the starting point must be to run a budget surplus. That is the fastest way this government can contribute to national savings: to start running surplus budgets. And in doing so, instead of being in the markets, borrowing money in competition with small business operators, in competition with farmers, in competition with larger operators—and therefore effectively crowding out the markets—the best thing this Labor government could do would be to get the budget back to surplus.

Now, it is not just us saying that. It is the Treasury providing that advice, through the various red books. The department of finance is providing that advice. The Reserve Bank and members of the Reserve Bank are providing that advice. It seems to be every day that credible economists are coming out and saying the best thing the government could do when the economy is running at full capacity, to take upward pressure off interest rates, to prevent crowding out in the credit markets, is to start doing something about getting the budget to surplus faster. But of course this is a government that continues to roll out stimulus spending in 2012 for an economic downturn in 2008! It is a little late! It is like trying to have a heart-start defibrillator to get Lazarus out of the box three days after he died—it is a little late. But this government is continuing to borrow money. This government is continuing to spend money. It is running expansive fiscal policy at a time when the economy is running at near full capacity, therefore it puts upward pressure on inflation and it puts upward pressure on interest rates.

The Labor Party just do not get it. Just as their policy on water is a mess, just as their policy in relation to asylum seekers is a mess, just as their policy in relation to climate change is a mess, so too is their treatment of the Australian economy—confused, leading to delay and uncertainty, leading to the point where Australians are saying the government need to pull back on their expenditure. We are now in a phase where the Reserve Bank is about to go with interest rates beyond the norm. You can have old Swannie every day, going forward and saying, ‘Oh, well’—

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

Order! The member for North Sydney—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

‘look at the cash rates’—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Order! If you were not shouting so much you would hear me. Would you please use the correct name for the member and their seat.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Sure. The correct name for the member is Wayne Swan. His seat is Lilley.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Thank you. Use it.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Okay, Wayne Swan in Lilley, if that is what you choose to hear.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Or ‘the Treasurer’.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

The Treasurer. Thank you for the short form, Mr Deputy Speaker—very helpful. I think it is hugely relevant that the Treasurer himself does not understand the ramifications of his own actions. From day one he has been uncertain of the direction he really wants to go. He comes into this place and he reads the lines that are fed up to him by the advisers to the dispatch box, and he reads the lines that are fed to him out of Treasury—not always exactly as fed out of Treasury, but along the lines—and he thinks, ‘Mission accomplished.’ But no, you have to have an instinctive feel for how things work. Had he had an extensive career in the private sector, the Treasurer himself would understand—

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

Mr Ewen Jones interjecting

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Or as my colleague the new member for Herbert, who is experienced in the private sector, in small business, would know; as my colleague at the table, the member for Cowper, would know—I am not sure whether the member for Adelaide would know. I don’t think the member for Dobell would know. Have you guys ever worked in business? No.

I would suggest that on this side of the House we know that you cannot keep spending more money than you have, that each year, if you spend more money than your revenue permits, you are going to be in a bit of trouble. This is something that Labor is not familiar with and the Treasurer himself is not familiar with. The Treasurer promised a surplus in 2008 and failed to deliver. When they were first asked about this, about when Labor will deliver their first surplus budget, they said, ‘Ah, we will be three years early.’ Three years earlier than what? ‘Well, three years earlier than we had to predict a surplus in six years time.’ You cannot deliver national savings if you do not have a surplus budget as part of the equation.

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I raise a point of order. I am enjoying the tirade that is coming here but I am not sure it has got much to do with the legislation that is before us. Certainly there is nothing in the legislation relating to the state of the economy, budgets and surpluses and those sorts of issues, and I would ask that you bring the member back to the legislation.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

I know the member for North Sydney is very much aware of the specific nature of this bill and amendment and will stick to that.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Absolutely. As you know, Mr Deputy Speaker, superannuation is about savings and superannuation also contributes to national savings. The member for Dobell, who I think is the chairman of the economics committee, has just illustrated the dearth, the shortage, the absence of economic skills in the Labor ranks when he could not draw the fundamental link between superannuation as a savings measure and the contribution to national savings. So I would urge the member for Dobell to heed my words. Listen. I know you struggle to—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for North Sydney will speak through the chair and will address the legislation.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I look forward to contributing. I say to you, Mr Deputy Speaker: the government has no plan whatsoever other than simply increasing the superannuation levy from nine per cent to 12 per cent to try and increase national savings. It is a lazy approach. Even Dr Henry, in the now famous Henry review into Australia’s taxation system, said there is a better way and at the end of the day a more lucrative way for the nation to increase superannuation by taking a different approach to increasing the superannuation levy from nine per cent to 12 per cent with some reform of the taxation arrangements apply to existing super.

Of the 138 recommendations in the Henry review, the government chose to accept 2½ of the recommendations. Within six weeks they dumped one of those recommendations, the original version of the mining tax, which left them with 1½ of the 138 recommendations. That is right up there with the success story of the 2020 Summit, where I seem to recall a similar acceptance rate of recommendations. But I say to you, Mr Deputy Speaker, that not only is superannuation vitally important to the financial security of everyday Australians and their families but, most significantly, superannuation is important to our level of national savings. At this crucial moment when we have the most generous terms of trade in 50 years, we need to be a nation that can start to fund ourselves, that can start to fund our growth.

I fully accept that as a nation we have imported capital; since 1788 we have been importing capital. I accept that. We have had massive demand and need for significant funding of capital infrastructure in this country. And I do praise Bob Hawke as Prime Minister of Australia, who was not only a very good Prime Minister but also a good mate of mine and a constituent. I would say that he deserves great praise for the introduction of compulsory superannuation in Australia. I am a believer in compulsory superannuation and it is a significant contribution. The coalition government implemented an increase in the superannuation guarantee levy from, if my memory serves me correctly, six per cent to nine per cent in the latter part of the 1990s. But, as Dr Henry and the panel point out in the Henry review, nine per cent is about right. This government, in order to appease its mates in the industry super funds, undertakes an approach to national savings that if it were running surpluses would not necessarily be necessary. I would say to you that if it heeded the recommendations of the Henry review there would be a better way to increase the pool of superannuation and at the same time deliver longer term benefits to Australian superannuants.

What is of interest is the fact that there is a cost associated with the recommendation in the Henry review on superannuation. I accept that. If we were not running last year the largest cash deficit in Australian history and this year the second-largest cash deficit in Australian history, if we were not doing that, then, by my Lord, I say that we would be able to afford a whole lot of tax initiatives that reduced the tax burden and provided a very real incentive for Australians to increase their contribution to superannuation and increase the benefits over the longer term of superannuation. So Labor have taken, as they traditionally do, a very lazy approach. You would appreciate this, Mr Deputy Speaker Scott. They have taken a very lazy approach to superannuation reform. This is not true reform. Australians cannot see where they will be at the end of it.

The irony is that Dr Henry and even the Labor Party themselves have identified that this initiative to increase the contribution surcharge from nine to 12 per cent is going to be at a cost to the budget over the longer term. So why not be smarter and accept the recommendations of Dr Henry? Why not be smarter and accept that you can improve the taxation arrangement for superannuation without putting a greater burden on Australian employers and employees?

We are going to hit the cathartic moment in the next few years where, under the Labor Party, Australians will be paying a new carbon tax and will be taking less pay home with an increased superannuation contribution. And interest rates are going to be higher. This is the classic combination that will end up being a perfect storm for the Labor Party over the next two to three years, because the cost of living for Australians is increasing. It will be this government’s actions and decision making—nothing short of that—that will make the everyday cost of living much harder for Australian families. The carbon tax means that electricity and so many other industries are going to be more expensive. Higher interest rates mean that people are going to have bigger mortgages, bigger credit card bills and bigger phone bills, with so many people putting them on their credit cards. Business is going to find it more expensive to fund expansionary growth because every day it will be out in the market competing with the government, which is in the business of borrowing $100 million a day to fund its fiscal expansion.

At the same time, above and beyond all of that, the Labor Party are increasing the superannuation contribution from nine to 12 per cent, which will mean that many individuals will have less take-home pay. Well done, Labor. All they could do is just cap it off with an increase in the GST. That would be the firecracker on New Year’s Eve. Labor have delivered to you all the bangers in the last hour in the lead-up to midnight and now they introduce an increase in the GST just to wrap it all up and make sure that Australian families and households are totally screwed by an incompetent government.

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Superannuation Legislation Amendment Bill 2010. It is no surprise that the member for North Sydney is opposed to increases in superannuation for working families and working people, because the Liberal Party has always been opposed to superannuation for working families and working people. In Australia we have had superannuation in some form for over a century, but by no means has that been universal for most of that time. In fact, in 1974 the Australian Bureau of Statistics conducted the first survey of superannuation and it came up with a pretty sorry state. Only 32 per cent of the workforce was covered by superannuation and only 15 per cent of females who worked were covered by superannuation. In the private sector it was even lower. Only 24 per cent of people in the private sector had super cover under the conservative government that was in at that time. It was not until 1985 that there was a major breakthrough.

I also thank the member for North Sydney for pointing out the contribution that the union movement made to superannuation in this country, working hand in hand with the Hawke Labor government. In 1985 the ACTU sought a three per cent employer superannuation contribution to be paid in as an industry fund as part of the national wage case claim with the then Australian Conciliation and Arbitration Commission. Before that, access to superannuation was deeply inequitable. For the member for North Sydney to stand here and rant for half an hour about the contribution that the coalition made to superannuation simply flies in the face of the facts.

He made some other incredible claims as well. The first was that the stimulus package that this government introduced was in some way a bad thing for Australia. As we all know, the Australian economy has come out of the global financial crisis better than any other country in the world. We have come out of it because of the targeted stimulus package that was there. The main point of the stimulus package was to ensure that we created and retained jobs in Australia. As the member for North Sydney would know, if you are contributing to superannuation as part of having a job, you need to actually have a job in the first place to contribute to superannuation. So national savings would have been affected if we had had hundreds of thousands of additional Australians out of jobs because of the global financial crisis. That is something that even a schoolboy economist would understand, but clearly the member for North Sydney does not.

He then tried to say that credible economists were critical of the path that this government took. I defy the member for North Sydney to come up with one credible economist who has not supported the stimulus intervention that this government took in relation to the global financial crisis. Whether it is international economists or the IMF or domestic economists, they have all said that this is the best targeted stimulus package in the world, and that is why Australia is seen as an economic marvel in terms of the way in which we came through the global financial crisis.

But we should not worry about what economists say, what the IMF says, what the Reserve Bank governor says or what Treasury says, because according to the member for North Sydney we do not need experts. We should ‘run the economy by instinctive feel’. So let’s not worry about the experts out there or the advice as to what is the best thing for the Australian economy or how we can keep people in jobs in Australia; let’s run the Australian economy by ‘instinctive feel’. If that is what the shadow Treasurer is proposing as the coalition’s policy and their approach to economics, it is a great thing that they are on the opposition benches and not in charge of the treasury bench. Heaven help us if we are going to ignore the experts and decide that this great economy and great country of Australia is going to be run by instinctive feel and we are not going to listen to the experts who are offering advice and who have said what a wonderful job Treasurer Wayne Swan and this government have done to ensure that Australia has come through the global financial crisis in a better position than any other country in the world.

As I said previously, before the unions’ national wage claim in 1985, only a minority of workers had superannuation. These were mainly higher earning white-collar workers, public servants and the defence forces. In recognition of the need to develop strategies to manage an ageing population, the then Labor government supported the ACTU’s claim. In February 1986 the commission confirmed that awards would include contributions of up to three per cent to approved superannuation funds. Between 1986 and 1990, superannuation funds rapidly increased, from around 40 per cent of employees to 79 per cent of employees, as a result of the commission’s ruling.

But despite the rapid growth a number of problems remained. The Labor government and the trade unions made sure that there was real reform in superannuation. There were considerable gaps in coverage in the private sector. There was a lack of compliance with award superannuation provisions. Not all employees were covered by the awards, and three per cent superannuation contributions were too small to significantly improve the retirement income for many employees—something that those on the opposite side, when they have been in charge of the Treasury bench, have never responded to and have never understood. They would rather us go back to the days when only 15 per cent of females had superannuation. That is the approach that those on the other side take.

Those on this side take a very, very different view to superannuation. We want to make sure that superannuation is accessible to everyone, that is equitable, that is not just for high income earners—white-collar workers—but is available to all. We on this side are actually proud of the relationship between the trade union movement and the Labor Party in establishing compulsory superannuation in this country.

In response to the problems associated with award superannuation, in recognition of its importance, on 1 July 1992 the superannuation guarantee was introduced. The superannuation guarantee was designed to be universal and compulsory, effectively extending coverage to employees who had previously not had access to it, requiring employers to comply and enabling a consistent increase in employees’ retirement savings in line with the government’s retirement income policy—an increase in national savings and an increase in individual savings, creating dignity for people once they reach retirement.

Again, I take you back to those figures. When the coalition was in government, only 32 per cent of the workforce was covered by superannuation, and only 15 per cent of females were covered by superannuation. So for the member for North Sydney to come into this place and lecture us about reforms in superannuation and say that we have not done enough in terms of superannuation and that we are not genuine about fixing superannuation flies in the face of the history of compulsory superannuation—the superannuation guarantee—in this country. It also flies in the face of our commitment to increase compulsory superannuation to 12 per cent. As I said, without the Labor Party, superannuation would be available only for those in white-collar jobs, those in the defence forces and those with high incomes.

This legislation goes to a number of changes and improvements and builds on the long history and legacy that Labor has had to superannuation. Firstly, schedule 1 amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 and the Income Tax Assessment Act 1997 to facilitate the transfer of superannuation unclaimed moneys from state and territory authorities and public sector superannuation schemes to the Commissioner of Taxation. The amendments will also enable the commissioner to accept and subsequently pay out amounts transferred by state and territory authorities and public sector superannuation schemes.

I note that the member for North Sydney is in favour of this particular amendment, and it is a good thing that the coalition has decided to support the amendment. This amendment will allow for the transfer of four different types of unclaimed superannuation: former temporary resident unclaimed superannuation in public sector schemes, small and insoluble lost accounts in public sector schemes, general unclaimed superannuation in public sector schemes, and private sector unclaimed superannuation which was paid to the states and territories prior to 1 July 2007.

The amendments will operate by allowing public sector superannuation schemes which have been prescribed by regulation to be treated as if they were private sector superannuation funds for the purposes of different components of the unclaimed money legislation. Only those schemes which have been nominated by the Commonwealth or the states and territories will be prescribed in the regulations.

Schedule 2 of this bill concerns changes to income tax deductibility of total and permanent disability insurance premiums paid by superannuation funds. Superannuation funds commonly take out death and disability insurance policies to insure their risk for a liability they may incur to their members, including temporary or permanent disability insurance. The practice of superannuation funds obtaining such insurance is consistent with the key objects of superannuation—that is, to provide benefits to members in retirement or, in the event of the member’s death, to the member’s beneficiaries.

As the fund contracts with insurance providers, any payout under an insurance policy due to the occurrence of an insured, permanent disability event will be made to the fund. A fund can only provide a benefit referable to that payment—and any other preserved benefits—to the member if a condition of release of benefits has been satisfied. There may be circumstances where, as a consequence of the definition of permanent disability used in the policy, a fund receives an insurance payment due to the occurrence of an insured event but no condition of release has been satisfied. With Better Super, the provisions regarding deductibility of TPD insurance premiums paid by the superannuation funds were rewritten and transferred from the Income Tax Assessment Act 1936 to the ITAA Act 1997, with effect for 2007-08 and later income years.

Industry representatives have indicated they consider that, under the ITAA 1936 provisions, a premium was fully deductible if paid for a policy insuring against some form of permanent disability and that this practice has continued after the 2006-07 income year under the provisions of the ITAA 1997. Industry’s practice has been to claim deductions for premiums relating to all TPD policies—notwithstanding that, in some cases, claims under such policies may result in payouts to the fund trustee in circumstances where the member could not satisfy the ‘permanent incapacity’ release condition.

To sum up schedule 2: the provision of the transitional arrangements will minimise the disruption to the superannuation industry. This will allow superannuation funds enough lead time to make the necessary administrative changes to apply the current provisions of the ITAA 1997 regarding the deductibility of TPD benefits as of 1 July 2011. Funds that have claimed the narrow deduction under the current law will have the opportunity to vary their tax return but this is not required. On the expiration of the transitional arrangements the current, narrower, tax deduction will be available to superannuation funds.

Schedule 3 of the bill deals with superannuation and relationship breakdowns. These amendments allow for a trustee or investment manager of a regulated superannuation fund to acquire assets from a related party where the acquisition occurs as the result of the relationship breakdown of a member.

This bill is in the long line of reforms that Labor governments have made to superannuation, starting most notably in 1995 with the historic agreement between the then Labor government and the ACTU to pursue compulsory superannuation through the Conciliation and Arbitration Commission, in the historic test case that was run in that year. Since that time it has been the Labor governments that have gone about making sure that people who work will have dignity when they retire, by making sure that there are adequate funds for their retirement through compulsory superannuation. This is something that those on this side of the parliament are very proud of. It is a tradition that we are continuing with this legislation. It is something that we want to continue to do, and we want to increase that compulsory superannuation from nine per cent to 12 per cent to make sure that all Australians have access to proper retirement funds, that they are able to retire with dignity and have enough money in their retirement. This is something that only a Labor government will do. I commend the bill to the House.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

As we have heard, the Superannuation Legislation Amendment Bill 2010 contains several sets of amendments to the existing superannuation law. The amendment that I want to focus on specifically in my remarks tonight is one that is included within schedule 4. It is one which would allow the Commissioner of Taxation to exercise a discretion for the purposes of excess contributions tax before an assessment is issued. The fundamental point I want to make tonight is that to grant the commissioner a discretion in this way to deal with an assessment of excess contributions tax is an inadequate response to a serious problem. The serious problem is the fact that Australians can be exposed to very high rates of penalty tax in circumstances where they make an innocent and inadvertent mistake in the amount they contribute to superannuation. We need to consider why it is that the commissioner is required to be given such a discretion in the first place. The reason is that the policy approach of this government in relation to contribution limits for superannuation is a real mess.

As we know, there are limits on the amount that any Australian can contribute to superannuation so as to enjoy the benefits of concessional treatment. The concessional treatment, of course, is that moneys which are paid into a superannuation fund are taxed at the rate of 15 per cent rather than the individual’s marginal tax rate. As we also know, the policy reason underlying this concessional treatment is to encourage people to make provision for their own retirement through building up a significant superannuation balance so that they are not reliant on a government funded pension. As we have heard speakers from all sides remark tonight, that underlying policy enjoys bipartisan support. The important point is that the concessional tax treatment is only available up to the concessional contributions cap.

The Rudd government, in one of its early acts in this area, reduced this cap. People aged 49 and below had the cap reduced from $50,000 to $25,000, and those aged 50 and above had it reduced from $100,000 to $50,000. This was a poor decision. It was a bad piece of public policy. It was done with limited notice and represented a fundamental change to the rules of the game. It threw the existing salary sacrifice arrangements of many thousands of Australians into disarray. Somebody who had been making regular annual contributions at a level above $25,000 was suddenly hit with a significant change in the rules—and severe consequences, in the form of excess contributions tax at 31.5 per cent on all amounts in excess of $25,000.

Every time the government tinkers with the rules about superannuation, it reduces confidence in the system. So the fact that this was a serious change to the rules in the middle of the game was a problem in and of itself. But there is a further and more serious problem, which is that the rules that now apply are so capricious that they can penalise people very severely if they make an innocent error. For example, many Australians do not understand that the superannuation guarantee contributions contribute towards the concessional contributions tax. Why would they be expected to understand this? The regulations around this area are eye-glazingly complex and most Australians would be very surprised to know about the capricious consequences which can be visited upon them if they make an innocent error.

How might such an innocent error occur? There are several ways. A person may be salary sacrificing a large amount of money into their superannuation fund and may simply and in good faith make a calculation error about the amount they are able to contribute without attracting the excess contributions tax. Another scenario is that an employer may make additional concessional contributions to the employee’s superannuation fund in ignorance of other contributions made by the employee. The combination of both the employer and employee contributions may trigger the excess contributions tax. Alternatively, a person may have a windfall and may make an error by contributing too much of that to their fund without realising the serious consequences that follow. Or—recognising the reality, which is that most Australians do not follow these complex laws themselves but instead rely upon advisers—the person making the contribution may simply receive bad advice. Yet quite remarkably an individual who has made an innocent error does not simply have the option of having the contributions returned and being subject to the normal taxation arrangements.

The measure proposed in the bill before the House today to give the commissioner extra powers to exercise discretion in some of these circumstances is a bandaid solution to a serious design flaw. Many Australians would be quite shocked to know that if they make an innocent mistake in these circumstances they can potentially be exposed to consequences including a 93 per cent marginal tax rate. To explain that: if you make a concessional contribution or a contribution which is intended to be a concessional contribution and you exceed the cap of $25,000 you are, as we have seen, exposed to the excess concessional contributions tax of 31.5 per cent. But if you are also making a non-concessional contribution—that is to say, a contribution that is made out of post-tax income—you also face a limit. If you exceed that non-concessional contribution then any excess amount attracts tax of 46.5 per cent.

The interaction of these provisions means that in certain circumstances Australians can be exposed to marginal tax of 93 per cent on a superannuation contribution. That will happen if you make a payment that exceeds the $25,000 limit and also happens to tip you over your limit for non-concessional contributions. Once it is over the $25,000, the incremental component over the $25,000 is automatically deemed to be non-concessional. If that inadvertently takes your non-concessional amount over your non-concessional limit you then hit that 93 per cent marginal tax rate. Let us be plain: this is a badly drafted provision which visits harsh and unfair consequences upon Australians who make an innocent mistake, a mistake which is all too easy to make given the eye-glazing complexity of the superannuation provisions.

One of the reasons that this has turned from a theoretical to a significantly more present risk is the Rudd-Gillard government’s capricious reduction in the contribution limits. This has turned a problem which was in the main theoretical into a real problem that can cause anguish to many thousands of Australians. What is the Gillard government’s bold solution to this problem contained in today’s bill? The Gillard government’s bold solution is to give the commissioner extra discretion. This bill gives the commissioner the power to make a determination to disregard or reallocate contributions for the purposes of excess contributions tax without first issuing an excess contributions tax assessment. I look at that supposed solution with considerable suspicion. I believe that many Australians with experience of dealing with the Australian Taxation Office would share that suspicion. This is a second-rate solution to the underlying problem.

As we have heard from the shadow Treasurer, we support the measures in the bill, including this one, on the grounds that it is the best that the government has put forward. But when you have a law which is flawed you should deal with the fundamental flaw. Australians should not be put in the position where they can be exposed to a sudden-death penalty tax that could arise due to an innocent mistake.

According to the Taxation Office’s statistics, more than 35,000 Australians breached the contributions tax rules for the 2008-09 year. It is very likely that the number will be bigger in subsequent years if current trends continue, I would suggest. You have a very large number of Australians being exposed in these circumstances to considerable mental anguish. They may have sold a small business or may have received a one-off bonus and set out to put the proceeds into superannuation so as to provide for themselves and suddenly they find that they could be facing the prospect of a very large proportion of those proceeds being confiscated by the tax office. It seems to me that in these circumstances it is not good enough for those Australians to be fobbed off with wafty assurances that the commissioner might exercise his discretion. Australians have a right to expect better from this government, and it is a shame that the solution that has been put forward to this problem in this bill is a second-best solution rather than one that addresses the fundamentally unacceptable and capricious nature of these provisions.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I thank the House for the opportunity to speak on this very important bill, the Superannuation Legislation Amendment Bill 2010.

Chris Bowen (McMahon, Australian Labor Party, Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

Mr Bowen interjecting

Mrs Bronwyn Bishop (Mackellar, Liberal Party, Shadow Minister for Seniors) Share this | Link to this | Hansard source

Mrs Bronwyn Bishop interjecting

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

The Minister for Immigration and Citizenship and the member for Mackellar will stop the across-the-table chatter. They will give the member for Oxley the courtesy that he deserves.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Deputy Speaker Scott, for controlling the conduct of the House. I appreciate it. I am expecting a point of order any moment. This is a very important piece of legislation. It puts in place a range of changes that need to take place after the long 12 years of a Howard government that continually made changes to the superannuation rules, almost as if superannuation were a plaything. Superannuation is an exceptionally important part of the Australian retirement income system. It was put in place by the Australian Labor Party when in government a little bit over 20 years ago to ensure that ordinary working people have the opportunity to save for their own retirements so that they can be independent in their own retirements like other people in the community.

We on this side of the House believe in superannuation. We have introduced a superannuation guarantee on this side of the House. We have continued to improve its performance over the years, as we are doing tonight in the amendments we have before us. I will take note of just a few of the things that have been said by other speakers about the changes we are making, but I particularly want to refer to the fact that these changes are in order to stabilise the superannuation system that we have in this country and follow on very clearly from the Henry review’s report on the sustainability of superannuation in this country and also the review that was done by Jeremy Cooper on structural efficiencies in our superannuation system.

If any government or anybody in this country is serious about a decent, fair, equitable and independent retirement—and we know that people ought to be given that opportunity—we need to get the rules right. We need slow, methodical, strategic change that is sustainable. Unfortunately that is not what we got under the previous administration. The attitude of continual and elastic, rubbery change that blew out of proportion the rules and conditions under which people could contribute to their superannuation really did set about putting superannuation on a trajectory that was unsustainable. What we are doing tonight in these amendments is making sure that we have a superannuation system in this country that can survive in the future and provide for individual people.

I will also draw to the attention of the House a small point from a little report called the Intergenerational report just to put into context the issue of sustainability which we all face and which we as a government face. By 2050 it is projected that there will be twice as many 65-year-olds as there are today. In 2050 there will be four times as many people aged over the age of 85 as there are today. Those are pretty stark facts. But the fact that really sticks in my mind is that in 1970 there were about 7.5 people in the workforce for everyone aged 65 years or older. Today there are about five people in the workforce for everyone aged 65 years or older. But in 2050 that figure is expected to be only 2.7 people in the workforce for everyone aged 65 years or older. That concerns me. That is an issue that government should deal with and should deal with properly. We need to provide for a stable, secure, long-term superannuation system which is sustainable a long way into the future rather than what may suit a small proportion of people who make specific contributions to their superannuation at particular points in time. I think that is the key bit that was missing in the debate that we heard from members of the opposition.

We need to get the settings right, and we need to leave them there. We need time for people to absorb them so that they are not confused, so that they do not have to deal with complex superannuation. Superannuation ought not to be so complex that you have to deal with it on a daily basis. For most people, it should be the case that they can deal with their superannuation on an annual basis or on a periodic basis as is their requirement rather than having to deal with continual government change and tinkering at the edges—the sort of changes we saw from the previous Howard government, which were just completely unsustainable and which distorted the capacity of our superannuation system into the future.

We have heard the very disingenuous debate of the other side. Most of it, although not all, was around the politics of this. On the one hand they were saying, ‘Yes, we will support this bill, but of course there are some problems with it,’ but on the other hand they have the view that in opposition you can never trust the ATO, Treasury or any government department. That is somewhat bizarre because it was not the case when they were in government. You cannot have it both ways. Where the rubber hits the road in this chamber is that you cannot have it both ways. If the professional people in those bureaucracies were good enough when the other side was in government, they ought to still be good enough today. If they could trust the ATO when they were in government collecting people’s taxes then they ought to be able to trust them now. You cannot have it both ways. If we have a professional bureaucracy and a professional Public Service in this country then we should not come into this place and deride them every time it suits our agenda or when they somehow do not match up with our particular political leanings.

These amendments actually make some very important changes to do with unclaimed money and members’ lost money. It is quite a significant figure. While the regulation does allow for private superannuation funds to transfer those unclaimed moneys from state and territory authorities across to the Commissioner of Taxation, that is not the case in the public sector—but it ought to be. We make those changes to make it clear and transparent and for there to be the ability to transfer those moneys across to the Commissioner of Taxation.

In saying that, it is important for people to also note that at any time they can claim for any lost funds that they discover or any moneys that have been unclaimed. It does not change that particular provision. People are still able to access their funds at any time in the future. More than that, what concerns me is the actual sheer size of the pool of unclaimed moneys and lost members’ funds, and in the future there is more work for us to do in dealing with those issues as well.

There is also transitional relief for income tax deductibility of total and permanent disability insurance premiums that are paid by superannuation funds. This is to get right the transitional arrangements that are in place so that premiums are paid in the correct amounts and also to provide a greater scope to deduct those total and permanent disability insurance premiums which are paid by the funds themselves.

There are also a range of other minor amendments which allow the public sector superannuation schemes to be prescribed by regulation to be treated as if they were a private sector scheme. That draws the rules that apply in one sector across to the other and makes sure that only those schemes which have been nominated by the Commonwealth or the states and territories will actually be prescribed in the regulations.

There is a particular amendment relating to the option of transferring both existing stocks and future flows of unclaimed superannuation to the ATO. That amendment will facilitate more uniform treatment of all those unclaimed moneys in both the private and public sector funds and I believe it will improve the likelihood of reuniting individuals with their lost or unclaimed superannuation. As I said earlier, this does not prohibit individuals from being able to claim from the ATO, at any time in the future, the money that belongs to them. This measure will have a positive revenue gain, which is estimated to be just under $30 million for the ATO over the forward estimates. There are a number of other transitional measures under the legislation which ensure that these things are done in accordance with the Income Tax Assessment Act 1936 and a range of other acts so that they accord with regulation and law, but these amendments do not limit the operation of the current law in any particular way.

There was a point raised about the discretion of the commissioner to make certain judgments in terms of excess allocation of funds to a superannuation fund and the tax implications of that. Our amendments clarify the due date for the shortfall interest charge for the purpose of excess contributions tax, which is 21 days after the commissioner provides notice of the amount that is payable. There is also provision to allow the Commissioner of Taxation to exercise discretion to disregard or to allocate to another financial year all or part of a person’s contributions for the purpose of excess contributions tax before an assessment is issued. It seemed that the only concern that the opposition had in relation to that was an issue of trust.

The issue was raised of whether you could possibly trust the ATO to get this right. If individuals make a mistake, the opportunity always exists to revisit that mistake, just as it would if the ATO made a mistake. So it is not so much an issue of trust but of whether an error is made. If an error is made there is an opportunity for individuals to revisit that error in a number of ways. I think the mechanisms provided are appropriate discretions for the Commissioner of Taxation and will actually make dealing with concessions and overpayments in relation to superannuation contributions easier.

People should pay a great deal of attention to the rules around superannuation, and if it is complex—and I accept that it is—they need to seek good advice. This is not an area where people should, without being fully informed, make ad hoc, irregular payments, not understanding the full tax consequences or implications of what they do. You would not do that in relation to any of your other financial dealings—be it tax, contributions to other funds, deductions or investments—and I do not see why superannuation contributions should be any different. A person needs to inform themselves properly. They can get professional advice on the proper mix of their superannuation contributions, their retirement goals and their needs to make sure that they get that mix right. This is not something that should be just played at as a game or where people should make some sort of guess and hope to get it right. It is too important in terms of people’s lifelong contributions and in terms of tax implications not only for individuals but also for government.

The reason that people make those extra contributions and the reason that there is a generous concessional contribution limit is that it is an attractive way to save. It attracts a lower rate of interest and costs less than any other investment vehicle. Therefore it is understandable that government needs to be able to effectively control, manage and support the system—which is supported by the tax system and by the taxpayer—to ensure that it is fair for everyone who contributes to it and to ensure that the tax paid at the start, during and at the end is fair and that people fully understand the system. I accept the issue of complexity and I accept that people ought to inform themselves fully, but I do not accept the opposition’s proposition that it is just a matter of trust and that you could not trust the Commissioner of Taxation to exercise discretion on these matters.

I note that the opposition does support these amendments. They are good amendments and I think they add more weight to a whole range of very important and necessary improvements that this government is making to our superannuation system for the long term, for its sustainability, for its ability to provide for people in their retirement. From modelling and a range of research, we understand what the future of this country will look like with respect to the number of people who will remain in the workforce compared to the number of people who will be retiring in 30, 40 and 50 years time. I congratulate the government and the minister for their good work in this area. I know that this is good legislation and it has the support of the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

in reply—Firstly, I would like to thank all those members who have contributed to this debate on the Superannuation Legislation Amendment Bill 2010. It is a good thing that the Minister for Immigration and Citizenship is at the table, because when he was minister for superannuation he contributed to a lot of the reforms which I am helping to implement now. I would also like to acknowledge the member for Oxley, whose work in terms of financial planning and other matters has added a lot to this debate.

The amendments contained in schedule 1 will allow both state and territory authorities and public sector superannuation schemes to transfer unclaimed superannuation to the Australian Tax Office. This will facilitate the centralisation of unclaimed superannuation administration with the ATO rather than with both the ATO and the numerous state authorities. Unclaimed superannuation typically arises when a fund cannot locate a member who has reached age-pension age and is entitled to a payment. Individuals will still be able to claim back their money from the ATO at any stage. The legislation will operate so that it only applies to those Commonwealth, state and territory schemes that are prescribed in the regulations. These amendments will also enable the ATO to subsequently pay out and apply the correct taxation treatment to amounts transferred to the states and territories and to Commonwealth public sector schemes.

These amendments will mean an ongoing gain to revenue estimated at $29.6 million over the forward estimates. The revenue gained from the measures will result from the transfer to the ATO of existing unclaimed superannuation held by the states and territories. The transfer does not in any way reduce an individual’s entitlement to that money; they will be able to claim their unclaimed superannuation back from the ATO at any time. Centralising administration in the ATO will mean that it will be easier for individuals to track down any unclaimed superannuation they may have.

Schedule 2 amends the tax laws to provide transitional relief to superannuation funds, enabling them to claim a broader deduction for total and permanent disability premiums—TPD premiums—for the income years 2004-05 to 2010-11. This amendment will allow lead time for arrangements to be put in place by the superannuation industry and enable funds to comply with the current law at the conclusion of the 2010-11 income year. Currently, superannuation funds can only claim a tax deduction for TPD premiums to the extent that their policies have the necessary connection to a liability of the fund for providing a disability superannuation benefit. The term ‘disability superannuation benefit’ only relates to a narrow range of TPD events. While the current law is consistent with the objectives of retirement income policy, it is misaligned with industry practice.

Both the term ‘disability superannuation benefit’ in the Income Tax Assessment Act 1997 and the term ‘death or disability benefits’ in the Income Tax Assessment Act 1936 are given a broader meaning under the transitional arrangements. Under the transitional arrangements, these terms relate to a greater number of TPD events, which will be described in regulations. The government has consulted with industry on the content of these regulations. This amendment will give certainty to the superannuation industry and facilitate compliance with the current law when the transitional arrangements cease.

Schedule 3 amends the Superannuation Industry (Supervision) Act 1993 to allow the trustee of a regulated superannuation fund to acquire an asset from a related party following the breakdown of their relationship. These amendments ensure that separating parties will be able to obtain a clean break from one another in terms of their superannuation matters. They also provide for equitable application of the in-house assets transitional arrangements. The amendments will remove potential discrimination and inconsistent treatment in the current application of the law.

The amendments contained in schedule 4 will allow individuals to provide deduction notices to a successor superannuation fund where they have made a contribution to an original superannuation fund. The amendments will also allow employers to claim a deduction for superannuation contributions made for former employees four months after the employee ceased employment and at any time where the contribution is made to a defined benefit fund. The legislation will provide clarification of the due date for the existing shortfall interest charge in relation to excess contributions tax and will allow the Commissioner of Taxation to exercise the discretion to disregard or reallocate contributions for the purposes of excess contributions tax without first issuing an excess contributions tax assessment.

The amendments will provide a regulation-making power to specify additional circumstances when a benefit from a public sector superannuation scheme has an untaxed element. The legislation will make a minor amendment to streamline references to the immigration secretary and immigration department. These amendments are necessary to ensure the continued smooth operation of the superannuation provisions of the income tax laws. This bill deserves the support of the parliament, and I commend it to the House.

Question agreed to.

Bill read a second time.